-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UiMfxGn4VNHR0tMLzptAXA+gRDto8S+S1Q47B4uWL9Xm5K2BbyssKJT1v+nhEfHM Gzs0UqIBTwfvbocLJL7EFA== 0000741513-98-000008.txt : 19980331 0000741513-98-000008.hdr.sgml : 19980331 ACCESSION NUMBER: 0000741513-98-000008 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PS PARTNERS VII LTD CENTRAL INDEX KEY: 0000781850 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 954018460 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15800 FILM NUMBER: 98578797 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: 8182448080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 10-K405 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1997 ----------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from to ------------------ ------------------- Commission File Number 0-15800 ------- PS PARTNERS VII, LTD., a California Limited Partnership ------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-4018460 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 701 Western Avenue Glendale, California 91201-2394 - -------------------------------------- ----------------------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (818) 244-8080 --------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [ X ] - ------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1. Business. --------- General - ------- PS Partners VII, Ltd. (the "Partnership") is a publicly held limited partnership formed under the California Revised Limited Partnership Act. Commencing in April 1986, 150,000 units of limited partnership interest (the "Units") were offered to the public in an interstate offering. The offering was completed in April 1987 with a total of 108,831 Units sold. The Partnership was formed to invest in and operate existing self-service facilities offering storage space for personal and business use (the "mini-warehouses") and to invest up to 35% of the net proceeds of the offering in and operate existing office and industrial properties. The Partnership's investments were made through general partnerships with Storage Equities, Inc., now known as Public Storage, Inc. ("PSI"), a real estate investment trust ("REIT") organized as a corporation under the laws of California. For tax administrative efficiency, the original general partnerships with PSI were consolidated into a single general partnership effective December 31, 1990. In 1995, there was a series of mergers among Public Storage Management, Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc. and their affiliates (collectively, "PSMI"), culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI into Storage Equities, Inc. In the PSMI Merger, Storage Equities, Inc. was renamed Public Storage, Inc. and it acquired substantially all of PSMI's United States real estate operations and became the operator of the Partnership's mini-warehouse properties. The Partnership's general partners (the "General Partners") are PSI and B. Wayne Hughes ("Hughes"). PSI became a co-general partner in September 1993, when PSI acquired the interest of PSI Associates, Inc. ("PSA"), an affiliate of PSMI, relating to PSA's general partner capital contribution in the Partnership. Hughes has been a general partner of the Partnership since its inception. Hughes is the chairman of the board and chief executive officer of PSI, and Hughes and members of his family (the "Hughes Family") are the major shareholders of PSI. The Partnership is managed, and its investment decisions are made by Hughes and the executive officers and directors of PSI. The limited partners of the Partnership have no right to participate in the management or conduct of its business affairs. The Partnership's mini-warehouse properties are managed by PSI pursuant to a Management Agreement. PSI believes that it is the largest operator of mini-warehouse facilities in the United States. Through 1996, the Partnership's commercial properties were managed by Public Storage Commercial Properties Group, Inc. ("PSCPG") pursuant to a Management Agreement. In January 1997, the Partnership and PSI and other related partnerships transferred a total of 35 business parks to PS Business Parks, L.P. ("PSBPLP"), formerly known as American Office Park Properties, L.P., an operating partnership formed to own and operate business parks in which PSI has a significant interest. Included among the properties transferred were the Partnership's business parks in exchange for a partnership interest in PSBPLP. Until March 17, 1998, the general partner of PSBPLP was American Office Park Properties, Inc., an affiliate of PSI. On March 17, 1998, American Office Park Properties, Inc. was merged into Public Storage Properties XI, Inc., which changed its name to PS Business Parks, Inc. ("PSBP"). PSBP is a REIT affiliated with PSI, and is publicly traded on the American Stock Exchange. As a result of the merger, PSBP became the general partner of PSBPLP (which changed its name from American Office Park Properties, L.P. to PS Business Parks, L.P.). See Item 13. PSI's current relationship with the Partnership includes (i) the joint ownership of 18 of the Partnership's 20 properties (which excludes the properties transferred to PSBPLP in January 1997), (ii) PSI is a co-general partner along with Hughes, who is chairman of the board and chief executive officer of PSI, (iii) as of December 31, 1997, PSI owned approximately 58.33% of the Partnership's limited partnership units and (iv) PSI is the operator of the Partnership's mini-warehouse facilities. 2 Investments in Facilities - ------------------------- The Partnership owns interests in 20 properties (excluding the properties transferred to PSBPLP in January 1997); 18 of such properties are held in a general partnership comprised of the Partnership and PSI. The Partnership initially owned interests in 23 properties; 21 mini-warehouses, and 2 business parks. The Partnership purchased its last property in August, 1987. One of the mini-warehouses, the Homestead, Florida facility, was completely destroyed by Hurricane Andrew in August 1992. Reference is made to the table in Item 2 for a summary of information about the Partnership's properties. The Partnership believes that its operating results have benefited from favorable industry trends and conditions. Notably, the level of new mini-warehouse construction has decreased since 1988 while consumer demand has increased. In addition, in recent years consolidation has occurred in the fragmented mini-warehouse industry. Mini-warehouses - --------------- Mini-warehouses, which comprise the majority of the Partnership's investments, are designed to offer accessible storage space for personal and business use at a relatively low cost. A user rents a fully enclosed space which is for the user's exclusive use and to which only the user has access on an unrestricted basis during business hours. On-site operation is the responsibility of resident managers who are supervised by area managers. Some mini-warehouses also include rentable uncovered parking areas for vehicle storage. Leases for mini-warehouse space may be on a long-term or short-term basis, although typically spaces are rented on a month-to-month basis. Rental rates vary according to the location of the property and the size of the storage space. Users of space in mini-warehouses include both individuals and large and small businesses. Individuals usually employ this space for storage of, among other things, furniture, household appliances, personal belongings, motor vehicles, boats, campers, motorcycles and other household goods. Businesses normally employ this space for storage of excess inventory, business records, seasonal goods, equipment and fixtures. Mini-warehouses in which the Partnership has invested generally consist of three to seven buildings containing an aggregate of between 291 to 1,175 storage spaces, most of which have between 25 and 400 square feet and an interior height of approximately 8 to 12 feet. The Partnership experiences minor seasonal fluctuations in the occupancy levels of mini-warehouses with occupancies higher in the summer months than in the winter months. The Partnership believes that these fluctuations result in part from increased moving activity during the summer. The Partnership's mini-warehouses are geographically diversified and are generally located in heavily populated areas and close to concentrations of apartment complexes, single family residences and commercial developments. However, there may be circumstances in which it may be appropriate to own a property in a less populated area, for example, in an area that is highly visible from a major thoroughfare and close to, although not in, a heavily populated area. Moreover, in certain population centers, land costs and zoning restrictions may create a demand for space in nearby less populated areas. As with most other types of real estate, the conversion of mini-warehouses to alternative uses in connection with a sale or otherwise would generally require substantial capital expenditures. However, the Partnership does not intend to convert its mini-warehouses to other uses. Commercial Properties - --------------------- Through 1996, the Partnership owned and operated two business parks; one in Mesa, Arizona and one in Tempe, Arizona. These properties were transferred to PSBPLP in January 1997 in exchange for a partnership interest in PSBPLP. Investment Objectives and Polices; Sale or Financing of Investments - ------------------------------------------------------------------- The Partnership's objectives are to (i) preserve and protect invested capital, (ii) maximize the potential for appreciation in value of its properties, (iii) provide Federal income tax deductions so that during the early 3 years of property operations a portion of cash distributions may be treated as a return of capital for tax purposes, and therefore, may not represent taxable income to the limited partners and (iv) provide for cash distributions from operations. The Partnership will terminate on December 31, 2038, unless dissolved earlier. Operating Strategies - -------------------- The Partnership's mini-warehouses are operated by PSI under the "Public Storage" name, which the Partnership believes is the most recognized name in the mini-warehouse industry. The major elements of the Partnership's operating strategies are as follows: * Capitalize on Public Storage's name recognition. PSI, together with its predecessor, has more than 20 years of operating experience in the mini-warehouse business. PSI has informed the Partnership that it is the largest mini-warehouse facility operator in the United States in terms of both number of facilities and rentable space operated. PSI believes that its marketing and advertising programs improve its competitive position in the market. PSI's in-house Yellow Pages staff designs and places advertisements in approximately 700 directories. Commencing in early 1996, PSI began to experiment with a telephone reservation system designed to provide added customer service. Customers calling either PSI's toll-free referral system, (800) 44-STORE, or a mini-warehouse facility are directed to PSI's reservation system where a trained representative discusses with the customer space requirements, price and location preferences and also informs the customer of other products and services provided by PSI. As of December 31, 1997, the telephone reservation system was supporting rental activity at all of the Partnership's properties. PSI's toll-free telephone referral system services approximately 160,000 calls per month from potential customers inquiring as to the nearest Public Storage mini-warehouse. * Maintain high occupancy levels and increase realized rents. Subject to market conditions, the Partnership generally seeks to achieve average occupancy levels in excess of 90% and to eliminate promotions prior to increasing rental rates. The monthly average realized rent per occupied square foot for the mini-warehouse facilities were $.64 in 1997 compared to $.61 in 1996. The weighted average occupancy levels at the mini-warehouse facilities increased from 89% during 1996 to 90% in 1997. The Partnership has increased rental rates in many markets where it has achieved high occupancy levels and eliminated or minimized promotions. * Systems and controls. PSI has an organizational structure and a property operation system, "CHAMP" (Computerized Help and Management Program), which links its corporate office with each mini-warehouse. This enables PSI to obtain daily information from each mini-warehouse and to achieve efficiencies in operations and maintain control over its space inventory, rental rates, promotional discounts and delinquencies. Expense management is achieved through centralized payroll and accounts payable systems and a comprehensive property tax appeals department, and PSI has an extensive internal audit program designed to ensure proper handling of cash collections. * Professional property operation. In addition to the approximately 150 support personnel at the Public Storage corporate offices, there are approximately 2,700 on-site personnel who manage the day-to-day operations of the mini-warehouses in the Public Storage system. These on-site personnel are supervised by 110 district managers, 15 regional managers and 3 divisional managers (with an average of 13 years experience in the mini-warehouse industry) who report to the president of the mini-warehouse property operator (who has 14 years of experience with the Public Storage organization). PSI carefully selects and extensively trains the operational and support personnel and offers them a progressive career path. See "Mini-warehouse Property Operator." Mini-warehouse Property Operator - -------------------------------- The Partnership's mini-warehouse properties are managed by PSI pursuant to a Management Agreement. Under the supervision of the Partnership, PSI coordinates the operation of the facilities, establishes rental policies and rates, directs marketing activity and directs the purchase of equipment and supplies, maintenance activity, and the selection and engagement of all vendors, supplies and independent contractors. 4 PSI engages, at the expense of the Partnership, employees for the operation of the Partnership's facilities, including resident managers, assistant managers, relief managers, and billing and maintenance personnel. Some or all of these employees may be employed on a part-time basis and may also be employed by other persons, partnerships, REITs or other entities owning facilities operated by PSI. In the purchasing of services such as advertising (including broadcast media advertising) and insurance, PSI attempts to achieve economies by combining the resources of the various facilities that it operates. Facilities operated by PSI have historically carried comprehensive insurance, including fire, earthquake, liability and extended coverage. PSI has developed systems for space inventory, accounting and handling delinquent accounts, including a computerized network linking PSI operated facilities. Each project manager is furnished with detailed operating procedures and typically receives facilities management training from PSI. Form letters covering a variety of circumstances are also supplied to the project managers. A record of actions taken by the project managers when delinquencies occur is maintained. The Partnership's facilities are typically advertised via signage, yellow pages, flyers and broadcast media advertising (television and radio) in geographic areas in which many of the Partnership's facilities are located. Broadcast media and other advertising costs are charged to the Partnership's facilities located in geographic areas affected by the advertising. From time to time, PSI adopts promotional programs, such as temporary rent reductions, in selected areas or for individual facilities. For as long as the Management Agreement is in effect, PSI has granted the Partnership a non-exclusive license to use two PSI service marks and related designs, including the "Public Storage" name, in conjunction with rental and operation of facilities managed pursuant to the Management Agreement. Upon termination of the Management Agreement, the Partnership would no longer have the right to use the service marks and related designs. The General Partners believe that the loss of the right to use the service marks and related designs could have a material adverse effect on the Partnership's business. The Management Agreement between the Partnership and PSI provides that the Management Agreement may be terminated without cause upon 60 days written notice by either party. Commercial Property Operator - ---------------------------- Through 1996, the Partnership's commercial properties were managed by PSCPG, now known as PS Business Parks, Inc., pursuant to a Management Agreement. In January 1997, the Partnership transferred its commercial properties to PSBPLP in exchange for a partnership interest. Competition - ----------- Competition in the market areas in which the Partnership operates is significant, and affects the occupancy levels, rental rates, and operating expenses of certain of the Partnership's facilities. Competition may be accelerated by any increase in availability of funds for investment in real estate. Recent increases in plans for development of mini-warehouses are expected to further intensify competition among mini-warehouse operators in certain market areas. In addition to competition from mini-warehouses operated by PSI, there are three other national firms and numerous regional and local operators. The Partnership believes that the significant operating and financial experience of PSI's executive officers and directors and the "Public Storage" name should enable the Partnership to continue to compete effectively with other entities. Other Business Activities - ------------------------- A corporation owned by the Hughes Family reinsures policies against losses to goods stored by tenants in the Partnership's mini-warehouses. The Partnership believes that the availability of insurance reduces the potential liability of the Partnership to tenants for losses to their goods from theft or destruction. This corporation receives the premiums and bears the risks associated with the insurance. 5 A corporation, in which PSI had a 95% economic interest and the Hughes Family has a 5% economic interest, sells locks, boxes, and tape to tenants to be used in securing their spaces and moving their goods. PSI believes that the availability of locks, boxes, and tape for sale promotes the rental of spaces. Employees - --------- There are 75 persons who render services on behalf of the Partnership. These persons include resident managers, assistant managers, relief managers, district managers, and administrative personnel. Some of these employees may be employed on a part-time basis and may also be employed by other persons, partnerships, REITs, or other entities owning facilities operated by PSI or PSBPLP. Impact of Year 2000 - ------------------- PSI has completed an initial assessment of its computer systems. The majority of the computer programs were installed or upgraded over the past few years and are Year 2000 compliant. Some of the older computer programs utilized by PSI were written without regard for Year 2000 issues and could cause a system failure or miscalculations with possible disruption of operations. Each of these computer programs and systems has been evaluated to be upgraded or replaced as part of PSI's Year 2000 project. The cost of the Year 2000 project will be allocated to all entities that use the PSI computer systems. The cost of the Year 2000 project which is expected to be allocated to the Partnership is approximately $60,000. The cost of new software will be capitalized and the cost of maintenance to existing systems will be expensed as incurred. The project is expected to be completed by March 31, 1999 which is prior to any anticipated impact on operating systems. PSI believes that with modifications to existing software and, in some instances, the conversion to new software, the Year 2000 issue will not pose significant operational problems. However, if such modifications are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Partnership. The costs of the project and the date on which PSI believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. ITEM 2. PROPERTIES. ---------- The following table sets forth information as of December 31, 1997, about properties owned by the Partnership. Eighteen of these properties were acquired jointly with PSI and were contributed to general partnerships comprised of the Partnership and PSI.
Net Number Rentable of Date of Ownership Location Square Feet Spaces Acquisition Percentage - -------- ----------- ------ ----------- ---------- CALIFORNIA Arleta 30,900 299 11/26/86 50.0% Osborne St. City of Industry 60,000 565 04/01/87 50.0 Amar Rd. COLORADO Denver 104,000 1,022 12/19/86 70.0 Sheridan Blvd. Lakewood 100,900 780 09/12/86 70.0 W. 6th Ave. FLORIDA Homestead - - 10/31/86 100.0 S.W. 157th Ave. (1)
6
Net Number Rentable of Date of Ownership Location Square Feet Spaces Acquisition Percentage - -------- ----------- ------ ----------- ---------- GEORGIA Marietta 95,100 637 12/10/86 50.0% Cobb Pkwy. INDIANA Hammond 45,100 395 08/11/87 40.2 Calumet OKLAHOMA Oklahoma City 61,000 608 05/28/87 100.0 Hefner Rd. OREGON Gresham 45,400 522 12/18/86 50.0 S.E. Burnside Hillsboro 36,200 458 12/19/86 50.0 Tualatin Valley Hwy. Portland 51,400 514 07/01/87 100.0 Moody St. TEXAS Austin 75,100 808 10/01/86 70.0 Research Blvd. Houston 77,400 678 10/01/86 70.0 Long Point Houston 90,100 709 10/01/86 70.0 N. Freeway Houston 122,100 1,105 10/01/86 70.0 Old Katy Rd. Houston 119,200 1,105 10/01/86 70.0 Plainfield Rd. Houston 120,400 1,175 10/01/86 70.0 South Loop 610 West San Antonio 80,600 788 12/23/86 50.0 Sunset Rd. VIRGINIA Annandale 31,400 291 03/16/87 50.0 Ravensworth Rd. WASHINGTON Auburn 52,800 605 12/10/86 50.0 Auburn Way N. Lynwood 96th St. SW 75,800 590 12/31/86 70.0
- --------- (1) In August 1992, the facility's mini-warehouse buildings were completely destroyed by Hurricane Andrew. The weighted average occupancy level for the mini-warehouse facilities was 90% in 1997 compared to 89% in 1996. The monthly average realized rent per square foot for the mini-warehouse facilities was $.64 in 1997 compared to $.61 in 1996. Substantially all of the Partnership's facilities were acquired prior to the time that it was customary to conduct environmental investigations in connection with property acquisitions. During the fourth quarter of 1995, an independent environmental consulting firm completed environmental assessments on the Partnership's properties to evaluate the environmental condition of, and 7 potential environmental liabilities of, such properties. Based on the assessments, the Partnership believes that it is probable that it will incur costs totaling $71,000 after December 31, 1997 for known environmental remediation requirements. Although there can be no assurance, the Partnership is not aware of any unaccrued environmental contamination of any of its property sites which individually or in the aggregate would be material to the Partnership's overall business, financial condition, or results of operations. ITEM 3. Legal Proceedings. ------------------ No material legal proceeding is pending against the Partnership. ITEM 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of 1997. PART II ITEM 5. Market for the Partnership's Common Equity and Related Stockholder Matters. -------------------------------------------------------------------- The Partnership has no common stock. The Units are not listed on any national securities exchange or quoted on the NASDAQ System, and there is no established public trading market for the Units. Secondary sales activity for the Units has been limited and sporadic. The General Partners monitor transfers of the Units (a) because the admission of the transferee as a substitute limited partner requires the consent of the General Partners under the Partnership's Amended and Restated Agreement of Limited Partnership, (b) in order to ensure compliance with safe harbor provisions to avoid treatment as a "publicly traded partnership" for tax purposes and (c) because PSI has purchased Units. However, the General Partners do not have information regarding the prices at which all secondary sale transactions in the Units have been effectuated. Various organizations offer to purchase and sell limited partnership interests (including securities of the type such as the Units) in secondary sales transactions. Various publications such as The Stanger Report summarize and report information (on a monthly, bimonthly or less frequent basis) regarding secondary sales transactions in limited partnership interests (including the Units), including the prices at which such secondary sales transactions are effectuated. Exclusive of the General Partners' interest in the Partnership, as of December 31, 1997, there were approximately 1,942 record holders of Units. The Partnership makes quarterly distributions of all "Cash Available for Distribution" and will make distributions of "Cash from Sales or Refinancing". Cash Available for Distribution is cash flow from all sources less cash necessary for any obligations or capital improvements, or reserves. Reference is made to Items 6 and 7 hereof for information on the amount of such distributions. 8 ITEM 6. SELECTED FINANCIAL DATA. -----------------------
For the Years Ended December 31, ------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------------------------------------------------------------- (In thousands, except per Unit data) Revenues $ 10,563 $ 10,584 $ 10,401 $ 10,227 $ 9,716 Depreciation and amortization 2,218 2,432 2,204 2,128 2,218 Interest expense - - - - 43 Income before loss on destroyed real estate facility 2,314 1,971 2,061 2,230 1,789 Net income 2,314 1,971 2,061 2,230 1,657 Limited partners' share 2,025 1,588 1,505 1,850 1,352 General partners' share 289 383 556 380 305 Limited partners' per unit data (a) Net income $ 18.61 $ 14.59 $ 13.83 $ 17.00 $ 12.42 Cash distributions (b) (c) $ 22.00 $ 30.01 $ 44.23 $ 39.35 $ 23.80 As of December 31, Cash and cash equivalents $ 1,346 $ 142 $ 535 $ 1,844 $ 2,675 Total assets $ 49,785 $ 50,122 $ 51,406 $ 54,630 $ 57,348
(a) Limited partners' per unit data is based on the weighted average number of units outstanding during the period (108,831 units). (b) The General Partners distributed, concurrent with the distribution for the third quarter of 1995, a portion of the operating cash reserve estimated to be $8.19 per Unit. (c) The General Partners distributed, concurrent with the distribution for the second quarter of 1994, the net insurance proceeds received for the destruction of the Homestead, Florida facility of $9.75 per Unit. Pursuant to the Partnership agreement, with respect to the 10% incentive on distributions of Cash Flow from Operations, the General Partners did not participate in the special distribution. 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ---------------------------------------------------------------- Results of Operations - --------------------- YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996: The Partnership's net income was $2,314,000 in 1997 compared to $1,971,000 in 1996, representing an increase of $343,000, or 17%. Excluding the 1996 operations for the Partnership's business park facilities as compared to the 1997 equity in income of real estate partnership, the increase is due to an increase in the Partnership's mini-warehouse operations, partially offset by increased minority interest in income for those properties held jointly with PSI. Rental income for the Partnership's mini-warehouse operations was $10,269,000 during 1997 compared to $9,672,000 in 1996, representing an increase of $597,000, or 6%. The increase in rental income was primarily attributable to increased rental rates and occupancy rates at the mini-warehouse facilities. The monthly average realized rent per square foot for the mini-warehouse facilities was $.64 in 1997 compared to $.61 for 1996. The weighted average occupancy levels at the mini-warehouse facilities increased from 89% during 1996 to 90% in 1997. Cost of operations (including management fees) increased $161,000, or 5%, to $3,696,000 in 1997 from $3,535,000 in 1996. This increase was primarily attributable to increases in advertising, property tax, and management fee expenses. Accordingly, for the Partnership's mini-warehouse operations, property net operating income increased by $436,000, or 7%, from $6,137,000 in 1996 to $6,573,000 in 1997. The following table summarizes the Partnership's operating income, net of depreciation, from its investment in PSBPLP during 1997 compared to that of the exchanged business park facilities for 1996: 1997 1996 ----------- ----------- Equity in earnings of real estate partnership $ 265,000 $ - Rental income - 900,000 Cost of operations - 421,000 ----------- ----------- Net operating income 265,000 479,000 Depreciation - 330,000 ----------- ----------- Operating income, net of depreciation $ 265,000 $ 149,000 =========== =========== The difference in operating income, net of depreciation, in 1997 and 1996 is primarily due to the effect of depreciation and an improvement in property operations. Depreciation and amortization attributable to the Partnership's mini-warehouses increased $116,000 from $2,102,000 in 1996 to $2,218,000 in 1997. This increase was primarily attributable to the depreciation of capital expenditures made during 1996 and 1997. Minority interest in income increased $102,000, or 5%, to $2,213,000 in 1997 from $2,111,000 during 1996. This increase was primarily attributable to an increase in operations at the Partnership's real estate facilities owned jointly with PSI. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995: The Partnership's net income was $1,971,000 in 1996 compared to $2,061,000 in 1995, representing a decrease of $90,000, or 4%. The decrease was primarily attributable to an increase in depreciation expense, combined with a decrease in interest income, partially offset by decreases in environmental costs and minority interest in income for those properties held jointly with PSI, combined with increased property operating results. 10 Property net operating income (rental income less cost of operations and management fees and excluding depreciation expense) increased approximately $45,000 in 1996 compared to 1995, as rental income increased by $279,000, or 3%, and cost of operations (including management fees) increased by $234,000, or 6%. Rental income for the Partnership's mini-warehouse operations was $9,672,000 in 1996 compared to $9,412,000 in 1995, representing an increase of $260,000, or 3%. The increase in rental income was primarily attributable to increased average realized rental rates at the mini-warehouse facilities. The monthly average realized rent per square foot for the mini-warehouse facilities were $.61 in 1996 compared to $.60 in 1995. The weighted average occupancy levels at the mini-warehouse facilities remained stable at 89% during 1996 and 1995. Costs of operations (including management fees) increased $233,000, or 7%, to $3,535,000 in 1996 from $3,302,000 in 1995. This increase was primarily attributable to increases in property tax, advertising and promotion, and payroll expenses. Accordingly, for the Partnership's mini-warehouse operations, property net operating income increased by $27,000 to $6,137,000 in 1996 from $6,110,000 in 1995. Rental income for the Partnership's business park operations was $900,000 in 1996 compared to $881,000 in 1995, representing an increase of $19,000, or 2%. Rental income in 1995 included a $36,000 lease buyout at the Partnership's Tempe, Arizona facility. Excluding the effect of the lease buyout, the increase in rental income of $55,000, or 6%, was primarily attributable to increased rental rates and increased occupancy rates at the Partnership's business park facilities. The monthly realized rent per square foot for the business park facilities was $.52 in 1996 compared to $.48 in 1995. The weighted average occupancy levels at the business park facilities were 100% in 1996 compared to 99% in 1995. Cost of operations (including management fees) increased $1,000 to $421,000 in 1996 from $420,000 in 1995. Accordingly, for the Partnership's business park facilities, property net operating income increased by $18,000, or 4%, to $479,000 in 1996 from $461,000 in 1995. Interest income decreased in 1996 over 1995 as a result of a decrease in average invested cash balances. Depreciation and amortization increased $228,000 to $2,432,000 in 1996 from $2,204,000 in 1995. This increase is principally attributable to depreciation of capital expenditures made during 1995 and 1996. Minority interest in income was $2,111,000 in 1996 and $2,184,000 in 1995, representing a decrease of $73,000, or 3%. The decrease was primarily attributable to the allocation of depreciation and amortization expenses (pursuant to the partnership agreement with respect to those real estate facilities which are jointly owned with PSI) to PSI of $118,000 for 1996 and $25,000 in 1995, partially offset by increased operations at the Partnership's mini-warehouse facilities which are jointly owned with PSI. Liquidity and Capital Resources - ------------------------------- The Partnership has adequate sources of cash to finance its operations, both on a short-term and a long-term basis, primarily by internally generated cash from property operations combined with cash on-hand at December 31, 1997 totaling $1,346,000. Cash flows from operating activities ($6,480,000 for the year ended December 31, 1997) have been sufficient to meet all current obligations of the Partnership. Total capital improvements were $578,000, $1,477,000, and $609,000 in 1997, 1996, and 1995, respectively. The increase in 1996 capital improvements is primarily attributable to various repair and refurbishment projects at four of the Partnership's Houston, Texas mini-warehouse facilities for approximately $858,000. During 1998, the Partnership anticipates incurring approximately $797,000 of capital improvements (including PSI's joint venture share of $272,000). During 1995, the Partnership's property manager commenced a program to enhance the visual appearance of the mini-warehouse facilities. Such enhancements include new signs, exterior color schemes, and improvements to the rental offices. 11 The Partnership expects to continue making quarterly distributions. Total distributions paid to the General Partners and the limited partners (including per Unit amounts) for 1997 and prior years were as follows: Total Per Unit ---------------- ------------- 1997 $2,687,000 $22.00 1996 3,666,000 30.01 1995 5,403,000 44.23 1994 4,687,000 39.35 1993 2,907,000 23.80 1992 2,701,000 22.10 1991 3,339,000 27.34 1990 2,407,000 19.71 1989 3,053,000 25.00 1988 3,054,000 25.00 1987 2,899,000 24.90 1986 547,000 12.89 The Partnership, in prior years, made distributions based on anticipated operating cash flows. Beginning with the second quarter of 1990, the distribution was lowered to a level supported by current operating cash flow after capital improvements and scheduled debt service. Since then, distributions have been increased based on improved property performance. The General Partners distributed, concurrent with the distributions for the fourth quarter of 1991, a portion of the operating reserve of the Partnership of approximately $8.15 per Unit. The General Partners distributed, concurrently with the distribution for the second quarter of 1994, the net insurance proceeds received for the destruction of the Homestead, Florida facility, of $9.75 per Unit. The General Partners distributed, concurrently with the distribution for the third quarter of 1995, a portion of the operating reserve of the Partnership of approximately $8.19 per Unit. Future distribution levels will be based on cash available for distributions (cash flow from all sources, less cash necessary for capital improvement needs and to establish reserves). Impact of Year 2000 - ------------------- PSI has completed an initial assessment of its computer systems. The majority of the computer programs were installed or upgraded over the past few years and are Year 2000 compliant. Some of the older computer programs utilized by PSI were written without regard for Year 2000 issues and could cause a system failure or miscalculations with possible disruption of operations. Each of these computer programs and systems has been evaluated to be upgraded or replaced as part of PSI's Year 2000 project. The cost of the Year 2000 project will be allocated to all entities that use the PSI computer systems. The cost of the Year 2000 project which is expected to be allocated to the Partnership is approximately $60,000. The cost of new software will be capitalized and the cost of maintenance to existing systems will be expensed as incurred. The project is expected to be completed by March 31, 1999 which is prior to any anticipated impact on operating systems. PSI believes that with modifications to existing software and, in some instances, the conversion to new software, the Year 2000 issue will not pose significant operational problems. However, if such modifications are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Partnership. The costs of the project and the date on which PSI believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. -------------------------------------------- The Partnership's financial statements are included elsewhere herein. Reference is made to the Index to Consolidated Financial Statements and Financial Statement Schedules in Item 14(a). ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. ----------------------------------------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP. --------------------------------------------------- The Partnership has no directors or executive officers. The Partnership's General Partners are PSI and B. Wayne Hughes. PSI, acting through its directors and executive officers, and Mr. Hughes manage and make investment decisions for the Partnership. The Partnership's mini-warehouse properties are managed by PSI pursuant to a Management Agreement. Through 1996, the Partnership's commercial properties were managed by PSCPG, now known as PS Business Parks, Inc., pursuant to a Management Agreement. In January 1997, the Partnership transferred its business parks to PSBPLP in exchange for a partnership interest in PSBPLP. The names of all directors and executive officers of PSI, the offices held by each of them with PSI, and their ages and business experience during the past five years are as follows:
Name Positions with PSI - --------------------------------------- ---------------------------------------------------- B. Wayne Hughes Chairman of the Board and Chief Executive Officer Harvey Lenkin President and Director B. Wayne Hughes, Jr. Vice President and Director John Reyes Senior Vice President and Chief Financial Officer Carl B. Phelps Senior Vice President Obren B. Gerich Senior Vice President Marvin M. Lotz Senior Vice President David Goldberg Senior Vice President and General Counsel A. Timothy Scott Senior Vice President and Tax Counsel David P. Singelyn Vice President and Treasurer Sarah Hass Vice President and Secretary Robert J. Abernethy Director Dann V. Angeloff Director William C. Baker Director Thomas J. Barrack, Jr. Director Uri P. Harkham Director
B. Wayne Hughes, age 64, a general partner of the Partnership, has been a director of PSI since its organization in 1980 and was President and Co-Chief Executive Officer from 1980 until November 1991 when he became Chairman of the Board and sole Chief Executive Officer. Mr. Hughes has been active in the real estate investment field for over 25 years. He is the father of B. Wayne Hughes, Jr. Harvey Lenkin, age 61, has been employed by PSI for 20 years and became President and a director of PSI in November 1991. Mr. Lenkin is a director of the National Association of Real Estate Investment Trusts (NAREIT). 13 B. Wayne Hughes, Jr., age 38, became a director of PSI in January 1998. He has been Vice President - Acquisitions of the Company since 1992. He is the son of B. Wayne Hughes. John Reyes, age 37, a certified public accountant, joined PSI in 1990 and was controller of PSI from 1992 until December 1996 when he became Chief Financial Officer. He became a Vice President of PSI in November 1995 and a Senior Vice President of PSI in December 1996. From 1983 to 1990, Mr. Reyes was employed by Ernst & Young. Carl B. Phelps, age 58, became a Senior Vice President of PSI in January 1998 with overall responsibility for property acquisition and development. From June 1991 until joining PSI, he was a partner in the law firm of Andrews & Kurth, L.L.P., which performed legal services for PSI. From December 1982 through May 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI. Obren B. Gerich, age 59, a certified public accountant, has been a Vice President of PSI since 1980 and became Senior Vice President of PSI in November 1995. He was Chief Financial Officer of PSI until November 1991. Marvin M. Lotz, age 55, has had overall responsibility for Public Storage's mini-warehouse operations since 1988. He became a Senior Vice President of PSI in November 1995. Mr. Lotz was an officer of PSI with responsibility for property acquisitions from 1983 until 1988. David Goldberg, age 48, joined PSI's legal staff in June 1991. He became Senior Vice President and General Counsel of PSI in November 1995. From December 1982 until May 1991, he was a partner in the law firm of Sachs & Phelps, then counsel to PSI. A. Timothy Scott, age 46, became a Senior Vice President and Tax Counsel of PSI and Vice President and Tax Counsel of the Public Storage REITs in November 1996. From June 1991 until joining PSI, Mr. Scott practiced tax law as a shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to PSI. Prior to June 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI. David P. Singelyn, age 36, a certified public accountant, has been employed by PSI since 1989 and became Vice President and Treasurer of PSI in November 1995. From 1987 to 1989, Mr. Singelyn was Controller of Winchell's Donut Houses, L.P. Sarah Hass, age 42, became Secretary of PSI in February 1992. She became a Vice President of PSI in November 1995. She joined PSI's legal department in June 1991, rendering services on behalf of PSI. From 1987 until May 1991, her professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI, and from April 1986 until June 1987, she was associated with that firm, practicing in the area of securities law. From September 1979 until September 1985, Ms. Hass was associated with the law firm of Rifkind & Sterling, Incorporated. Robert J. Abernethy, age 58, has been President of American Standard Development Company and of Self-Storage Management Company, which develop and operate mini-warehouses, since 1976 and 1977, respectively. Mr. Abernethy has been a director of PSI since its organization in 1980. He is a member of the board of directors of Johns Hopkins University and of the Los Angeles County Metropolitan Transportation Authority and a former member of the board of directors of the Metropolitan Water District of Southern California. Dann V. Angeloff, age 62, has been President of the Angeloff Company, a corporate financial advisory firm, since 1976. The Angeloff Company has rendered, and is expected to continue to render, financial advisory and securities brokerage services for PSI. Mr. Angeloff is the general partner of a limited partnership that owns a mini-warehouse operated by PSI and which secures a note owned by PSI. Mr. Angeloff has been a director of PSI since its organization in 1980. He is a director of Compensation Resource Group, Eagle Lifestyle Nutrition, Inc., Nicholas/Applegate Growth Equity Fund, Nicholas/Applegate Investment Trust, ReadyPac Produce, Inc. and Royce Medical Company. William C. Baker, age 64, became a director of PSI in November 1991. Since November 1997, Mr. Baker has been Chairman of the Board and Chief Executive Officer of The Santa Anita Companies, Inc., which operates the Santa Anita 14 Racetrack and is a wholly-owned subsidiary of Meditrust Operating Company. From August 1996 until November 1997, he was Chairman of the Board and Chief Executive Officer of Santa Anita Operating Company and Chairman of the Board of the Board of Santa Anita Realty Enterprises, Inc., the companies which were merged with Meditrust in November 1992. From April 1993 through May 1995, Mr. Baker was President of Red Robin International, Inc., an operator and franchiser of casual dining restaurants in the United States and Canada. From January 1992 through December 1995, he was Chairman and Chief Executive Officer of Carolina Restaurant Enterprises, Inc., a franchisee of Red Robin International, Inc. Since 1991, he has been Chairman of the Board of Coast Newport Properties, a real estate brokerage company. From 1976 to 1988, he was a principal shareholder and Chairman and Chief Executive Officer of Del Taco, Inc., an operator and franchiser of fast food restaurants in California. Mr. Baker is a director of Callaway Golf Company and Meditrust Operating Company. Thomas J. Barrack, Jr., age 50, became a director of PSI in February 1998. Mr. Barrack has been the Chairman and Chief Executive Officer of Colony Capital, Inc. since September 1991. Colony Capital, Inc. is one of the largest real estate investors in America, having acquired properties in the U.S., Europe and Asia. Prior to founding Colony Capital, Inc., from 1987 to 1991, Mr. Barrack was a principal with the Robert M. Bass Group, Inc., the principal investment vehicle for Robert M. Bass of Fort Worth, Texas. From 1985 to 1987, Mr. Barrack was President of Oxford Ventures, Inc., a Canadian-based real estate development company. From 1984 to 1985, he was Senior Vice President at E.F. Hutton Corporate Finance in New York. Mr. Barrack was appointed by President Ronald Reagan as Deputy Under Secretary at the U.S. Department of the Interior from 1982 to 1983. Mr. Barrack currently is a director of Continental Airlines, Inc. and Virgin Entertainment Group, Ltd. Uri P. Harkham, age 49, became a director of PSI in March 1993. Mr. Harkham has been the President and Chief Executive Officer of the Jonathan Martin Fashion Group, which specializes in designing, manufacturing and marketing women's clothing, since its organization in 1976. Since 1978, Mr. Harkham has been the Chairman of the Board of Harkham Properties, a real estate firm specializing in buying and managing fashion warehouses in Los Angeles and Australia. Pursuant to Articles 16 and 17 of the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), a copy of which is included in the Partnership's prospectus included in the Partnership's Registration Statement, File No. 33-1280, each of the General Partners continues to serve until (i) death, insanity, insolvency, bankruptcy or dissolution, (ii) withdrawal with the consent of the other general partner and a majority vote of the limited partners, or (iii) removal by a majority vote of the limited partners. Each director of PSI serves until he resigns or is removed from office by PSI, and may resign or be removed from office at any time with or without cause. Each officer of PSI serves until he resigns or is removed by the board of directors of PSI. Any such officer may resign or be removed from office at any time with or without cause. There have been no events under any bankruptcy act, no criminal proceedings, and no judgments or injunctions material to the evaluation of the ability of any director or executive officer of PSI during the past five years. ITEM 11. EXECUTIVE COMPENSATION. ----------------------- The Partnership has no subsidiaries, directors or officers. See Item 13 for a description of certain transactions between the Partnership and the General Partners and their affiliates. 15 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ---------------------------------------------------------------
(a) At December 31, 1997, PSI beneficially owned more than 5% of the Units of the Partnership: Title Amount of Percent of Name and Address of Beneficial of Class Beneficial Owner Ownership Class - ------------------ -------------------------------------------- ------------------- ----------- Units of Limited Public Storage, Inc. Partnership 701 Western Avenue Interest Glendale, CA 91201-2394 (1) 63,478 Units (1) 58.33%
- --------------- (1) These Units are held of record by SEI Arlington Acquisition Corporation, a wholly-owned subsidiary of PSI. The Partnership is not aware of any other beneficial owners of more than 5% of the Units. (b) The Partnership has no officers and directors. The General Partners (or their predecessor-in-interest) have contributed $550,000 to the capital of the Partnership representing 1% of the aggregate capital contributions and as a result participate in the distributions to the limited partners and in the Partnership's profits and losses in the same proportion that the general partners' capital contribution bears to the total capital contribution. Information regarding ownership of the Units by PSI, a General Partner, is set forth under section (a) above. The directors and executive officers of PSI, as a group, do not own any units. (c) The Partnership knows of no contractual arrangements, the operation of the terms of which may at a subsequent date result in a change in control of the Partnership, except for articles 16, 17 and 21.1 of the Partnership Agreement, which provide, in substance, that the limited partners shall have the right, by majority vote, to remove a general partner and that a general partner may designate a successor with the consent of the other general partner and a majority of the limited partners. The Partnership has acquired interests in 20 properties (which exclude the properties transferred to PSBPLP in January 1997); 18 of such properties are held in a general partnership comprised of the Partnership and PSI. Under the terms of the partnership agreement, PSI has the right to compel a sale of each property at any time after seven years from the date of acquisition at not less than its independently determined fair market value provided the Partnership receives its share of the net sales proceeds solely in cash. As of December 31, 1997, PSI has the right to require the Partnership to sell a majority of its properties. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ----------------------------------------------- The Partnership Agreement provides that the General Partners and their affiliates are entitled to the following compensation: 1. Incentive distributions equal to 10% of Cash Flow from Operations. 2. Provided the limited partners have received distributions equal to 100% of their investment plus a cumulative 8% per year (not compounded) on their investment (reduced by distributions other than from Cash Flow from Operations), subordinated incentive distributions equal to 15% of remaining Cash from Sales or Refinancings. 3. Provided the limited partners have received distributions equal to 100% of their capital contributions plus a cumulative 6% per year (not compounded) on their investment (reduced by distributions other than distributions from Cash Flow from Operations), brokerage commissions at the lesser of 3% of the sales price of a property or 50% of a competitive commission. 16 During 1997, approximately $269,000 was paid to PSI with respect to items 1, 2, and 3 above. The Partnership owns interests in 20 properties (which exclude the properties transferred to PSBPLP in January 1997); 18 of such properties are held in a general partnership comprised of the Partnership and PSI. The Partnership has a Management Agreement with PSI pursuant to which the Partnership pays PSI a fee of 6% of the gross revenues of the mini-warehouse spaces operated for the Partnership. During 1997, the Partnership paid fees of $617,000 to PSI pursuant to the Management Agreement. Through 1996, the Partnership's commercial properties were managed by PSCPG pursuant to a Management Agreement which provides for the payment of a fee by the Partnership of 5% of the gross revenues of the commercial space operated for the Partnership. In January 1997, the Partnership and PSI and other related partnerships transferred a total of 35 business parks to PSBPLP, an operating partnership formed to own and operate business parks in which PSI has a significant interest. Included among the properties transferred were the Partnership's business parks in exchange for a partnership interest in PSBPLP. The general partner of PSBPLP is PS Business Parks, Inc., a REIT traded on the American Stock Exchange. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. --------------------------------------------------------------- (a) List of Documents filed as part of the Report. 1. Financial Statements: See Index to Consolidated Financial Statements and Financial Statement Schedules. 2. Financial Statement Schedules: See Index to Consolidated Financial Statements and Financial Statement Schedules. 3. Exhibits: See Exhibit Index contained herein. (b) Reports on Form 8-K. None. (c) Exhibits: See Exhibit Index contained herein. 17 PS PARTNERS VII, LTD., a California Limited Partnership INDEX TO EXHIBITS 3.1 Amended and Restated Agreement of Limited Partnership. Previously filed with the Securities and Exchange Commission as an Exhibit to the Storage Equities, Inc. Registration Statement No. 33-43750 and incorporated herein by reference. 10.1 Second Amended and Restated Management Agreement dated November 16, 1995, between the Partnership and Public Storage Management, Inc. Previously filed with the Securities and Exchange Commission as an exhibit to PS Partners, Ltd.'s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. 10.2 Amended Management Agreement dated February 21, 1995 between Storage Equities, Inc. and Public Storage Commercial Properties Group, Inc. Previously filed with the Securities and Exchange Commission as an exhibit to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.3 Participation Agreement dated as of April 2, 1986, among Storage Equities, Inc., the Partnership, Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr. Previously filed with the Securities and Exchange Commission as an exhibit to the Storage Equities, Inc. Current Report on Form 8-K dated August 20, 1986 and incorporated herein by reference. 27 Financial date schedule. Filed herewith. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PS PARTNERS VII, LTD., a California Limited Partnership Dated: March 26, 1998 By: Public Storage, Inc., General Partner By: /s/ B Wayne Hughes ----------------------------------------- B. Wayne Hughes, Chairman of the Board By: /s/ B Wayne Hughes ----------------------------------------- B. Wayne Hughes, General Partner Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Partnership in the capacities and on the dates indicated.
Signature Capacity Date - ----------------------------------- ------------------------------------------ ------------------------------------- /s/ B. Wayne Hughes Chairman of the Board and Chief March 26, 1998 - ---------------------------- Executive Officer of Public Storage, Inc. and B. Wayne Hughes General Partner (principal executive officer) /s/ Harvey Lenkin President and Director March 26, 1998 - ---------------------------- of Public Storage, Inc. Harvey Lenkin /s/ B. Wayne Hughes, Jr. Vice President and Director March 26, 1998 - ---------------------------- of Public Storage, Inc. B. Wayne Hughes, Jr. /s/ John Reyes Senior Vice President and Chief Financial Officer March 26, 1998 - ---------------------------- of Public Storage, Inc. (principal financial John Reyes officer and principal accounting officer) /s/ Robert J. Abernethy Director of Public Storage, Inc. March 26, 1998 - ----------------------------- Robert J. Abernethy /s/ Dann V. Angeloff Director of Public Storage, Inc. March 26, 1998 - ------------------------------ Dann V. Angeloff /s/ William C. Baker Director of Public Storage, Inc. March 26, 1998 - ------------------------------ William C. Baker /s/ Uri P. Harkham Director of Public Storage, Inc. March 26, 1998 - ------------------------------ Uri P. Harkham
19 PS PARTNERS VII, LTD., a California Limited Partnership INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) Page References Report of Independent Auditors F-1 Consolidated Financial Statements and Schedules: Consolidated Balance Sheets as of December 31, 1997 and 1996 F-2 For the years ended December 31, 1997, 1996 and 1995: F-3 Statements of Income Consolidated Statements of Partners' Equity F-4 Consolidated Statements of Cash Flows F-5 - F-6 Notes to Consolidated Financial Statements F-7 - F-10 Schedule III - Real Estate and Accumulated Depreciation F-11 - F-12 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. 20 Report of Independent Auditors The Partners PS Partners VII, Ltd., a California Limited Partnership We have audited the consolidated balance sheets of PS Partners VII, Ltd., a California Limited Partnership, as of December 31, 1997 and 1996 and the related consolidated statements of income, partners' equity, and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PS Partners VII, Ltd., a California Limited Partnership, at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP February 23, 1998 Los Angeles, California F-1
PS PARTNERS VII, LTD. a California Limited Partnership CONSOLIDATED BALALNCE SHEETS December 31, 1997 and 1996 1997 1996 ------------ ------------ ASSETS Cash and cash equivalents $ 1,346,000 $ 142,000 Rent and other receivables 72,000 73,000 Real estate facilities, at cost: Land 16,030,000 18,782,000 Buildings and equipment 44,431,000 51,664,000 ------------ ------------ 60,461,000 70,446,000 Less accumulated depreciation (19,250,000) (20,703,000) ------------ ------------ 41,211,000 49,743,000 Investment in real estate partnership 7,046,000 - Other assets 110,000 164,000 ------------ ------------ $ 49,785,000 $ 50,122,000 ============ ============ LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 987,000 $ 1,054,000 Advance payments from renters 353,000 341,000 Minority interest in general partnerships 21,631,000 21,540,000 Partners' equity: Limited partners' equity, $500 per unit, 150,000 units authorized, 108,831 issued and outstanding 26,475,000 26,844,000 General partners' equity 339,000 343,000 ------------ ------------ Total partners' equity 26,814,000 27,187,000 ------------ ------------ $ 49,785,000 $ 50,122,000 ============ ============
See accompanying notes. F-2
PS PARTNERS VII, LTD. a California Limited Partnership CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 1997, 1996, and 1995 1997 1996 1995 ----------- ----------- ----------- REVENUE: Rental income $ 10,269,000 $ 10,572,000 $ 10,293,000 Equity in income of real estate partnership 265,000 - - Interest income 29,000 12,000 108,000 ----------- ----------- ----------- 10,563,000 10,584,000 10,401,000 ----------- ----------- ----------- COSTS AND EXPENSES: Cost of operations 3,079,000 3,331,000 3,113,000 Management fees 617,000 625,000 609,000 Depreciation and amortization 2,218,000 2,432,000 2,204,000 Administrative 122,000 114,000 120,000 Environmental costs - - 110,000 ----------- ----------- ----------- 6,036,000 6,502,000 6,156,000 ----------- ----------- ----------- Income before minority interest 4,527,000 4,082,000 4,245,000 Minority interest in income (2,213,000) (2,111,000) (2,184,000) ----------- ----------- ----------- NET INCOME $ 2,314,000 $ 1,971,000 $ 2,061,000 =========== =========== =========== Limited partners' share of net income ($18.61, $14.59, and $13.83 per unit in 1997, 1996, and 1995, respectively) $ 2,025,000 $ 1,588,000 $ 1,505,000 General partners' share of net income 289,000 383,000 556,000 ----------- ----------- ----------- $ 2,314,000 $ 1,971,000 $ 2,061,000 =========== =========== ===========
See accompanying notes. F-3
PS PARTNERS VII, LTD. a California Limited Partnership CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY For the years ended December 31, 1997, 1996, and 1995 Limited General Partners Partners Total ------------ --------- ------------ Balances at December 31, 1994 $ 31,831,000 $ 393,000 $ 32,224,000 Net income 1,505,000 556,000 2,061,000 Distributions (4,814,000) (589,000) (5,403,000) ------------ --------- ------------ Balances at December 31, 1995 28,522,000 360,000 28,882,000 Net income 1,588,000 383,000 1,971,000 Distributions (3,266,000) (400,000) (3,666,000) ------------ --------- ------------ Balances at December 31, 1996 26,844,000 343,000 27,187,000 Net income 2,025,000 289,000 2,314,000 Distributions (2,394,000) (293,000) (2,687,000) ------------ --------- ------------ Balances at December 31, 1997 $ 26,475,000 $ 339,000 $ 26,814,000 ============ ========= ============
See accompanying notes. F-4
PS PARTNERS VII, LTD. a California Limited Partnership CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996, and 1995 1997 1996 1995 ----------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,314,000 $ 1,971,000 $ 2,061,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,218,000 2,432,000 2,204,000 Decrease (increase) in rent and other receivables 1,000 (25,000) (5,000) Decrease (increase) in other assets 54,000 (39,000) (7,000) (Decrease) increase in accounts payable (67,000) 84,000 30,000 Increase (decrease) in advance payments from renters 12,000 (46,000) 14,000 Equity in income of real estate partnership (265,000) - - Minority interest in income 2,213,000 2,111,000 2,184,000 ----------- --------- --------- Total adjustments 4,166,000 4,517,000 4,420,000 ----------- --------- --------- Net cash provided by operating activities 6,480,000 6,488,000 6,481,000 ----------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from insurance settlement for partial condemnation of real estate facility - - 312,000 Distributions from real estate partnership 111,000 - - Additions to real estate facilities (578,000) (1,477,000) (609,000) ----------- --------- --------- Net cash used in investing activities (467,000) (1,477,000) (297,000) ----------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to holder of minority interest (2,122,000) (1,738,000) (2,090,000) Distributions to partners (2,687,000) (3,666,000) (5,403,000) ----------- --------- --------- Net cash used in financing activities (4,809,000) (5,404,000) (7,493,000) ----------- --------- --------- Net increase (decrease) in cash and cash equivalents 1,204,000 (393,000) (1,309,000) Cash and cash equivalents at the beginning of the period 142,000 535,000 1,844,000 ----------- --------- --------- Cash and cash equivalents at the end of the period $ 1,346,000 $ 142,000 $ 535,000 =========== ========= =========
See accompanying notes. F-5
PS PARTNERS VII, LTD. a California Limited Partnership CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996, and 1995 (Continued) 1997 1996 1995 ----------- --------- --------- Supplemental schedule of noncash investing and financing activities: Investment in real estate partnership $ (6,892,000) $ - $ - Transfer of real estate facilities for interest in real estate 6,892,000 - - partnership, net
See accompanying notes. F-6 PS PARTNERS VII, LTD., a California Limited Partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997 1. Summary of Significant Accounting Policies and Partnership Matters ------------------------------------------------------------------ Description of Partnership -------------------------- PS Partners VII, Ltd., a California Limited Partnership (the "Partnership") was formed with the proceeds of an interstate public offering. PSI Associates II, Inc. ("PSA"), an affiliate of Public Storage Management, Inc., organized the Partnership along with B. Wayne Hughes ("Hughes"). In September 1993, Storage Equities, Inc., now known as Public Storage, Inc. ("PSI"), a California corporation, acquired the interest of PSA relating to its general partner capital contribution in the Partnership and was substituted as a co-general partner in place of PSA. In 1995, there was a series of mergers among Public Storage Management, Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc. and their affiliates (collectively, "PSMI"), culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI into Storage Equities, Inc. In the PSMI Merger, Storage Equities, Inc. was renamed Public Storage, Inc. and it acquired substantially all of PSMI's United States real estate operations and became the operator of the Partnership's mini-warehouse properties. The Partnership has invested in existing mini-warehouse storage facilities which offer self-service storage spaces for lease, usually on a month-to-month basis, to the general public and, to a lesser extent, in existing business park facilities which offer industrial and office space for lease. The Partnership has ownership interests in 20 properties in 10 states, which exclude 2 properties transferred to PS Business Parks, L.P. ("PSBPLP") in January 1997. 18 of the properties are owned jointly through 15 general partnerships (the "Joint Ventures") with PSI. For tax administrative efficiency the Joint Ventures were subsequently consolidated into a single general partnership. The Partnership is the managing general partner of the Joint Ventures, with ownership interests in the Joint Ventures ranging from 40.2% to 70%. Basis of Presentation --------------------- The consolidated financial statements include the accounts of the Partnership and the Joint Ventures. PSI's ownership interest in the Joint Ventures is shown as minority interest in general partnerships in the accompanying consolidated balance sheets. All significant intercompany balances and transactions have been eliminated. Minority interest in income represents PSI's share of net income with respect to the Joint Ventures. Under the terms of the partnership agreements all depreciation and amortization with respect to each Joint Venture is allocated solely to the Partnership until the limited partners recover their initial capital contribution. Thereafter, all depreciation and amortization is allocated solely to PSI until it recovers its initial capital contribution. All remaining depreciation and amortization is allocated to the Partnership and PSI in proportion to their ownership percentages. Depreciation and amortization allocated to PSI was $116,000, $118,000, and $25,000 in 1997, 1996, and 1995, respectively. The allocation of depreciation and amortization to PSI has the effect of reducing minority interest, and has no effect on the reported depreciation and amortization expense. Under the terms of the partnership agreements, PSI has the right to compel the sale of each property in the general partnerships at any time after seven years from the date of acquisition at not less than its independently determined fair market value provided the Partnership receives its share of the net proceeds F-7 PS PARTNERS VII, LTD., a California Limited Partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997 1. Summary of Significant Accounting Policies and Partnership Matters (continued) ------------------------------------------------------------------ Basis of Presentation (continued) --------------------------------- solely in cash. PSI's right to require the Partnership to sell all of the jointly owned properties became exercisable during 1993. Depreciation and Amortization ----------------------------- The Partnership depreciates the buildings and equipment on a straight-line method over estimated useful lives of 25 and 5 years, respectively. Leasing commissions relating to business park properties are expensed when incurred. Revenue Recognition ------------------- Property rents are recognized as earned. Allocation of Net Income ------------------------ The General Partners' share of net income consists of an amount attributable to their 1% capital contribution and an additional percentage of cash flow (as defined, see Note 4) which relates to the General Partners' share of cash distributions as set forth in the Partnership Agreement. All remaining net income is allocated to the limited partners. Per Unit Data ------------- Per unit data is based on the weighted average number of limited partner units (108,831) outstanding during the year. Environmental Cost ------------------ Substantially all of the Partnership's facilities were acquired prior to the time that it was customary to conduct extensive environmental investigations in connection with the property acquisitions. During the fourth quarter of 1995, an independent environmental consulting firm completed environmental assessments on the Partnership's properties to evaluate the environmental condition of, and potential environmental liabilities of such properties. Based on the assessments, the Partnership believes that it is probable that it will incur costs totaling $71,000 after December 31, 1997 for known environmental remediation requirements. During 1997, 1996, and 1995, the Partnership paid none, $13,000, and $25,000, respectively, in connection with the environmental remediations. Although there can be no assurance, the Partnership is not aware of any unaccrued environmental contamination of its facilities which individually or in the aggregate would be material to the Partnership's overall business, financial condition, or results of operations. Use of Estimates ---------------- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Distributions ------------------ The Partnership Agreement provides for quarterly distributions of cash flow from operations (as defined). Cash distributions per limited partner unit were $22.00, $30.01, and $44.23 for 1997, 1996, and 1995, respectively. F-8 PS PARTNERS VII, LTD., a California Limited Partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997 1. Summary of Significant Accounting Policies and Partnership Matters (continued) ------------------------------------------------------------------ Cash and Cash Equivalents ------------------------- For financial statement purposes, the Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. 2. Real Estate Facilities ---------------------- In August 1992, the buildings at a mini-warehouse facility located in Homestead, Florida were completely destroyed by Hurricane Andrew. The facility was adequately insured with respect to business interruption and reconstruction of the facility. During 1993, the Partnership received net insurance settlement proceeds of approximately $1,212,000. The General Partners decided not to reconstruct the buildings and have not yet sold the related land. In 1993, the Partnership recognized a loss of $132,000 on the insurance settlement and write-off of the net book value of the property. In 1993, the State of Texas exercised its right of eminent domain and took possession of a portion of the Houston, North Freeway mini-warehouse facility, including land and buildings. Since 1993, the Partnership and the State of Texas have been negotiating an appropriate amount of compensation to be paid to the Partnership for the portion of the property which was condemned. In 1995, a final settlement was reached whereby the Partnership received total condemnation proceeds of $845,000 (initial proceeds were received in 1993, and the final settlement was received in 1995). Approximately $413,000 of the proceeds was utilized to construct additional rental space on the remaining property. In 1995, the Partnership reduced real estate facilities by approximately $332,000, representing the net book value of the property taken in the condemnation. In 1995, the State of Oregon exercised its right of eminent domain, and took possession of a portion of the Tualatin Highway, Hillsboro mini-warehouse facility. Property claimed included utilities, signage, and drainage easements. The Partnership and the State of Oregon reached a settlement in 1997, whereby the Partnership received condemnation proceeds of approximately $100,000. Accordingly, in 1997, the Partnership reduced real estate facilities by the amount of the proceeds. Net of capitalized costs previously incurred of approximately $100,000 (during 1995 and 1996) to cure defects caused by the condemnation, there was no net change in the overall book value of the Tualatin real estate facilities, as a result of the partial condemnation. In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 ("Statement 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Statement 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the method of accounting for long-lived assets that are expected to be disposed. The Partnership adopted Statement 121 in 1996 and the adoption had no effect. In January 1997, the Partnership and PSI and other related partnerships transferred a total of 35 business parks to PSBPLP, an operating partnership formed to own and operate business parks in which PSI has a significant interest. Included among the properties transferred were the Partnership's business parks in exchange for a partnership interest in PSBPLP. The general partner of PSBPLP is PS Business Parks, Inc. F-9 PS PARTNERS VII, LTD., a California Limited Partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997 3. General Partners' Equity ------------------------ The General Partners have a 1% interest in the Partnership. In addition, the General Partners have a 10% interest in cash distributions attributable to operations, exclusive of distributions attributable to sales and refinancing proceeds. Proceeds from sales and refinancings will be distributed entirely to the limited partners until the limited partners recover their investment plus a cumulative 8% annual return (not compounded); thereafter, the General Partners have a 15% interest in remaining proceeds. 4. Related Party Transactions -------------------------- The Partnership has a management agreement with PSI whereby PSI operates the Partnership's mini-warehouse facilities for a fee equal to 6% of the facilities' monthly gross revenue (as defined). In January 1997, the Partnership transferred its business park facilities to PSBPLP in exchange for a partnership interest in PSBPLP. PSI has a significant economic interest in PSBPLP and PSBP. 5. Leases ------ The Partnership has invested primarily in existing mini-warehouse storage facilities which offer self-service storage spaces for lease to the general public. Leases for such space are usually on a month-to-month basis. 6. Taxes Based on Income --------------------- Taxes based on income are the responsibility of the individual partners and, accordingly, the Partnership's consolidated financial statements do not reflect a provision for such taxes. Taxable net income was $4,762,000, $1,833,000 and $1,825,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The difference between taxable income and book income is primarily related to timing differences in depreciation expense. F-10
PS PARTNERS VII, LTD. A CALIFORNIA LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION Costs Gross Carrying Amount Initial Cost subsequent At December 31, 1997 ----------------------to acquisition -------------------------------------------------- Date Building & Building & Building & Accumulated Acquired Description Encumbrances Land Improvement Improvements Land Improvements Total Depreciation - ----------------------------------------------------------------------------------------------------------------------------------- Mini-warehouse 9/86 Lakewood/W. 6th Ave. $ - $ 1,070,000 $ 3,155,000 $ 479,000 $ 1,070,000 $ 3,634,000 $ 4,704,000 $ 1,697,000 10/86 Pilgrim/Houston/Loop 610 - 1,299,000 3,491,000 926,000 1,299,000 4,417,000 5,716,000 1,977,000 10/86 Pilgrim/Houston/S.W. Fwy - 904,000 2,319,000 539,000 904,000 2,858,000 3,762,000 1,261,000 10/86 Pilgrim/Houston/FM 1960 - 719,000 1,987,000 2,000 662,000 2,046,000 2,708,000 887,000 10/86 Pilgrim/Houston/Old Katy Rd. - 1,365,000 3,431,000 917,000 1,365,000 4,348,000 5,713,000 1,886,000 10/86 Pilgrim/Houston/Long Point - 451,000 1,187,000 469,000 451,000 1,656,000 2,107,000 772,000 10/86 Austin/Red Rooster - 1,390,000 1,710,000 393,000 1,390,000 2,103,000 3,493,000 926,000 12/86 Lynnwood/196th SW - 1,063,000 1,602,000 314,000 1,063,000 1,916,000 2,979,000 844,000 12/86 Auburn/Auburn Way North - 606,000 1,144,000 325,000 606,000 1,469,000 2,075,000 681,000 12/86 Gresham/Burnside - 351,000 1,056,000 335,000 351,000 1,391,000 1,742,000 613,000 12/86 Denver/Sheridan Rd. - 1,033,000 2,792,000 589,000 1,033,000 3,381,000 4,414,000 1,479,000 12/86 Marietta/Cobb Pkwy. - 536,000 2,764,000 548,000 536,000 3,312,000 3,848,000 1,477,000 12/86 Hillsboro/Tualatin Hwy. - 461,000 574,000 207,000 461,000 781,000 1,242,000 380,000 11/86 Arleta/Osborne St. - 987,000 663,000 230,000 987,000 893,000 1,880,000 393,000 4/87 City of Industry/Amar Rd. - 748,000 2,052,000 363,000 748,000 2,415,000 3,163,000 646,000 3/87 Annandale/Ravensworth - 679,000 1,621,000 185,000 679,000 1,806,000 2,485,000 801,000 5/87 OK City/Hefner - 459,000 941,000 206,000 459,000 1,147,000 1,606,000 499,000 12/86 San Antonio/Sunst Rd. - 1,206,000 1,594,000 474,000 1,206,000 2,068,000 3,274,000 871,000 8/86 Hammond/Calumet - 97,000 751,000 470,000 97,000 1,221,000 1,318,000 496,000 7/86 Portland/Moody - 663,000 1,637,000 (68,000) 663,000 1,569,000 2,232,000 664,000 ------------------------------------------------------------------------------------------------- $ - $ 16,087,000 $ 36,471,000 $ 7,903,000 $ 16,030,000 $ 44,431,000 $ 60,461,000 $ 19,250,000 =================================================================================================
F-11
PS PARTNERS VII, LTD. A CALIFORNIA LIMITED PARTNERSHIP REAL ESTATE RECONCILIATION SCHEDULE III (CONTINUED) (A) The following is a reconciliation of cost and related accumulated depreciation. GROSS CARRYING COST RECONCILIATION Years Ended December 31, ----------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Balance at beginning of the period $ 70,446,000 $ 68,969,000 $ 68,847,000 ------------ ------------ ------------ Additions during the period: Improvements, etc. 578,000 1,477,000 587,000 Deductions during the period: Disposition of real estate (10,563,000) - (465,000) ------------ ------------ ------------ Balance at the close of the period $ 60,461,000 $ 70,446,000 $ 68,969,000 ============= ============ ============ ACCUMULATED DEPRECIATION RECONCILIATION Years Ended December 31, ----------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Balance at beginning of the period $ 20,703,000 $ 18,271,000 $ 16,222,000 Additions during the period: Depreciation 2,218,000 2,432,000 2,049,000 Deductions during the period: Disposition of real estate (3,671,000) - - ------------ ------------ ------------ Balance at the close of the period $ 19,250,000 $ 20,703,000 $ 18,271,000 ============ ============ ============
(B) The aggregate cost of real estate for Federal income tax purposes is $59,804,000. F-12 EX-27 2 FDS --
5 0000781850 PS PARTNERS VII, LTD. 1 U.S. $ 12-MOS DEC-31-1997 JAN-1-1997 DEC-31-1997 1 1,346,000 0 72,000 0 0 1,418,000 60,461,000 (19,250,000) 49,785,000 1,340,000 0 0 0 0 26,814,000 49,785,000 0 10,563,000 0 3,697,000 2,339,000 0 0 2,314,000 0 2,314,000 0 0 0 2,314,000 18.61 18.61
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