Storage Firm Partnerships Shifted to Trusts


Public Storage Inc. in Glendale has completed the first phase of its plan to convert 23 of its limited partnerships to real estate investment trusts whose shares can be traded in the stock market.

Public Storage, with its familiar bright-orange signs, is the nation’s largest operator of self-storage warehouses. Over the years it also has organized more than 150 funds--including public and private partnerships, as well as REITs--that have raised more than $2 billion from investors for building new warehouses and other properties.

Five of the 23 partnerships that Public Storage is converting to REITs made the change Dec. 31, and their shares began trading on the American Stock Exchange last week. They are named Public Storage Properties 8, 9, 10, 11 and 12. Eighteen other partnerships are in various stages of converting to REIT status, said Harvey Lenkin, president of the five new REITs and a vice president of Public Storage.


Besides having stock ownership, REITs are investment vehicles that avoid paying income taxes at the corporate level because they distribute nearly all of their profits to stockholders.

In proxy material sent to investors, whose approval was required to form the new REITs, Public Storage said it proposed the conversions to provide the investors with an investment that could be bought and sold more easily than their partnership units, a so-called more liquid investment.

Also, the company said the change would “increase the ability to attract new investors,” something Public Storage’s partnerships have had trouble doing in recent quarters because of the national slump in the commercial real estate market.

Public Storage also expressed “concern with the negative perception” of real estate partnerships among investors, compared with “the growing public acceptance and understanding of REITs.”

The five new REITs now listed on the American Stock Exchange are of similar size, with each owning between 13 and 23 properties, mostly self-storage facilities and business parks. Their annual revenues last year ranged from $6 million to $8.3 million, and their profits represented 39 to 46 cents per $1 of revenue.

Public Storage President B. Wayne Hughes Sr. and a Public Storage affiliate also were the general partners for the REITs’ predecessor partnerships, and as a group they maintain a 26% voting stake in each of the new REITs.

As the stocks of the five REITs began trading last week, they got a warm reception on Wall Street. Last Thursday, each of the REITs gained more than $1 a share, or 12%. (The market was closed Friday in observance of Good Friday.)

There are two other REITs that Public Storage earlier organized: Storage Properties Inc. and Storage Equities Inc., also based in Glendale.

Their stocks have performed well this year. Storage Properties, which began trading on the Amex last October, climbed 33% in this year’s first quarter, to $7.50 a share. Storage Equities’ stock climbed 21%, to $6 a share, on the New York Stock Exchange.