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REAL ESTATE
LIMITED PARTNERSHIP SCORECARD
Name of Offering -
PUBLIC STORAGE INVESTORS 12, a Cal. L.P. 5-2-88
Size - $5,650,000 (113 units
@ $50M each - staged 3-5 yrs.) Min. $1,750,000. Goals: 1. Pres. of capital.
2. Produce rental income to offset expenses., service debt & prov. cash
avail for dist. 3. Provide pot. cap. gain thru apprec. of props. Private
placement. Hld. pd. - 7-10 yrs. - pg. 6. Suitability - Accred. + 35
non-accred. - Income in curr. yr. - $75M + N/W of $150M or $200M of N/W
alone(excl. h,c, & f). Staged - curr. liquidity - $45M/unit - Gross
inc. 20% of N/W - $270M. G.P. may request tax returns.
Sponsor - Public Storage
Investors, Inc. (PSII) & B. Wayne Hughes, 75% owner of PSI.
Description - L.P. org.
to acq. 3 parcels of land to be developed & held for rental income
& apprec. as self storage facilities offering storage space for pers.
& bus. use (mini-warehouses). There are two props located in Calif. -
San Francisco and Montebello (L.A.) The other prop. is located in
Baltimore, Md. L.P. has completed dev't. on only one of the props.
(Baltimore) and is developing the other 2 parcels.
1. General Partner
Experience - Public Storage Investors, Inc. was org. in 1984 (pg. 60). PSI,
not the G.P. was org. in 1972 but began syndicating in 1976 (PSP I).
Score ______2______
2. Net Worth
Consideration - 12-21-87 - Audit of PSII Corp. G.P. - $1,254,020. Pg. 60.
B. Wayne Hughes, indiv. repres. a N/W of $1,000,000. HE IS PERSONAL
GUARANTOR OF OTHER PSI L.P.'S TO THE EXTENT OF $50,000,000!
Score ______1______
3. Resale Activity
(Track record) - Pg. 59 - PSI - 31 Public L.P.'s & 27 privates along with
19 foreign progs. As of 12-31-87, 726 facilities under mgmt., dev'd 443
projects, 398,000 rental spaces and 82 projects under dev't. Only 1-2 sales
shown in notes!
Score ______2______
4. Compensation - Mgmt.
fees & R/E comm. unsubordinated. G.P. cash flow partic. is 5%,
unsubord. and 5% profits on sale, also unsubord.
Score ______1______
5. Load Factors - Sales
Comm. - 10.0%, O & O - 5.0%, Acquisition fees - 5.4% (pg. 38) loan
guar. fee & stand-by fee - 5.2% for a total of 25.6%. 6% of acq. cost =
$304,080.
Score ______1_______
SCORECARD (Page 2)
6. Guarantees - No
dealer, salesman or any other person has been auth. to give any info. or to
make any rep. not contained in this offering memorandum. No liquidity. Pg.
31 - If required by lender, PSI has agreed to guarantee pymt. of prin.
& int. on the first mtg. until NOI reaches a spec. level. Pg. 36 - PSI
to prov. perm. fin'g. if none can be obtained. PSI gets a 1%-3% fee. Note -
stand-by cash advances are ltd. to $400M max. - pg. 36. G.P. may loan funds
but they are not subordinated. pg. 10.
Score ______3______
7. Self-Dealing
(Conflicts of Interest) -1. L.P. may buy prop. from PSI & reimb. them
for cost + carrying charges. 2. Placement agent - PSI Securities - Affil.
No indep. due dilig. 3. PSI rec. 4% contractors profit and 6% of aggreg.
acq. & dev't. cost. 4. Competition from PSI to develop near these
props. 5. Pg. 41 - 15% of G.P. ints. in L.P. may be reallowed to placement
agent - PSI Securities, Christopher Weil or Focus Securities (affils). 6. San
Francisco prop. not appraised! If less than acq. & dev't. cost, PSI
will return diff. to L.P. (Note - Why not wait till appraised?) 7. Pg. 32 -
PSI rec. 1-3% annual stand-by loan guar. fee. 8. Pg. 66 - Sales incentives
to B.D.'s and reps. selling deal.
Score _____ 2_______
8. Limited Partners
Rights - Removal of G.P. is by simple majority but ONLY FOR CAUSE, INCLUDE.
BREACH OF FID. DUTY, INTENT. MISCONDUCT, GROSS NEGLIGENCE OR INSOLVENCY.
All other limited partner democratic. rights are by simple majority, but
require the G.P. concurr. Pg. 105
Score ______3_______
9. Leverage - Cost of
acq. & dev't. - $11,138,000. Debt - $9,112,000 for leverage of 81%.
However, the L.P. antic. add'l financing in 1993!
Score ______2______
10. Financing - No
first mtg. loan commit. made. Antic. 10 yr. $9MM, 11% - 30 yr. amort.
Secondary fin'g. - 5 yr. interest only! May obtain variable rate fin'g.
with neg. amortiz. Construct. loans mature as follows: 1. S.F. - 11'86 (6
mos. extension poss. for a fee). 2. L.A. (Montebello) - 1'89 (6 mos.
extension poss. for a fee). Balloon of $8.2MM due 12-31-98.
Score _____ 2______
11. Valuation Ratio -
Only 2 appraisals obtained for comparison purposes! 1. Baltimore - $3.2MM
(assum. 90% occup.) Both appraisals are as of 12-15-87 and done on an
"as if completed & operating at stabilized occupancy"! 100 %
capital raised - 25.6% load = 74.4% going into the property. Very low!
Score _____ 1______
12. Assumptions - Pg.
10 - The forecast assumes a rate of expense increase to be 1/2 the rate of
revenue increase. Should be the same! Goal is 90% occup. A 9% cap. rate is
projected on sale. Using the 8% rent inc. projections ( there is also 4%
& 6%), the 1990 proj. NOI is $1,082,455. Based on the L.P. loaded cost
on the 3 props. (debt of $9MM + cash raised of $5.650MM, the L.P.
consideration is $14,652,000. The cap. rate is only 7.34%. Extremely low!
Score ______3_______
SCORECARD (Page 3)
13. Percentage of
Supply to Demand - Pg. 12 - Each prop. will face sig. competition from
other mini-warehouses within each respective mkt. area. surveys of comps.
pre- pared IN HOUSE, NOT INDEPENDENTLY. SAN FRAN. NOT APPRAISED!
Mini-warehouses are a new business with much competition and increasing. 1.
Baltimore - existing 6 story bldg. + basement. 56,163 sq. ft. of rentable
storage area. 674 units rennov. completed 3'88 - 3 COMPETING FACILITIES
WITHIN 3 MI. Occup.- 75%-80%. 2. San Fran. - exist. 3 story bldg. with
basement curr. being rennov. 45,055 sq. ft. - 674 units completion date -
10-1-88. THERE ARE 12 MINI-WAREHOUSES WITHIN 3 MI. AND 4 WITHIN 1 MI.!
Occup. ave. 80-90% with 2 in rent up phase. 3. Montebello (L.A.) One story
M/W bldg. One 3 story M/W bldg. 68,630 sq. ft. with 761 units to be comp.
11-1-88. THERE ARE 6 MINI - WAREHOUSES WITHIN 3 MI. ) ONE DEV'D BY PSI). 2
are in rent up and the others ave 85-90% occupancy.
Score ______2_______
14. Limited Partnership
Consid. vs. Comp. -125.6%
Score ______1______
15. Risk Factors (% of
normal risk) 1. Liquidity risk. 2. Inv't. of 2 props. (S.F. & Balt.) not
independently surveyed, S.F. not appraised! 3. Dev't. risk. 4. R/E
operating risk.. 4. Competition. 5. Diff. to deal with defaults. 6. Delays
in sale or refi. 7. Uninsured losses. 8. Energy supply shtgs. & allocs.
9. Leverage risk. - 90% +, ultimately. 10. Balloon pymt. risk. 11. Tax
risk.
Score ______2______
Total Score ___28 of 75
= 37%
* (Min. Accept. 55 of
75 = 73%)

FEND
- Securities Expert Witness
Telephone: (310)641-0377
FAX: (310)649-3663
Email: fendmase@ca.rr.com
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