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 [NO FEE REQUIRED]

                   For the fiscal year ended December 31, 1996

          ( )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 001-12910

                             SUSA Partnership, L.P.
             (Exact name of registrant as specified in its charter)


                 Tennessee                              62-1554135
      State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization
10440 Little Patuxent Parkway, Suite 1100,                 21044
               Columbia, MD                              (Zip Code)
 (Address of principal executive offices)


       Registrant's telephone number, including area code: (410) 730-9500

           Securities registered pursuant to Section 12(b) of the Act:

  Title of each class                 Name of each exchange on which registered
  -------------------                 -----------------------------------------
 SUSA Partnership, L.P.                          New York Stock Exchange
     7.12% Notes
 Due November 15, 2003


        Securities registered pursuant to section 12(g) of the Act: None

         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 ('229.405 of this chapter) is not contained  herein,
and will not be  contained,  to the best of this  registrant's  knowledge,  in a
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (  )

         The aggregate market value of the units held by  non-affiliates  of the
registrant  was  approximately  $72,106,000  as of  March  26,  1997,  based  on
1,903,797 units held by non-affiliates of the registrant. (For this computation,
the  registrant  has  excluded  the  market  value  of  all  units  reported  as
beneficially  owned by executive  officers and directors of the  registrant  and
certain other stockholders;  such an exclusion shall not be deemed to constitute
an admission that any such person is an "affiliate" of the registrant.)

                                   1,903,797
(Number of units of limited partnership interest outstanding as of March 26,
1997)

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part II and Part III incorporate  certain information by reference from
the Storage USA, Inc.'s 1996 Annual Report to Shareholders  and from the Storage
USA,  Inc.'s  definitive  proxy  statement  to be filed with respect to the 1997
Annual Meeting of Shareholders.

<PAGE>

                                     Part I

Item 1.  Business
          General

         SUSA Partnership,  L.P. (the  "Partnership") is engaged in the business
of  owning,  managing,   acquiring,   developing  and  franchising  self-storage
facilities.   At  December  31,  1996,  the  Partnership  owned  242  facilities
containing  16.3 million net rentable  square feet in 29 states and the District
of Columbia and managed for others 27 facilities  containing  an additional  1.6
million net  rentable  square  feet,  making it the fourth  largest  operator of
self-storage  facilities in the United States.  The facilities are located in or
near major metropolitan areas,  operate under the Storage USA(R) name, and offer
low-cost, easily accessible and enclosed storage space for personal and business
use.  Average  physical and economic  occupancy for the facilities  owned by the
Partnership  at December  31,  1996,  were 86% and 79%,  respectively.  Physical
occupancy is computed by dividing the total net rentable square feet occupied as
of the date computed by the total net rentable square feet for the facilities in
a particular  location.  Economic occupancy is computed by dividing the expected
income by the gross potential  income.  Gross potential income is defined as the
sum of all  units  available  to  rent  multiplied  by the  market  rental  rate
applicable to those units as of the date computed. Expected income is defined as
the sum of all units rented as of the date  computed,  multiplied  by the rental
rate per the existing leases  applicable to those units as of the date computed.
Rent per square foot for the facilities owned by the Partnership at December 31,
1996,  was $9.73.  Rent per square  foot is the  annualized  result  obtained by
dividing gross potential income by total net rentable square feet available on a
given date.

         The Partnership is a fully integrated  organization  that has expertise
in  acquisition,   development,  construction  and  management  of  self-storage
facilities  and has  approximately  890 employees.  Its sole general  partner is
Storage USA, Inc. (the "Company"),  which is a  publicly-held,  self-managed and
self-advised real estate investment trust ("REIT").  The Company conducts all of
its activities through the Partnership and its subsidiaries, and at December 31,
1996, it owned a 93% interest in the Partnership.

         The Partnership's  primary business objectives are to increase its cash
flow  from  operations  and  the  value  of the  Partnership's  facilities.  The
Partnership plans to achieve these objectives  through the strategies  discussed
below,  including  improving the operations of its  facilities  and  selectively
expanding its portfolio of facilities through  acquisition and development.  The
Partnership  believes that it is distinguishable from most of its competitors by
its  access to  capital  markets,  the  management  information  systems  it has
developed,  the skilled  personnel  it has  gathered  and  trained for  managing
self-storage   facilities,   and  its  expertise  in  acquiring  and  developing
self-storage   facilities  in  diverse  locales  with  potential  for  increased
occupancy and rental rates.

Self-Storage Facilities

         The    Partnership's    self-storage    facilities    offer   customers
fully-enclosed  units,  which  are for  their  exclusive  use and to which  they
control access by furnishing their own locks. The facilities  generally  contain
400 to 1,000 units  varying in size from 25 to 400 square feet.  The majority of
the Partnership's tenants are individuals,  ranging from high-income  homeowners
to  college  students,  who  typically  store  furniture,  appliances  and other
household and personal items.  Commercial users range from sales representatives
and  distributors  storing  inventory to small  businesses  that typically store
equipment,  records and seasonal items. The facilities  generally have a diverse
tenant base of 500to 600 tenants,  with no single tenant occupying more than one
to two percent of the net rentable square feet of a facility.

         The  Partnership's  self-storage  facilities  are  located  near  major
business and  residential  areas,  and generally are clearly  visible and easily
accessible  from  major  traffic  arteries.  They  are  generally  protected  by
computer-controlled  access gates,  door alarm systems and video cameras.  These
facilities are typically  constructed of one-story  masonry or tilt-up  concrete
walls, with an individual roll-up door for each storage space and with removable
steel interior walls to permit reconfiguration and to protect items from damage.
Sites have wide drive aisles to  accommodate  most vehicles.  The  Partnership's
facilities are designed to be aesthetically pleasing, are kept clean and in good
repair by friendly,  trained managers, and are open for service during hours and
on  days  convenient  to  tenants  and  prospective  tenants.  At  most  of  the
facilities,   a  property  manager  lives  in  an  apartment  located  on  site.
Climate-controlled  space is offered in many  facilities  for storing items that
are sensitive to extreme humidity or temperature. Some of the facilities provide
paved  secure  storage  areas for  recreational  vehicles,  boat and  commercial
vehicles. All facilities offer reception of deliveries for commercial customers.

Internal Growth Strategy

         The  Partnership's  internal  growth  strategy  is to  pursue an active
leasing  policy  (which  includes  aggressively  marketing  available  space and
renewing  existing  leases at higher rents per square foot).  As a result of its
internal growth  strategy,  the Partnership has  historically  received  premium
rents,  while achieving high occupancy levels and increasing  profitability.  By
implementing  this strategy for the 96 facilities owned by the Partnership since
December  31,  1994,  the  Partnership,  for  1996,  increased  revenue  and net
operating income by 7.7% and 5.7%, respectively,  over revenue and net operating
income achieved by the Partnership in the prior year.

        O          Aggressive  Leasing - The  Partnership  seeks to increase its
                  revenues by increasing  and  maintaining  the occupancy in its
                  facilities  through  the use of sales and  marketing  programs
                  that are customized for each location by facility managers who
                  have  substantial  authority  and  effective  incentives.  The
                  facility  managers  are  trained to market both  phone-in  and
                  walk-in prospective tenants.  Emphasis is placed on conversion
                  from the initial  telephone  call to an on-site visit and from
                  the on-site visit to a rental.

        O          Regularly  Scheduled  Rent  Increases - The  Partnership  has
                  historically increased rents in all of its facilities at least
                  once a year  regardless of the occupancy  level. As a facility
                  nears 100%  occupancy,  the  Partnership  typically  increases
                  rents more frequently.

        O          Trained Facility Managers - The Partnership carefully selects
                  and thoroughly trains managers of its self-storage facilities.
                  To hire outgoing, personable, sales-oriented people capable of
                  implementing these programs,  the Partnership uses personality
                  profiles and personal  interviews to screen  applicants during
                  the recruiting  process.  Training  programs  feature facility
                  operations   and  marketing   manuals,   sales  and  marketing
                  programs,  telephone  communication,  and  computer  and daily
                  facility  operations  (unit  rental,  retail  sales,  facility
                  maintenance,  security  systems  and  financial  duties).  The
                  Partnership's   formal  training   programs  are  followed  by
                  on-the-job  training  (supervised by a regional manager) and a
                  three-step,   self-administered   certification  program.  The
                  Partnership   conducts  monthly  telephone  surveys  in  which
                  "mystery shoppers" hired by the Partnership call each facility
                  posing as prospective  customers.  These  telephone  calls are
                  recorded and graded by management  for policy  compliance  and
                  sales skills.

       O           Integrated  Management  Information  Systems  -  To  maintain
                  appropriate controls and enhance operational efficiencies, the
                  Partnership  has installed at each facility  computer  systems
                  with  comprehensive  facilities  management  software.  Weekly
                  operating results are transmitted  electronically from each of
                  these  facilities  to the  Partnership's  headquarters.  These
                  systems  allow the  Partnership  to  monitor  closely  manager
                  performance  and market response to the  Partnership's  rental
                  structure.

External Growth Strategy

         The Partnership's  external growth strategy is designed to increase the
number of  facilities  owned by the  Partnership  either by  acquiring  suitably
located,  under-performing  facilities  that offer upside  potential  due to low
occupancy rates or non-premium  pricing,  or by developing and  constructing new
self-storage   facilities  in  favorable   markets.   In  pursuing   acquisition
opportunities,  the  Partnership  seeks to add facilities in those  metropolitan
areas in which the  Partnership  operates and  selectively  to enter new markets
that  have  desirable  characteristics  such  as  a  growing  population  and  a
concentration of multifamily  dwellings.  The Partnership  intends to acquire or
develop facilities that are near residential areas,  clearly visible to consumer
traffic, easily accessible for entrance and exit and attractively designed.

Acquisitions

         Since the the Company's  initial public offering in March 1994 ("IPO"),
the  Partnership  has  purchased 198  self-storage  facilities  containing  13.2
million  net  rentable   square  feet  for  an  aggregate   purchase   price  of
approximately $674 million.  Management  believes that there are several factors
that favor its acquisition policy:

        O          Fragmented Industry Ownership - The Partnership believes that
                  there are approximately 25,000 self-storage  facilities in the
                  United  States with  approximately  906  million net  rentable
                  square feet. At December 31, 1996, the 10 largest operators of
                  self-storage  facilities managed approximately 2,900 or 12% of
                  all facilities.  Management believes this fragmented ownership
                  offers opportunities for acquisitions, including opportunities
                  resulting from the necessity of sale by some smaller operators
                  who cannot  obtain  refinancing,  the  desire of some  smaller
                  operators to sell their facilities to obtain  retirement funds
                  or to seek alternative investments, and the inability of other
                  smaller  operators  to obtain  funds with which to compete for
                  acquisitions as timely and inexpensively as the Partnership.

        O          Operating  Efficiencies  - The  Partnership  believes  that a
                  significant percentage of self-storage properties are owned by
                  smaller  operators which  historically have been operated less
                  efficiently than the Partnership's facilities. The Partnership
                  believes  it has  developed  an  expertise  in  improving  the
                  performance of such properties.

        O          Demand for Tax Deferral - In several of its acquisitions, the
                  Partnership  has financed a portion of the sales price through
                  the issuance of units of limited  partnership  interest in the
                  Partnership  ("Units"),  permitting  the  sellers  to at least
                  partially  defer  taxation of capital gains.  The  Partnership
                  believes  that  its  ability  to  offer  Units  as a  form  of
                  consideration  is a key element in its ability to successfully
                  negotiate with sellers of self-storage  facilities.  Since the
                  IPO, the  Partnership  has issued 1.8 million  Units valued at
                  $56  million  in  consideration  for  the  acquisition  of  35
                  self-storage facilities.

        O          Property   Assimilation   -  The   Partnership's   integrated
                  management   information  systems  allow  it  to  quickly  and
                  efficiently  assimilate its  acquisition  targets.  All of the
                  Partnership's   facilities  are  electronically  linked  to  a
                  central computer system, which allows management to control an
                  increased  number of facilities with minimal  additional human
                  resources.  Management expects the data systems, together with
                  its track record of managing or  developing  facilities in new
                  areas  of  the  country,   to  assist  in  integrating  future
                  facilities into the Partnership.  Commonly, the Partnership is
                  able to retrain existing  managers of acquired  facilities and
                  rapidly realize operating improvements.

Development

         Management  believes  that there are factors that favor its  facilities
development strategy. These factors include:

        O          Development  Expertise - The  Partnership  has recently taken
                  advantage   of  its   in-house   development   capability   to
                  selectively  develop new  facilities  in areas where  suitable
                  acquisitions may not be available.  The development activities
                  consist  primarily  of additions  to existing  facilities  and
                  construction  of new  facilities.  Since 1985, the Partnership
                  and predecessor  organizations  have developed and constructed
                  21 facilities,  15 of which the Partnership  owns. At December
                  31,  1996,  the  Partnership  had  under  construction  or  in
                  development approximately 1.3 million net rentable square feet
                  contained  in  12  new  facilities  and  in  expansions  to 18
                  existing facilities.

        O          Development Capital - The Partnership has a proven ability to
                  access  various forms of capital that  differentiates  it from
                  most of its  competitors,  particularly  since capital for the
                  construction  of new  self-storage  facilities  (traditionally
                  funded  by  savings  and  loan  associations)  has  been  less
                  available in recent years.

Capital Strategy

         The  Company  and the  Partnership  intend to  maintain a  conservative
capital  structure  designed  to enchance  access to capital  and to  facilitate
earnings growth.  The Company expects to finance long-term capital needs through
the  issuance  of equity and debt  securities.  Since the IPO,  the  Company has
issued $312  million of its Common  Stock in three  public  offerings  and $ 252
million  of its  Common  Stock in a series of direct  placements  with  Security
Capital  U.S.  Realty  ("USRealty"),  an affiliate  of Security  Capital  Group,
pursuant  to the  strategic  alliance  discussed  below.  The  proceeds of these
offerings were  contributed to the Partnership in exchange for units of interest
in the Partnership . In October 1996, the Partnership  issued to the public $100
million of its unsecured  7.125% Senior Notes due November 1, 2003. In addition,
since the IPO, the Operating  Partnership has issued 1.8 million Units valued at
$56 million in consideration for the acquisition of 35 self-storage facilities.

         Short-term  capital needs,  including  acquisition  funding pending the
issuance of additional securities,  are met through the Partnership's  revolving
lines of credit.  The  Partnership  has  available  $105.0  million in unsecured
revolving lines of credit with a group of commercial  banks,  under which it had
borrowed  $52.7  million as of December  31, 1996.  At December  31,  1996,  the
Partnership  also had  mortgage  loans  outstanding  of $45.7  million that were
secured by 17 properties.  The policy of the Company and the Partnership,  which
is subject to change at the discretion of the Company's  Board of Directors,  is
to limit total indebtedness to the lesser of 50% of total assets at cost or that
amount that will  sustain a minimum debt  service  coverage  ratio of 3:1. As of
December 31, 1996, the total  indebtedness  of the  Partnership  would have been
22.8% of total assets at cost and its debt service  coverage  ratio for the year
ended December 31, 1996, would have been 7:1. The Partnership believes that this
policy,  the  Company's  success in  raising  equity  capital  and  through  the
Partnership,  debt capital, its preference for unsecured debt and its ability to
purchase  self-storage  facilities  in exchange  for Units all  demonstrate  the
commitment of the  Partnership to maintain a conservative  but flexible  capital
structure that will permit  continued access to the capital markets on favorable
terms.

Strategic Alliance with Security Capital U.S. Realty

         In March 1, 1996, the Company  entered into a Stock Purchase  Agreement
and a Strategic  Alliance  Agreement  with  USRealty.  Under the Stock  Purchase
Agreement, between March and September 1996, USRealty purchased from the Company
7,028,754  shares of Common Stock for an aggregate  direct  investment of $220.0
million. The Strategic Alliance Agreement,  among other things, permits USRealty
to purchase up to 37.5% of the  Company's  Common  Stock and to  participate  in
certain offerings of the Company's equity securities. Through March 27, 1997, US
Realty had purchased an additional  3,713,047 shares of Common Stock,  including
851,000 shares purchased pursuant to the exercise of its participation rights in
connection with the Company's  public sale of 1,610,000 shares in March 1997. As
of March , 1997,  USRealty  owned  10,741,801  shares,  or 37%, of the Company's
outstanding  Common Stock.  Also,  pursuant to the Strategic  Alliance Agreement
USRealty has placed two of its  nominees on the  Company's  Board of  Directors,
William  D.  Sanders,  Chairman  of the  Board and Chief  Executive  Officer  of
Security  Capital  Group,  and J. Marshall Peck,  Managing  Director of Security
Capital Investment Research  Incorporated.  USRealty's investment in the Company
is subject to  additional  limitations  and terms under the  Strategic  Alliance
Agreement and a Registration Rights Agreement.

The  Partnership  believes  that the alliance with USRealty has provided it with
access to significant additional financial and strategic resources not otherwise
readily  available to it, thereby  enhancing its short-term and long-term growth
prospects and better  positioning it to capitalize on  opportunities as the REIT
industry   matures.   The   Partnership   also  expects  that  it  will  benefit
significantly from its affiliation with USRealty and access to USRealty's market
knowledge, operating experience and research capabilities.

Franchise Operations

         In June 1996,  the  Partnership  formed  Storage  USA  Franchise  Corp.
("Franchise  Corp."),  in which the Partnership has a 97.5% interest.  Franchise
Corp. offers the Partnership's systems,  expertise and a registered trademark to
third  parties  under a franchise  program that the  Partnership  believes to be
unique in the self-storage  industry.  The Partnership formed Franchise Corp. to
be a  non-capital  intensive  revenue  source and does not  anticipate  that the
franchise  program will have a material  impact on its operating  results in the
near term.

Operating Practices

         The  Partnership  believes  that it has been  successful  in  operating
self-storage   facilities   primarily  due  to  the  Partnership's   convenient,
attractive,  well-equipped facilities, its friendly,  customer-service oriented,
on-site facility management staff, and its experienced corporate staff.


<PAGE>


Pricing Policy

         The  Partnership  is  typically  confident  in  its  local  competitive
position,  and tends to seek  higher  rents  more  aggressively  in  appropriate
unit-size categories than its competitors.  The Partnership believes the average
rental rate per net rentable  square foot in its  facilities  is usually  higher
than the rental rates at its competitor's facilities. The Partnership's managers
frequently  survey  activities  and  conditions  at  competing  facilities.   In
addition, the geographic diversity of self-storage facility tenants allows rents
to be raised more often at the end of rental  periods in a  non-uniform  manner,
unlike apartments which must generally raise rents in a uniform manner on a less
routine basis.

Marketing

         The  Partnership  employs  various  means to maintain  and increase its
share of the  self-storage  market for its  facilities and to obtain rental rate
increases.  The Partnership  develops a written marketing plan for each facility
with a strong emphasis on developing a  customer-oriented  management  team. The
Partnership  utilizes yellow page advertising,  site signage and location as the
primary means to advertise its services. The Partnership utilizes some print and
media  advertising,  but  generally  only  during a  facility's  lease up stage.
Primarily   marketing  emphasis  is  placed  on  training  managers  to  act  as
salespeople and to convert  prospective  tenants into actual  tenants.  Managers
visit area apartment complexes and businesses to contact potential customers and
provide  them  with  information  regarding  the  Partnership's   services.  The
Partnership's  facility  managers  also  seek new  tenant  referrals  from  area
apartment managers, moving and storage personnel, and existing tenants.

Capital Expenditures and Maintenance

         Due to the type of simple structures and durable materials used for the
facilities,  property  maintenance is minimal as compared to other types of real
estate investments.  The majority of the Partnership's facilities are one story,
with either tilt-up concrete or masonry  load-bearing  walls, easily moved steel
interior walls, and metal roofs.  Typical capital expenditures include replacing
asphalt roofs,  gates, air  conditioning  equipment and elevators (as contrasted
with expense  items such as  repairing  asphalt,  repairing a door,  pointing up
masonry  walls,  painting  trim and  facades,  repairing  a  fence,  maintaining
landscaping, and repairing damage caused by tenant vehicles). Maintenance within
a storage unit between leasing  typically  consists of sweeping out the unit and
changing a light bulb. Maintenance is the responsibility of the facility manager
who resides in the apartment located at most of the facilities.

Property Security

         All  facilities are equipped with a modern  security  system after they
have been conformed to Partnership  standards.  The facility  manager  obtains a
positive  identification of each tenant prior to leasing.  The individual tenant
is then given a designated personal  identification number for use in connection
with a computerized gate access system. Each access is computer-logged  (and may
be denied  for  non-payment  of rent)  and the gate and some  drive  aisles  are
monitored by video cameras.

Data Processing/Management Information Systems

         The  Partnership's  computer  system,  which links the corporate office
with each  facility,  expedites  financial  statement  and budget  preparations,
internal auditing and provides  detailed  information with respect to the tenant
mix, occupancy levels, revenues, expenses and other information relating to each
facility.  All necessary data is transmitted weekly to the Partnership's central
office.  Management believes that the Partnership's  present information systems
will be adequate to support additional growth with minimal additional upgrades.

Staffing and Training

         Each existing  facility is typically managed by a management couple who
reside on site and are responsible  for the overall  operations of the facility,
plus a relief  manager.  The  Partnership's  facility  managers  are  trained to
provide conscientious customer service, are provided with incentives to exercise
properly  the  powers  granted  to  them,   and  are   supervised   through  the
Partnership's management information systems and site audits. Incentive programs
are put in place for facility  management teams which emphasize  monthly budgets
set for each facility.  Managers  receive bonuses based upon exceeding  budgeted
goals.




<PAGE>


Employee Recognition and Compensation

         In addition to their  salaries,  the  Partnership's  facility  managers
receive annual vacation,  health insurance and the ability to participate in the
Company's  401(k)  tax-advantaged  savings  plan and 1993  Omnibus  Stock  Plan.
Facility  managers  generally  receive  bonuses  when  monthly  revenues  exceed
budgeted  amounts and when annual  revenue  increases  over the prior year.  The
Partnership  has a program  to  recognize  good  performance  of  managers  on a
quarterly  and  yearly   basis,   with  winners   receiving   cash  bonuses  and
Partnership-wide recognition.


"Total Storage Satisfaction Guaranteed TM" Program

         The Partnership's  "Total Storage  Satisfaction  Guaranteed TM" Program
emphasizes  an  aggressive  approach  which  seeks to create a positive  storage
experience for the customer and to promote repeat business and referrals.

Collections

         Rents are paid in advance on a monthly basis.  The Partnership  imposes
substantial  late fees for delinquent  payment of rent beginning five days after
the due date and escalating periodically thereafter.  The Partnership's accounts
receivable  collection  history  has  averaged  over  98% in  recent  years  due
primarily  to  management  scrutiny  and  favorable  state laws which permit the
relatively  rapid  eviction of  non-paying  tenants and the sale of their stored
goods without court order to pay past due charges. Upon non-payment of rent, the
tenant's  access code is  invalidated  and a  Partnership  lock is placed on the
storage unit.  The actual time typically  required to evict a non-paying  tenant
and to sell and remove his goods is between 45 and 75 days after  default in the
states in which the  facilities  are located.  Customers  generally  bring their
accounts   current  after  access  is  denied  and  the  eviction  rate  at  the
Partnership's facilities has not been material.

Other Activities

         The  Partnership  sells  locks and  packing  materials  and, at certain
locations, rents trucks to both tenants and non-tenants. The trucks are owned by
a third-party rental company and the Partnership  receives a commission for each
rental.  The  Partnership,through  a wholly-owned  subsidiary also manages for a
fee, self-storage properties owned by others.

Local Regulations

         As with all real  property,  storage  facilities  must conform to local
zoning ordinances.  Typically,  self-storage  facilities are not a permitted use
within  the  commercial  and  retail  zones  desired  by  the   Partnership  for
development of a new facility.  Therefore, the Partnership must generally obtain
a special use permit or zoning  variance to undertake the  development  of a new
facility.

Competition

         Competition  exists in all of the market areas in which the  facilities
are located.  The Partnership  principally faces competitors who seek to attract
tenants primarily on the basis of lower prices. However, the Partnership usually
does not seek to be the lowest price competitor. Rather, based on the quality of
its facilities  and its customer  service-oriented  managers and amenities,  the
Partnership's strategy is to lead particular markets in terms of prices.

         The pool of  self-storage  users has  increased  in recent years due to
greater consumer  awareness,  cost reduction  programs by businesses,  increased
mobility  in the  general  population  and an  increasing  mix of  products  and
services offered by self-storage  facilities.  Although circumstances vary among
markets,   the  Partnership   believes  that  current  demand  for  self-storage
facilities  is strong when  compared  to the  available  supply of  self-storage
space.  At the  same  time,  the  Partnership  believes  that few  operators  of
self-storage facilities are currently constructing additional facilities or have
access to the capital and the development and construction  expertise  necessary
to do so.  Therefore,  the Partnership  believes that the supply of self-storage
facilities will remain  relatively  limited for some time, and that the industry
generally will continue to experience  strong  occupancy and  increasing  rental
rates.  The Partnership  believes that its access to capital markets as a public
company,  the systems and methods it has developed and the skilled  personnel it
has gathered and trained for acquiring and managing self-storage facilities with
potential  for  increased  occupancy  and rental  rates,  and its  expertise  in
facility  development  and  construction  place the Partnership in a position to
capitalize on these market conditions for the benefit of its shareholders.



<PAGE>



         Certain of the  Partnership's  competitors  operate more facilities and
have substantially  greater financial resources than the Partnership.  The three
largest  self-storage  managers,  based on  industry  data as to the  number  of
facilities  operated (whether or not the facilities are owned),  are: (1) Public
Storage  Management,  Inc. (66.3 million square feet in 1,121  facilities);  (2)
U-Haul International, Inc. (18.2 million square feet in 779 facilities); and (3)
Shurgard  Incorporated  (18.1 million square feet in 296  facilities).  (Source:
Self-Storage  Almanac 1996-1997 edition).  The Partnership is the fourth largest
self-storage  manager,  with 18.7 million  square feet in 281  facilities  as of
March 27, 1997.  These other  entities may generally be able to accept more risk
than the Partnership can prudently  manage,  including risks with respect to the
geographic  proximity  of its  investments  and the  payment of higher  facility
acquisition prices. This competition may generally reduce the number of suitable
acquisition  opportunities  offered to the  Partnership  and  increase the price
required to be able to consummate  the  acquisition  of  particular  facilities.
Further,  the Partnership  believes that competition from entities organized for
purposes  substantially similar to the Partnership's  objectives could increase.
Nevertheless,  the  Partnership  believes that the  operations,  development and
financial   experience  of  its   executive   officers  and  directors  and  its
customer-oriented  approach to  management  of  self-storage  facilities  should
enable the Partnership to compete effectively.

Employees

All persons  referred to herein as employees of the Partnership are employees of
the Partnership or of its subsidiaries. As of December 31, 1996, the Partnership
employed  approximately 893 employees,  of whom  approximately 250 were employed
part-time  (fewer  than 30 hours  per  week)  on a  regular  basis.  None of the
Partnership's employees is covered by a collective bargaining agreement.

Qualification as a Real Estate Investment Trust

The Company  operates so as to qualify as a REIT under the Internal Revenue Code
of 1986, as amended (the "Code"). Generally, a REIT which complies with the Code
and distributes at least 95% of its taxable income to its shareholders  does not
pay federal tax on its distributed income.  Qualification as a REIT involves the
application  of highly  technical  and  complex  rules for which  there are only
limited  judicial or  administrative  interpretations.  The  complexity of these
rules is  greater  in the case of a REIT that  holds its  assets in  partnership
form.  Furthermore,  there are no controlling authorities that deal specifically
with many tax issues affecting a REIT that operates self-storage facilities. The
determination of various factual matters and  circumstances  not entirely within
the Company's  control may affect its ability to qualify as a REIT. In addition,
new regulations,  administrative interpretations or court decisions could have a
substantial  adverse effect with respect to the  qualifications as a REIT or the
federal income tax  consequences of such  qualification.  If the Company were to
fail to qualify as a REIT in any taxable year,  the Company would not be allowed
a deduction for  distributions  to  shareholders in computing its taxable income
and would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular  corporate rates.  Unless entitled
to relief under certain Code provisions,  the Company also would be disqualified
from  treatment as a REIT for the four taxable  years  following the year during
which  qualification was lost. As a result,  the cash available for distribution
to shareholders  would be reduced for each of the years  involved.  Although the
Company  currently  intends to operate in a manner designed to qualify as a REIT
it is possible that future economic,  market, legal, tax or other considerations
may  cause  the  Board of  Directors,  with the  consent  of a  majority  of the
shareholders, to revoke the REIT election.


Environmental Matters

         The Partnership has obtained Phase 1 environmental audits on all of its
facilities from various outside environmental  engineering firms. The purpose of
the Phase 1 audits is to identify  potential  sources of  contamination at these
facilities and to access the status of environmental regulatory compliance.  The
Phase 1 audits include historical reviews of the facilities,  reviews of certain
public  records,   preliminary  investigations  of  the  sites  and  surrounding
properties, visual inspection for the presence of asbestos, PCBs and underground
storage tanks,  and the preparation and issuance of a written report.  A Phase 1
audit does not  include  invasive  procedures,  such as soil  sampling or ground
water  analysis.  In certain  instances  the  Partnership  has obtained  Phase 2
environmental  audits  or  procedures  in order  to  determine  (using  invasive
testing) whether potential sources of contamination  indicated in Phase 1 audits
actually  exist.  While some of the facilities have in the past been the subject
of  environmental   remediation  or  underground   storage  tank  removal,   the
Partnership  is  not  aware  of  any   contamination  of  facilities   requiring
remediation  under current law. The  Partnership  will not take ownership of any
acquisition facility prior to completing a satisfactory environmental review and
inspection  procedure.  No assurance  can be given that the Phase 1 and 2 audits
identified or will identify all  significant  environmental  problems or that no
additional environmental liabilities exist.

         Under various federal,  state and local laws and regulations,  an owner
or operator of real estate may be liable for the costs of removal or remediation
of certain  hazardous  or toxic  substances  on such  property.  Such laws often
impose such liability  without regard to whether the owner caused or knew of the
presence of hazardous or toxic substances and whether or not the storage of such
substances  was in  violation  of a  tenant's  lease.  Furthermore,  the cost of
remediation or removal of such substances may be  substantial,  and the presence
of such substances,  or the failure to promptly  remediate such substances,  may
adversely affect the owner's ability to sell such real estate or to borrow using
such real estate as collateral.  In connection  with the ownership and operation
of its  facilities,  the Company or the  Partnership  may become liable for such
costs.




<PAGE>



         The  environmental  audit  reports have not revealed any  environmental
liability that the Partnership  believes would have a material adverse effect on
the  Partnership's  business,  assets  or  results  of  operations,  nor  is the
Partnership aware of any such liability. Nevertheless, it is possible that these
reports do not or will not reveal all  environmental  liabilities  or that there
are material  environmental  liabilities  of which the  Partnership  is unaware.
Moreover,  no  assurances  can be given  that (i)  future  laws,  ordinances  or
regulations  will not  impose any  material  environmental  liability,  (ii) the
current  environmental  condition of the facilities  will not be affected by the
condition  of the  properties  in the  vicinity of the  facilities  (such as the
presence of leaking  underground storage tanks) or by third parties unrelated to
the  Partnership  or the Company or, (iii) tenants will not violate their leases
by introducing hazardous or toxic substances into the Partnership's  facilities.
The Partnership may be potentially liable as owner of the facility for hazardous
materials stored in units in violation of a tenant's lease, although to date the
Partnership has not incurred any such liability.

         The  Partnership  believes that the facilities are in compliance in all
material  respects with all applicable  federal,  state and local ordinances and
regulations  regarding  hazardous or toxic  substances  and other  environmental
matters. The Partnership has not been notified by any governmental  authority of
any material  noncompliance,  liability or claim  relating to hazardous or toxic
substances  or other  environmental  substances  in  connection  with any of its
present or former properties.


Policies and Objectives with Respect to Certain Activities

         The  following  is a  discussion  of the  Partnership's  policies  with
respect  to  investment  financing,  conflict  of  interest  and  certain  other
activities.  The policies with respect to these  activities have been determined
by the Board of Directors of the Company and may be amended or revised from time
to time at the  discretion  of the  Board  of  Directors  without  a vote of the
shareholders  of the Company,  except that (i) changes in certain  policies with
respect to conflicts of interest must be consistent with legal  requirements and
(ii) the Company cannot take any action intended to terminate its  qualification
as a REIT without the  approval of the holders of a majority of the  outstanding
Common Stock. See also  "-Limitations on Corporate Actions Pursuant to Strategic
Alliance Agreement" below.


Acquisition, Development and Investment Policies

         The  Partnership's  investment  objectives  are to  acquire  or develop
income-producing  self-storage  facilities  with property level cash flow growth
potential.   The  Partnership's  business  is  focused  solely  on  self-storage
facilities.  The  Partnership's  policy is to acquire  facilities with less than
mature  occupancy  levels or less than optimum  rental rates to expand  existing
facilities, and to develop new facilities. The Partnership reviews its portfolio
of  self-storage  facilities  periodically  and  considers  whether  any  of its
facilities  are  no  longer  an  optimal  use of the  Partnership's  capital  or
management resources.  When a facility is no longer considered an optimal use of
the Partnership's capital, the Partnership will seek to sell the facility taking
into account the tax consequences of such sales.

         The Partnership expects to pursue its investment objectives through the
direct and indirect ownership of self-storage  facilities.  The Partnership will
participate with other entities in property  ownership,  thought joint ventures,
subject to  limitations  of the Strategic  Alliance  Agreement or other types of
co-ownership.  Equity investment may be subject to existing  mortgage  financing
and other  indebtedness  that may have priority over the equity  interest of the
Partnership.

         While the Partnership  emphasizes  equity real estate  investments,  it
may,  in its  discretion,  invest in mortgage  and other real estate  interests,
including  securities of other REITs.  The Partnership does not currently invest
in  securities  of other  REITs and has no  present  intention  of doing so. The
Partnership may invest in participating or convertible mortgages if it concludes
that it may benefit from the cash flow or any  appreciation  in the value of the
subject   property.   Such  mortgages  are  similar  to  equity   participation.
Specifically, the Partnership may make participating and non-participating loans
collateralized self-storage facilities owned by third parties.

         The  Company  is  subject  to  certain  restrictions  on its  investing
activities  pursuant to the  Strategic  Alliance  Agreement  with US Realty,  as
described below.

         The Partnership intends to continue to manage  self-storage  facilities
owned by others for a fee.

         The  Partnership  may make  investments  other than as described  above
although it does not currently intend to do so.


<PAGE>

Financing Policies

         The Company  intends to make  additional  investments  in  self-storage
facilities and may incur or cause the Partnership to incur  indebtedness to make
such  investments or to meet the distribution  requirements  imposed by the REIT
provisions  of the  Code,  to the  extent  that  cash  flow  from the  Company's
investments and working capital is insufficient.

         The  Partnership  may  from  time to  time  re-evaluate  its  borrowing
policies in light of then current  economic  conditions,  relative costs of debt
and  equity  capital,  market  values  of  facilities,  growth  and  acquisition
opportunities  and other  factors.  The Charter and Bylaws of the Company do not
limit the amount or percentage of indebtedness, funded or otherwise, the Company
or the  Partnership  might  incur.  The Board of  Directors  of the  Company has
adopted a policy  limiting the Company's and the  Partnership's  indebtedness to
the lesser of 50% of its total  assets at cost or the amount that will sustain a
minimum debt service coverage ratio of 3:1. However, the Board of Directors can,
without shareholder  approval,  amend or modify its current policy on borrowing.
If this policy were changed, the Partnership could become more highly leveraged,
resulting  in an  increase  in debt  service  that  could  adversely  affect the
Partnership's  cash flow and ability to make  distributions to its shareholders,
an  increased  risk of  default  on its  obligations  and an  increased  risk of
foreclosure  on  facilities  securing  debt.  In the event  management  deems it
appropriate,  the Partnership will enter into  arrangements  with a creditworthy
financial  institution for the purpose of limiting the maximum  interest expense
to which the  Partnership  would be subjected in the event  interest rates rise.
The  Company  is  also  subject  to  certain  limitations  with  respect  to the
incurrence of indebtedness under the Strategic Alliance Agreement,  as described
below.

         Borrowings  may be incurred  through the  Partnership  or the  Company.
Indebtedness  incurred  by the  Company  may be in the form of bank  borrowings,
secured and  unsecured,  and publicly  and  privately  placed debt  instruments.
Indebtedness  incurred by the  Partnership  may be in the form of purchase money
obligations  to the sellers of  properties,  publicly or  privately  placed debt
instruments, financing from banks, institutional investors or other lenders, any
of which  indebtedness  may be unsecured or may be secured by mortgages or other
interests in the property owned by the  Partnership.  Such  indebtedness  may be
recourse to all or any part of the assets of the Company or the Partnership,  or
may be limited to the particular property to which the indebtedness relates. The
proceeds from any borrowings by the Company or the  Partnership  may be used for
the  payment  of  distributions,   working  capital,  for  refinancing  existing
indebtedness or for financing acquisitions or expansions of facilities.

         If the  Board  of  Directors  determines  to  raise  additional  equity
capital, the Board has the authority, generally without shareholder approval, to
issue  additional  common stock,  preferred  stock or other capital stock of the
Company in any manner (and on such terms and for such consideration) as it deems
appropriate,  including in exchange for property.  Except for  USRealty's rights
under the Strategic  Alliance  Agreement to participate in certain  issuances or
sales of the Company's capital stock,  existing  shareholders have no preemptive
right to purchase  shares  issued in any offering,  and any such offering  might
cause a dilution of a shareholder's investment in the Company.

Conflict of Interest Policies

         The  Company's  Board of  Directors  and its  officers  are  subject to
certain  provisions of Tennessee law which are designed to eliminate or minimize
certain  potential  conflicts  of  interest.  In  addition,  the Company and the
Partnership  has adopted  certain  policies  designed to  eliminate  or minimize
potential conflicts of interest.  However,  there can be no assurance that these
policies  always  will  be  successful  in  eliminating  the  influence  of such
conflicts,  and if they are not  successful,  decisions could be made that might
fail to reflect fully the interests of all shareholders.

         Amended  Charter and Bylaw  Provisions.  The  Company's  Charter,  with
limited exceptions, requires that a majority of the Company's Board of Directors
be  comprised  of persons  who are not  officers  or  employees  of the  Company
("Independent Directors"). The Charter provides that such requirement may not be
amended,  altered,  changed or repealed without the affirmative vote of at least
80% of the  members of the Board of  Directors  or the  affirmative  vote of the
holders of not less than 75% of the  outstanding  shares of capital stock of the
Company  entitled to vote. In addition,  the Company's  Bylaws  provide that any
action  pertaining  to any  transaction  involving  the Company,  including  the
purchase,  sale,  lease or  mortgage  of any  real  estate  asset  or any  other
transaction  in which a director or officer of the Company,  or any affiliate of
the  foregoing,  has any direct or  indirect  interest,  must be  approved  by a
majority of the directors, including a majority of the Independent Directors.



<PAGE>


         The Operating  Partnership.  The Partnership Agreement as defined below
gives  the  Company,  as  General  Partner  of  the  Partnership  (the  "General
Partner"),  full, complete and exclusive  discretion in managing and controlling
the  business  of the  Partnership  and in making all  decisions  affecting  the
business and assets of the Partnership.  The Partnership Agreement provides that
the General Partner may cause the Partnership to issue additional Units for such
consideration  and on such terms and conditions as the Company in its discretion
may determine.

         Provisions   of  Tennessee   Law.   Pursuant  to  Tennessee   law  (the
jurisdiction under which the Company is organized), each director is required to
discharge his duties in good faith,  with the care an ordinarily  prudent person
in a like position would exercise under similar circumstances and in a manner he
reasonably  believes to be in the best interests of the Company.  The provisions
of the Company's  Bylaws are more stringent than the Tennessee law  restrictions
on  transactions  with the Company in which a director or officer of the Company
has a direct or indirect interest.

         Officers' Ownership.  The Company has adopted a policy, in which all of
its officers have concurred,  generally prohibiting officers of the Company from
owning,  directly or  indirectly,  interests in  self-storage  facilities  which
compete  with the  Company's  facilities,  as well as from  owning  Units if the
result  would be that the  officers  would have a  different  tax basis from the
Company in any facilities acquired by the Partnership.

Policies with Respect to other Activities

         The Company has authority to offer shares of its capital stock or other
securities  and to  repurchase  or otherwise  reacquire  its shares or any other
securities and may engage in such activities in the future.  The Company may pay
cash or issue shares of Common Stock to holders of Units upon  exercise of their
Redemption Rights (as described below).  The Company has not engaged in trading,
underwriting,  agency  distribution or sale of securities of other issuers,  nor
has the  Company  invested in the  securities  of other  issuers  other than the
Partnership for the purpose of exercising  control.  The Company intends to make
investments that will not cause it to be treated as an investment  company under
the Investment Company Act of 1940.

         At all  times,  the  Company  intends to make  investments  in a manner
consistent  with the  requirements  of the Code for the  Company to qualify as a
REIT  unless,  because of changing  circumstances  or changes in the Code (or in
Treasury Regulations), the Board of Directors, with the consent of a majority of
the  shareholders,  determines that it is no longer in the best interests of the
Company to qualify as a REIT.

Working Capital Reserves Policy

         The Partnership  will attempt to maintain  working capital  reserves in
amounts  adequate to meet normal  contingencies in connection with the operation
of the Partnership's business and investments.





<PAGE>

Limitations on Corporate Actions Pursuant to Strategic Alliance Agreement.

         Pursuant to the Strategic  Alliance  Agreement,  and until the first to
occur  of (y) the  expiration  of the  five-year  period  following  shareholder
approval of the Strategic  Alliance (the "Standstill  Period") and any extension
thereof, and (z) the first date following the consummation of the second funding
in  connection  with the  Strategic  Alliance on which US Realty's  ownership of
Company Common Stock drops below 20% of the outstanding shares of Company Common
Stock  for a  continuous  period  of 180 days (a "20%  Termination  Date"),  the
Company may not (a) incur total  indebtedness in an amount  exceeding 60% of the
value of the  Company's  total assets (which is deemed to be equal to the market
value of the Company's  outstanding equity (on a fully-diluted  basis at a price
of $31.30 per share) and debt as of March 1, 1996, plus the acquisition  cost of
properties  acquired  after  March  1,  1996  (less  any  proceeds  of  property
dispositions that are distributed to shareholders)), (b) cause or permit the sum
of (i)  securities of any other person,  (ii) assets held other than directly by
the  Company  or  the  Partnership,  (iii)  loans  made  by the  Company  to the
Partnership  or any other  Subsidiary,  or the reverse,  (iv) assets  managed by
persons other than employees of the Company or the Partnership, to, at any time,
exceed 10%, at cost,  of the  consolidated  assets owned by both the Company and
the  Partnership,  (c) own real property other than  self-storage  facilities or
land suitable for the development of self-storage facilities whose value exceeds
10% of the  aggregate  value of the Company's  real estate  assets at cost,  (d)
terminate  its  eligibility  for  treatment  as a REIT for  federal  income  tax
purposes,  or (e) except as permitted or required by  agreements  existing as of
March 1, 1996, (i) own any interest in any partnership unless the Company is the
sole managing general partner of such partnership or (ii) permit the Partnership
to issue units,  or securities  convertible  or exercisable  for Units,  if such
issuance  would  cause the  Company to own less than 90% of the Units on a fully
diluted basis (collectively,  the "Corporate Action Covenants"). The Company has
certain  specified  rights to cure certain failures to comply with the Corporate
Action Covenants.

         In  addition,  the  Partnership  is  subject  to  certain  limitations,
pursuant to the Strategic  Alliance that continue until USRealty's  ownership of
Company  Common  Stock  shall  have  been  below  20% by value  of the  actually
outstanding  shares of Company Common Stock for a continuous  period of 180 days
(subject to certain  conditions).  Generally,  these  limitations  restrict  the
amount of assets that the Partnership own indirectly  through other entities and
the manner in which the Parntership  conducts its business.  USRealty  requested
these  conditions  because of its belief  that REITs with  direct and  extensive
control over the operation of all of their assets operate more  effectively  and
in order to permit US Realty to comply with certain requirements of the Code and
other countries' tax laws applicable to foreign investors.  The Company,  during
the same period,  has agreed not to take actions in the future that would result
in more than 10% of its gross income,  or more than 10% of the Company's  assets
by value (subject to certain adjustments), being attributable to properties that
are  indirectly  owned and are not  managed by  employees  of the Company or the
Partnership. USRealty has agreed to waive these requirements in certain specific
instances  where indirect  ownership  facilitates  the Company's  acquisition of
certain facilities.


         The   Partnership   believes  that  these   limitations  are  generally
consistent  with its  operating  strategies  and does not believe that they will
materially  restrict its  operations  or have a material  adverse  effect on its
financial  condition or results of operations,  though there can be no assurance
that they will not do so in the future.

Forward-Looking Statements and Risk Factors

         All statements  contained in this Annual Report that are not historical
facts,  including but not limited to,  statements  regarding  the  Partnership's
business  strategies  and  managements'  evaluation of industry and  competitive
conditions,   are  based  on  current   expectations.   These   statements   are
forward-looking  in nature  and  involve  a number  of risks and  uncertainties.
Actual results may differ materially.  Among the factors that could cause actual
results  to  differ  materially  are  the  following:  changes  in the  economic
conditions in the markets in which the Partnership operates negatively affecting
impacting the financial resources of the Partnership's  clients;  certain of the
Partnership's  competitors with substantially  greater financial  resources than
the  Partnership  reducing  the  number of  suitable  acquisition  opportunities
offered to the  Partnership and increasing the price necessary to consummate the
acquisition of particular  facilities;  increased  development of new facilities
and competition in Partnership markets resulting in over-supply and lower rental
or  occupancy  rates;  the  availability  of  sufficient  capital to finance the
Partnership's business plan on terms satisfactory to the Partnership;  increased
costs related to compliance with laws,  including  environmental  laws;  general
business and economic conditions;  and other risk factors described elsewhere in
this Annual Report. The Partnership cautions readers not to place undue reliance
on any such  forward-looking  statements,  which statements are made pursuant to
the Private Securities Litigation Reform Act of 1995 and, as such, speak only as
of the date made.

        The Partnership's business is subject to the following particular risks:

Acquisition and Development Risks; Risks Related to Co-Investments in Property

                  Acquisitions  entail  risks  that  investments  will  fail  to
perform in accordance with  expectations  and that judgments with respect to the
prices paid for acquired  facilities and the costs of any improvements  required
to bring  an  acquired  facility  up to  standards  established  for the  market
position  intended for that facility will prove  inaccurate,  as well as general
investment   risks  associated  with  any  new  real  estate   investment.   The
self-storage  development  business  involves  significant  risks in addition to
those  involved in the  ownership  and  operation  of  established  self-storage
facilities, including unfavorable financing terms, timing delays in construction
and lease-up, unavailable take-out financing and less-favorable than anticipated
lease terms.

Debt Financing Reduces Cash Flow and Increases Risk of Default

         General Risks. The Partnership finances certain of its acquisitions and
development  with unsecured debt and, in some cases,  mortgage debt. As a result
of the  Company's  use of debt in its  capital  structure,  the  Partnership  is
subject to the risks  normally  associated  with debt  financing.  The  required
payments on  indebtedness  are not reduced if the  economic  performance  of any
property  declines.  If such decline occurs,  the Partnership's  ability to make
debt service payments would be adversely affected. If a property is mortgaged to
secure payment of  indebtedness  and the  Partnership is unable to meet mortgage
payments,  the property  could be transferred to the mortgagee with a consequent
loss of revenue and asset value to the  Partnership.  Likewise if increased debt
payment requirements utilize funds that would otherwise have been distributed in
order to meet the 95% REIT  distribution  test,  the  Company  may lose its REIT
status.

         In order to maintain its qualification as a REIT, the Company must make
annual  distributions  to its shareholders of at least 95% of its taxable income
(which does not include net capital  gains).  Under certain  circumstances,  the
Company may be required to make  distributions  in excess of cash  available for
distribution to shareholders in order to meet such distribution requirements. In
such event,  the Company  would seek to borrow the amount of the  deficiency  or
sell assets to obtain the cash  necessary  to make  distributions  to retain its
qualification as a REIT for federal income tax purposes.

         No  Limitation  on Debt.  The Board of  Directors  has adopted a policy
limiting the Company's  total indebtedness to not more than 50% of its total
assets at cost or the amount that will sustain a minimum  debt service  coverage
ration  of  3:1.  However,  the  Board  of  Directors  of the  Company,  without
shareholder  approval,  may amend or modify its current policy on borrowing.  If
this policy were changed,  the Partnership  could become more highly  leveraged,
resulting  in an  increase  in debt  service  that  could  adversely  affect the
Partnership's funds from operations, cash flow and ability to make distributions
to its  shareholders,  an increased  risk of default on its  obligations  and an
increased  risk of  foreclosure  on facilities  securing debt. See "Policies and
Objectives with Respect to Certain Activities--Financing Policies."

Changes in Policies

         The major  policies of the  Partnership,  including  its policies  with
respect  to  acquisitions,  development,  financing,  growth,  operations,  debt
limitation  and  distributions,  will be determined by the Board of Directors of
the Company. The Board of Directors may amend or revise these and other policies
from time to time  without a vote of the limited  partners.  See  "Policies  and
Objectives with Respect to Certain Activities."

Tax Risks

         Tax  Liabilities  as a Consequence of the Failure to Qualify as a REIT.
The Company intends to operate so as to qualify as a REIT for federal income tax
purposes.  However,  no assurance  can be given that the Company will qualify or
remain qualified as a REIT.  Qualification as a REIT involves the application of
highly  technical  and complex  provisions  of the  Internal  Revenue  Code (the
"Code")  for  which   there  are  only   limited   judicial  or   administrative
interpretations. The complexity of these provisions and of the applicable income
tax regulations that have been promulgated under the Code is greater in the case
of a REIT that holds its assets in partnership form.  Furthermore,  there are no
controlling  authorities that deal specifically with many tax issues affecting a
REIT that operates self-storage facilities. The determination of various factual
matters and  circumstances  not entirely within the Company's control may affect
its ability to qualify as a REIT.  In addition,  no assurance  can be given that
legislation, new regulations,  administrative interpretations or court decisions
will not have a substantial  adverse effect with respect to the qualification as
a REIT or the federal income tax consequences of such qualification.

                  If the  Company  were  to  fail  to  qualify  as a REIT in any
taxable year, the Company would not be allowed a deduction for  distributions to
shareholders  in  computing  its taxable  income and would be subject to federal
income tax  (including any  applicable  alternative  minimum tax) on its taxable
income at regular corporate rates.  Unless entitled to relief under certain Code
provisions,  the Company also would be disqualified from treatment as a REIT for
the four taxable years following the year during which  qualification  was lost.
As a result,  the cash  available  for  distribution  to  shareholders  would be
reduced for each of the years involved. Moreover, if the Company were to fail to
qualify  as  a  REIT,  it  would  no  longer  be  subject  to  the  distribution
requirements of the Code and, to the extent that  distributions  to stockholders
had been made in anticipation of the Company's qualification,  the Company might
be required to borrow funds or to liquidate  assets to pay applicable  corporate
tax.  Although the Company  currently intends to operate in a manner designed to
qualify as a REIT, it is possible that future  economic,  market,  legal, tax or
other  considerations  may cause the Board of  Directors,  with the consent of a
majority of the shareholders, to revoke the REIT election.

         Adverse Effects of REIT Minimum Distribution Requirements.  In order to
qualify  as a  REIT,  the  Company  generally  will  be  required  each  year to
distribute to its shareholders at least 95% of its net taxable income (excluding
any net  capital  gain).  In  addition,  the  Company  will be  subject  to a 4%
nondeductible  excise tax on the amount, if any, by which certain  distributions
paid by it with respect to any calendar year are less than the sum of (i) 85% of
its ordinary  income,  (ii) 95% of its capital gain net income for that year and
(iii) 100% of its undistributed taxable income from prior years.

                  The Company intends to make  distributions to its shareholders
to comply with the 95% distribution  requirement and to avoid the  nondeductible
excise tax. The Company's  income and cash flow consists  primarily of its share
of those  items from the  Partnership.  Differences  in timing  between  taxable
income and cash available for distribution could require the Company,  by itself
or through the  Partnership,  to borrow funds on a short-term  basis to meet the
95%  distribution  requirement  and to avoid the  nondeductible  excise tax. For
federal income tax purposes,  distributions  paid to shareholders may consist of
ordinary income,  capital gains,  nontaxable return of capital, or a combination
thereof.  The Company will provide its shareholders  with an annual statement as
to the taxability of distributions.

                  Distributions   by  the  Partnership  are  determined  by  the
Company's  Board of  Directors  and will be  dependent  on a number of  factors,
including the amount of the Partnership's  cash available for distribution,  the
Partnership's  financial  condition,  any  decision by the Board of Directors to
reinvest funds rather than to distribute such funds, the  Partnership's  capital
expenditures,  the annual distribution requirements under the REIT provisions of
the Code and such other factors as the Board of Directors deems relevant.

         Classification  of the Partnership  and Its Subsidiary  Partnerships as
Partnerships for Federal income Tax Purposes; Impact on REIT Status. The Company
believes  that the  Partnership  and its  subsidiary  partnerships  each will be
classified as a  partnership  for federal  income tax purposes.  If the Internal
Revenue Service (the "Service") were to challenge successfully the tax status of
the  Partnership  or any  subsidiary  partnership  as a partnership  for federal
income tax purposes, such partnership would be taxable as a corporation.  If the
Partnership  were  treated as a  corporation,  the Company  would not be able to
satisfy the asset and income  requirements  for REIT status.  If any  subsidiary
partnership were treated as a corporation, the Company may cease to qualify as a
REIT  because  the  Company  would be  treated  as owning  more than 10% of such
partnership's  voting  securities.  Furthermore,  the  imposition of a corporate
income tax on the  Partnership  or a significant  subsidiary  partnership  would
substantially  reduce  the  amount of cash  available  for  distribution  to the
Company and its shareholders.

Self-Storage Industry Risks

         Operating  Risks.  The  Partnership's  facilities  are  subject  to all
operating risks common to the self-storage facility industry.  These include the
risks  normally  associated  with lack of demand for rental  spaces in a locale,
changes in supply of or demand for similar or  competing  facilities  in an area
and changes in market rental rates.

         Competition.   The   Partnership's   facilities   compete   with  other
self-storage  properties in their geographic markets.  Most of the Partnership's
competitors  seek to compete by offering  storage space at lower prices than the
Company.  However, instead of emphasizing lower prices, the Partnership seeks to
emphasize its  facilities'  convenience  and  customer-oriented  management  and
amenities to attract quality tenants.

         The Partnership competes in operations and for investment opportunities
with entities  which have  substantially  greater  financial  resources than the
Partnership.  These  entities may generally be able to accept more risk than the
Partnership can prudently manage. Competition may generally reduce the number of
suitable  investment  opportunities  offered to the Partnership and increase the
bargaining power of property owners seeking to sell.

Real Estate Investment Risks

         General Risks.  The  Partnership's  investments  are subject to varying
degrees of risk  generally  incident  to the  ownership  of real  property.  The
underlying  value  of  the  Partnership's   real  estate   investments  and  the
Partnership's  income and ability to make  distributions  to its shareholders is
dependent upon the  Partnership's  ability to operate the facilities in a manner
sufficient to maintain or increase cash provided by operations.  Income from the
facilities  may be adversely  affected by adverse  changes in national  economic
conditions, adverse changes in local market conditions due to changes in general
or local economic conditions and neighborhood characteristics,  competition from
other   self-storage   properties,   changes  in  interest   rates  and  in  the
availability,  cost and terms of mortgage funds, the impact of present or future
environmental  legislation and compliance with  environmental  laws, the ongoing
need for  capital  improvements,  changes  in real  estate  tax  rates and other
operating  expenses,  adverse changes in governmental rules and fiscal policies,
civil unrest,  acts of God,  including  earthquakes and other natural  disasters
(which may result in uninsured  losses),  acts of war, adverse changes in zoning
laws, and other factors which are beyond the control of the Company.

         Illiquidity of Real Estate May Limit its Value. Real estate investments
are relatively illiquid. The ability of the Partnership to vary its portfolio in
response to changes in economic and other conditions will be limited.  There can
be no assurance  that the Company will be able to dispose of an investment  when
it finds  disposition  advantageous  or  necessary or that the sale price of any
disposition will recoup or exceed the amount of the Partnership's investment.

         Uninsured  and  Underinsured  Losses  Could  Result in Loss of Value of
Facilities.  The Partnership  maintains  comprehensive  insurance on each of its
facilities, including liability, fire and extended coverage. Management believes
this coverage is of the type and amount customarily  obtained for or by an owner
on real  property.  However,  there are certain types of losses,  generally of a
catastrophic  nature, such as earthquakes and floods, that may be uninsurable or
not economically insurable, as to which the Partnership's facilities are at risk
in their particular locales. The Partnership's management uses its discretion in
determining amounts,  coverage limits and deductibility provisions of insurance,
with a view to requiring appropriate insurance on the Partnership's  investments
at a  reasonable  cost and on  suitable  terms.  This may  result  in  insurance
coverage that in the event of a substantial  loss would not be sufficient to pay
the full current market value or current  replacement cost of the  Partnership's
lost   investment.   Inflation,   changes  in  building  codes  and  ordinances,
environmental considerations, and other factors also might make it infeasible to
use  insurance  proceeds  to  replace a  facility  after it has been  damaged or
destroyed.  Under such  circumstances,  the insurance  proceeds  received by the
Partnership  might not be adequate to restore its economic position with respect
to such property.

         Possible Liability Relating to Environmental  Matters.  The Partnership
may be subject to  liability  under  various  environmental  laws as an owner or
operator of real estate.  See  "Business - Operating  Practices -  Environmental
Matters."

Anti-Takeover Measures

         The  following  limitations  could  have the effect of  discouraging  a
takeover or other transaction in which shareholders of the Company might receive
a premium for their shares over the then  prevailing  market price or which such
holders might believe to be otherwise in their best interest.

         Ownership  Limitation.  In order for the Company  currently to maintain
its qualification as a REIT, not more than 50% in value of its outstanding stock
may be owned,  directly  or  constructively,  by five or fewer  individuals  (as
defined in the Code to include  certain  entities)  (the "5/50  Rule").  For the
purpose of preserving the Company's REIT  qualification,  the Charter  prohibits
direct or constructive  ownership of more than 9.8% of the outstanding shares of
Common Stock by any person  (except US Realty,  which may acquire up to 37.5% of
the Company's  Common Stock).  This ownership  limitation may have the effect of
precluding  acquisition  of control of the Company by a third party  without the
approval of the Board of Directors.

         Staggered  Board.  The Board of Directors of the Company  currently has
three  classes  of  directors,  with  the  terms  of  the  classes  expiring  in
consecutive years. The staggered terms of directors may affect the shareholders'
ability to change control of the Company even if a change in control were in the
shareholders' interest.

         Preferred Stock. The Charter authorizes the Board of Directors to issue
up to 5,000,000  shares of preferred  stock and to establish the preferences and
rights of any shares  issued.  The  issuance of  preferred  stock could have the
effect of delaying or  preventing  a change in control of the Company  even if a
change in control were in the shareholders' interest.

         Tennessee  Anti-Takeover  Statutes.  As a  Tennessee  corporation,  the
Company is subject to various  legislative acts set forth in the Tennessee Code,
including the Tennessee  Investor  Protection Act, Business  Combination Act and
Greenmail Act, which impose certain  restrictions and require certain procedures
with respect to certain  takeover offers and business  combinations,  including,
but  not  limited  to,  combinations  with  interested  shareholders  and  share
repurchases from certain shareholders.

Partnership Agreement

         The following  summary of the Second Amended and Restated  Agreement of
Limited Partnership of SUSA Partnership, L.P. ("Partnership Agreement"), and the
descriptions  of certain  provisions  thereof set forth  elsewhere  in this Form
10-K, are qualified in their entirety by reference to the Partnership Agreement,
and the amendments thereto, which are filed as exhibits to this Form 10-K.

Management

         The Partnership has been organized as a Tennessee limited  partnership.
The Company, as the General Partner has full, exclusive complete  responsibility
and discretion in the management and control of the  Partnership and the limited
partners  have no  authority to transact  business  for, or  participate  in the
management  activities or decisions of, the Partnership.  However, any amendment
to the  Partnership  Agreement that would (i) affect the  Redemption  Rights (as
defined below),  (ii) adversely  affect the limited  partners' rights to receive
cash  distributions  (other  than with  respect to the  issuance  of  additional
Units),  (iii) alter the  Partnership's  allocations  of income or losses (other
than with  respect to the  issuance of  additional  Units) or (iv) impose on the
limited partners any obligations to make additional contributions to the capital
of the  Partnership,  would require the consent of limited  partners (other than
the General  Partner)  holding more than 51% of the percentage  interests of the
limited partners in addition to the consent of the General Partner.  Pursuant to
an  Agreement  of General  Partner  executed in  connection  with the  Company's
acquisition of five self-storage  facilities in 1995, the Company has agreed not
to give its consent to any such  amendment that has not been approved by limited
partners  holding  51% of the  Units  issued  to them in  connection  with  such
acquisition.


Transferability of Interests

         The  Company  may not  voluntarily  withdraw  from the  Partnership  or
transfer or assign its general  partnership  interest in the Partnership  unless
the  transaction  in which such  withdrawal  or transfer  occurs  results in the
limited partners' receiving property in an amount equal to the amount they would
have received had they exercised their Redemption  Rights  immediately  prior to
such   transaction,   or  unless  the  successor  to  the  Company   contributes
substantially  all of its assets to the Partnership in return for an interest in
the Partnership.  With certain limited exceptions,  the limited partners may not
transfer their Units,  in whole or in part,  without the consent of the Company,
which consent may be withheld in the Company's sole discretion.  The Company may
not consent to any transfer that would cause the  Partnership to be treated as a
separate  corporation  for federal  income tax purposes or would  jeopardize the
REIT status of the Company.



<PAGE>


Capital Contributions

         With certain  exceptions,  the Company  shall not issue any  additional
shares of Common  Stock  other than to all  holders of Common  Stock (or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase  Common Stock),  unless (A) the Company shall cause
the  Partnership  to issue to the  Company,  partnership  interests  (or rights,
options,  warrants or convertible or exchangeable securities of the Partnership)
having  designations,  preferences and other rights,  all such that the economic
interests are substantially  similar to those of the additional shares of Common
Stock and (B) the Company  contributes  the  proceeds  from the issuance of such
additional shares to the Partnership;  provided,  however,  that the Company may
issue  additional  securities  of Common  Stock (or such  other  securities)  in
connection with an acquisition of a property to be held directly by the Company,
but if and only if, such direct acquisition and issuance of additional shares of
Common Stock (or such other  securities) have been approved and determined to be
in the best  interests of the Company and the  Partnership  by a majority of the
Company's independent directors.  The Partnership Agreement provides that if the
Partnership requires additional funds at any time or from time to time in excess
of funds available to the Partnership from borrowings or capital  contributions,
the Company may borrow such funds from a financial  institution  or other lender
and lend such funds to the  Partnership  on the same terms and conditions as are
applicable  to the  Company's  borrowing  of such funds.  As an  alternative  to
borrowing  funds  required by the  Partnership,  the Company may  contribute the
amount of such  required  funds as an  additional  capital  contribution  to the
Partnership  subject to the terms and  conditions  set forth in the  Partnership
Agreement. Moreover, the Company is authorized to cause the Partnership to issue
partnership  interests  for less  than  fair  market  value if the  Company  has
concluded  in good  faith that such  issuance  is in the best  interests  of the
Company and the Partnership. If the Company so contributes additional capital to
the Partnership,  the Company's  partnership interest in the Partnership will be
increased  on a  proportionate  basis  based upon the amount of such  additional
capital  contributions  and the  value  of the  Partnership  at the time of such
contributions.  Conversely,  the partnership  interests of the limited  partners
will be decreased on a  proportionate  basis in the event of additional  capital
contributions by the Company. In addition, if the Company contributes additional
capital to the  Partnership,  the  Company  will  revalue  the  property  of the
Partnership  to its fair market  value (as  determined  by the  Company) and the
capital accounts of the partners will be adjusted to reflect the manner in which
the  unrealized  gain or loss  inherent  in such  property  (that  has not  been
reflected  in the capital  accounts  previously)  would be  allocated  among the
partners  under the terms of the  Partnership  Agreement if there were a taxable
disposition  of such  property  for such  fair  market  value on the date of the
revaluation.

Awards Under Omnibus Stock Plan

         If stock options  granted in connection with the Company's 1993 Omnibus
Stock Plan are  exercised,  the    Partnership  Agreement  requires the
Company to  contribute to the  Partnership  as an  additional  contribution  the
exercise price received by the Company in connection with the issuance of Common
Stock  to  such  exercising  participant.  However,  the    Partnership
Agreement  will treat the Company as having  contributed  an amount equal to the
fair market value of the Common Stock issued to the exercising  party or, in the
case of restricted  shares (as defined in Rule 144 under the  Securities  Act of
1933,  as amended) of Common Stock (the  "Restricted  Shares"),  the fair market
value  of the  restricted  shares  as the  applicable  restrictions  lapse,  for
purposes of increasing the percentage  interest of the Company (and diluting the
percentage interests of the limited partners) in the partnership.





<PAGE>

Redemption Rights

         Pursuant to the Partnership Agreement, a Limited Partner has Redemption
Rights  on or after the first  anniversary  after  which  such  Limited  Partner
acquires Units,  which will enable such Limited Partner to cause the Partnership
to  redeem  its  Units  in  exchange  for  Restricted   Shares  or,  in  certain
circumstances, cash. The redemption price will be paid in cash in the discretion
of the  Company or in the event that the  issuance of  Restricted  Shares to the
redeeming  Limited  Partner would (i) result in any person  owning,  directly or
indirectly,  shares of Common Stock in excess of the Ownership Limitation,  (ii)
result in shares of capital  stock of the Company  being owned by fewer than 100
persons (determined without reference to any rules of attribution), (iii) result
in the Company being  "closely held" within the meaning of section 856(h) of the
Code,  (iv)  otherwise  cause the Company to lose REIT status,  or (v) cause the
acquisition  of shares of Common Stock by such redeeming  Limited  Partner to be
"integrated" with any other  distribution of shares of Common Stock for purposes
of  complying  with the  Securities  Act.  The number of shares of Common  Stock
issuable  upon  exercise of the  Redemption  Rights  will be  adjusted  upon the
occurrence of share splits,  mergers,  consolidations  or similar pro rata share
transactions,  which  otherwise  would have the effect of diluting the ownership
interests  of the  limited  partners or the  shareholders  of the  Company.  The
limited  partners  have the right to require the Company to register  the Common
Stock  issuable upon exercise of the Redemption  Rights  pursuant to federal and
state securities laws.

Distributions

         The Partnership Agreement provides that the Partnership will distribute
cash from operations (including net sale or refinancing proceeds,  but excluding
net proceeds from the sale of the Partnership's  property in connection with the
liquidation of the Partnership)  quarterly, in amounts determined by the Company
in its sole discretion,  to the partners, for any fiscal year of the Partnership
in accordance with their  respective  percentage  interests in the  Partnership.
Upon  liquidation of the  Partnership,  after payment of, or adequate  provision
for, debts and obligations of the Partnership,  including any partner loans, any
remaining  assets of the  Partnership  will be  distributed to all partners with
positive capital  accounts in accordance with their respective  positive capital
account  balances.  If the Company has a negative balance in its capital account
following a liquidation of the  Partnership,  it will be obligated to contribute
cash to the Partnership equal to the negative balance in its capital account.

Allocations

         Income, gain and loss of the Partnership for each fiscal year generally
will be  allocated  among the  partners  in  accordance  with  their  respective
interests in the Partnership,  subject to compliance with the provisions of Code
sections 704(b) and 704( c) and Treasury Regulations promulgated thereunder.

Operations

         The Partnership  Agreement requires that the Partnership be operated in
a manner  that will enable the  Company to satisfy  the  requirements  for being
classified  as a REIT,  to avoid any  federal  income or  excise  tax  liability
imposed by the Code and to ensure that the Partnership will not be classified as
a "publicly traded partnership" for purposes of section 7704 of the Code.

         In addition to the  administrative  and  operating  costs and  expenses
incurred by the Partnership,  the Partnership will pay all administrative  costs
and expenses of the Company (the "Company  Expenses")  and the Company  Expenses
will be treated as expenses of the Partnership.  The Company Expenses  generally
will  include (A) all  expenses  relating to the  formation  and  continuity  of
existence of the Company,  (B) all expenses  relating to the public offering and
registration of securities by the Company,  (C) all expenses associated with the
preparation  and filing of any periodic  reports by the Company  under  federal,
state or local laws or regulations,  (D) all expenses associated with compliance
by the Company with laws,  rules and  regulations  promulgated by any regulatory
body and (E) all other operating or administrative costs of the Company incurred
in the ordinary course of its business on behalf of the Partnership. The Company
Expenses,  however,  will not include any administrative and operating costs and
expenses   incurred  by  the  Company  that  are  attributable  to  self-storage
facilities owned by the Company  directly.  The Company  currently does not have
any such self-storage facilities.

Term

         The Partnership  will continue until December 31, 2154, or until sooner
dissolved  upon (i) the  bankruptcy,  dissolution  or  withdrawal of the Company
(unless the limited partners elect to continue the  Partnership),  (ii) the sale
or other  disposition of all or substantially all the assets of the Partnership,
(iii) the  redemption of all limited  partnership  interests in the  Partnership
(other  than those held by the  Company,  if any),  or (iv) the  election of the
General Partner.


Tax Matters

         Pursuant to the partnership  Agreement,  the Company is the tax matters
partner of the  Partnership  and,  as such,  will have  authority  to handle tax
audits and to make tax elections under the Code on behalf of the Partnership.


<PAGE>


Item 2. Properties

The  following  are  definitions  of terms used  throughout  this  discussion in
analyzing the Partnership's business. Physical occupancy is defined as the total
net rentable square feet rented as of the date computed divided by the total net
rentable square feet available. Economic occupancy is determined by dividing the
expected income by the gross potential income. Gross potential income is defined
as the sum of all units available to rent at a facility multiplied by the market
rental rate  applicable to those units as of the date computed.  Expected income
is defined as the sum of the monthly rent being  charged for the rented units at
a  facility  as of the date  computed.  Rent per  square  foot is defined as the
annualized  result of dividing  gross  potential  income on the date computed by
total net rentable square feet.

<PAGE>
<TABLE>
<CAPTION>

                              PROPERTY                               AVAIL        AVAIL.          % PHY       RENT PER       % ECON
                                                                     UNITS        SQ. FT.          OCC          SQ. FT.         OCC
                                                                     -----        -------          ---          -------         ---
<S> <C>
ALABAMA
         BIRMINGHAM                                                  272         36,250             75%           $7.45         71%
         VESTAVIA                                                    614         74,262             89%           $8.19         83%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                       886        110,512             85%           $7.95         79%

ARIZONA
         22ND ST/TUSCON                                              471         47,350             92%           $8.84         86%
         24TH ST/YUMA                                                470         48,450             96%           $7.00         93%
         CAVE CREEK                                                  731         61,024             82%          $10.37         76%
         E. PHOENIX                                                  460         45,520             96%           $7.58         90%
         ORACLE/TUCSON                                               486         50,150             84%           $9.39         82%
         TEMPE                                                       673         65,666             92%           $8.35         91%
         PHOENIX-32ND STREET                                         848         80,125             89%           $9.53         80%
         7TH ST. & INDIAN SCHOOL-PHOENIX                             466         24,810             97%          $13.52         90%
         MESA/ALMA SCHOOL RD                                         845         79,480             80%           $7.81         71%
         MESA/COUNTRY CLUB                                           600         59,975             89%           $7.06         68%
         MESA/EAST MAIN ST                                           865        122,503             71%           $5.51         52%
         METRO-21ST/PEORIA-PHOENIX                                   404         46,449             92%           $8.48         79%
         N PHOENIX - BELL RD                                         762         80,165             65%          $10.95         65%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     8,081        811,667             84%           $8.43         76%

CALIFORNIA, NORTHERN
         CAMPBELL                                                    472         28,313             92%          $22.60         83%
         CAPITOLA                                                    511         46,742             99%          $13.23         88%
         MONTEREY                                                  1,157         75,676             97%          $15.93         87%
         PALO ALTO                                                   605         46,075             98%          $14.77         89%
         SAN JOSE                                                    790         70,753             98%          $14.27         87%
         SANTA  CRUZ                                                 721         48,766             93%          $14.89         89%
         SANTA CLARA                                               1,049         94,100             99%          $12.71         84%
         SCOTT'S VALLEY                                              337         31,706             99%          $14.88         87%
         WATSONVILLE                                                 306         33,132             97%          $11.15         89%
         SALINAS                                                     454         53,700             99%           $9.68         88%
         WHITTIER                                                    598         73,933             88%           $9.01         83%
         FLORIN/FREEPORT-SACRAMENTO                                  665         59,415             88%          $10.07         76%
         SUNRISE/SACRAMENTO                                          703         93,092             94%           $6.25         80%
         SANTA ROSA                                                1,017         96,375            100%           $8.77         87%
         PACHECO/FIRST AVE. NORTH                                    779         58,745             88%          $12.26         86%
         SACRAMENTO/AUBURN                                           721         78,955             88%           $6.69         78%
         SACRAMENTO                                                  517         62,400             87%           $6.30         82%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                    11,402      1,051,878             94%          $11.19         85%

CALIFORNIA, SOUTHERN
         CHATSWORTH                                                  811        104,616             77%          $11.11         67%
         CITY OF INDUSTRY                                            797         80,057             93%           $8.43         83%
         COLTON                                                      485         45,845             86%           $6.62         79%
         COVINA                                                      714         76,401             88%          $10.16         80%
         FALLBROOK                                                   464         48,950             93%           $6.99         89%
         GARDEN GROVE                                                774         78,373             79%           $9.72         78%
         HEMET                                                       363         45,535             93%           $5.60         90%
         HIGHLAND                                                    556         62,397             98%           $6.63         91%
         MARINA DEL REY                                            1,249        114,531             84%          $16.96         73%
         MIRAMAR ARJONS                                              866        120,207             82%           $9.01         77%
         MIRAMAR CABOT                                               456         37,796             96%           $9.93         90%
         MORENO VALLEY                                               524         44,831             91%           $7.54         87%
         NORWALK                                                     919         80,785             91%          $11.75         82%
         OCEANSIDE                                                 1,199         75,125             90%          $12.17         83%
         PALM-GENE AUTRY                                             620         72,975             90%           $7.16         85%
         PANORAMA CITY                                               790         80,812             83%          $10.58         74%
         REDLANDS                                                    654         71,740             90%           $6.46         86%
         RIALTO                                                      580         58,375             87%           $6.65         80%
         SAN BERN./23RD ST.                                          775         79,320             81%           $6.63         71%
         SAN BERN./BASELINE                                        1,198        112,416             71%           $6.27         67%
         SAN BERN./MILL AVE                                          586         57,305             71%           $6.48         66%
         SAN BERN./WATERMAN                                        1,197        132,106             62%           $5.30         55%
         SAN DIEGO/PT. LOMA                                        1,537        140,899             67%          $11.16         65%
         SANTA ANA                                                   800         86,850             68%          $11.59         58%
         SAN MARCOS                                                  277         37,200             98%           $6.50         90%
         SANTEE                                                      775         83,195             77%           $7.97         67%
         TAMARISK                                                    839         73,637             86%           $8.80         73%
         VICTORVILLE                                                 439         54,124             81%           $5.68         73%
         WESTMINSTER                                                 678         65,572             83%          $10.36         73%
         YUCAIPA                                                     376         39,618             92%           $6.81         80%
         THOUSAND PALMS                                              729         49,617             81%           $9.79         71%
         HUNTINGTON BEACH                                            710         67,739             84%           $8.57         69%
         LA PUENTE                                                   648         69,435             95%           $9.33         82%
         HUNTINGTON BEACH II/McFADDEN AVE                            764         71,105             93%           $8.79         84%
         HAWAIIAN GARDENS-NORWALK BLVD                             1,188        134,709             76%           $9.67         73%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                    26,337      2,654,198             82%           $8.99         75%

DC/BALTIMORE AREA
         14TH & U ST.                                              1,402        107,405             81%          $15.34         78%
         ANNAPOLIS/RTE 50                                            628         70,930             90%          $14.98         82%
         ANNAPOLIS/TROUT                                             751         65,267             90%          $16.34         82%
         COLUMBIA                                                    731         71,285             92%          $15.28         86%
         ESSEX                                                       528         60,590             93%          $12.47         87%
         MILLERSVILLE                                                857         82,325             99%          $10.59         89%
         MONT. VILLAGE                                               656         74,633             84%          $12.52         76%
         ROCKVILLE                                                   935         57,565             88%          $18.10         82%
         SILVER SPRING                                               983         89,510             90%          $17.72         85%
         WALDORF                                                     680         75,875             95%           $9.42         87%
         BALTIMORE CITY                                              846         82,174             84%           $9.84         80%
         RT 3/MILLERSVILLE                                           417         32,050             99%          $11.00         92%
         CHARLOTTESVILLE/SEMINOLE TRAIL                              484         46,425             67%          $10.66         56%
         CLARENDON                                                   909         68,049             38%          $17.22         35%
         FREDERICKSBURG/JEFFERSON DAVIS HWY                          471         47,475             70%          $10.30         62%
         FREDERICKSBURG/PLANK ROAD                                   564         50,258             73%          $10.50         64%
         RESTON                                                      614         54,505             58%          $16.18         51%
         STAFFORD/JEFFERSON DAVIS HWY.                               469         51,286             69%          $10.60         64%
         CHANTILLY                                                   532         49,200             86%          $14.66         81%
         FAIRFAX STATION                                             778         64,135             95%          $13.88         88%
         FALLS CHURCH                                                656         60,763             89%          $14.38         75%
         WILLOW LAWN                                                 638         71,917             97%          $12.19         86%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                    15,529      1,433,622             84%          $13.53         76%

FLORIDA, WESTERN
         FT. MYERS - SAN CARLOS                                      413         52,175             94%           $8.69         86%
         LONGWOOD                                                    610         65,575             87%          $11.07         77%
         PT RICHEY - HWY 19                                          501         80,409             91%           $6.28         82%
         OLD US41-NAPLES                                             626         71,725             94%           $7.93         83%
         SARASOTA                                                    907        102,645             76%          $10.97         68%
         TAMPA-ADAMO                                                 635         81,775             91%           $7.74         82%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     3,692        454,304             88%           $8.83         78%

FLORIDA, SOUTHERN
         ANSIN BLVD-HALLANDALE                                     1,145         99,193             84%          $10.53         80%
         DAVIE/I595                                                1,133         87,235             90%          $13.12         86%
         DORAL-MIAMI                                                 885         83,223             89%          $11.52         87%
         HWY 441-MIAMI                                               936         80,541             89%          $11.95         84%
         IVES DAIRY                                                  706         75,712             80%          $13.54         75%
         KENDALL                                                     891         80,670             77%          $14.33         73%
         MIAMI GARDENS/441                                           858         37,258             75%          $13.01         65%
         MIAMI-SUNSET                                                950         78,984             96%          $14.32         92%
         N. LAUDERDALE - MCNAB                                       865         80,547             77%          $12.30         69%
         QUAIL-MIAMI                                                 947         77,983             78%          $12.35         65%
         TAMIAMI-MIAMI                                               985         77,452             89%          $11.81         94%
         WPB II                                                      738         70,345             79%           $9.81         76%
         WPB SOUTH                                                   701         62,050             81%          $11.11         75%
         CORAL WAY-MIAMI                                             865         84,873             77%          $13.72         72%
         EVERGREEN-BOCA RATON                                        650         84,114             98%          $11.64         91%
         EVERGREEN-FT. LAUDERDALE                                    814         63,083             97%          $10.84         96%
         MILLER RD.-MIAMI                                            964         73,815             69%          $15.01         59%
         HARBORVIEW RD/PT CHARLOTTE                                  582         49,725             88%          $10.30         75%
         MIRAMAR/STATE RD 7                                        1,879        151,188             77%           $9.97         65%
         DELRAY BEACH/W. ATLANTIC BLVD.                              460         44,475             89%           $8.48         77%
         DAVIE/STATE RD 7                                          1,266        117,408             80%          $12.00         75%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                    19,220      1,659,874             83%          $11.99         77%

GEORGIA
         ACWORTH                                                     328         39,753             87%           $8.02         75%
         EASTPOINT                                                   686         65,884             93%           $9.64         87%
         LILBURN                                                     545         66,140             86%           $7.69         76%
         SOUTH COBB                                                  578         54,750             83%           $8.16         78%
         WESTERN HILLS                                               587         70,125             81%           $7.48         71%
         STONE MOUNTAIN                                              627         81,260             89%           $7.99         80%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     3,351        377,912             87%           $8.16         78%

ILLINOIS
         BRICKYARD                                                   901         91,875             93%           $9.08         88%
         CERMAK                                                      798         63,288             95%          $10.50         94%
         SCHAUMBURG                                                  603         80,736             91%          $11.07         90%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     2,302        235,899             93%          $10.14         90%

KANSAS CITY AREA

         OLATHE - KSC                                                434         47,550             86%           $7.84         77%
         OVERLAND PK - KSC                                           378         47,075             95%           $9.31         93%
         SHAWNEE - KSC                                               486         56,255             86%           $8.41         78%
         STATE AVENUE-KSC                                            390         49,925             90%           $7.25         87%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     1,688        200,805             89%           $8.20         84%

MICHIGAN
         LINCOLN PARK                                                537         63,650             97%           $8.94         94%
         TEL DIXIE                                                   470         46,350             95%           $7.94         97%
         GRAND RAPIDS/28TH STREET                                    636         53,943             97%           $6.98         93%
         GRANDVILLE-SPARTAN IND. DRIVE                               597         59,654             85%           $6.17         80%
         TROY/COOLIDGE HIGHWAY                                       511         59,180             96%          $11.06         91%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     2,751        282,777             94%           $8.26         91%

MISSOURI
         GRANDVIEW                                                   515         53,820             97%           $7.23         98%
         RAYTOWN-350 HWY                                             454         51,050             96%           $6.64         93%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                       969        104,870             96%           $6.94         96%

NEVADA
         DECATUR/OAKEY                                               548         52,305             86%           $9.31         75%
         LORENZI/RAINBOW RD                                          563         56,500             89%           $9.83         81%
         SAHARA                                                      729        127,432             78%           $6.98         65%
         SAHARA/PIONEER                                              610         73,100             85%           $7.77         75%
         STORTITE/CHARLESTON                                         520         55,850             85%           $8.23         74%
         SUNSET SAFSTO                                               683         69,274             91%           $9.13         80%
         TROPICANA                                                   512         57,465             86%           $9.39         74%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     4,165        491,926             85%           $8.40         74%

NEW ENGLAND STATES
         E. HARTFORD                                                 842         85,370             87%           $9.63         75%
         ENFIELD                                                     548         66,100             79%           $8.45         64%
         HAVERHILL                                                   545         53,545             98%           $9.22         95%
         NEW BEDFORD                                                 567         65,700             70%           $9.10         53%
         WETHERSFLD                                                  704         94,700             74%           $9.06         62%
         WHITMAN                                                     337         34,625             99%          $11.37         89%
         WORCESTER                                                   470         65,150             90%           $8.98         84%
         FARMINGTON                                                  599         82,900             97%           $9.28         91%
         ROCKY HILL                                                  667         84,950             92%           $9.43         83%
         WATERBURY                                                   515         50,950             90%           $9.57         83%
         NORTH ATTLEBORO                                             430         46,025             94%          $10.90         89%
         NORTHBOROUGH                                                513         64,200             91%           $9.62         77%
         SOUTH EASTON                                                467         64,490             91%           $8.25         90%
         NASHUA/TYNGSBORO                                            566         79,100             99%           $8.88         92%
         BROCKTON                                                    690         70,125             94%          $10.55         86%
         FALL RIVER                                                  626         76,250             84%           $7.74         76%
         SALISBURY                                                   488         59,325             89%           $8.92         81%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     9,574      1,143,505             89%           $9.25         80%

NEW JERSEY
         HACKENSACK                                                1,498        123,860             84%          $17.91         75%
         HARRISON                                                    586         29,862             82%          $19.34         79%
         FLANDERS                                                    215         25,790             86%          $14.44         68%
         MAYS LANDING                                                269         29,680             85%           $9.54         81%
         ORANGE                                                    1,018         80,815             85%          $18.56         84%
         SECAUCUS                                                  1,181        106,975             93%          $16.88         81%
         POMONA                                                      325         34,400             86%          $10.11         78%
         CHERRY HILL/CUTHBERT                                        443         49,020             93%          $11.30         89%
         CHERRY HILL/RTE 70                                          478         60,676             96%          $10.42         95%
         LAWNSIDE                                                    638         55,200             97%          $13.22         87%
         PENNSAUKEN                                                  747         80,375             78%          $11.67         73%
         WILMINGTON                                                  632         71,825             87%          $11.37         78%
         CORAM/BALD HILL                                             940         94,714             94%          $12.36         81%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     8,970        843,192             88%          $14.17         80%

NEW MEXICO
         ALBUQ.-COORS/CENTRAL                                        394         52,500             90%           $6.38         81%
         ALBUQ.-E. CENTRAL                                           328         29,150             92%           $7.64         79%
         ALBUQ.-EUBANK                                               866         74,025             76%           $6.73         70%
         ALBUQ.-OSUNA                                                641         71,110             83%           $6.26         80%
         ELLISON/NM                                                  546         54,635             85%           $9.09         72%
         HOTEL CIRCLE                                                461         52,842             49%           $8.85         33%
         LEGION/NM                                                   494         43,950             88%          $10.62         79%
         LOMAS/NM                                                    411         31,650             85%           $9.96         73%
         MONTGOMERY/NM                                               533         49,245             85%           $9.69         75%
         SAN MATEO/NM                                                437         44,285             63%           $8.60         56%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     5,111        503,392             79%           $8.15         69%

NEW ORLEANS
         TCHOUPITOULAS - N.O.                                        663         68,562             89%          $10.81         80%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                       663         68,562             89%          $10.81         80%

NORTH CAROLINA
         CHARLOTTE/AMITY ROAD                                        633         70,652             94%           $7.43         82%
         CHARLOTTE/TYRON ST.                                         796         66,932             88%           $8.49         78%
         RALEIGH/HILLSBOROUGH                                        515         55,932             92%           $8.30         84%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     1,944        193,516             91%           $8.05         81%

OKLAHOMA
         10TH ST - OKC                                               511         58,000             90%           $5.11         80%
         AIR DEPOT - OKC                                             485         54,100             98%           $5.15         95%
         MERIDIAN - OKC                                              601         82,300             78%           $4.23         72%
         MIDWEST CITY - OKC                                          521         61,415             98%           $5.65         93%
         MOORE - OKC                                                 411         51,900             94%           $5.12         88%
         NW EXPRESSWAY - OKC                                         447         51,000             94%           $5.86         86%
         SOONER ROAD/OKC                                             549         59,900             92%           $5.57         82%
         OKC/33RD STREET                                             350         37,180             90%           $5.42         84%
         OKC/ROXBURY BLVD.                                           378         40,150             93%           $5.26         84%
         MINGO-TULSA                                                 765         81,913             84%           $6.88         78%
         PEORIA-TULSA                                                489         62,225             75%           $6.13         70%
         S. LEWIS-TULSA                                              537         46,538             93%           $7.44         90%
         SHERIDAN-TULSA                                              557         66,310             92%           $6.56         87%
         SKELLY-TULSA                                                368         44,660             72%           $5.55         64%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     6,969        797,591             88%           $5.71         82%

OREGON
         PORTLAND/185TH AVE                                          814         68,110             94%          $11.72         88%
         PORTLAND/229T H AVE                                         688         71,410             91%           $8.46         85%
         PORTLAND/MURRAY BLVD.                                       662         63,345             90%           $9.88         77%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     2,164        202,865             92%          $10.00         83%

PENNSYLVANIA
         ALLENTOWN                                                   723         59,700             90%           $8.83         86%
         BETHLEHEM                                                   790         71,740             87%           $9.16         83%
         KING OF PRUSSIA                                             717         81,855             98%          $10.13         94%
         PHILADELPHIA                                                597         70,275             89%          $11.99         81%
         WARMINSTER                                                  543         56,660             97%          $10.25         94%
         NORRISTOWN                                                  624         61,590             96%          $13.71         88%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     3,994        401,820             93%          $10.65         87%

SOUTH CAROLINA
         CHARLESTON/ASHELY RD.                                       628         63,608             90%           $6.75         78%
         COLUMBIA/BROAD RIVER RD.                                    513         57,797             91%           $6.49         86%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     1,141        121,405             90%           $6.63         82%

TENNESSEE
         GATEWAY                                                     464         50,875             95%           $6.92         92%
         MEMPHIS-MT. MORIAH                                          764         86,505             76%          $10.87         69%
         MEMPHIS-RIDGEWAY                                            543         51,950             82%           $7.30         70%
         SUMMER                                                      578         61,066             89%          $10.82         82%
         UNION                                                       529         57,585             97%          $10.77         82%
         ANTIOCH/BELL RD                                             567         65,300             72%           $8.93         66%
         NASHVILLE                                                   913        109,800             89%           $7.87         80%
         NASHVILLE/HAYWOOD                                           461         48,225             95%           $7.01         86%
         NASHVILLE/LEBANON PIKE                                      715         83,674             92%           $8.58         85%
         NASHVILLE/MURFREESBORO, SE                                  695        101,875             68%           $7.84         65%
         NASHVILLE/MURFREESBURG                                      350         35,925             86%           $7.13         76%
         NASHVILLE/OLD HICKORY BLVD.                                 551         73,132             81%          $10.17         74%
         NASHVILLE/TROUSDALE RD                                      684        101,475             79%           $8.25         79%
         CHATTANOOGA                                                 440         46,875             95%           $7.33         82%
         FRANKLIN/LIBERY PK                                          558         72,600             73%           $8.05         73%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     8,812      1,046,862             83%           $8.62         77%

TEXAS
         EULESS BLVD.                                                795        103,246             85%           $7.09         76%
         FT. WORTH AVE - DALLAS                                      479         48,118             97%           $7.55         89%
         IRVING-ARPT FREEWAY                                         819         84,272             94%           $7.43         80%
         MIDWAY-DALLAS                                               538         53,850             92%          $10.45         83%
         N. FREEWAY-FT.WORTH                                         636         87,744             84%           $5.27         78%
         W. SETTLEMENT-HWY 183                                     1,624        169,048             86%           $6.66         77%
         S. FREEWAY-FT.WORTH                                         711         79,270             90%           $5.40         85%
         SPRING/I-45 NORTH                                           612         72,140             83%           $8.97         78%
         SUGARLAND/OLD MILL RD.                                      478         54,910             56%           $8.48         51%
         DALLAS-PRESTON RD.                                          719         86,775             89%           $9.41         84%
         BEDFORD/EULESS                                              665         76,265             89%           $7.53         79%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     8,076        915,638             86%           $7.43         78%

UTAH
         OREM                                                        553         59,450             75%           $6.95         67%
         SANDY                                                       563         83,760             75%           $7.17         70%
         WEST VALLEY                                                 464         53,375             82%           $7.32         75%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                     1,580        196,585             77%           $7.14         71%

WASHINGTON STATE
         VANCOUVER/78TH STREET                                       585         62,550             94%           $7.39         85%
-----------------------------------------------------------------------------------------------------------------------------------
         TOTAL                                                       585         62,550             94%           $7.39         85%

===================================================================================================================================
TOTALS                                                           159,956     16,367,727             86%           $9.73         79%
</TABLE>






<PAGE>


Item 3.  Legal Proceedings.

         There are no material legal proceedings pending against the Partnership
or any of its subsidiaries.

Item 4.  Submission of Matters to a Vote of Security Holders.

         No matters were  submitted to a vote of the  Partnership's  unitholders
during the last quarter of its fiscal year ended December 31, 1996.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         No established public trading market exists for the Units. At March 27,
1997,  there were 55 limited  partners and 1,898,397 Units  outstanding  held by
such limited partners. During 1996, the Partnership made the following quarterly
cash  distributions  per Unit:  $0.5625  in the First  Quarter;  $ 0.5625 in the
Second  Quarter;  $ 0.5625 in the  Third  Quarter;  and $ 0.5625  in the  Fourth
Quarter.

         The  table  below  sets  forth  all  issuances  of  Units  made  by the
Partnership to persons other than the Company during the year ended December 31,
1996. All Units were issued in exchange for interests in self-storage facilities
acquired by the  Partnership.  The price per Unit is  determined  by the closing
price of a share of the Company's Common Stock on the date of issuance as quoted
on the New York Stock  Exchange.  The  offerings  were exempt from  registration
pursuant to Regulation D under the Securities Act of 1933, as amended  (investor
are required to establish  their status as accredited  investors  pursuant to an
investor questionnaire):

                                                    Price
         Date               Units Issued            Per Unit
         ----               ------------            --------
         03/06/96             47,808                $32.17
         04/12/96             16,786                 33.90
         04/30/96            113,249                 32.45
         06/30/96             67,453                 32.80
         09/30/96             18,302                 33.47
         11/01/96            498,392                 34.41
         11/15/96             65,063                 34.57
         11/26/96             74,342                 36.60

         For a  description  of the terms  under which the Units may be redeemed
for Common  Stock,  see Item 1.  Business,  "Partnership  Agreement - Redemption
Rights."


Item 6.  Selected Financial Data.

         Pages are attached hereto as Exhibit 13.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operation.

         Pages are attached hereto as Exhibit 13.

Item 8.  Financial Statements and Supplementary Data.

         Pages are attached hereto as Exhibit 13.

Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure.

         None.



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

         Incorporated  herein by  reference  from the  captions  "  Election  of
Directors" and "--Compliance  with Section 16 of the Securities  Exchange Act of
1934" in the Company's  definitive  proxy  statement to be filed with respect to
its Annual Meeting of Shareholders.

         The following  information relates to executive officers of the General
Partner who are not also directors:

         Douglas  Chamberlain has been Executive Vice President,  Development of
the General Partner since March 1994 and President and Chief  Operating  Officer
of Storage USA Construction  Corp. since March 1989. From December 1985 to March
1989, Mr. Chamberlain served as Vice President of Baltimore Contractors, Inc., a
general contracting firm located in Baltimore, Maryland. Mr. Chamberlain holds a
Masters degree in Structural Engineering from the University of Maryland.



<PAGE>



         Karl Haas has been Executive Vice President,  Management of the General
Partner  since  March  1994.  He was  Executive  Vice  President  of Storage USA
Management  Corp.  from October  1988 until  November  1991,  when he became its
President and Chief Operating Officer. From October 1983 through September 1988,
Mr. Haas served as Treasurer for Ward Development Corp., a real estate developer
located in Baltimore, Maryland. Mr. Haas received his Bachelor of Science degree
in Accounting from the University of Maryland,  is a Certified Public Accountant
and worked for the accounting firm of Arthur Young & Co. for ten years.

         Morris J.  Kriger has been  Executive  Vice  President  of the  General
Partner since March of this year, and is responsible for Acquisitions. Mr Kriger
holds a Bachelors  Degree in  Industrial  Management  from MIT and  received his
Juris  Doctorate  from  Harvard  Law School.  Mr.  Kriger has more than 30 years
experience in practical real estate law and lending law, representing developers
and  lenders in a variety of real estate  types  throughout  the United  States.
Kriger  has also  served as  General  Counsel  to two  prestigious  real  estate
companies.

         Jesse Morgan has been Executive Vice President since March of this year
and is responsible for Development.  A business  graduate of Tulane  University,
Mr.  Morgan  spent 11 years with The  Balcor  Company,  formerly  a division  of
American  Express,  heading a  variety  of  efforts  including  property  sales,
property management,  asset portfolio and investment management. Mr. Morgan more
recently  has  worked  as  a  consultant  to  Storage  USA  in  the  independent
development of self storage properties and brokering of several acquisitions.

         Carol Shipley has been Senior Vice President, Management of the General
Partner since 1991, and is primarily  responsible for facility  manager training
and  marketing.  From 1985 to 1991,  Ms.  Shipley  served in various  positions,
including President,  with the Robert T. Foley Company, which owned and operated
office,  residential  and  self-storage  properties.  Ms.  Shipley  served  as a
National  Director of the Self-Storage  Association,  President of the Northeast
Region of the  Self-Storage  Association  and is a recent Past  President of the
Washington Area Self-Storage Association. Ms. Shipley attended the University of
Maryland, where she majored in Business Management.

         Richard B. Stern has been Senior Vice President, Development since July
of this year.  Prior to  joining  the  General  Partner,  Mr.  Stern held Senior
Executive  positions with Kemper  Corporation,  Baird & Warner and Balcor.  Rich
hold a B.A. in Urban  Planning  from the  University  if Illinois  and a M.A. in
Geography from Northeastern Illinois University.

         Christopher  Marr  became  Vice  President,   Financial  Reporting  and
Controller of the General Partner on August 1, 1994. From 1986 to July 1994, Mr.
Marr worked for the accounting firm of Coopers & Lybrand, from 1992 through 1994
as a senior manager. Mr. Marr holds a Bachelor of Arts degree in Accounting from
Loyola College, Baltimore, Maryland, and is a Certified Public Accountant.

         James G. Williams  currently  serves as Vice  President and Director of
Acquisitions.  Mr.  Williams  has been  associated  with  Storage USA in various
capacities,  including  financial  analysis,  brokering  services to third party
owners,  and  acquisitions,  since  January 1990. He holds a Bachelor of Science
degree in Accounting  from Union  University  and worked for three years for the
accounting  firm  of  Coopers  &  Lybrand.   Mr.  Williams  is  Mr.   Jernigan's
brother-in-law.

         David M. Levenfeld has been Vice President,  Development  since July of
this year.  Prior to joining the General  Partner,  Mr. Levenfeld worked for The
River Group,  Inc. Mr.  Levenfeld holds a B.A. in Political  Science from Boston
University and a M.B.A. from The Wharton School.


Item 11.  Executive Compensation.

         Incorporated   herein  by  reference  from  the  caption  "Election  of
Directors - Executive  Compensation" in the Company's definitive proxy statement
to be filed with respect to its Annual Meeting of Shareholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         Incorporated  herein  by  reference  from  the  captions  "Election  of
Directors - Securities  Ownership of Management"  and  "--Security  Ownership of
Certain  Beneficial  Owners" in the Company's  definitive  proxy statement to be
filed with respect to its Annual Meeting of Shareholders.

Item 13.  Certain Relationships and Related Transactions.

         Incorporated   herein  by  reference  from  the  caption  "Election  of
Directors - Certain Transactions" in the Company's definitive proxy statement to
be filed with respect to its Annual Meeting of Shareholders.



<PAGE>


                                     PART IV


Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)      The  following  documents  are filed as a part of this  report  and are
         hereby incorporated by reference:

<TABLE>
<CAPTION>
<S> <C>
                                                                                     1996 Annual Report to      Form 10-K
                                                                                   Shareholders (Exhibit 13)
                                                                                                              ---------------
                                                                                                 Page Numbers
                                                                                          (Manually signed original)
                                                                                   ------------------------------------------
    1.    Financial Statements:

          Report of Coopers & Lybrand L.L.P.                                                               __            ___

          Balance sheets as of December 31, 1996 and 1995                                                  __            ___
          Statements  of  operations  for the years ended  December 31, 1996 and
          1995, for the period March 24, 1994 (inception) through December 31,
          1994.                                                                                            __            ___

          Statements of cash flows for the years ended December 31, 1996 and
          1995, for the period March 24, 1994 (inception) through December 31,
          1994.                                                                                            __            ___

          Statements of Partnership Capital for the years ended December 31,
          1996 and 1995, for the period March 24, 1994 (inception) through
          December 31, 1994.                                                                              ___            ___

          Notes to financial statements                                                                  ____           ____

          Supplementary information on Quarterly financial data (unaudited)                                 __            ___
          Selected Financial Data                                                                        ____           ____

          Schedule III, Real Estate and Accumulated  Depreciation as of December                           ____          ____
          31, 1996

          Report of Independent Accountants                                                                ____          ____

</TABLE>

         All other  schedules are omitted since the required  information is not
present or is not present in amounts  sufficient  to require  submission  of the
schedule,  or because the  information  required  is  included in the  financial
statements and notes thereto.

(b)      Reports on Form 8-K

         On October 24, 1996, the  Partnership  filed its Current Report on Form
8-K.  The filing  included  the  following  historical  and pro forma  financial
statements  with  respect to the 9  self-storage  facilities  referred to in the
filing.

         Financial Statements Applicable to Real Estate Properties Acquired:
         o        Report of Independent Accountants
         o        Acquisition  Facilities Historical Summaries of Combined Gross
                  Revenue  and  Direct  Operating  Expenses  for the year  ended
                  December 31, 1995 (Audited), and for the six months ended June
                  30, 1996 (Unaudited).
         o        Notes to  Historical  Summaries of Combined  Gross Revenue and
                  Direct Operating Expenses


         Pro Forma Financial Information:
         o        Unaudited  Pro-Forma  Combined  Condensed  Balance Sheet as of
                  June 30, 1996.
         o        Unaudited  Pro-Forma Combined Condensed Statement of Operation
                  for the six months ended June 30, 1996.
         o        Unaudited Pro-Forma Combined Condensed Statement of Operations
                  for the year ended December 31, 1995.
         o        Notes to  Unaudited  Pro-Forma  Combined  Condensed  Financial
                  Statements.

         On October 31,  1996,  the Company  filed an  amendment  to its Current
Report on Form 8-K,  filed  October 24, 1996.  The amendment  corrected  certain
immaterial financial information in the initial filing.

         On December 19, 1996, the Company filed its Current Report on Form 8-K.
The filing included the following  historical and pro forma financial statements
with respect to the 26 self-storage facilities referred to in the filing.

         Financial Statements Applicable to Real Estate Properties Acquired:
         o        Report of Independent Accountants
         o        Acquisition  Facilities Historical Summaries of Combined Gross
                  Revenue  and  Direct  Operating  Expenses  for the year  ended
                  December  31, 1995  (Audited),  and for the nine months  ended
                  September 30, 1996 (Unaudited).
         o        Notes to  Historical  Summaries of Combined  Gross Revenue and
                  Direct Operating Expenses


         Pro Forma Financial Information:

         o        Unaudited  Pro-Forma  Combined  Condensed  Balance Sheet as of
                  September 30, 1996.

         o        Unaudited  Pro-Forma Combined Condensed Statement of Operation
                  for the nine months ended September 30, 1996.

         o        Unaudited Pro-Forma Combined Condensed Statement of Operations
                  for the year ended December 31, 1995.

         o        Notes to  Unaudited  Pro-Forma  Combined  Condensed  Financial
                  Statements.


(c)    Exhibits

         The following exhibits are filed as part of this report:

 Exhibit No.                    Description
 -----------                    -----------
       3.1++++  Second Amended and Restated Agreement of Limited  Partnership of
                SUSA Partnership,  L.P. (the "Partnership"),  dated as September
                21, 1994 (the "Partnership Agreement").

         3.2    First  Amendment to the Partnership  Agreement,  dated March 19,
                1996 (filed as Exhibit 10.3 to the Current Report on Form 8-K of
                Storage USA, Inc.,  (the  "Comapany"),  filed April 1, 1996, and
                incorporated by reference herein).

         3.3    Second Amendment to the Partnership Agreement,  dated as of June
                14, 1996 (filed as Exhibit 10.0 to the Company's  Current Report
                on Form 8-K/A filed July 17, 1996, and incorporated by reference
                herein).

         3.4    Third Amendment to Partnership Agreement, dated as of August 14,
                1996 (filed as Exhibit 10.1 to the Company's  Amendment No. 1 to
                a Registration  Statement on Form S-3 (File No. 333-04556),  and
                incorporated by reference herein).

          10.1  Amended Charter of Storage USA, Inc. (the "Company"),  (filed as
                Exhibit 4.2 to the Company's Amendment No. 1 to the Registration
                Statement on Form S-3 (File No. 333-04556),  and incorporated by
                reference herein).

         10.2*  Restated and Amended Bylaws of the Company.

         10.3*  Agreement  between the Company  and certain  executive  officers
                prohibiting conflicting self-storage interest.

         10.4*  Company's Omnibus Stock Option Plan.

         10.5*  Deed of Trust  Promissory  Note made by Severn River  Associates
                Limited Partnership ("Severn River") in favor of Aid Association
                of Lutherans ("AAL").

         10.6  First Deed of Trust made by Severn River in favor of AAL.

         10.7  SUSA Partnership, L.P. 401(k) Savings Plan.

        10.8*  Form of Registration  Rights  Agreement  relating to Partnership
                unit issuances in 1994.

        10.9** Promissory  Note  dated  February  8,  1995,  in the  amount  of
                $15,000,000 executed by the Partnership payable to Crestar Bank.

        10.10** Promissory  Note  dated  February  8,  1995,  in the  amount  of
                $15,000,000  executed  by  the  Partnership  payable  to  Signet
                Bank/Virginia.

         10.11+ Credit  Agreement,  dated as of December 21, 1995,  by and among
                the  Partnership,  the Company,  and The First  National Bank of
                Chicago.

         10.12 Promissory  Note,  dated  December  21,  1995,  in the amount of
                $25,000,000  executed by the  Partnership,  payable to The First
                National Bank of Chicago.

        10.13+ Form of  Agreement  of  General  Partners  relating  to  certain
                Partnership issuances in 1995 and schedule of beneficiaries.

        10.14++ Promissory Note, dated March 23, 1995, in the original principal
                amount of $2,400,000  executed by the Partnership.

        10.15++ Form  of  Registration  Rights  Agreement  relating  to  certain
                issuances  of   Partnership   units  after 1994 and schedule  of
                beneficiaries.

       10.16++  Form of Stock  Purchase  Agreement in  connection  with the 1995
                Employee   Stock   Purchase  and  Loan  Plan,  and  schedule  of
                participants.

       10.17++  Form of  Promissory  Note in  connection  with the 1995 Employee
                Stock Purchase and Loan Plan, and schedule of issuers.

         10.18  Stock Purchase Agreement, dated as of March 1, 1996, between the
                Company and Security  Capital Holdings S.A. and Security Capital
                U.S.  Realty  (filed as Exhibit  10.1 to the  Company's  Current
                Report on Form 8-K,  filed March 7, 1996,  and  incorporated  by
                reference herein).

         10.19  Amendment No. 1 to Stock Purchase Agreement, dated July 1, 1996,
                between the Company, Security Capital Holdings S.A. and Security
                Capital  U.S.  Realty  (filed as Exhibit  10.3 to the  Company's
                Amendment No. 1 to Registration Statement on Form S-3 (File  No.
                333-04556), and incorporated by reference herein).

         10.20  Strategic Alliance Agreement, dated as of March 1, 1996, between
                the Company and  Security  Capital  Holdings  S.A.  and Security
                Capital  U.S.  Realty  (filed as Exhibit  10.1 to the  Company's
                Current  Report  on Form  8-K,  filed  on  April  1,  1996,  and
                incorporated by reference herein).

         10.21  Amendment No. 1 to Strategic Alliance Agreement,  dated June 14,
                1996, between the Company,  the Partnership,  Storage USA Trust,
                Security Capital U.S. Realty and Security Capital Holdings, S.A.
                (filed as Exhibit 10.2 to the  Company's  Amendment No. 1 to the
                Registration  Statement  on Form S-3 (File No.  333-04556),  and
                incorporated by reference herein).

         10.22  Registration  Rights  Agreement,  dated  as of March  19,  1996,
                between  the  Company,   Security  Capital  Holdings,  S.A.  and
                Security  Capital  U.S.  Realty  (filed as  Exhibit  10.2 to the
                Company's  Current  Report on Form 8-K,  filed on April 1, 1996,
                and incorporated by reference herein).

         10.23  Indenture,  dated November 1, 1996,  between the Partnership and
                First  National  Bank of Chicago,  as Trustee  (filed as Exhibit
                10.1 to the  Company's  Current  Report  on Form  8-K,  filed on
                November 8, 1996, and incorporated by reference herein).

         10.24+ First  Amendment to the  Adoption  Agreement  for the  Company's
                401(k) Plan.

            21  Subsidiaries  of  Registrant.

          23.1  Consent of Coopers & Lybrand L.L.P.

          27    Financial Data Schedule.

          99    Managements  Discussion and Analysis of Financial  Condition and
                Results of Operations; Selected  Financial  Data;  and Financial
                Statements  of the  Partnership,  including  footnotes,  for the
                fiscal year ended December 31, 1996.

--------------------

*        Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-11,  File No.  33-74072,  as amended,  and  incorporated by reference
         herein.
**       Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-11,  File No.  33-82764,  as amended,  and  incorporated by reference
         herein.
***      Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
         fiscal year ended  December 31,  1994,  and  incorporated  by reference
         herein.
+        Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
         fiscal year ended  December 31,  1995,  and  incorporated  by reference
         herein.
++       Filed as an Exhibit to the  Company's  Current  Report on Form 8-K,  as
         amended to Form 8-K/A Filed  November 17,  1995,  and  incorporated  by
         reference herein.
++       Filed as an Exhibit to the Company's  Current Report on form 8-K, filed
         May 30, 1995, and incorporated by reference herein.
++++     Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-3, File No. 33-91302, and incorporated by reference herein.

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                SUSA PARTNERSHIP, L.P.
                                by STORAGE USA, Inc.,
                                General Partner


                                By:  /s/ Thomas E. Robinson
                                   ----------------------------------
                                     Thomas E. Robinson
                                          President
                                 and Chief Financial Officer









         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
Storage USA, Inc., General Partner of the registrant,  and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>

                          Signature                                                Title                               Date
                          ---------                                                -----                               ----

                      /s/ DEAN JERNIGAN                       Chairman of the Board of Directors                  March 28, 1997
                  ------------------------                    Chief Executive Officer (Principal
                        Dean Jernigan                         Executive Officer)


                   /s/ THOMAS E. ROBINSON                     Director, President, and                            March 28, 1997
                  ------------------------                    Chief Financial Officer
                     Thomas E. Robinson


                    /s/ Howard P. Colhoun                     Director                                            March 28, 1997
                  ------------------------
                      Howard P. Colhoun


                     /s/ DENNIS A. REEVE                      Director                                            March 28, 1997
                  ------------------------
                       Dennis A. Reeve


                       /s/ HARRY THIE                         Director                                            March 28, 1997
                  ------------------------
                         Harry Thie


                     /s/ MARK JORGENSEN                       Director                                            March 28, 1997
                  ------------------------
                       Mark Jorgensen


                       /s/ JOHN MCCANN                        Director                                            March 28, 1997
                  ------------------------
                         John McCann


                   /s/ WILLIAM D. SANDERS                     Director                                            March 28, 1997
                  ------------------------
                     William D. Sanders


                    /s/ J. MARSHALL PECK                      Director                                            March 28, 1997
                  ------------------------
                      J. Marshall Peck
</TABLE>

<PAGE>


                             SUSA PARTNERSHIP, L.P.
                                  Exhibit Index

 Exhibit No.                    Description
 -----------                    -----------
       3.1++++  Second Amended and Restated Agreement of Limited  Partnership of
                SUSA Partnership,  L.P. (the "Partnership"),  dated as September
                21, 1994 (the "Partnership Agreement").

         3.2    First  Amendment to the Partnership  Agreement,  dated March 19,
                1996 (filed as Exhibit 10.3 to the Current Report on Form 8-K of
                Storage USA, Inc.,  (the  "Comapany"),  filed April 1, 1996, and
                incorporated by reference herein).

         3.3    Second Amendment to the Partnership Agreement,  dated as of June
                14, 1996 (filed as Exhibit 10.0 to the Company's  Current Report
                on Form 8-K/A filed July 17, 1996, and incorporated by reference
                herein).

         3.4    Third Amendment to Partnership Agreement, dated as of August 14,
                1996 (filed as Exhibit 10.1 to the Company's  Amendment No. 1 to
                a Registration  Statement on Form S-3 (File No. 333-04556),  and
                incorporated by reference herein).

          10.1  Amended Charter of Storage USA, Inc. (the "Company"),  (filed as
                Exhibit 4.2 to the Company's Amendment No. 1 to the Registration
                Statement on Form S-3 (File No. 333-04556),  and incorporated by
                reference herein).

         10.2*  Restated and Amended Bylaws of the Company.

         10.3*  Agreement  between the Company  and certain  executive  officers
                prohibiting conflicting self-storage interest.

         10.4*  Company's Omnibus Stock Option Plan.

         10.5*  Deed of Trust  Promissory  Note made by Severn River  Associates
                Limited Partnership ("Severn River") in favor of Aid Association
                of Lutherans ("AAL").

         10.6  First Deed of Trust made by Severn River in favor of AAL.

         10.7  SUSA Partnership, L.P. 401(k) Savings Plan.

        10.8*  Form of Registration  Rights  Agreement  relating to Partnership
                unit issuances in 1994.

        10.9** Promissory  Note  dated  February  8,  1995,  in the  amount  of
                $15,000,000 executed by the Partnership payable to Crestar Bank.

        10.10** Promissory  Note  dated  February  8,  1995,  in the  amount  of
                $15,000,000  executed  by  the  Partnership  payable  to  Signet
                Bank/Virginia.

         10.11+ Credit  Agreement,  dated as of December 21, 1995,  by and among
                the  Partnership,  the Company,  and The First  National Bank of
                Chicago.

         10.12 Promissory  Note,  dated  December  21,  1995,  in the amount of
                $25,000,000  executed by the  Partnership,  payable to The First
                National Bank of Chicago.

        10.13+ Form of  Agreement  of  General  Partners  relating  to  certain
                Partnership issuances in 1995 and schedule of beneficiaries.

        10.14++ Promissory Note, dated March 23, 1995, in the original principal
                amount of $2,400,000  executed by the Partnership.

        10.15++ Form  of  Registration  Rights  Agreement  relating  to  certain
                issuances  of   Partnership   units  after 1994 and schedule  of
                beneficiaries.

       10.16++  Form of Stock  Purchase  Agreement in  connection  with the 1995
                Employee   Stock   Purchase  and  Loan  Plan,  and  schedule  of
                participants.

       10.17++  Form of  Promissory  Note in  connection  with the 1995 Employee
                Stock Purchase and Loan Plan, and schedule of issuers.

         10.18  Stock Purchase Agreement, dated as of March 1, 1996, between the
                Company and Security  Capital Holdings S.A. and Security Capital
                U.S.  Realty  (filed as Exhibit  10.1 to the  Company's  Current
                Report on Form 8-K,  filed March 7, 1996,  and  incorporated  by
                reference herein).

         10.19  Amendment No. 1 to Stock Purchase Agreement, dated July 1, 1996,
                between the Company, Security Capital Holdings S.A. and Security
                Capital  U.S.  Realty  (filed as Exhibit  10.3 to the  Company's
                Amendment No. 1 to Registration Statement on Form S-3 (File  No.
                333-04556), and incorporated by reference herein).

         10.20  Strategic Alliance Agreement, dated as of March 1, 1996, between
                the Company and  Security  Capital  Holdings  S.A.  and Security
                Capital  U.S.  Realty  (filed as Exhibit  10.1 to the  Company's
                Current  Report  on Form  8-K,  filed  on  April  1,  1996,  and
                incorporated by reference herein).

         10.21  Amendment No. 1 to Strategic Alliance Agreement,  dated June 14,
                1996, between the Company,  the Partnership,  Storage USA Trust,
                Security Capital U.S. Realty and Security Capital Holdings, S.A.
                (filed as Exhibit 10.2 to the  Company's  Amendment No. 1 to the
                Registration  Statement  on Form S-3 (File No.  333-04556),  and
                incorporated by reference herein).

         10.22  Registration  Rights  Agreement,  dated  as of March  19,  1996,
                between  the  Company,   Security  Capital  Holdings,  S.A.  and
                Security  Capital  U.S.  Realty  (filed as  Exhibit  10.2 to the
                Company's  Current  Report on Form 8-K,  filed on April 1, 1996,
                and incorporated by reference herein).

         10.23  Indenture,  dated November 1, 1996,  between the Partnership and
                First  National  Bank of Chicago,  as Trustee  (filed as Exhibit
                10.1 to the  Company's  Current  Report  on Form  8-K,  filed on
                November 8, 1996, and incorporated by reference herein).

         10.24+ First  Amendment to the  Adoption  Agreement  for the  Company's
                401(k) Plan.

            21  Subsidiaries  of  Registrant.

          23.1  Consent of Coopers & Lybrand L.L.P.

          27    Financial Data Schedule.

          99    Managements  Discussion and Analysis of Financial  Condition and
                Results of Operations; Selected  Financial  Data;  and Financial
                Statements  of the  Partnership,  including  footnotes,  for the
                fiscal year ended December 31, 1996.

--------------------

*        Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-11,  File No.  33-74072,  as amended,  and  incorporated by reference
         herein.
**       Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-11,  File No.  33-82764,  as amended,  and  incorporated by reference
         herein.
***      Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
         fiscal year ended  December 31,  1994,  and  incorporated  by reference
         herein.
+        Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
         fiscal year ended  December 31,  1995,  and  incorporated  by reference
         herein.
++       Filed as an Exhibit to the  Company's  Current  Report on Form 8-K,  as
         amended to Form 8-K/A Filed  November 17,  1995,  and  incorporated  by
         reference herein.
++       Filed as an Exhibit to the Company's  Current Report on form 8-K, filed
         May 30, 1995, and incorporated by reference herein.
++++     Filed as an Exhibit to the  Company's  Registration  Statement  on Form
         S-3, File No. 33-91302, and incorporated by reference herein.