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

                                Storage USA, Inc.
             (Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>

                     Tennessee                                               62-1251239
          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)
</TABLE>

       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
 Common Stock $.01 par value                        New York Stock Exchange


        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 (Section  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 voting stock held by  non-affiliates
of the registrant was approximately  $624,484,000 as of March 26, 1997, based on
16,641,626  shares  held  by   non-affiliates  of  the  registrant.   (For  this
computation,  the  registrant has excluded the market value of all shares of its
Common Stock 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.)

                                   27,203,427
(Number of shares outstanding of the registrant's  Common Stock, as of March 26,
1997)

                       DOCUMENTS INCORPORATED BY REFERENCE

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









<PAGE>


                                     Part 1

Item 1.  Business
         General

         Storage USA, Inc. (the "Company") is engaged in the business of owning,
managing,  acquiring,  developing and franchising  self-storage  facilities.  At
December 31, 1996, the Company 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 Company 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 Company 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 Company is a fully  integrated  organization  that has expertise in
acquisition, development, construction and management of self-storage facilities
and  has  approximately  890  employees.   The  Company  operates  through  SUSA
Partnership,  L.P.  (the  "Partnership")  of which the  Company is sole  general
partner.  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 Company's primary business objectives are to increase its cash flow
from operations and the value of the Company's facilities.  The Company 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  Company
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 Company'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  Company'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 500 to 600 tenants, with no single tenant occupying more than one
to two percent of the net rentable square feet of a facility.

         The Company'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 Company'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 Company'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 Company has historically  received  premium rents,  while
achieving high occupancy  levels and increasing  profitability.  By implementing
this  strategy for the 96  facilities  owned by the Company  since  December 31,
1994, the Company,  for 1996,  increased  revenue and net operating income by 7%
and 5.7%,  respectively,  over revenue and net operating  income achieved by the
Company in the prior year.

       O           Aggressive  Leasing  - The  Company  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  Company  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 Company  typically  increases rents
                  more frequently.

       O           Trained Facility Managers - The Company carefully selects and
                  thoroughly trains managers of its self-storage facilities.  To
                  hire outgoing,  personable,  sales-oriented  people capable of
                  implementing  these  programs,  the Company  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
                  Company'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 Company conducts
                  monthly telephone surveys in which "mystery shoppers" hired by
                  the  Company  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
                  Company 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 Company's headquarters.  These systems allow
                  the Company to monitor closely manager  performance and market
                  response to the Company's rental structure.

External Growth Strategy

         The  Company's  external  growth  strategy is designed to increase  the
number of facilities owned by the Company 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
Company seeks to add facilities in those metropolitan areas in which the Company
operates   and   selectively   to  enter  new   markets   that  have   desirable
characteristics  such as a growing population and a concentration of multifamily
dwellings.  The Company  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 Company's  initial public offering in March 1994  (the"IPO"),
the Company 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 Company  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 Company.

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

       O           Demand for Tax Deferral - In several of its acquisitions, the
                  Company 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  Company
                  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 Company has issued 1.8  million  Units valued at $56
                  million   in   consideration   for  the   acquisition   of  35
                  self-storage facilities.

       O           Property  Assimilation - The Company's integrated  management
                  information  systems  allow  it  to  quickly  and  efficiently
                  assimilate  its  acquisition  targets.  All of  the  Company'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 Company. Commonly, the Company 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  Company  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 Company and
                  predecessor  organizations  have developed and  constructed 21
                  facilities,  15 of which the Company  owns.  At  December  31,
                  1996,  the Company 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  Company  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.  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 Company's revolving lines
of credit.  The Company has available $105.0 million in two 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 Company 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 Company is 22.8% of total assets at cost and
its debt service  coverage  ratio for the year ended  December 31, 1996, is 7:1.
The Company believes that this policy,  the Company's  success in raising equity
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  Company  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 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 US Realty
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 27, 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 Company 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 Company 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  Company   formed  Storage  USA  Franchise   Corp.
("Franchise Corp."), in which the Company has a 97.5% interest.  Franchise Corp.
offers the  Company's  systems,  expertise  and a registered  trademark to third
parties under a franchise  program that the Company believes to be unique in the
self-storage  industry.  The Company 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  Company   believes  that  it  has  been  successful  in  operating
self-storage  facilities primarily due to the Company'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 Company 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 Company  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 Company'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 Company employs various means to maintain and increase its share of
the self-storage  market for its facilities and to obtain rental rate increases.
The Company  develops a written  marketing  plan for each facility with a strong
emphasis on developing a customer-oriented management team. The Company utilizes
yellow  page  advertising,  site  signage and  location as the primary  means to
advertise its services.  The Company 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 Company's services.  The Company'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 Company'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  Company  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 Company'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 Company's  central
office.  Management believes that the Company'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 Company'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 Company'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 Company'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
Company has a program to recognize  good  performance of managers on a quarterly
and  yearly  basis,   with  winners  receiving  cash  bonuses  and  Company-wide
recognition.

"Total Storage Satisfaction Guaranteed TM" Program

         The  Company'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  Company  imposes
substantial  late fees for delinquent  payment of rent beginning five days after
the due date and  escalating  periodically  thereafter.  The Company'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 Company 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 Company's facilities
has not been material.

Other Activities

         The  Company  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 Company  receives a commission  for each
rental. The Company, through a 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 Company for development of
a new  facility.  Therefore,  the Company  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 Company  principally  faces  competitors  who seek to attract
tenants  primarily on the basis of lower prices.  However,  the Company  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
Company'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 Company 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 Company  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
Company  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 Company 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  Company in a position  to  capitalize  on these  market
conditions for the benefit of its shareholders.



<PAGE>



         Certain of the Company's  competitors  operate more facilities and have
substantially  greater financial  resources than the Company.  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  Company 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 Company  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 Company and increase the price required
to be able to consummate the acquisition of particular facilities.  Further, the
Company  believes  that   competition  from  entities   organized  for  purposes
substantially similar to the Company's objectives could increase.  Nevertheless,
the Company 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  Company to compete
effectively.

Employees

All persons  referred to herein as employees of the Company are employees of the
Partnership or its  subsidiaries.  As of December 31, 1996, the Company employed
approximately 890 employees,  of whom  approximately 250 were employed part-time
(fewer  than 30  hours  per  week) on a  regular  basis.  None of the  Company'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 Real Estate Investment Trust ("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 Company 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  Company  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 Company is
not aware of any contamination of facilities requiring remediation under current
law. The Company 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 Company  believes would have a material adverse effect on the
Company's business, assets or results of operations, nor is the Company 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  Company  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 Company's facilities.  The Company 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 Company has not
incurred any such liability.


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

         The Company  expects to pursue its  investment  objectives  through the
direct and  indirect  ownership  of  self-storage  facilities.  The Company 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
Company.

         While the Company emphasizes equity real estate investments, it may, in
its discretion,  invest in mortgage and other real estate  interests,  including
securities of other REITs.  The Company does not currently  invest in securities
of other REITs and has no present  intention of doing so. The Company 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 Company
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 Company intends to continue to manage self-storage facilities owned
by others for a fee.



         The Company 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 Company 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 might incur. The
Board of  Directors of the Company has adopted a policy  limiting the  Company'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 Company could become more highly
leveraged,  resulting in an increase in debt service that could adversely affect
the Company'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  Company  will enter  into  arrangements  with a  creditworthy
financial  institution for the purpose of limiting the maximum  interest expense
to which the Company 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 Operating  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 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 Operating 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
Operating 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  Company  will  attempt to  maintain  working  capital  reserves in
amounts  adequate to meet normal  contingencies in connection with the operation
of the Company'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 Operating Partnership, to, at
any time,  exceed 10%, at cost,  of the  consolidated  assets  owned by both the
Company  and  the  Operating  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 Operating 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 Company 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 Company may own  indirectly  through  other  entities and the manner in
which the Company  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
USRealty 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  Operating
Partnership. USRealty has agreed to waive these requirements in certain specific
instances  where indirect  ownership  facilitates  the Company's  acquisition of
certain facilities.

         The Company  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 Company'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 Company  operates  negatively  affecting  impacting  the  financial
resources of the Company's  clients;  certain of the Company's  competitors with
substantially  greater financial  resources than the Company reducing the number
of suitable acquisition  opportunities offered to the Company and increasing the
price  necessary  to  consummate  the  acquisition  of  particular   facilities;
increased  development  of new facilities  and  competition  in Company  markets
resulting in over-supply and lower rental or occupancy  rates;  the availability
of  sufficient   capital  to  finance  the  Company's  business  plan  on  terms
satisfactory  to the Company;  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 Company
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 Company'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 Company  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 Company 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 Company's  ability to make debt service
payments  would be  adversely  affected.  If a property is  mortgaged  to secure
payment of indebtedness and the Company 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 Company.  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 Company  could  become more highly  leveraged,
resulting  in an  increase  in debt  service  that  could  adversely  affect the
Company'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."

         Effect of Market  Interest  Rates on Price of Common Stock.  One of the
factors that  influences the price of the Common Stock in public trading markets
is the annual  yield  from  distributions  by the  Company on the price paid for
Common  Stock as compared to yields on other  financial  instruments.  Thus,  an
increase  in  market  interest  rates  will  result  in  higher  yields on other
financial  instruments,  which could  adversely  affect the market  price of the
Common Stock.

Changes in Policies

                  The major policies of the Company, including its policies with
respect  to  acquisitions,  development,  financing,  growth,  operations,  debt
limitation and distributions,  will be determined by its Board of Directors. The
Board of  Directors  may amend or revise these and other  policies  from time to
time  without a vote of the  shareholders  of the  Company.  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 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 Company'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 Company's  facilities compete with other self-storage
properties in their geographic markets.  Most of the Company's  competitors seek
to compete by offering storage space at lower prices than the Company.  However,
instead  of  emphasizing  lower  prices,  the  Company  seeks to  emphasize  its
facilities'  convenience  and  customer-oriented  management  and  amenities  to
attract quality tenants.

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

Real Estate Investment Risks

         General Risks. The Company's investments are subject to varying degrees
of risk  generally  incident to the ownership of real  property.  The underlying
value of the Company's  real estate  investments  and the  Company's  income and
ability  to  make  distributions  to its  shareholders  is  dependent  upon  the
Company'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 Company 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 Company's investment.

         Uninsured  and  Underinsured  Losses  Could  Result in Loss of Value of
Facilities.  The  Company  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 Company's facilities are at risk in
their  particular  locales.  The  Company's  management  uses its  discretion in
determining amounts,  coverage limits and deductibility provisions of insurance,
with a view to requiring appropriate insurance on the Company'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  Company'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 Company might not be
adequate to restore its economic position with respect to such property.

         Possible Liability Relating to Environmental  Matters.  The Company 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 Operating  Partnership
Agreement,  and the amendments thereto, which are filed as exhibits to this Form
10K.

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 Operating
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.

Redemption Rights



<PAGE>



         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 Company'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.

<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 Company 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  Company's  shareholders
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.

         Incorporated herein by reference from the captions "Common Stock Price"
and   "Shareholders"   appearing  in  the   Company's   1996  Annual  Report  to
Shareholders,  the relevant  portion of which is attached  hereto as Exhibit 13.
Information regarding the Company's dividend policy is included in Item 7.

Item 6.  Selected Financial Data.

         Incorporated  herein by reference from the caption "Selected  Financial
Data"  appearing  in the  Company's  1996  Annual  Report to  Shareholders,  the
relevant portion of which is attached hereto as Exhibit 13.

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

         Incorporated  herein  by  reference  from  the  caption   "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
appearing in the  Company's  1996 Annual  Report to  Shareholders,  the relevant
portion of which is attached hereto as Exhibit 13.

Item 8.  Financial Statements and Supplementary Data.

         The Company's Financial  Statements and Supplementary Data for the year
ended December 31, 1996, are incorporated herein by reference from the Company's
1996 Annual Report to  Shareholders,  the relevant  portion of which is 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 Company
who are not also directors:

         Douglas  Chamberlain has been Executive Vice President,  Development of
the  Company  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 Company
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 Company 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 Company
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  company,  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 Company 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  Company,  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 - Security  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, and for the period January 1, 1994 through March 23, 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, and for the period January 1, 1994 through March 23, 1994                                  __            ___

          Statements of shareholders' equity for the years ended December 31,
          1996 and 1995, for the period March 24, 1994 (inception) through
          December 31, 1994, and for the period January 1, 1994 through March 23,                         ___            ___
          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 Company 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  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).

          3.2*  Restated and Amended Bylaws of the Company.

            4*  Specimen Common Stock Certificate.

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

         10.2*  Company's Omnibus Stock Option Plan.

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

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

         10.5*  SUSA Partnership, L.P. (the "Partnership") 401(k) Savings Plan.

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

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

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

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

        10.10+  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.

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

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

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

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

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

       10.16++++Second Amended and Restated Agreement of Limited  Partnership of
                the Partnership,  dated as September 21, 1994 (the  "Partnership
                Agreement").

         10.17  First  Amendment to the Partnership  Agreement,  dated March 19,
                1996 (filed as Exhibit 10.3 to the Company's  Current  Report on
                Form 8-K/A,  filed April 1, 1996, and incorporated  by reference
                herein).

         10.18  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).

         10.19  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).

         10.20  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).

         10.21  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).

         10.22  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).

         10.23  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
                Registration  Statement  on Form S-3 (File No.  333-04556),  and
                incorporated by reference herein).

         10.24  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).

         10.25  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).

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

          13    Relevant ortions of of the  Company's  1996  Annual  Report to
                Shareholders are filed herewith.

          21    Subsidiaries  of  Registrant.

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

          27    Financial Data Schedule.
--------------------

*        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.
++       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.

                                STORAGE USA, INC.


                                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
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>


                                 EXHIBIT INDEX


 Exhibit No.                 Description
 -----------                 -----------

           3.1  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).

          3.2*  Restated and Amended Bylaws of the Company.

            4*  Specimen Common Stock Certificate.

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

         10.2*  Company's Omnibus Stock Option Plan.

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

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

         10.5*  SUSA Partnership, L.P. (the "Partnership") 401(k) Savings Plan.

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

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

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

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

        10.10+  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.

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

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

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

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

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

       10.16++++Second Amended and Restated Agreement of Limited  Partnership of
                the Partnership,  dated as September 21, 1994 (the  "Partnership
                Agreement").

         10.17  First  Amendment to the Partnership  Agreement,  dated March 19,
                1996 (filed as Exhibit 10.3 to the Company's  Current  Report on
                Form 8-K,  filed April 1, 1996,  and  incorporated  by reference
                herein).

         10.18  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).

         10.19  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).

         10.20  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).

         10.21  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).

         10.22  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).

         10.23  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
                Registration  Statement  on Form S-3 (File No.  333-04556),  and
                incorporated by reference herein).

         10.24  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).

         10.25  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).

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

          13    Relevant portions of of the  Company's  1996  Annual  Report to
                Shareholders are filed herewith.

          21    Subsidiaries  of  Registrant.

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

          27    Financial Data Schedule.
--------------------

*        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.
++       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.