News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
For Release: Immediately
Date: August 2, 2007
Contact: Clemente Teng
(818) 244-8080
Public Storage Reports Results for the Second Quarter Ended June 30, 2007
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the second quarter ended June 30, 2007.
OPERATING RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2007:
- -------------------------------------------------------------
Net income for the three months ended June 30, 2007 was $77,104,000 compared to
net income of $128,862,000 for the same period in 2006, representing a decrease
of $51,758,000. This decrease is primarily due to increased amortization expense
totaling $70.9 million due to the amortization of certain intangible assets
acquired in our merger with Shurgard Storage Centers, Inc. ("Shurgard"), which
closed on August 22, 2006, combined with an increase of $35.7 million in
depreciation expense related to facilities acquired in the merger. In addition,
during the three months ended June 30, 2007, our general and administrative
expense increased significantly as we incurred $9.6 million in expenses related
to our proposed offering of shares in our European business and $2.0 million of
expenses related to our reorganization as a Maryland real estate investment
trust (a "Maryland REIT").
The negative impacts to our net income from the above mentioned items were
partially offset by improved operations from our Same Store group of facilities,
continued growth in operations from our newly developed and recently expanded
facilities, as well as continued growth in our recently acquired self-storage
facilities including the facilities acquired in the merger with Shurgard.
Our Same Store net operating income, before depreciation expense, increased by
approximately $2,224,000 to $151,927,000, or 1.5%, as a result of a 1.7%
improvement in revenues partially offset by a 2.1% increase in cost of
operations. Aggregate net operating income for our newly developed and recently
expanded and acquired facilities (other than the Shurgard facilities) increased
by approximately $2,968,000 to $26,102,000 compared to the same period in 2006.
This increase was largely due to the impact of facilities acquired in 2005, 2006
and 2007, combined with continued fill-up of our newly developed and expansion
facilities. For those facilities that were acquired in the Shurgard merger, net
operating income was approximately $83,821,000 for the quarter ended June 30,
2007. Our expanded media advertising, along with our aggressive pricing and
promotional discount programs, increased our entire domestic portfolio's
(including the Shurgard portfolio for all periods presented) average occupancy
to 89.7% for the second quarter 2007 compared to 88.6% last year and 87.5% in
the first quarter 2007. The overall occupancy at the end of June 2007 was 90.6%
compared to 89.3% last year.
For the three months ended June 30, 2007, we had a net income allocable to our
common shareholders (after allocating net income to our preferred and equity
shareholders) of $14,433,000 or $0.08 per common share on a diluted basis
compared to income of $71,130,000 or $0.55 per common share on a diluted basis
for the same period in 2006, representing a decrease of $56,697,000 or $0.47 per
diluted common share, or 84.6%. The decreases in net income allocable to common
shareholders on an aggregate and per-share basis are due primarily to the impact
of the factors described above, combined with an increase in income allocated to
preferred shareholders, as described below.
For the three months ended June 30, 2007 and 2006, we allocated $57,315,000 and
$52,376,000 of our net income, respectively, to our preferred shareholders based
on distributions paid. The year-over-year increase is due to the issuance of
additional preferred securities, partially offset by the redemption of preferred
securities that had higher dividend rates than the newly issued preferred
securities.
Weighted average diluted shares increased to 170,213,000 for the three months
ended June 30, 2007 from 129,062,000 for the three months ended June 30, 2006.
The increase in weighted average diluted shares is due primarily to the issuance
of approximately 38.9 million shares in the merger with Shurgard, as well as the
exercise of employee stock options assumed in the merger with Shurgard.
1
OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2007:
- ---------------------------------------------------------
Net income for the six months ended June 30, 2007 was $136,882,000 compared to
$243,078,000 for the same period in 2006, representing a decrease of
$106,196,000. This decrease is primarily due to increased amortization expense
totaling $156.7 million due to the amortization of certain intangible assets
acquired in our merger with Shurgard combined with an increase of $71.4 million
in depreciation expense related to facilities acquired in the merger. In
addition, during the six months ended June 30, 2007, our general and
administrative expense increased significantly as we incurred $9.6 million in
expenses related to our proposed offering of shares in our European business,
$2.0 million of expenses related to our reorganization as a Maryland REIT, and
$5.3 million in integration expenses related to the merger.
These items were partially offset by improved operations from our Same Store
group of facilities, continued growth in operations from our newly developed and
recently expanded facilities along with continued growth in our recently
acquired self-storage facilities (including the facilities acquired from
Shurgard).
Same Store net operating income, before depreciation expense, increased by
$6,578,000 to $299,776,000, or 2.2%, as a result of a 2.3% improvement in
revenues partially offset by a 2.4% increase in cost of operations. Aggregate
net operating income for our newly developed, acquired and expansion
self-storage facilities (excluding the Shurgard facilities) increased by
approximately $7,722,000 to $51,005,000. We earned an aggregate of $160,930,000
in net operating income with respect to the facilities acquired from Shurgard.
Net income allocable to our common shareholders (after allocating net income to
our preferred and equity shareholders) was $10,079,000 or $0.06 per common share
on a diluted basis for the six months ended June 30, 2007 compared to
$133,375,000 or $1.03 per common share on a diluted basis for the same period in
2006, representing a decrease of $0.97 per common share, or 94.2%. The decrease
in net income allocable to common shareholders and earnings per common diluted
share are due primarily to the impact of the factors described above, combined
with an increase in income allocated to preferred shareholders, as described
below.
For the six months ended June 30, 2007 and 2006, we allocated $116,091,000 and
$98,991,000 of our net income, respectively, to our preferred shareholders based
on distributions paid. The year-over-year increase is due to the issuance of
additional preferred securities, partially offset by the redemption of preferred
securities that had higher dividend rates than the newly preferred securities
issued.
Weighted average diluted shares increased to 170,275,000 for the six months
ended June 30, 2007 from 129,037,000 for the six months ended June 30, 2006. The
increase in weighted average diluted shares is due primarily to the issuance of
approximately 38.9 million shares in the merger with Shurgard, as well as the
exercise of employee stock options assumed in the merger with Shurgard.
FUNDS FROM OPERATIONS:
- ----------------------
For the three months ended June 30, 2007, funds from operations ("FFO")
increased to $1.10 per common share on a diluted basis as compared to $0.99 per
common share for the same period in 2006, representing an increase of $0.11 per
common share, or 11.1%. For the six months ended June 30, 2007, FFO increased to
$2.15 per common share on a diluted basis as compared to $1.93 per common share
for same period in 2006, representing an increase of $0.22 per common share, or
11.4%.
For the three and six months ended June 30, 2007 and 2006, FFO has been impacted
as a result of (i) additional expenses incurred in connection with the merger
with Shurgard included in general and administrative expense totaling
approximately $1.3 million and $5.3 million for the three and six months ended
June 30, 2007, respectively, as compared to $1.1 million and $2.2 million,
respectively, for the same periods in 2006, (ii) net foreign currency exchange
gains of approximately $5.6 million and $10.6 million for the three and six
months ended June 30, 2007, respectively, (iii) expenses related to our proposed
offering of shares in our European business totaling $9.6 million for the three
months ended June 30, 2007, (iv) additional expenses related to our
reorganization as a Maryland REIT totaling approximately $2.0 million for the
three months ended June 30, 2007, (v) an increase in estimated insurance
proceeds with respect to damage caused by Hurricane Katrina of $2.7 million, and
(vi) our pro rata share of PS Business Parks, Inc.'s application of EITF Topic
D-42 in connection with the redemption of preferred securities totaling $729,000
in the three and six months ended June 30, 2006 and included in equity in
earnings of real estate entities.
2
The following table provides a summary of the impact of these items that have
occurred during the three and six months ended June 30, 2007 and 2006:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
Percentage Percentage
2007 2006 Change 2007 2006 Change
----------- ---------- ----------- --------- ---------- -----------
FFO per common share prior to adjustments for
the following items......................... $ 1.15 $ 1.01 13.9% $ 2.17 $ 1.96 10.7%
Costs and expenses incurred in connection with
the merger with Shurgard.................... (0.01) (0.01) (0.03) (0.02)
Foreign currency exchange gain................. 0.03 - 0.06 -
Costs and expenses incurred in connection with a
proposed offering of shares in our European
business.................................... (0.06) - (0.06) -
Costs to reorganize as a Maryland REIT......... (0.01) - (0.01) -
Increase in insurance proceeds - casualty gain. - - 0.02 -
Application of EITF Topic D-42 in connection
with the redemption of preferred securities. - (0.01) - (0.01)
----------- ---------- --------- ----------
FFO per common share, as reported ............. $ 1.10 $ 0.99 11.1% $ 2.15 $ 1.93 11.4%
=========== ========== ========= ==========
FFO is a term defined by the National Association of Real Estate Investment
Trusts ("NAREIT"). It is generally defined as net income before depreciation
with respect to real estate assets and gains and losses on real estate assets.
FFO is presented because management and many analysts consider FFO to be one
measure of the performance of real estate companies. In addition, we believe
that FFO is helpful to investors as an additional measure of the performance of
a REIT, because net income includes the impact of depreciation, which assumes
that the value of real estate diminishes predictably over time, while we believe
that the value of real estate fluctuates due to market conditions and in
response to inflation. FFO computations do not consider scheduled principal
payments on debt, capital improvements, distribution and other obligations of
the Company. FFO is not a substitute for our cash flow or net income as a
measure of our liquidity or operating performance or our ability to pay
dividends. Other REITs may not compute FFO in the same manner; accordingly, FFO
may not be comparable among REITs. See the attached reconciliation of net income
to funds from operations included in the selected financial data attached to
this press release.
PROPERTY OPERATIONS-SAME STORE FACILITIES:
- ------------------------------------------
We derive substantially all of our revenues from the ownership and management of
self-storage facilities. In order to evaluate the performance of our overall
self-storage portfolio, we analyze the operating performance of our stabilized
self-storage facilities.
As of June 30, 2007, our "Same Store" portfolio consists of 1,316 facilities,
which represents the facilities that we have consolidated in our financial
statements and have been operating at a stabilized basis throughout 2005, 2006
and first six months of 2007.
The Same Store facilities contain approximately 77.8 million net rentable square
feet, representing approximately 63% of the aggregate net rentable square feet
in the United States of our consolidated self-storage portfolio at June 30,
2007. The following table summarizes the historical operating results of the
Same Store facilities:
3
Selected Operating Data for the Same Store
Facilities (1,316 Facilities): Three Months Ended June 30, Six Months Ended June 30,
- ------------------------------ --------------------------------------- ---------------------------------------
Percentage Percentage
2007 2006 Change 2007 2006 Change
------------- ----------- ----------- ----------- ------------ -----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income................................. $ 220,056 $ 216,347 1.7% $ 435,783 $ 426,152 2.3%
Late charges and administrative fees collected 10,105 10,005 1.0% 20,055 19,497 2.9%
------------- ----------- ----------- ----------- ------------ -----------
Total revenues (a)............................ 230,161 226,352 1.7% 455,838 445,649 2.3%
Cost of operations (excluding depreciation):
Property taxes ............................... 21,630 20,730 4.3% 44,501 42,718 4.2%
Direct property payroll....................... 16,098 16,624 (3.2)% 32,239 32,143 0.3%
Advertising and promotion..................... 9,161 7,058 29.8% 15,889 14,021 13.3%
Utilities..................................... 5,112 4,734 8.0% 10,540 9,929 6.2%
Repairs and maintenance....................... 7,016 7,437 (5.7)% 14,057 14,541 (3.3)%
Telephone reservation center.................. 2,182 2,204 (1.0)% 4,251 4,247 0.1%
Property insurance............................ 2,377 3,343 (28.9)% 4,831 5,305 (8.9)%
Other costs of management..................... 14,658 14,519 1.0% 29,754 29,547 0.7%
------------- ----------- ----------- ----------- ------------ -----------
Total cost of operations (a).................... 78,234 76,649 2.1% 156,062 152,451 2.4%
------------- ----------- ----------- ----------- ------------ -----------
Net operating income (before depreciation) (b).... 151,927 149,703 1.5% 299,776 293,198 2.2%
Depreciation expense.............................. (40,391) (39,298) 2.8% (80,797) (80,349) 0.6%
------------- ----------- ----------- ----------- ------------ -----------
Operating income.................................. $ 111,536 $ 110,405 1.0% $ 218,979 $ 212,849 2.9%
============= ============ =========== =========== ============ ===========
Gross margin (before depreciation)................ 66.0% 66.1% (0.2)% 65.8% 65.8% -
Weighted average for the period:
Square foot occupancy (c)....................... 91.5% 92.1% (0.7)% 90.6% 91.1% (0.5)%
Realized annual rent per occupied square foot (d) $ 12.37 $ 12.08 2.4% $ 12.37 $ 12.03 2.8%
(f)...............................................
REVPAF (e) (f).................................. $ 11.32 $ 11.13 1.7% $ 11.21 $ 10.96 2.3%
Weighted average at June 30:
Square foot occupancy........................... 92.2% 92.6% (0.4)%
In place annual rent per occupied square foot (g) $ 13.69 $ 13.33 2.7%
Total net rentable square feet (in thousands)..... 77,782 77,782 -
a) See attached reconciliation of these amounts to our consolidated
self-storage revenues and operating expenses. Revenues and cost of
operations do not include ancillary revenues and expenses generated at
the facilities with respect to tenant reinsurance, retail sales and truck
rentals. "Other costs of management" included in cost of operations
principally represents all the indirect costs incurred in the operations
of the facilities. Indirect costs principally include supervisory costs
and corporate overhead cost incurred to support the operating activities
of the facilities.
b) Net operating income (before depreciation) or "NOI" is a non-GAAP
(generally accepted accounting principles) financial measure that
excludes the impact of depreciation expense. Although depreciation is an
operating expense, we believe that NOI is a meaningful measure of
operating performance, because we utilize NOI in making decisions with
respect to capital allocations, in determining current property values,
segment performance and comparing period-to-period and market-to-market
property operating results. NOI is not a substitute for net operating
income after depreciation in evaluating our operating results.
c) Square foot occupancies represent weighted average occupancy levels over
the entire period.
d) Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income by the weighted average occupied
square footage for the period. Realized annual rent per occupied square
foot takes into consideration promotional discounts, credit card fees and
other costs that reduce rental income from the contractual amounts due.
e) Annualized rental income per available square foot ("REVPAF") represents
annualized rental income divided by total available net rentable square
feet.
f) Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF because
exclusion of these amounts provides a better measure of our ongoing level
of revenue, by excluding the volatility of late charges, which are
dependent principally upon the level of tenant delinquency, and
administrative fees, which are dependent principally upon the absolute
level of move-ins for a period.
g) In place annual rent per occupied square foot represents annualized
contractual rents per occupied square foot without reductions for
promotional discounts, and excludes late charges and administrative fees.
4
The following table summarizes additional selected financial data with respect
to our Same Store facilities:
Three Months Ended
----------------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
-------------- ------------- -------------- -------------- ---------------
Total revenues (in 000's):
2006..................................... $ 219,297 $ 226,352 $ 233,420 $ 227,007 $ 906,076
2007..................................... $ 225,677 $ 230,161
Total cost of operations (excluding
depreciation expense) (in 000's):
2006..................................... $ 75,802 $ 76,649 $ 74,947 $ 72,149 $ 299,547
2007..................................... $ 77,828 $ 78,234
Property taxes (in 000's):
2006..................................... $ 21,988 $ 20,730 $ 21,700 $ 18,844 $ 83,262
2007..................................... $ 22,871 $ 21,630
Media advertising expense (in 000's):
2006..................................... $ 4,130 $ 2,802 $ 1,049 $ 3,823 $ 11,804
2007..................................... $ 3,365 $ 5,333
Other advertising and promotion
expense (in 000's):
2006..................................... $ 2,833 $ 4,256 $ 3,723 $ 3,640 $ 14,452
2007..................................... $ 3,363 $ 3,828
REVPAF:
2006..................................... $ 10.79 $ 11.13 $ 11.46 $ 11.16 $ 11.13
2007..................................... $ 11.09 $ 11.32
Weighted average realized annual rent per
occupied square foot for the period:
2006..................................... $ 11.97 $ 12.08 $ 12.55 $ 12.42 $ 12.26
2007..................................... $ 12.35 $ 12.37
Weighted average square foot occupancy levels
for the period:
2006..................................... 90.1% 92.1% 91.3% 89.8% 90.8%
2007..................................... 89.8% 91.5%
MERGER WITH SHURGARD:
- ---------------------
On August 22, 2006, we completed the merger with Shurgard Storage Centers, Inc.
Included in general and administrative expense are costs related to completing
the integration of the two companies of approximately $1.3 million and $5.3
million for the three and six months ended June 30, 2007, respectively. Similar
costs relating to pursuing the merger totaling $1.1 million and $2.2 million
were incurred in the three and six months ended June 30, 2006, respectively. We
do not expect there will be further merger integration costs.
SHURGARD EUROPE:
- ----------------
We own and operate 103 wholly-owned European facilitates with 5.6 million net
rentable square feet along with a 20% interest in two joint ventures which
collectively own 65 European properties with 3.2 million net rentable square
feet. The two joint ventures collectively had approximately $327 million of
outstanding debt at June 30, 2007, which is included in our condensed
consolidated financial statements.
At June 30, 2007, one of the joint ventures had seven facilities under
construction (358,000 net rentable square feet), with total estimated costs of
approximately $75 million, of which approximately $45 million had been incurred
as of June 30, 2007. We also have seven facilities, and one redevelopment
project of an existing facility, in development with an aggregate of 407,000 net
rentable square feet. Total estimated costs for these projects, aggregating
approximately $64 million (approximately $4 million incurred as of June 30,
2007), will be funded by us. The development of these facilities is subject to
various risks and contingencies.
During the second quarter of 2007, we completed the development of one facility
in Denmark at a total cost of $8 million, adding 50,000 net rentable square feet
to the portfolio.
5
During the second quarter of 2007, a share offering of Shurgard Europe was
initiated to be listed on Eurolist of EuronextTM Brussels. Due to adverse market
conditions, this offering was withdrawn on June 21, 2007. There is no estimate
as to when or if a future offering may occur. We incurred $9.6 million in
expenses related to our proposed offering of shares which is included in general
and administrative expense for the three and six months ended June 30, 2007.
As previously disclosed in January 2007, we filed an arbitration action with our
joint venture partner related to our intention to terminate the joint ventures
early. As part of our efforts to resolve this dispute, we had entered into an
agreement to exchange their interest in the joint ventures for shares in the
proposed public company; however, because the offering has been withdrawn,
Shurgard Europe will continue to pursue its arbitration action.
DEVELOPMENT AND ASSET ACQUISITION ACTIVITIES IN THE UNITED STATES:
- ------------------------------------------------------------------
During the quarter, we acquired a self-storage facility in California containing
53,000 net rentable square feet, for approximately $6.3 million and have entered
into agreements to acquire five additional facilities in California and Georgia
with net rentable square feet of 395,000, for an aggregate purchase price of
approximately $44 million. These transactions are expected to close in the third
quarter.
At June 30, 2007, we had 41 projects (1,786,000 net additional rentable square
feet) that were either under construction or were expected to begin construction
generally within the next year, which expand existing self-storage facilities
and enhance their visual appeal for a total estimated cost of $140 million.
These projects will be fully funded by us. Opening dates for these facilities
are estimated through the next 24 months. The development of these facilities is
subject to various risks and contingencies.
ISSUANCE AND REDEMPTION OF PREFERRED SECURITIES:
- ------------------------------------------------
On July 2, 2007, we issued 6,900,000 depositary shares, with each depositary
share representing 1/1,000 of a 7.0% Cumulative Preferred Share of Beneficial
Interest, Series N, for aggregate gross proceeds of $172.5 million. A portion of
the net proceeds from this offering were used to repay a portion of borrowings
under our revolving credit facility and the remainder will be used to make
additional investments in self-storage facilities and for other general
corporate purposes.
During September 2007, we have the opportunity to redeem our 7.50% Series V
preferred stock ($172.5 million). The potential redemption of this security
would result in EITF Topic D-42 allocations of approximately $6 million in the
third quarter of 2007. No decision has been made to redeem these securities.
SHARE REPURCHASES:
- ------------------
Our Board of Trustees has authorized the repurchase from time to time of up to
25,000,000 shares of our common stock on the open market or in privately
negotiated transactions. From the inception of the repurchase program through
August 2, 2007, we have repurchased a total of 22,201,720 shares (none from
January 1, 2006 through August 2, 2007) of common stock at an aggregate cost of
approximately $567.2 million.
DISTRIBUTIONS DECLARED:
- -----------------------
On August 2, 2007 the Board of Trustees declared a quarterly distribution of
$0.50 per regular common share and $0.6125 per share on the depositary shares
each representing 1/1,000 of a share of Equity Stock, Series A. Distributions
were also declared with respect to the Company's various series of preferred
stock. All the distributions are payable on September 27, 2007 to shareholders
of record as of September 12, 2007.
SECOND QUARTER CONFERENCE CALL:
- -------------------------------
A conference call is scheduled for Friday, August 3, 2007 at 10:00 a.m. (PDT) to
discuss the second quarter ended June 30, 2007 earnings results. The participant
toll free number is (866) 406-5408 (conference ID number 8992421). A
simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations"
(conference ID number 8992421). A replay of the conference call may be accessed
through August 16, 2007 by calling (877) 519-4471 or by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations." Both
forms of replay utilize conference ID number 8992421.
ABOUT PUBLIC STORAGE:
- ---------------------
Public Storage, a member of the S&P 500 and The Forbes Global 2000, is a fully
integrated, self-administered and self-managed real estate investment trust that
primarily acquires, develops, owns and operates self-storage facilities. The
Company's headquarters are located in Glendale, California. The Company's
6
self-storage properties are located in 38 states and seven Western European
nations. At June 30, 2007, the Company had interests in 2,006 storage facilities
with approximately 126 million net rentable square feet in the United States and
168 storage facilities with approximately 9 million net rentable square feet in
Europe.
Additional information about Public Storage is available on our website,
www.publicstorage.com.
FORWARD-LOOKING STATEMENTS:
- ---------------------------
All statements in this press release, other than statements of historical fact,
are forward-looking statements which may be identified by the use of the words
"expects," "believes," "anticipates," "should," "estimates" and similar
expressions. These forward-looking statements involve known and unknown risks
and uncertainties, which may cause Public Storage's actual results and
performance to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact future results and
performance are described from time to time in Public Storage's filings with the
Securities and Exchange Commission, including in Item 1A, "Risk Factors" in
Public Storage's Annual Report on Form 10-K for the fiscal year ended December
31, 2006 and our Quarterly Reports on Form 10-Q, and in reports on Form 8-K.
These risks include, but are not limited to, the following: risks related to the
merger with Shurgard including difficulties that may be encountered in
completing the integration of Public Storage and Shurgard, the impact of the
merger on occupancy and rental rates, the inability to realize or delays in
realizing expected results from the merger, and risks associated with
international operations; changes in general economic conditions and in the
markets in which Public Storage operates; the impact of competition from new and
existing storage and commercial facilities and other storage alternatives, which
could impact rents and occupancy levels at our facilities; difficulties in
Public Storage's ability to evaluate, finance and integrate acquired and
developed properties into its existing operations and to fill up those
properties; the impact of the regulatory environment as well as national, state,
and local laws and regulations including, without limitation, those governing
Real Estate Investment Trusts, which could increase our expenses and reduce cash
available for distribution; consumers' failure to accept the containerized
storage concept; difficulties in raising capital at reasonable rates; delays in
the development process; and economic uncertainty due to the impact of war or
terrorism. Public Storage disclaims any obligation to update publicly or
otherwise revise any forward-looking statements, whether as a result of new
information, new estimates, or other factors, events or circumstances after the
date of this press release, except where expressly required by law.
7
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
2007 2006 2007 2006
-------------- ------------- ------------- ---------------
(Amounts in thousands, except per share data)
Revenues:
Self-storage rental income....................... $ 411,216 $ 262,232 $ 809,997 $ 513,579
Ancillary operations............................. 36,977 25,582 70,438 47,678
Interest and other income........................ 955 10,047 3,080 15,122
-------------- ------------- ------------- ---------------
449,148 297,861 883,515 576,379
-------------- ------------- ------------- ---------------
Expenses:
Cost of operations:
Self-storage facilities ....................... 149,366 89,395 298,286 177,098
Ancillary operations .......................... 21,743 17,150 42,744 32,424
Depreciation and amortization (a)................ 167,601 48,580 344,082 98,608
General and administrative (b)................... 21,465 6,975 37,981 13,754
Interest expense................................. 16,707 1,872 33,515 3,429
-------------- ------------- ------------- ---------------
376,882 163,972 756,608 325,313
-------------- ------------- ------------- ---------------
Income from continuing operations before equity in
earnings of real estate entities, gain on disposition
of real estate investments, casualty gain, foreign
currency exchange gain, income from derivatives
and minority interest in income................... 72,266 133,889 126,907 251,066
Equity in earnings of real estate entities .......... 2,782 3,124 6,759 6,590
Gain on disposition of real estate investments ...... 2,238 466 2,238 466
Casualty gain (c).................................... - - 2,665 -
Foreign currency exchange gain....................... 5,553 - 10,593 -
Income from derivatives, net......................... 1,771 - 1,009 -
Minority interest in income allocable to:
Preferred minority interests based upon ongoing
distributions....................................... (5,403) (4,658) (10,806) (8,249)
Other partnership interests ........................ (2,121) (4,070) (2,501) (7,638)
-------------- ------------- ------------- ---------------
Income from continuing operations.................... 77,086 128,751 136,864 242,235
Cumulative effect of change in accounting
principle........................................ - - - 578
Discontinued operations ......................... 18 111 18 265
-------------- ------------- ------------- ---------------
Net income $ 77,104 $ 128,862 $ 136,882 $ 243,078
============== ============= ============= ===============
Net income allocation:
Allocable to preferred shareholders.............. $ 57,315 $ 52,376 $ 116,091 $ 98,991
Allocable to equity shareholders, Series A....... 5,356 5,356 10,712 10,712
Allocable to common shareholders................. 14,433 71,130 10,079 133,375
-------------- ------------- ------------- ---------------
$ 77,104 $ 128,862 $ 136,882 $ 243,078
============== ============= ============= ===============
Per common share:
Net income per share - Basic..................... $ 0.09 $ 0.55 $ 0.06 $ 1.04
============== ============= ============= ===============
Net income per share - Diluted................... $ 0.08 $ 0.55 $ 0.06 $ 1.03
============== ============= ============= ===============
Weighted average common shares - Basic........... 169,346 128,180 169,288 128,151
============== ============= ============= ===============
Weighted average common shares - Diluted ........ 170,213 129,062 170,275 129,037
============== ============= ============= ===============
(a) Depreciation and amortization increased substantially, principally due to
$70,928,000 and $156,712,000 in amortization of intangibles acquired in the
merger with Shurgard for the three and six months ended June 30, 2007,
respectively, as well as $35,700,000 and $71,400,000 in depreciation of the
buildings acquired in the merger with Shurgard for the same periods.
Amortization of the intangible assets acquired in the merger with Shurgard
is expected to be approximately $51,994,000 in the third quarter of 2007
and $36,938,000 in the fourth quarter of 2007.
8
(b) Included in general and administrative expense are merger related costs
totaling $1.3 million and $1.1 million for the three months ended June 30,
2007 and 2006, respectively, and $5.3 million and $2.2 million for the six
months ended June 30, 2007 and 2006, respectively. Also included in general
and administrative expense for the three months ended June 30, 2007 are
$9.6 million in expenses associated with our proposed offering of shares in
our European business, and $2.0 million in expenses related to our
reorganization as a Maryland REIT.
(c) During 2005, several of our self-storage facilities were significantly
damaged by Hurricane Katrina. As a result, a loss was recorded in 2005
based on the excess of the net book value of the damaged facilities over
the estimated insurance proceeds that we would receive.
9
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
June 30, December 31,
2007 2006
-------------------- ---------------------
(Amounts in thousands, except share and
per share data)
ASSETS
Cash and cash equivalents .................................... $ 46,743 $ 535,684
Operating real estate facilities:
Land and building, at cost................................. 11,339,578 11,261,865
Accumulated depreciation................................... (1,940,189) (1,754,362)
-------------------- ---------------------
9,399,389 9,507,503
Construction in process....................................... 98,645 90,038
-------------------- ---------------------
9,498,034 9,597,541
Investment in real estate entities............................ 321,208 301,905
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 260,015 414,602
Restricted cash............................................... 20,206 19,900
Other assets.................................................. 156,268 154,207
-------------------- ---------------------
Total assets........................................... $ 10,477,108 $ 11,198,473
==================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings on bank credit facilities.......................... $ 70,000 $ 345,000
Notes payable and debt due to joint venture partner........... 1,018,368 1,503,542
Preferred stock called for redemption......................... - 302,150
Accrued and other liabilities................................. 326,985 333,706
-------------------- ---------------------
Total liabilities...................................... 1,415,353 2,484,398
Minority interest - preferred partnership interests........... 325,000 325,000
Minority interest - other partnership interests............... 178,124 181,030
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized,
1,732,600 shares issued (in series) and outstanding
(1,712,600 at December 31, 2006), at liquidation preference:
Cumulative Preferred Stock, issued in series............. 3,355,000 2,855,000
Common Stock, $0.10 par value, 200,000,000 shares authorized,
169,360,999 shares issued and outstanding (169,144,467 at
December 31, 2006)....................................... 16,937 16,915
Equity Stock, Series A, $0.01 par value, 200,000,000 shares
authorized, 8,744.193 shares issued and outstanding at June
30, 2007 and December 31, 2006........................... - -
Paid-in capital............................................ 5,655,666 5,661,507
Cumulative net income...................................... 3,640,174 3,503,292
Cumulative distributions paid.............................. (4,144,819) (3,847,998)
Accumulated other comprehensive income..................... 35,673 19,329
-------------------- ---------------------
Total shareholders' equity............................... 8,558,631 8,208,045
-------------------- ---------------------
Total liabilities and shareholders' equity............. $ 10,477,108 $ 11,198,473
==================== =====================
10
Shurgard Domestic Same Store Selected Operating Data
- ----------------------------------------------------
The Shurgard Domestic Same Store pool of 344 facilities are all stabilized since
January 1, 2005 and will therefore provide meaningful comparative data for 2005,
2006 and first six months of 2007. Previously, the Shurgard Domestic Same Store
Pool included 355 facilities, which has now been reduced for 11 facilities
which, effective May 24, 2007, were no longer consolidated in our operating
results. After May 24, 2007, our pro rata share of the net operating results of
these 11 facilities is presented as a component of Equity in Earnings of Real
Estate Entities, and our net investment in these properties is reflected on our
balance sheet as Investment in Real Estate Entities.
The operating data presented in the table below reflects the historical data
from January 1, 2006 through June 30, 2006, the period for which the 344
facilities were operated under Shurgard combined with the historical data from
January 1, 2007 through June 30, 2007, the period operated under Public Storage.
SELECTED OPERATING DATA FOR THE 344 FACILITIES
- ----------------------------------------------
OPERATED BY SHURGARD ON A STABILIZED BASIS SINCE
- ------------------------------------------------
JANUARY 1, 2005 ("SHURGARD DOMESTIC SAME STORE
- ----------------------------------------------
FACILITIES"): (a)
- -------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------- ---------------------------------------
Percentage Percentage
2007 2006 Change 2007 2006 Change
------------- ------------ ----------- ------------- ------------- -----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income................................. $ 65,402 $ 63,155 3.6% $ 128,484 $ 124,181 3.5%
Late charges and administrative fees
collected................................... 2,159 2,183 (1.1%) 4,222 4,248 (0.6%)
------------- ------------ ----------- ------------- ------------- -----------
Total revenues (b)............................ 67,561 65,338 3.4% 132,706 128,429 3.3%
Cost of operations (excluding depreciation):
Property taxes ............................... 6,703 6,178 8.5% 13,443 12,367 8.7%
Direct property payroll....................... 4,361 7,735 (43.6%) 9,051 15,449 (41.4%)
Advertising and promotion..................... 2,317 1,211 91.3% 4,160 2,775 49.9%
Utilities..................................... 1,696 1,587 6.9% 3,702 3,465 6.8%
Repairs and maintenance....................... 2,011 1,402 43.4% 4,032 2,979 35.3%
Telephone reservation center.................. 574 - - 1,118 - -
Property insurance............................ 708 348 103.4% 1,425 687 107.4%
Other costs of management..................... 4,437 5,442 (18.5%) 9,066 11,174 (18.9%)
------------- ------------ ----------- ------------- ------------- -----------
Total cost of operations (b).................... 22,807 23,903 (4.6%) 45,997 48,896 (5.9%)
------------- ------------ ----------- ------------- ------------- -----------
Net operating income (excluding depreciation) (c) $ 44,754 $ 41,435 8.0% $ 86,709 $ 79,533 9.0%
============= ============ =========== ============= ============= ===========
Gross margin (before depreciation)................ 66.2% 63.4% 4.4% 65.3% 61.9% 5.5%
Weighted average for the period:
Square foot occupancy (d)....................... 89.4% 84.6% 5.7% 88.1% 84.0% 4.9%
Realized annual rent per occupied square foot (e) $ 13.26 $ 13.53 (2.0%) $ 13.21 $ 13.39 (1.3%)
REVPAF (f) (g).................................. $ 11.85 $ 11.44 3.6% $ 11.64 $ 11.25 3.5%
Weighted average at June 30:
Square foot occupancy........................... 90.4% 85.5% 5.7%
Total net rentable square feet (in thousands)..... 22,076 22,076 -
(a) Operating data reflects the operations of these facilities without regard
to the time period in which Public Storage owned the facilities; only the
amounts for the period January 1, 2007 through June 30, 2007 are included
in our consolidated operating results.
(b) Revenues and cost of operations do not include ancillary revenues and
expenses generated at the facilities with respect to tenant reinsurance,
retail sales and truck rentals. "Other costs of management" included in
cost of operations principally represents all the indirect costs incurred
in the operations of the facilities. Indirect costs principally include
supervisory costs and corporate overhead cost incurred to support the
operating activities of the facilities. These amounts presented herein will
not necessarily compare to amounts previously presented by Shurgard in its
public reporting due to differences in classification of revenues and
expenses, including tenant reinsurance, retail sales and truck rental
activities which are included on our income statement under "ancillary
operations" but were previously presented by Shurgard as self-storage
revenue and operating expenses.
11
(c) Net operating income (before depreciation) or "NOI" is a non-GAAP
(generally accepted accounting principles) financial measure that excludes
the impact of depreciation expense. Although depreciation is an operating
expense, we believe that NOI is a meaningful measure of operating
performance, because we utilize NOI in making decisions with respect to
capital allocations, in determining current property values, segment
performance, and comparing period-to-period and market-to-market property
operating results. NOI is not a substitute for net operating income after
depreciation in evaluating our operating results. Depreciation is not
presented herein because it is not comparable during the period owned by us
and during the period owned by Shurgard, due to differing historical costs
and depreciable lives.
(d) Square foot occupancies represent weighted average occupancy levels over
the entire period.
(e) Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income by the weighted average occupied
square footage for the period. Realized annual rent per occupied square
foot takes into consideration promotional discounts, credit card fees and
other costs that reduce rental income from the contractual amounts due.
(f) Annualized rental income per available square foot ("REVPAF") represents
annualized rental income divided by total available net rentable square
feet.
(g) Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF because exclusion
of these amounts provides a better measure of our ongoing level of revenue,
by excluding the volatility of late charges, which are dependent
principally upon the level of tenant delinquency, and administrative fees,
which are dependent principally upon the absolute level of move-ins for a
period.
12
Shurgard European Same Store Selected Operating Data
- ----------------------------------------------------
In the merger with Shurgard, we acquired 103 wholly-owned facilities and an
interest in 57 facilities owned by affiliated joint ventures located in seven
European countries. The operating data presented in the table below reflects the
historical data for the Same Store portfolio in Europe from January 1, 2006
through June 30, 2006, the period for which the facilities were operated under
Shurgard combined with the historical data from January 1, 2007 through June 30,
2007, the period operated under Public Storage.
Selected Operating Data for the 96 facilities
operated by Shurgard Europe on a stabilized basis
since January 1, 2005 ("Europe Same Store
Facilities"): (a)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ --------------------------------------
Percentage Percentage
2007 2006 Change 2007 2006 Change
------------ ----------- ----------- ------------ ---------- -------------
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates) (b)
Revenues:
Rental income................................. $ 30,732 $ 27,961 9.9% $ 60,003 $ 54,569 10.0%
Late charges and administrative fees collected 313 255 22.7% 592 534 10.9%
------------ ----------- ----------- ------------ ---------- -------------
Total revenues (c)............................ 31,045 28,216 10.0% 60,595 55,103 10.0%
Cost of operations (excluding depreciation):
Property taxes ............................... 1,464 1,301 12.5% 2,662 2,619 1.6%
Direct property payroll....................... 3,629 4,074 (10.9%) 7,209 8,129 (11.3%)
Advertising and promotion..................... 1,309 1,595 (17.9%) 2,532 3,455 (26.7%)
Utilities..................................... 722 815 (11.4%) 1,572 1,708 (8.0%)
Repairs and maintenance....................... 738 867 (14.9%) 1,561 1,718 (9.1%)
Property insurance............................ 343 372 (7.8%) 701 741 (5.4%)
Other costs of management..................... 4,916 4,941 (0.5%) 9,486 9,341 1.6%
------------ ----------- ----------- ------------ ---------- -------------
Total cost of operations (c).................... 13,121 13,965 (6.0%) 25,723 27,711 (7.2%)
------------ ----------- ----------- ------------ ---------- -------------
Net operating income (excluding depreciation) (d) $ 17,924 $ 14,251 25.8% $ 34,872 $ 27,392 27.3%
============ =========== =========== ============ ========== =============
Gross margin (before depreciation)................ 57.7% 50.5% 14.3% 57.5% 49.7% 15.7%
Weighted average for the period:
Square foot occupancy (e)....................... 89.9% 83.5% 7.7% 89.2% 82.8% 7.7%
Realized annual rent per occupied square foot (f) $ 25.87 $ 25.34 2.1% $ 25.45 $ 24.94 2.0%
REVPAF (g) (h).................................. $ 23.26 $ 21.16 9.9% $ 22.70 $ 20.65 9.9%
Weighted average at June 30:
Square foot occupancy........................... 91.1% 85.9% 6.1%
In place annual rent per occupied square foot (i) $ 27.29 $ 26.10 4.6%
Total net rentable square feet (in thousands)..... 5,286 5,286 -
(a) Operating data reflects the operations of these facilities without regard
to the time period in which Public Storage owned the facilities; only the
amounts for the period January 1, 2007 through June 30, 2007 are included
in our consolidated operating results.
(b) Amounts for the quarter and six months, respectively, ended June 30, 2006
are translated based upon the average exchange rates for the quarter and
six months, respectively, ended June 30, 2007. Amounts for the quarter and
six months, respectively, ended June 30, 2007 are translated based upon the
average exchange rates in effect for each period as denoted more fully in
Note 2 to our financial statements, "Summary of Significant Accounting
Policies." The majority of our operations are denominated in Euros and
British Pounds. The Euro was translated at an average exchange rate of
approximately 1.348 and 1.329, respectively, in US Dollars per Euro for the
three and six months ended June 30, 2007, respectively. The British Pound
was translated at an average exchange rate of approximately 1.985 and
1.969, respectively, in US Dollars per British Pound for the three and six
months ended June 30, 2007, respectively.
13
(c) Revenues and cost of operations do not include ancillary revenues and
expenses generated at the facilities with respect to tenant reinsurance and
retail sales. "Other costs of management" included in cost of operations
principally represents all the indirect costs incurred in the operations of
the facilities. Indirect costs principally include supervisory costs and
corporate overhead cost incurred to support the operating activities of the
facilities. These amounts presented herein will not necessarily compare to
amounts previously presented by Shurgard in its public reporting due to
differences in classification of revenues and expenses, including tenant
reinsurance and retail sales which are included on our income statement
under "ancillary operations" but were previously presented by Shurgard as
self-storage revenue and operating expenses.
(d) Net operating income (before depreciation) or "NOI" is a non-GAAP
(generally accepted accounting principles) financial measure that excludes
the impact of depreciation expense. Although depreciation is an operating
expense, we believe that NOI is a meaningful measure of operating
performance, because we utilize NOI in making decisions with respect to
capital allocations, in determining current property values, segment
performance, and comparing period-to-period and market-to-market property
operating results. NOI is not a substitute for net operating income after
depreciation in evaluating our operating results. Depreciation is not
presented herein because it is not comparable during the period owned by us
and during the period owned by Shurgard, due to differing historical costs
and depreciable lives.
(e) Square foot occupancies represent weighted average occupancy levels over
the entire period.
(f) Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income by the weighted average occupied
square footage for the period. Realized annual rent per occupied square
foot takes into consideration promotional discounts, credit card fees and
other costs that reduce rental income from the contractual amounts due.
(g) Annualized rental income per available square foot ("REVPAF") represents
annualized rental income divided by total available net rentable square
feet.
(h) Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF because exclusion
of these amounts provides a better measure of our ongoing level of revenue,
by excluding the volatility of late charges, which are dependent
principally upon the level of tenant delinquency, and administrative fees,
which are dependent principally upon the absolute level of move-ins for a
period.
(i) In place annual rent per occupied square foot represents annualized
contractual rents per occupied square foot without reductions for
promotional discounts, and excludes late charges and administrative fees.
14
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds From Operations (a)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2007 2006 2007 2006
-------------- ------------- ------------- --------------
(Amounts in thousands, except per share data)
Computation of Funds from Operations (FFO) allocable to Common Stock
Net income................................................................ $ 77,104 $ 128,862 $ 136,882 $ 243,078
Add back - depreciation and amortization.............................. 167,601 48,580 344,082 98,608
Add back - depreciation and amortization included in Discontinued
Operations........................................................ - 66 - 108
Eliminate - depreciation with respect to non-real estate assets....... (108) (45) (206) (105)
Eliminate - our pro rata share of PSB's gain on sale of real estate... - (711) - (1,023)
Eliminate - gain on sale of real estate assets........................ (2,238) (466) (2,238) (466)
Depreciation from unconsolidated real estate investments.............. 11,279 9,466 21,034 18,720
Add back - minority interest share of income.......................... 7,524 8,728 13,307 15,887
-------------- ------------- ------------- --------------
Consolidated FFO.......................................................... 261,162 194,480 512,861 374,807
Allocable to preferred minority interests based upon ongoing
distributions............................................................ (5,403) (4,658) (10,806) (8,249)
Allocable to other minority interests..................................... (5,473) (4,386) (9,276) (8,266)
-------------- ------------- ------------- --------------
Remaining FFO allocable to our shareholders............................... 250,286 185,436 492,779 358,292
Less: allocations to preferred and equity stock shareholders:
Preferred shareholder distributions .................................. (57,315) (52,376) (116,091) (98,991)
Equity Stock, Series A distributions.................................. (5,356) (5,356) (10,712) (10,712)
-------------- ------------- ------------- --------------
Remaining FFO allocable to Common Stock (a)............................... $ 187,615 $ 127,704 $ 365,976 $ 248,589
Weighted average shares:
Regular common shares................................................. 169,346 128,180 169,288 128,151
Weighted average stock options and restricted stock units outstanding
using treasury method ................................................ 867 882 987 886
-------------- ------------- ------------- --------------
Weighted average common shares for purposes of computing fully-diluted
FFO per common share...................................................... 170,213 129,062 170,275 129,037
============== ============= ============= ==============
FFO per common share (a).................................................. $ 1.10 $ 0.99 $ 2.15 $ 1.93
============== ============= ============= ==============
(a) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts ("NAREIT"). FFO is a non-GAAP (generally
accepted accounting principles) financial measure. FFO is generally defined
as net income before depreciation with respect to real estate assets and
gains and losses on real estate assets. FFO is presented because management
and many analysts consider FFO to be one measure of the performance of real
estate companies. In addition, we believe that FFO is helpful to investors
as an additional measure of the performance of a REIT, because net income
includes the impact of depreciation, which assumes that the value of real
estate diminishes predictably over time, while we believe that the value of
real estate fluctuates due to market conditions and in response to
inflation. FFO computations do not consider scheduled principal payments on
debt, capital improvements, distributions, and other obligations of the
Company. FFO is not a substitute for our cash flow or net income as a
measure of our liquidity or operating performance or our ability to pay
dividends. Other REITs may not compute FFO in the same manner; accordingly,
FFO may not be comparable among REITs.
15
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution (c)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
2007 2006 2007 2006
------------- ------------ ------------- -------------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to Common Stock (a)........................ $ 187,615 $ 127,704 $ 365,976 $ 248,589
Add: Non-cash stock-based compensation expense........... 2,360 1,491 4,868 3,027
Less: Non-cash foreign exchange and derivative gains..... (7,324) - (11,602) -
Add: Non-cash EITF Topic D-42 charges included in equity
in earnings of real estate entities.................. - 729 - 729
Less: Capital expenditures to maintain facilities (b).... (20,500) (15,070) (25,207) (23,449)
------------- ------------ ------------- -------------
Funds available for distribution ("FAD") (c)............. $ 162,151 $ 114,854 $ 334,035 $ 228,896
============= ============ ============= =============
Distribution to common shareholders...................... $ 85,025 $ 64,297 $ 170,018 $ 128,595
============= ============ ============= =============
Distribution payout ratio (c)............................ 52.4% 56.0% 50.9% 56.2%
============= ============ ============= =============
(a) Funds from operations ("FFO") is a term defined by the National Association
of Real Estate Investment Trusts ("NAREIT"). FFO is a non-GAAP (generally
accepted accounting principles) financial measure. FFO is generally defined
as net income before depreciation with respect to real estate assets and
gains and losses on real estate assets. FFO is presented because management
and many analysts consider FFO to be one measure of the performance of real
estate companies. In addition, we believe that FFO is helpful to investors
as an additional measure of the performance of a REIT, because net income
includes the impact of depreciation, which assumes that the value of real
estate diminishes predictably over time, while we believe that the value of
real estate fluctuates due to market conditions and in response to
inflation. FFO computations do not consider scheduled principal payments on
debt, capital improvements, distributions, and other obligations of the
Company. FFO is not a substitute for our cash flow or net income as a
measure of our liquidity or operating performance or our ability to pay
dividends. Other REITs may not compute FFO in the same manner; accordingly,
FFO may not be comparable among REITs.
(b) Capital expenditures excludes approximately $3,600,000 for the six months
ended June 30, 2007, of costs incurred to re-brand the U.S. Shurgard
facilities to the "Public Storage" name, which principally consists of
permanent signage.
(c) Funds available for distribution ("FAD") represents FFO, plus 1) impairment
charges with respect to real estate assets, 2) the non-cash portion of
stock-based compensation expense, 3) income allocation to preferred equity
holders in accordance with EITF Topic D-42, less capital expenditures and
any gain or loss on foreign exchange or from derivatives. The distribution
payout ratio is computed by dividing the distribution paid by FAD. FAD is
presented because many analysts consider it to be a measure of the
performance and liquidity of real estate companies and because we believe
that FAD is helpful to investors as an additional measure of the
performance of a REIT. FAD is not a substitute for our cash flow or net
income as a measure of our liquidity, operating performance, or our ability
to pay dividends. Other REITs may not compute FAD in the same manner;
accordingly, FAD may not be comparable among REITs.
16
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Same Store Revenues and Cost of Operations
To Consolidated Self-Storage Rental Income and Cost of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ---------------------------
2007 2006 2007 2006
------------ ------------ ------------- -------------
(Amounts in thousands)
Revenues for the 1,316 Same Store facilities......... $ 230,161 $ 226,352 $ 455,838 $ 445,649
Revenues for non-Same Store facilities (a): Development
facilities (year opened):
2007.......................................... 71 - 79 -
2006.......................................... 1,080 56 1,937 56
2005.......................................... 1,005 584 1,916 953
2003 and 2004................................. 5,655 5,244 11,135 10,192
Expansion facilities.......................... 19,800 18,486 39,163 35,886
Acquisition facilities (year acquired):
2007.......................................... 299 - 311 -
2006.......................................... 2,401 1,442 4,686 1,839
2005.......................................... 6,937 6,178 13,569 11,816
Newly consolidated facilities.................... 3,834 3,890 7,570 7,188
Consolidated U.S. Shurgard facilities (b):
Shurgard Same Stores......................... 67,561 - 132,706 -
Other facilities............................. 25,224 - 48,670 -
Deconsolidated U.S. Shurgard facilities (c)...... 831 - 2,198 -
Consolidated Europe Shurgard facilities (b):
Shurgard Same Stores......................... 31,045 - 60,595 -
Other facilities............................. 15,312 - 29,624 -
------------ ------------ ------------- -------------
Consolidated self-storage revenues (d)................ $ 411,216 $ 262,232 $ 809,997 $ 513,579
============ ============ ============= =============
Cost of operations for the 1,316 Same Store facilities $ 78,234 $ 76,649 $ 156,062 $ 152,451
Cost of operations for non-Same Store facilities (a): Development facilities
(year opened):
2007.......................................... 47 - 88 -
2006.......................................... 680 114 1,216 114
2005.......................................... 568 406 1,128 820
2003 and 2004................................. 1,585 1,601 3,206 3,182
Expansion facilities.......................... 7,353 6,582 14,418 13,015
Acquisition facilities (year acquired):
2007.......................................... 126 - 129 -
2006.......................................... 1,179 717 2,288 942
2005.......................................... 2,577 2,385 5,146 4,854
Newly consolidated facilities.................... 865 941 1,742 1,720
Consolidated U.S. Shurgard facilities (b):
Shurgard Same Stores......................... 22,807 - 45,997 -
Other facilities............................. 9,895 - 19,790 -
Deconsolidated U.S. Shurgard facilities (c)...... 344 - 916 -
Consolidated Europe Shurgard facilities (b):
Shurgard Same Stores......................... 13,121 - 25,723 -
Other facilities............................. 9,985 - 20,437 -
------------ ------------ ------------- -------------
Consolidated self-storage cost of operations (d)...... $ 149,366 $ 89,395 $ 298,286 $ 177,098
============ ============ ============= =============
17
(a) We consolidate the operating results of additional self-storage facilities
that are not Same Store facilities. Such facilities are not included in the
Same Store pool either because they were not stabilized for the entire
period from January 1, 2005 through June 30, 2007, or because we acquired
these facilities from third parties after December 31, 2004.
(b) Represents the operations of the facilities acquired in the merger with
Shurgard, which remain consolidated at June 30, 2007, for the period from
January 1, 2007 through June 30, 2007.
(c) Represents the operations of the 11 facilities acquired from Shurgard that
we discontinued consolidation with the Company effective May 24, 2007, for
the period their operating results were consolidated.
(d) Self-storage revenues and cost of operations do not include revenues and
expenses generated at the facilities with respect to tenant reinsurance,
retail sales and truck rentals.
18