News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
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For Release: Immediately
Date: February 27, 2008
Contact: Clemente Teng
(818) 244-8080
PUBLIC STORAGE REPORTS RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED
DECEMBER 31, 2007 AND INCREASES CASH DIVIDEND 10%
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the fourth quarter and year ended December 31, 2007. The Company
also announced that it had increased its cash dividend per regular common share
from $0.50 to $0.55, an increase of 10%.
OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2007:
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Net income for the three months ended December 31, 2007 was $167.9 million
compared to a net loss of $10.2 million for the same period in 2006,
representing an improvement of $178.1 million. This improvement is primarily due
to reduced depreciation and amortization expense, reduced general and
administrative expense, improved operations from our real estate facilities and
an increased foreign currency exchange gain.
Depreciation and amortization expense for the quarter ended December 31, 2007
decreased by $94.8 million, as compared to the same period in 2006. This
decrease is primarily due to a reduction in amortization expense related to
customer intangible assets that we obtained in the August 22, 2006 acquisition
of Shurgard Storage Centers, Inc. (the "Shurgard Merger"). For the three months
ended December 31, 2007, intangible amortization expense primarily related to
the intangibles acquired in the Shurgard Merger totaled $36.8 million as
compared to $125.3 million for the same period in 2006.
General and administrative expense declined $24.3 million for the three months
ended December 31, 2007 as compared to the same period in 2006. This decline was
primarily due to integration expenses associated with the Shurgard Merger
totaling $23.5 million during the three months ended December 31, 2006.
Net operating income, before depreciation, for our self-storage operations
totaled $285.9 million for the three months ended December 31, 2007 as compared
to $254.6 million for the same period in 2006, representing an increase of $31.3
million. For those facilities that were acquired in the Shurgard Merger, net
operating income was approximately $93.9 million for the quarter ended December
31, 2007 as compared to $74.7 million for the same period in 2006.
During the quarter ended December 31, 2007, we recognized a foreign currency
exchange gain of $16.6 million relating to intercompany loans between our U.S.
and European subsidiaries. The gain was the result of the continued weakening of
the US Dollar relative to the Euro during the quarter. See "Shurgard Europe"
below for further information.
For the three months ended December 31, 2007, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $102.2 million or $0.60 per common share on a diluted basis
compared to a net loss of $80.4 million or $0.48 per common share on a diluted
basis for the same period in 2006, representing an increase of $182.6 million or
$1.08 per common share on a diluted basis. These improvements are due primarily
to the impact of the factors described above with respect to net income, as well
as a decrease in income allocated to our preferred shareholders, as described
below.
For the three months ended December 31, 2007 and 2006, we allocated $60.3
million and $55.0 million 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. In the three months ended December 31, 2006, we
also recorded allocations of income to our preferred shareholders with respect
to the application of EITF Topic D-42 totaling $9.9 million in connection with
the redemption of preferred securities.
1
Weighted average diluted shares increased to 170,089,000 for the three months
ended December 31, 2007 from 169,063,000 for the same period in 2006.
OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2007:
Net income for the year ended December 31, 2007 was $457.5 million compared to
$314.0 million for the same period in 2006, representing an increase of $143.5
million. This increase is primarily due to improved operations from our real
estate facilities combined with an increased foreign currency exchange gain and
a reduction in general and administrative expense. These items were partially
offset by increases in depreciation and amortization expense and interest
expense.
Comparisons of our revenues, expenses, and weighted average shares outstanding
are significantly impacted by the Shurgard Merger, which closed on August 22,
2006. The results with respect to the assets and liabilities acquired in the
Shurgard Merger are included in our operating results from August 23, 2006
through December 31, 2006 during the year ended December 31, 2006, as compared
to the entire year ended December 31, 2007.
Net operating income, before depreciation, for our self-storage operations
totaled $1,082.2 million for the year ended December 31, 2007 as compared to
$810.8 million for the same period in 2006, representing an increase of $271.4
million. The increase is primarily due to the addition of 647 facilities that we
acquired in the Shurgard Merger. Net operating income of the former Shurgard
properties was approximately $347.8 million for the year ended December 31,
2007, as compared to $110.1 million for the same period in 2006, which reflects
the operations of these facilities from August 23, 2006 through December 31,
2006.
During the year ended December 31, 2007, we recognized a foreign currency
exchange gain aggregating $57.6 million relating to intercompany loans between
our U.S. and European subsidiaries. The gain was the result of the continued
weakening of the US Dollar relative to the Euro during the year ended December
31, 2007. See "Shurgard Europe" below for further information.
General and administrative expense declined $24.9 million in the year ended
December 31, 2007 as compared to the same period in 2006. This decline was
primarily due to the reduction in integration expenses associated with the
Shurgard Merger, contract termination costs, and development costs that were
expensed with respect to terminated projects; offset partially by costs incurred
in 2007 with respect to our reorganization as a Maryland REIT, and the costs
associated with a proposed offering of shares in our European business. These
expenses aggregated $56.4 million for the year ended December 31, 2006 as
compared to $19.0 million for the same period in 2007.
Depreciation and amortization expense for the year ended December 31, 2007
increased by $184.8 million, as compared to the same period in 2006. This
increase is primarily due to increased depreciation and amortization expense
with respect to the buildings and intangible assets acquired in the Shurgard
Merger.
Net income allocable to our common shareholders (after allocating net income to
our preferred and equity shareholders) was $199.4 million or $1.17 per common
share on a diluted basis for the year ended December 31, 2007 compared to $46.9
million or $0.33 per common share on a diluted basis for the same period in
2006, representing an increase of $152.5 million or $0.84 per common share on a
diluted basis. The increase in net income allocable to common shareholders and
earnings per common share on a diluted basis are due primarily to the impact of
the factors described above with respect to net income, as well as a decrease in
income allocated to preferred shareholders, as described below.
For the years ended December 31, 2007 and 2006, we allocated $236.8 million and
$214.2 million 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. In 2006, we also recorded allocations of income to our
preferred shareholders with respect to the application of EITF Topic D-42
totaling $31.5 million (or $0.22 per common share on a diluted basis) in
connection with the redemption of preferred securities.
Weighted average diluted shares increased to 170,147,000 for the year ended
December 31, 2007 from 143,715,000 for the year ended December 31, 2006. The
increase in weighted average diluted shares is due primarily to the impact of
the issuance of 38.9 million shares in connection with the Shurgard Merger.
FUNDS FROM OPERATIONS:
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For the three months ended December 31, 2007, funds from operations ("FFO")
increased to $1.40 per common share on a diluted basis as compared to $0.89 per
common share for the same period in 2006, representing an increase of $0.51 per
common share, or 57.3%.
2
For the three months ended December 31, 2007, FFO has been impacted as a result
of (i) net foreign currency exchange and derivative gains totaling $16.3 million
($4.4 million for the same period in 2006), and (ii) development costs that are
included in general and administrative expense with respect to canceled projects
totaling $0.5 million ($0.9 million for the same period in 2006). For the same
period in 2006, FFO was impacted by (i) a $1.0 million impairment charge on a
discontinued self-storage facility, (ii) costs and expenses incurred in
connection with the Shurgard Merger totaling $23.5 million, and (iii) our pro
rata share of PS Business Parks, Inc.'s application of EITF Topic D-42 included
in equity in earnings, and our application of EITF Topic D-42, in connection
with the redemption of preferred securities totaling $10.6 million.
For the year ended December 31, 2007, FFO increased to $4.97 per common share on
a diluted basis as compared to $3.57 per common share for the same period in
2006, representing an increase of $1.40 per common share, or 39.2%.
For the year ended December 31, 2007, FFO has been impacted as a result of (i)
net foreign currency exchange and derivatives gains of approximately $58.4
million ($4.3 million for the same period in 2006), (ii) development costs that
are included in general and administrative expense with respect to terminated
projects totaling $2.1 million ($10.2 million for the same period in 2006),
(iii) an impairment charge included in discontinued operations with respect to
the closure of a containerized storage facility totaling $0.9 million, (iv)
additional expenses incurred in connection with the Shurgard Merger included in
general and administrative expense totaling approximately $5.3 million ($44.0
million for the same period in 2006), (v) $9.6 million in general and
administrative expenses related to our proposed offering of shares in our
European business, (vi) $2.0 million in general and administrative expense
associated with our reorganization as a Maryland REIT, and (vii) an increase in
insurance proceeds with respect to damage caused by Hurricane Katrina of $2.7
million. In addition, for the year ended December 31, 2006, FFO has been
impacted as a result of (i) contract termination costs included in general and
administrative expense totaling $2.2 million, (ii) a $1.0 million impairment
charge on a discontinued self-storage facility and (iii) our pro rata share of
PS Business Parks, Inc.'s application of EITF Topic D-42 included in equity in
earnings, and our application of EITF Topic D-42, in connection with the
redemption of preferred securities totaling $33.6 million.
The following table provides a summary of the impact of these items that have
occurred during the three months and year ended December 31, 2007 and 2006:
Three Months Ended Year Ended
December 31, December 31,
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Percentage Percentage
2007 2006 Change 2007 2006 Change
---------- ---------- ----------- ---------- ---------- -----------
FFO per common share prior to adjustments for
the following items......................... $ 1.30 $ 1.08 20.4% $ 4.73 $ 4.17 13.4%
Foreign currency exchange and derivative gains, 0.10 0.03 0.34 0.03
net.........................................
Cancellation of development projects........... - (0.01) (0.01) (0.07)
Impairment charges on discontinued containerized
storage operations.......................... - - (0.01) -
Impairment charge on discontinued self-storage
facility.................................... - (0.01) - (0.01)
Costs and expenses incurred in connection with
the Shurgard Merger......................... - (0.14) (0.03) (0.30)
Contract termination costs..................... - - - (0.02)
Costs and expenses incurred in connection with a
proposed offering of shares in our European
business.................................... - - (0.06) -
Costs to reorganize as a Maryland REIT......... - - (0.01) -
Increase in insurance proceeds - casualty gain - - 0.02 -
Application of EITF Topic D-42 in connection
with the redemption of preferred securities. - (0.06) - (0.23)
---------- ---------- ----------- ---------- ---------- -----------
FFO per common share, as reported.............. $ 1.40 $ 0.89 57.3% $ 4.97 $ 3.57 39.2%
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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
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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. 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:
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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 December 31, 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 2007.
The Same Store facilities contain approximately 77.8 million net rentable square
feet, representing approximately 62% of the aggregate net rentable square feet
in the U.S. of our consolidated self-storage portfolio at December 31, 2007. The
following table summarizes the historical operating results of the Same Store
facilities:
Selected Operating Data for the Same Store
Facilities (1,316 Facilities): (unaudited) Three Months Ended December 31, Year Ended December 31,
- ------------------------------------------- -------------------------------------- ---------------------------------------
Percentage Percentage
2007 2006 Change 2007 2006 Change
---------- ----------- ----------- ------------ ------------ ----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income................................. $ 221,802 $ 216,945 2.2% $ 884,379 $ 865,981 2.1%
Late charges and administrative fees collected 10,014 10,062 (0.5)% 40,709 40,095 1.5%
---------- ----------- ----------- ------------ ------------ ----------
Total revenues (a)............................ 231,816 227,007 2.1% 925,088 906,076 2.1%
Cost of operations (excluding depreciation):
Property taxes ............................... 17,913 18,844 (4.9)% 85,132 83,262 2.2%
Direct property payroll....................... 15,564 15,274 1.9% 63,236 63,945 (1.1)%
Advertising and promotion..................... 4,659 7,463 (37.6)% 26,495 26,256 0.9%
Utilities..................................... 5,034 4,948 1.7% 21,157 20,459 3.4%
Repairs and maintenance....................... 7,056 7,655 (7.8)% 29,037 29,515 (1.6)%
Telephone reservation center.................. 2,303 1,914 20.3% 8,549 8,316 2.8%
Property insurance............................ 1,900 1,074 76.9% 8,835 9,400 (6.0)%
Other costs of management..................... 14,878 14,977 (0.7)% 58,988 58,394 1.0%
---------- ----------- ----------- ------------ ------------ ----------
Total cost of operations (a).................... 69,307 72,149 (3.9)% 301,429 299,547 0.6%
---------- ----------- ----------- ------------ ------------ ----------
Net operating income (before depreciation) (b).... 162,509 154,858 4.9% 623,659 606,529 2.8%
Depreciation expense.............................. (41,115) (41,338) (0.5)% (162,465) (162,981) (0.3)%
---------- ----------- ----------- ------------ ------------ ----------
Operating income.................................. $ 121,394 $ 113,520 6.9% $ 461,194 $ 443,548 4.0%
========== =========== =========== ============ ============ ==========
Gross margin (before depreciation)................ 70.1% 68.2% 2.8% 67.4% 66.9% 0.7%
Weighted average for the period:
Square foot occupancy (c)....................... 88.6% 89.8% (1.3)% 90.1% 90.8% (0.8)%
Realized annual rent per occupied square foot (d)$ 12.87 $ 12.42 3.6% $ 12.62 $ 12.26 2.9%
(f)...............................................
REVPAF (e) (f).................................. $ 11.41 $ 11.16 2.2% $ 11.37 $ 11.13 2.2%
Weighted average at December 31:
Square foot occupancy........................... 88.1% 89.3% (1.3)%
In place annual rent per occupied square foot (g) $ 13.81 $ 13.37 3.3%
Total net rentable square feet (in thousands)..... 77,782 77,782 -
a) Seeattached 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.
4
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.
The following table summarizes additional selected financial data with respect
to our Same Store facilities (unaudited):
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 $ 237,434 $ 231,816 $ 925,088
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 $ 76,060 $ 69,307 $ 301,429
Property taxes (in 000's):
2006..................................... $ 21,988 $ 20,730 $ 21,700 $ 18,844 $ 83,262
2007..................................... $ 22,871 $ 21,630 $ 22,718 $ 17,913 $ 85,132
Media advertising expense (in 000's):
2006..................................... $ 4,130 $ 2,802 $ 1,049 $ 3,823 $ 11,804
2007..................................... $ 3,365 $ 5,333 $ 2,885 $ 1,876 $ 13,459
Other advertising and promotion
expense (in 000's):
2006..................................... $ 2,833 $ 4,256 $ 3,723 $ 3,640 $ 14,452
2007..................................... $ 3,363 $ 3,828 $ 3,062 $ 2,783 $ 13,036
REVPAF:
2006..................................... $ 10.79 $ 11.13 $ 11.46 $ 11.16 $ 11.13
2007..................................... $ 11.09 $ 11.32 $ 11.66 $ 11.41 $ 11.37
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 $ 12.89 $ 12.87 $ 12.62
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% 90.5% 88.6% 90.1%
SHURGARD EUROPE:
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We own and operate 104 wholly-owned European facilities with 5.7 million net
rentable square feet along with a 20% interest in two joint ventures which
collectively own 70 European facilities with 3.5 million net rentable square
feet. The two joint ventures collectively had approximately $376.7 million of
outstanding debt payable to third parties at December 31, 2007, which is
included in our condensed consolidated financial statements.
5
At December 31, 2007, one of the joint ventures had two facilities under
construction (115,000 net rentable square feet), with total estimated costs of
approximately $21.0 million, of which approximately $14.0 million had been
incurred as of December 31, 2007. We also have 11 facilities and one
redevelopment project under construction, which will be funded by us (621,000
net rentable square feet). Total estimated costs for these projects are
approximately $102.9 million of which approximately $18.0 million was incurred
as of December 31, 2007. The development of these facilities is subject to
various risks and contingencies.
During the fourth quarter of 2007, we completed the development of one facility
in the Netherlands at a total cost of $9.0 million, adding 89,000 net rentable
square feet to the portfolio. Also during the fourth quarter of 2007, one of the
joint ventures completed the development of four facilities located in France,
Denmark, and the United Kingdom at a total cost of $44.0 million, adding 194,000
net rentable square feet to the portfolio.
At December 31, 2007, our European subsidiaries owed approximately (euro)377.7
million ($555.9 million as of December 31, 2007) to our domestic subsidiaries.
The loans are eliminated in consolidation for financial reporting purposes. We
expect our European subsidiaries to obtain external financing in the next 12 to
24 months, which will fund the repayment of the loans. The loans, which are
denominated in Euros, have not been hedged. The amount of US Dollars that will
be received on repayment will depend upon the exchange rates at the time. Based
upon the change in estimated US Dollars to be received caused by fluctuation in
currency rates during each respective period, foreign currency translation gains
of $16.6 million and $57.6 million, respectively, were recorded in the three
months and year ended December 31, 2007. The US Dollar exchange rate relative to
the Euro was approximately 1.319, 1.426, and 1.472, and at December 31, 2006,
September 30, 2007, and December 31, 2007, respectively.
As previously disclosed in January of 2008, we reached an agreement in principle
for a prospective investor to acquire a 51% interest in Shurgard Europe in a
private transaction. The price is generally consistent with the previously
disclosed proceeds Public Storage expected to receive for its equity interest in
last year's terminated European share offer. No binding agreement has been
signed with the prospective investor and there is no assurance that a binding
agreement will be signed or that the transaction will be completed. It is
estimated that the completion of the transaction will take place at the end of
the first quarter of 2008, assuming a binding agreement is signed and the
conditions related to the transaction are satisfied.
DEVELOPMENT AND ASSET ACQUISITION ACTIVITIES IN THE UNITED STATES:
During the fourth quarter of 2007, we completed the development of a facility
and five expansion projects at a total cost of $22.0 million, adding 231,000 net
rentable square feet.
We have entered into agreements to acquire two self-storage facilities in
California with net rentable square feet of 248,000 for an aggregate purchase
price of $31 million which includes approximately $10 million of assumed debt.
While the acquisitions are subject to contingencies, these transactions are
expected to close in the second quarter of 2008.
At December 31, 2007, we had 29 projects that were either under construction or
were expected to begin construction generally within the next year, comprised of
27 projects (1,105,000 net additional rentable square feet) which expand
existing self-storage facilities and enhance their visual appeal for a total
estimated cost of $106.9 million, and two newly developed self-storage
facilities (113,000 net rentable square feet) for a total estimated cost of
$14.7 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.
SHARE REPURCHASES:
- ------------------
Our Board of Trustees has authorized the repurchase from time to time of up to
25,000,000 of our common shares on the open market or in privately negotiated
transactions. No common shares were repurchased during 2007. From January 1,
2008 through February 27, 2008, we repurchased a total of 1,520,196 common
shares for an aggregate of approximately $111.9 million. From the inception of
the repurchase program through February 21, 2008, we have repurchased a total of
23,721,916 common shares at an aggregate cost of approximately $679.1 million.
DISTRIBUTIONS DECLARED:
- -----------------------
On February 27, 2008 the Board of Trustees declared a quarterly distribution of
$0.55 per regular common share, representing a 10% increase from $0.50 per
share, and $0.6125 per share on the depositary shares each representing 1/1,000
of a share of Equity Shares, Series A. Distributions were also declared with
respect to the Company's various series of preferred shares. All the
distributions are payable on March 31, 2008 to shareholders of record as of
March 14, 2008.
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FOURTH QUARTER CONFERENCE CALL:
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A conference call is scheduled for Thursday, February 28, 2008 at 10:00 a.m.
(PST) to discuss the fourth quarter ended December 31, 2007 earnings results.
The domestic dial-in number is (866) 406-5408, and the international dial-in
number is (973) 582-2770 (conference ID number for either domestic or
international is 32927323). A simultaneous audio web cast may be accessed by
using the link at www.publicstorage.com under "Corporate Information, Investor
Relations" (conference ID number 32927323). A replay of the conference call may
be accessed through March 14, 2008 by calling (800) 642-1687 (domestic), or
(706) 645-9291 (international), or by using the link at www.publicstorage.com
under "Corporate Information, Investor Relations." All forms of replay utilize
conference ID number 32927323.
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
self-storage properties are located in 38 states and seven Western European
nations. At December 31, 2007, the Company had interests in 2,012 self-storage
facilities with approximately 126 million net rentable square feet in the U.S.
and 174 storage facilities with approximately nine 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 Form 10-K for the fiscal year ended December 31, 2007 expected to
be filed on or before February 29, 2008, our Quarterly Reports on Form 10-Q, and
current reports on Form 8-K. These risks include, but are not limited to, the
following: general risks associated with the ownership and operation of real
estate including changes in demand for our storage facilities, potential
liability for environmental contamination, adverse changes in tax, real estate
and zoning laws and regulations, and the impact of natural disasters; risks
associated with downturns in the national and local economies in the markets in
which we operate; the risk that the parties may for any reason be unable to
finalize negotiations and completion of a possible transaction involving
Shurgard Europe; the impact of competition from new and existing storage and
commercial facilities and other storage alternatives; difficulties in our
ability to successfully evaluate, finance, integrate into our existing
operations and manage acquired and developed properties; risks related to our
participation in joint ventures; risks associated with international operations
including, but not limited to, unfavorable foreign currency rate fluctuations
that could adversely affect our earnings and cash flows; the impact of the
regulatory environment as well as national, state, and local laws and
regulations including, without limitation, those governing REITs; risks
associated with a possible failure by us to qualify as a REIT under the Internal
Revenue Code of 1986, as amended; disruptions or shutdowns of our automated
processes and systems; difficulties in raising capital at a reasonable cost;
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
Three Months Ended Year Ended
December 31, December 31,
------------------------------ -------------------------------
2007 2006 2007 2006
(Unaudited) (Unaudited)
-------------- ------------ -------------- --------------
(Amounts in thousands, except per share data)
Revenues:
Self-storage rental income.................... $ 424,508 $ 397,336 $ 1,662,454 $ 1,239,697
Ancillary operations.......................... 34,830 32,226 142,500 109,515
Interest and other income..................... 5,080 4,026 11,417 31,799
-------------- ------------ -------------- --------------
464,418 433,588 1,816,371 1,381,011
-------------- ------------ -------------- --------------
Expenses:
Cost of operations:
Self-storage facilities .................... 138,570 142,706 580,227 428,910
Ancillary operations ....................... 16,263 19,256 79,638 69,528
Depreciation and amortization (a)............. 130,750 225,576 622,410 437,568
General and administrative (b)................ 10,352 34,665 59,749 84,661
Interest expense.............................. 14,899 20,310 63,671 33,062
-------------- ------------ -------------- --------------
310,834 442,513 1,405,695 1,053,729
-------------- ------------ -------------- --------------
Income (loss) from continuing operations before equity
in earnings of real estate entities, gain on disposition
of real estate investments, casualty gain, foreign
currency exchange gain, (expense) income from derivatives
and minority interest in income................ 153,584 (8,925) 410,676 327,282
Equity in earnings of real estate entities ....... 2,555 2,687 12,738 11,895
Gain on disposition of real estate investments ... 217 955 2,547 2,177
Casualty gain .................................... - - 2,665 -
Foreign currency exchange gain (c)............... 16,616 508 57,593 336
(Expense) income from derivatives, net............ (275) 3,894 851 3,926
Minority interest in income allocable to:
Preferred minority interests..................... (5,403) (5,403) (21,612) (19,055)
Other partnership interests ..................... (2,529) (2,003) (7,931) (12,828)
-------------- ------------ -------------- --------------
Income (loss) from continuing operations.......... 164,765 (8,287) 457,527 313,733
Cumulative effect of a change in accounting
principle..................................... - - - 578
Discontinued operations ...................... 3,122 (1,946) 8 (285)
-------------- ------------ -------------- --------------
Net income (loss) $ 167,887 $ (10,233) $ 457,535 $ 314,026
============== ============ ============== ==============
Net income (loss) allocation:
- -----------------------------
Allocable to preferred shareholders based on
distribution paid........................... $ 60,333 $ 54,962 $ 236,757 $ 214,218
Allocable to preferred shareholders based on
redemptions................................. - 9,850 - 31,493
Allocable to Equity Shares, Series A.......... 5,356 5,356 21,424 21,424
Allocable to common shareholders.............. 102,198 (80,401) 199,354 46,891
-------------- ------------ -------------- --------------
$ 167,887 $ (10,233) $ 457,535 $ 314,026
============== ============ ============== ==============
Per common share:
Net income (loss) per share - Basic........... $ 0.60 $ (0.48) $ 1.18 $ 0.33
============== ============ ============== ==============
Net income (loss) per share - Diluted......... $ 0.60 $ (0.48) $ 1.17 $ 0.33
============== ============ ============== ==============
Weighted average common shares - Basic........ 169,415 169,063 169,342 142,760
============== ============ ============== ==============
Weighted average common shares - Diluted ..... 170,089 169,063 170,147 143,715
============== ============ ============== ==============
(a) Depreciation and amortization increased due to $36.8 million and $247.8
million in amortization of intangible assets primarily acquired in the
Shurgard Merger for the three months and year ended December 31, 2007,
8
respectively, compared to $125.3 million and $175.9 million for the three
months and year ended December 31, 2006, respectively. In addition, we
recorded $35.7 million and $142.8 million in depreciation of the buildings
acquired in the Shurgard Merger for the three months and year ended
December 31, 2007, respectively, compared to $49.3 million and $61.7
million for the same periods in 2006.
(b) For the three months ended December 31, 2007, general and administrative
expense includes (i) development costs that were expensed with respect to
terminated projects totaling $0.5 million ($0.9 million for the same period
in 2006), (ii) ongoing general and administrative expense related to our
European operations for the entire quarter ended December 31, 2007
(includes amounts only from August 23, 2006 with respect to the same period
in 2006), and (iii) $1.9 million in additional incentive compensation. In
addition, for the three months ended December 31, 2006, general and
administrative expense includes integration expenses incurred in connection
with the acquisition of Shurgard totaling approximately $23.5 million. For
the year ended December 31, 2007, general and administrative expense
includes (i) development costs that were expensed with respect to
terminated projects totaling $2.1 million ($10.2 million for the same
period in 2006), (ii) additional expenses incurred in connection with the
Shurgard Merger totaling approximately $5.3 million ($44.0 million for the
same period in 2006), (iii) the aforementioned additional incentive
compensation totaling $1.9 million, (iv) $9.6 million related to our
proposed offering of shares in our European business, (v) $2.0 million
associated with our reorganization as a Maryland REIT and (vi) ongoing
general and administrative expense related to our European operations for
the entire year ended December 31, 2007 (includes amounts only from August
23, 2006 with respect to the same period in 2006). In addition, for the
year ended December 31, 2006, we incurred contract termination costs of
$2.2 million.
(c) We recorded foreign exchange gains aggregating approximately $16.6 million
and $57.6 million in the three months and year ended December 31, 2007,
respectively, related to our intercompany loans to our European subsidiary,
representing the impact of the fluctuation of the exchange rate in US
Dollars to the Euro.
9
PUBLIC STORAGE
SELECTED FINANCIAL DATA
December 31, December 31,
2007 2006
(unaudited)
------------------- --------------------
(Amounts in thousands, except share and
per share data)
ASSETS
Cash and cash equivalents .................................... $ 245,444 $ 535,684
Operating real estate facilities:
Land and buildings, at cost................................ 11,658,807 11,261,865
Accumulated depreciation................................... (2,128,225) (1,754,362)
------------------- --------------------
9,530,582 9,507,503
Construction in process....................................... 60,324 90,038
------------------- --------------------
9,590,906 9,597,541
Investment in real estate entities............................ 306,743 301,905
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 173,745 414,602
Restricted cash............................................... 18,972 19,900
Other assets.................................................. 132,658 154,207
------------------- --------------------
Total assets........................................... $ 10,643,102 $ 11,198,473
=================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings on bank credit facilities.......................... $ - $ 345,000
Notes payable and debt due to joint venture partner........... 1,069,928 1,503,542
Preferred shares called for redemption........................ - 302,150
Accrued and other liabilities................................. 303,357 333,706
------------------- --------------------
Total liabilities...................................... 1,373,285 2,484,398
Minority interest - preferred partnership interests........... 325,000 325,000
Minority interest - other partnership interests............... 181,688 181,030
Shareholders' equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value,
50,000,000 shares authorized, 1,739,500 shares issued (in series) and
outstanding (1,712,600 at December 31,
2006), at liquidation preference......................... 3,527,500 2,855,000
Common Shares of beneficial interest, $0.10 par value,
200,000,000 shares authorized, 169,422,475 shares issued and
outstanding (169,144,467 at December 31, 2006)........... 16,943 16,915
Equity Shares of beneficial interest, Series A, $0.01 par value,
200,000,000 shares authorized, 8,744.193 shares
issued and outstanding at December 31, 2007 and
December 31, 2006........................................ - -
Paid-in capital............................................ 5,653,975 5,661,507
Cumulative net income...................................... 3,960,827 3,503,292
Cumulative distributions paid.............................. (4,446,181) (3,847,998)
Accumulated other comprehensive income (a)................. 50,065 19,329
------------------- --------------------
Total shareholders' equity............................... 8,763,129 8,208,045
------------------- --------------------
Total liabilities and shareholders' equity............. $ 10,643,102 $ 11,198,473
=================== ====================
(a) The increase at December 31, 2007 as compared to the balance at December
31, 2006 principally reflects the increase in our net investment (comprised
of our equity investment and intercompany loans) in our European
subsidiaries associated with changes in exchange rates relative to the U.S.
dollar, to the extent that these increases are not already recognized in
our net income (we recognized a total of $57.6 million of such gains in the
year ended December 31, 2007). The exchange rates of the Euro relative to
the U.S. dollar increased from 1.319 at December 31, 2006 to 1.472 at
December 31, 2007.
10
Shurgard Domestic Same Store Selected Operating Data
The Shurgard Domestic Same Store pool of 343 facilities are all stabilized since
January 1, 2005 and will therefore provide meaningful comparative data for 2005,
2006 and 2007.
The operating data presented in the table below reflects the historical data
from January 1, 2006 through August 23, 2006, the period for which the 343
facilities were operated under Shurgard, combined with the historical data from
August 23, 2006 through December 31, 2007, the period operated under Public
Storage.
Selected Operating Data for the 343 facilities
operated on a stabilized basis since January 1, 2005
("Shurgard Domestic Same Store Facilities"):
(unaudited)(a)
Three Months Ended December 31, Year Ended December 31,
-------------------------------------- -------------------------------------
Percentage Percentage
2007 2006 (a) Change 2007 2006 (a) Change
------------ ------------ ----------- ------------ ----------- ----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income................................. $ 65,237 $ 62,031 5.2% $ 259,588 $ 247,634 4.8%
Late charges and administrative fees collected 2,142 2,049 4.5% 8,595 8,618 (0.3)%
------------ ------------ ----------- ------------ ----------- ----------
Total revenues (b)............................ 67,379 64,080 5.1% 268,183 256,252 4.7%
Cost of operations (excluding depreciation):
Property taxes ............................... 5,780 6,299 (8.2)% 25,687 24,798 3.6%
Direct property payroll....................... 4,114 5,908 (30.4)% 17,322 28,181 (38.5)%
Advertising and promotion..................... 1,215 2,421 (49.8)% 6,840 5,639 21.3%
Utilities..................................... 1,660 1,757 (5.5)% 7,186 7,135 0.7%
Repairs and maintenance....................... 1,999 2,020 (1.0)% 8,031 6,271 28.1%
Telephone reservation center.................. 600 507 18.3% 2,226 669 232.7%
Property insurance............................ 571 662 (13.7)% 2,603 1,834 41.9%
Other costs of management..................... 4,429 4,336 2.1% 17,797 21,475 (17.1)%
------------ ------------ ----------- ------------ ----------- ----------
Total cost of operations (b).................... 20,368 23,910 (14.8)% 87,692 96,002 (8.7)%
------------ ------------ ----------- ------------ ----------- ----------
Net operating income (excluding depreciation) (c) $ 47,011 $ 40,170 17.0% $ 180,491 $ 160,250 12.6%
============ ============ =========== ============ =========== ==========
Gross margin (before depreciation)................ 69.8% 62.7% 11.3% 67.3% 62.5% 7.7%
Weighted average for the period:
Square foot occupancy (d)....................... 87.9% 85.0% 3.4% 88.5% 84.4% 4.9%
Realized annual rent per occupied square foot (e) $ 13.62 $ 13.39 1.7% $ 13.46 $ 13.46 -
REVPAF (f) (g).................................. $ 11.97 $ 11.38 5.2% $ 11.91 $ 11.36 4.8%
Weighted average at December 31:
Square foot occupancy........................... 87.6% 85.2% 2.8%
In place annual rent per occupied square foot (h) $14.47 $14.38 0.6%
Total net rentable square feet (in thousands)..... 21,797 21,797 -
(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 August 23, 2006 through December 31, 2007 are
included in our consolidated operating results for each respective period.
(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.
(h) 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.
12
Shurgard European Same Store Selected Operating Data
- ----------------------------------------------------
In the Shurgard Merger, 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 for each period
reflects the historical data for the European Same Store Portfolio from January
1, 2006 through August 22, 2006, the period for which the facilities were
operated under Shurgard combined with the historical data from August 23, 2006
through December 31, 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"): (unaudited)
- --------------------------
Three Months Ended December 31, Year Ended December 31,
-------------------------------------- -----------------------------------
Percentage Percentage
2007 2006 (a) Change 2007 2006 (a) Change
----------- ------------ ---------- ----------- ----------- ----------
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates) (b)
Revenues:
Rental income................................. $ 34,523 $ 32,031 7.8% $ 127,001 $ 116,260 9.2%
Late charges and administrative fees collected 362 307 17.9% 1,277 1,127 13.3%
----------- ------------ ---------- ----------- ----------- ----------
Total revenues (b)............................ 34,885 32,338 7.9% 128,278 117,387 9.3%
Cost of operations (excluding depreciation):
Property taxes ............................... 1,559 1,374 13.5% 5,746 5,352 7.4%
Direct property payroll....................... 4,146 4,326 (4.2%) 15,035 16,614 (9.5%)
Advertising and promotion..................... 780 1,107 (29.5%) 4,050 5,832 (30.6%)
Utilities..................................... 784 772 1.6% 2,986 3,229 (7.5%)
Repairs and maintenance....................... 1,022 917 11.5% 3,373 3,602 (6.4%)
Property insurance............................ 281 450 (37.6%) 1,213 1,564 (22.4%)
Other costs of management..................... 5,089 4,693 8.4% 19,014 18,746 1.4%
----------- ------------ ---------- ----------- ----------- ----------
Total cost of operations (b).................... 13,661 13,639 0.2% 51,417 54,939 (6.4%)
----------- ------------ ---------- ----------- ----------- ----------
Net operating income (excluding depreciation) (c) $ 21,224 $ 18,699 13.5% $ 76,861 $ 62,448 23.1%
=========== ============ =========== =========== =========== ==========
Gross margin (before depreciation)................ 60.8% 57.8% 5.2% 59.9% 53.2% 12.6%
Weighted average for the period:
Square foot occupancy (d)....................... 90.4% 89.1% 1.5% 89.8% 85.2% 5.4%
Realized annual rent per occupied square foot (e) $ 28.90 $ 27.20 6.3% $ 26.75 $ 25.81 3.6%
REVPAF (f) (g).................................. $ 26.12 $ 24.24 7.8% $ 24.03 $ 21.99 9.3%
Weighted average at December 31:
Square foot occupancy........................... 89.0% 89.1% (0.1%)
In place annual rent per occupied square foot (h) $ 30.95 $ 28.68 7.9%
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 August 23, 2006 through December 31, 2007 are
included in our consolidated operating results. For comparative purposes,
these amounts are presented on a constant exchange rate basis. The amounts
for the three months and year ended December 31, 2006 have been restated
using the actual respective exchange rates for the same periods in 2007.
The exchange rates for the Euro relative to the U.S. dollar were 1.448 and
1.370, respectively, for the three months and year ended December 31, 2007.
(b) 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.
13
(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.
(h) 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 Year Ended
December 31, December 31,
--------------------------- ---------------------------
2007 2006 2007 2006
------------ ------------- ------------- -------------
(Amounts in thousands, except per share data)
Computation of Funds from Operations (FFO) allocable to Common Shares
Net income (loss)......................................................... $ 167,887 $ (10,233) $ 457,535 $ 314,026
Add back - depreciation and amortization.............................. 130,750 225,576 622,410 437,568
Add back - depreciation and amortization included in Discontinued
Operations........................................................ 114 386 484 650
Eliminate - depreciation with respect to non-real estate assets....... (89) (67) (406) (225)
Eliminate - our pro rata share of PSB's gain on sale of real estate... - - - (1,047)
Eliminate - gain on sale of real estate assets........................ (217) (955) (2,547) (2,177)
Eliminate - gain on sale of real estate assets included in
discontinued operations...................................... (4,336) - (4,336) (2,370)
Add back - Depreciation from unconsolidated real estate investments... 12,754 10,139 45,307 38,890
Add back - minority interest share of income.......................... 7,932 7,406 29,543 31,883
------------ ------------- ------------- -------------
Consolidated FFO.......................................................... 314,795 232,252 1,147,990 817,198
Allocable to preferred minority interests................................ (5,403) (5,403) (21,612) (19,055)
Allocable to other minority interests..................................... (6,421) (5,010) (21,989) (17,312)
------------ ------------- ------------- -------------
Remaining FFO allocable to our shareholders............................... 302,971 221,839 1,104,389 780,831
Less: allocations to preferred and equity shareholders:
Preferred shareholder distributions .................................. (60,333) (54,962) (236,757) (214,218)
Issuance costs on redeemed preferred shares........................... - (9,850) - (31,493)
Equity Shares, Series A distributions................................. (5,356) (5,356) (21,424) (21,424)
------------ ------------- ------------- -------------
Remaining FFO allocable to Common Shares (a).............................. $ 237,282 $ 151,671 $ 846,208 $ 513,696
============ ============= ============= =============
Weighted average shares:
Regular common shares................................................. 169,415 169,063 169,342 142,760
Weighted average stock options and restricted share units outstanding
using treasury method ........................................... 674 959 805 955
------------ ------------- ------------- -------------
Weighted average common shares for purposes of computing fully-diluted
FFO per common share...................................................... 170,089 170,022 170,147 143,715
============ ============= ============= =============
FFO per diluted common share (a).......................................... $ 1.40 $ 0.89 $ 4.97 $ 3.57
============ ============= ============= =============
(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 Year Ended
December 31, December 31,
------------------------- ------------------------
2007 2006 2007 2006
------------ ----------- ----------- -----------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to Common Shares (a)....................... $ 237,282 $ 151,671 $ 846,208 $ 513,696
Add: Non-cash share-based compensation expense........... 1,197 1,442 8,511 6,310
Add: Impact of application of EITF Topic D-42............ - 9,850 - 31,493
Less: Non-cash foreign exchange and derivative gains..... (16,341) - (58,444) -
Add: Non-cash EITF Topic D-42 charges included in equity
in earnings of real estate entities.................. - 760 - 2,089
Less: Aggregate capital expenditures..................... (19,649) (34,960) (69,102) (79,326)
Add back: Capital expenditures for Shurgard rebranding
effort............................................... - 11,115 3,600 12,934
------------ ----------- ----------- -----------
Funds available for distribution ("FAD") (b)............. $ 202,489 $ 139,878 $ 730,773 $ 487,196
============ =========== =========== ===========
Distribution to common shareholders...................... $ 84,980 $ 84,938 $ 340,002 $ 298,219
============ =========== =========== ===========
Distribution payout ratio (c)............................ 42.0% 60.7% 46.5% 61.2%
============ =========== =========== ===========
(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) Funds available for distribution ("FAD") represents FFO, plus (i)
impairment charges with respect to real estate assets, (ii) the non-cash
portion of stock-based compensation expense, (iii) 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. FAD does not take into consideration required principal
payments on debt. 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 Revenues and Cost of Operations
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------ ----------------------------
2007 2006 2007 2006
------------ ----------- -------------- -------------
(Amounts in thousands)
Revenues for the 1,316 Same Store facilities......... $ 231,816 $ 227,007 $ 925,088 $ 906,076
Revenues for non-Same Store facilities (a): Development
facilities (year opened):
2007.......................................... 157 - 354 -
2006.......................................... 1,511 625 4,780 1,056
2005.......................................... 1,212 862 4,293 2,599
2003 and 2004................................. 5,697 5,422 22,723 21,248
Expansion facilities.......................... 21,146 19,544 82,079 75,319
Acquisition facilities (year acquired):
2007.......................................... 988 - 1,980 -
2006.......................................... 2,609 2,239 9,894 6,246
2005.......................................... 7,123 6,596 27,956 24,949
Newly consolidated facilities.................... 4,000 3,736 15,572 14,610
Consolidated U.S. Shurgard facilities (b):
Shurgard Same Stores......................... 67,379 64,080 268,183 91,956
Other facilities............................. 26,638 23,753 102,831 34,233
Deconsolidated U.S. Shurgard facilities (c)...... - 868 1,394 1,245
Reconsolidated U.S. Shurgard facilities (c)...... 244 489 1,048 697
Consolidated Europe Shurgard facilities (b)...... 53,988 42,115 194,279 59,463
------------ ----------- -------------- -------------
Consolidated self-storage revenues (d)................ $ 424,508 $ 397,336 $ 1,662,454 $ 1,239,697
============ =========== ============== =============
Cost of operations for the 1,316 Same Store facilities $ 69,307 $ 72,149 $ 301,429 $ 299,547
Cost of operations for non-Same Store facilities (a): Development facilities
(year opened):
2007.......................................... 154 - 320 -
2006.......................................... 641 501 2,354 959
2005.......................................... 449 533 2,094 1,734
2003 and 2004................................. 1,426 1,222 6,207 5,981
Expansion facilities.......................... 7,400 7,472 29,020 27,009
Acquisition facilities (year acquired):
2007.......................................... 584 - 1,031 -
2006.......................................... 1,206 946 4,589 2,949
2005.......................................... 2,181 2,425 9,833 9,703
Newly consolidated facilities.................... 823 871 3,391 3,515
Consolidated U.S. Shurgard facilities (b):
Shurgard Same Stores......................... 20,368 23,910 87,692 32,439
Other facilities............................. 9,267 10,472 39,005 14,111
Deconsolidated U.S. Shurgard facilities (c)...... - 302 515 436
Reconsolidated U.S. Shurgard facilities (c)...... 101 277 502 377
Consolidated Europe Shurgard facilities (b)...... 24,663 21,626 92,245 30,150
------------ ----------- -------------- -------------
Consolidated self-storage cost of operations (d)...... $ 138,570 $ 142,706 $ 580,227 $ 428,910
============ =========== ============== =============
(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 December 31, 2007, or because we
acquired these facilities from third parties after December 31, 2004.
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(b) Represents the operations of the facilities acquired in the Shurgard
Merger, which remain consolidated at December 31, 2007, for the period from
January 1, 2007 through December 31, 2007.
(c) Represents the operations of 11 facilities acquired in the Shurgard Merger
which we discontinued consolidation in our financial statements effective
May 24, 2007. On November 15, 2007, we acquired a controlling ownership
position in five of these previously deconsolidated facilities, and
recommenced consolidation of these properties effective November 15, 2007.
The operations for these 11 facilities from August 23, 2006 through May 24,
2007, combined with the operations of the five facilities that we
recommenced consolidation after November 15, 2007, are included in this
table.
(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.
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