News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
- --------------------------------------------------------------------------------
For Release: Immediately
Date: May 8, 2008
Contact: Clemente Teng
(818) 244-8080
PUBLIC STORAGE REPORTS RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2008
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the first quarter ended March 31, 2008.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008:
- ------------------------------------------------------------
Net income for the three months ended March 31, 2008 was $512.3 million compared
to $59.8 million for the same period in 2007, representing an improvement of
$452.5 million. This improvement is primarily due to a gain of $341.9 million
recognized on the disposition of an interest in Shurgard Europe (see "Shurgard
Europe" below for further information), reduced amortization expense, improved
operations from our real estate facilities and an increase in foreign currency
exchange gain.
Depreciation and amortization expense for the quarter ended March 31, 2008
decreased by $53.9 million, as compared to the same period in 2007. This
decrease is primarily due to a reduction in amortization expense related to
intangible assets that we obtained in the August 22, 2006 acquisition of
Shurgard Storage Centers, Inc. (the "Shurgard Merger"). For the three months
ended March 31, 2008, amortization expense related to our intangible assets
totaled $28.4 million as compared to $85.8 million for the same period in 2007.
Net operating income, before depreciation expense, for our self-storage
operations totaled $267.9 million for the three months ended March 31, 2008 as
compared to $249.9 million for the same period in 2007, representing an increase
of $18.0 million. Most of this increase was generated by the facilities that
were acquired in the Shurgard Merger as net operating income for these
facilities was approximately $90.8 million for the quarter ended March 31, 2008
as compared to $77.2 million for the same period in 2007.
During the quarter ended March 31, 2008, we recognized a foreign currency
exchange gain totaling $41.0 million, as compared to $5.0 million for the same
period in 2007, relating to intercompany loans between our U.S. and European
subsidiaries. The gain in each period was the result of the continued weakening
of the US Dollar relative to the Euro during each period. See "Shurgard Europe"
below for further information.
For the three months ended March 31, 2008, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $446.7 million or $2.64 per common share on a diluted basis
compared to a net loss of $4.4 million or $0.03 per common share on a diluted
basis for the same period in 2007, representing an improvement of $451.1 million
or $2.67 per common share on a diluted basis. These improvements are due
primarily to the impact of the factors described above with respect to the
improvement in our net income.
For the three months ended March 31, 2008 and 2007, we allocated $60.3 million
and $58.8 million of our net income, respectively, to our preferred shareholders
based on distributions paid. The year-over-year increase is due primarily to the
issuance of additional preferred securities.
Weighted average diluted common shares were 169,230,000 and 169,229,000,
respectively, for the three months ended March 31, 2008 and 2007.
1
FUNDS FROM OPERATIONS:
- ----------------------
For the three months ended March 31, 2008, funds from operations ("FFO")
increased to $1.39 per common share on a diluted basis as compared to $1.05 per
common share for the same period in 2007, representing an increase of $0.34 per
common share, or 32.4%.
For the three months ended March 31, 2008, FFO has been impacted as a result of
(i) net foreign currency exchange and derivative gains of approximately $41.0
million ($4.3 million for the same period in 2007), partially offset by (ii)
approximately $2.5 million of additional incentive compensation related to the
aforementioned disposition of an interest in Shurgard Europe (which is included
in our general and administrative expense). The gain of $341.9 million
recognized on the disposition of an interest in Shurgard Europe is not included
in our FFO. We expect to incur additional incentive compensation in the second
quarter of 2008 of approximately $25 million. While this incentive compensation
is related to the disposition of Shurgard Europe, these amounts will not be
reflected as a component of our reported gain on sale and instead will be
classified as general and administrative expense and, as a result, will reduce
our reported FFO. For the three months ended March 31, 2007, FFO was further
impacted by (i) additional expenses incurred in connection with the Shurgard
Merger included in general and administrative expense totaling approximately
$4.0 million and (ii) an increase in insurance proceeds with respect to damage
caused by Hurricane Katrina of $2.7 million.
The following table provides a summary of the impact of these items that have
occurred during the three months ended March 31, 2008 and 2007:
Three Months Ended March 31,
-----------------------------------
Percentage
2008 2007 Change
----------- ---------- ----------
FFO per common share prior to adjustments for
the following items......................... $ 1.16 $ 1.02 13.7%
Foreign currency exchange and derivative gains, 0.24 0.03
net.........................................
Costs and expenses incurred in connection with
the disposition of an interest in Shurgard -
Europe...................................... (0.01)
Costs and expenses incurred in connection with
the Shurgard Merger......................... - (0.02)
Increase in insurance proceeds - casualty 0.02
gain ....................................... -
----------- ----------
FFO per common share, as reported.............. $ 1.39 $ 1.05 32.4%
=========== ==========
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, 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 - COMBINED DOMESTIC SAME STORE FACILITIES:
- --------------------------------------------------------------
The following table summarizes the historical operating results of the combined
Public Storage Legacy Same Store Facilities and the Shurgard Domestic Same Store
Facilities (the "Combined Domestic Same Store Facilities"). These facilities are
all stabilized as of January 1, 2006 and contain approximately 109.4 million net
rentable square feet, representing approximately 88% of the aggregate net
rentable square feet of our U.S. consolidated self-storage portfolio at March
31, 2008. The results of the Public Storage Legacy Same Store Facilities and the
Shurgard Domestic Same Store Facilities are disclosed separately in the selected
financial data section of this press release.
2
Selected Operating Data for the Combined Domestic
- -------------------------------------------------
Same Store Facilities (1,789 Facilities): Three Months Ended March 31,
- ----------------------------------------- ---------------------------------------
Percentage
2008 2007 Change
------------ ----------- -----------
(Dollar amounts in thousands, except
weighted average data)
Revenues:
Rental income................................. $ 313,242 $ 304,154 3.0%
Late charges and administrative fees collected 13,539 13,015 4.0%
------------ ----------- -----------
Total revenues (a)............................ 326,781 317,169 3.0%
Cost of operations:
Property taxes................................ 33,705 32,318 4.3%
Direct property payroll....................... 22,844 22,566 1.2%
Media advertising............................. 6,366 4,820 32.1%
Other advertising and promotion............... 4,130 4,633 (10.9)%
Utilities..................................... 8,623 8,415 2.5%
Repairs and maintenance....................... 10,722 9,991 7.3%
Telephone reservation center.................. 2,914 2,857 2.0%
Property insurance............................ 2,994 3,449 (13.2)%
Other costs of management..................... 23,049 21,474 7.3%
------------ ----------- -----------
Total cost of operations (a).................... 115,347 110,523 4.4%
------------ ----------- -----------
Net operating income (before depreciation) (b) ... 211,434 206,646 2.3%
Depreciation and amortization expense (c)......... (81,213) (116,117) (30.1)%
------------ ----------- -----------
Operating income.................................. $ 130,221 $ 90,529 43.8%
============ =========== ===========
Gross margin (before depreciation)................ 64.7% 65.2% (0.8)%
Weighted average for the period:
Square foot occupancy (d)....................... 88.8% 88.8% -
Realized annual rent per occupied
square foot (e)(g).............................. $ 12.89 $ 12.52 3.0%
REVPAF (f) (g).................................. $ 11.45 $ 11.12 3.0%
Weighted average at March 31:
Square foot occupancy........................... 89.4% 89.4% -
In place annual rent per occupied square foot (h) $ 13.87 $ 13.42 3.4%
Total net rentable square feet (in thousands)..... 109,436 109,436 -
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) Depreciation and amortization expense for the quarter ended March 31, 2008
decreased primarily due to a reduction in amortization expense related to
intangible assets that we obtained in the Shurgard Merger.
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 which excludes late charges and administrative
fees divided by total available net rentable square feet. Rental income is
also net of promotional discounts and collection costs, including bad debt
expense and credit card fees.
3
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.
The following table summarizes additional selected financial data with respect
to the Combined Domestic Same Store Facilities (unaudited):
Three Months Ended
----------------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
----------- ----------- -------------- -------------- ---------------
Total revenues (in 000's):
2008..................................... $ 326,781
2007..................................... $ 317,169 $ 325,144 $ 336,117 $ 327,885 $ 1,306,315
Total cost of operations (excluding
depreciation expense) (in 000's):
2008..................................... $ 115,347
2007..................................... $ 110,523 $ 110,480 $ 106,668 $ 98,557 $ 426,228
Property taxes (in 000's):
2008..................................... $ 33,705
2007..................................... $ 32,318 $ 31,110 $ 32,340 $ 26,389 $ 122,157
Media advertising expense (in 000's):
2008..................................... $ 6,366
2007..................................... $ 4,820 $ 7,589 $ 4,044 $ 2,622 $ 19,075
Other advertising and promotion
expense (in 000's):
2008..................................... $ 4,130
2007..................................... $ 4,633 $ 5,027 $ 4,180 $ 3,874 $ 17,714
REVPAF:
2008..................................... $ 11.45
2007..................................... $ 11.12 $ 11.40 $ 11.77 $ 11.50 $ 11.45
Weighted average realized annual rent per
occupied square foot for the period:
2008..................................... $ 12.89
2007..................................... $ 12.52 $ 12.54 $ 13.06 $ 13.02 $ 12.79
Weighted average square foot occupancy levels for the period:
2008..................................... 88.8%
2007..................................... 88.8% 90.9% 90.1% 88.3% 89.5%
SHURGARD EUROPE:
- ----------------
As previously announced, on March 31, 2008, we closed the acquisition by an
institutional investor of a 51% interest in Public Storage's Shurgard Europe
operations for approximately (euro)383.2 million ($606 million), plus an
adjustment for operating results (as defined) of Shurgard Europe from December
31, 2007 through March 31, 2008. This adjustment, representing additional
estimated proceeds accrued in the current quarter, is currently estimated to be
approximately (euro)4.8 million ($7.5 million). As a result of the transaction,
Public Storage owns the remaining 49% interest and is the managing member of the
newly formed joint venture that now owns Shurgard Europe's operations. The
existing Shurgard Europe management team will continue operations in Brussels,
Belgium. The new joint venture includes Shurgard's 20% equity interest in two
existing ventures, which are the subject of previously disclosed arbitration. If
the remaining interests in those ventures can be acquired, they may be
incorporated into the newly formed entity. In connection with this transaction,
we recognized a gain on the disposition totaling $341.9 million.
In connection with the transaction, the intercompany debt owed by Shurgard
Europe to Public Storage was modified to (i) fix the interest rate at 7.5% per
year, (ii) adjust the outstanding balance from approximately (euro)381 million
at December 31, 2007 to (euro)391 million ($619 million) as of March 31, 2008,
and (iii) modify the term of the loans to one year with an additional one year
extension. Shurgard Europe intends to repay all of its intercompany debt to
Public Storage through the issuance of third-party debt as soon as market
conditions permit, but no later than March 31, 2010. 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
4
caused by fluctuation in currency rates during the first quarter of 2008,
foreign currency translation gains of $41.0 million were recorded in the three
months ended March 31, 2008. The US Dollar exchange rate relative to the Euro
was approximately 1.319, 1.472, and 1.580, at December 31, 2006, December 31,
2007, and March 31, 2008, respectively. In addition, Public Storage is committed
to provide additional loans to Shurgard Europe, under the same terms as the
intercompany debt, of up to (euro)305 million to fund Shurgard Europe's
obligations to repay existing third-party indebtedness owed by the two joint
ventures and the possible acquisition of the remaining interest in the two joint
ventures.
As a result of the transaction, we will begin to account for our investment in
Shurgard Europe under the equity method; accordingly, Shurgard Europe's accounts
are no longer consolidated with those of Public Storage effective March 31,
2008.
During the first quarter of 2008, Shurgard Europe completed the development of a
facility located in France at a total cost of $14.5 million, adding 51,000 net
rentable square feet to the portfolio. Also during the first quarter of 2008,
one of the existing joint ventures completed the development of two facilities
located in France and Sweden at a total cost of $19.0 million, adding 115,000
net rentable square feet to the portfolio.
Shurgard Europe has an interest in 176 facilities (9.3 million net rentable
square feet) located in seven European countries. Included in this total are 72
facilities (3.7 million net rentable square feet) that are owned in two joint
ventures in which Shurgard Europe has a 20% interest. The two joint ventures
collectively had approximately $417.2 million of outstanding debt payable to
third parties at March 31, 2008. A facility located in London was not included
in the Shurgard Europe transaction discussed above. This facility is wholly
owned by Public Storage, but continues to be managed by Shurgard Europe for a
fee. Shurgard Europe has an option to acquire this facility from Public Storage
through June 30, 2008.
DEVELOPMENT AND ASSET ACQUISITION ACTIVITIES:
- ---------------------------------------------
During the first quarter of 2008, we completed two expansion projects at a total
cost of $5.0 million with 82,000 net rentable square feet.
At March 31, 2008, we were under contract to acquire two self-storage facilities
in California with net rentable square feet of 210,000 for an aggregate purchase
price of $31 million, which includes approximately $10 million of assumed debt.
On April 22, 2008, we acquired one of these facilities containing 101,000 net
rentable square feet at a cost of approximately $16 million. While the remaining
acquisition is subject to contingencies, it is expected to close in the second
quarter of 2008.
At March 31, 2008, we had 29 projects that were either under construction or
were expected to begin construction generally within the next year, comprised of
three newly developed self-storage facilities (168,000 net rentable square feet)
in the United States for a total estimated cost of $22.3 million, 25 projects
(1,026,000 net additional rentable square feet) in the United States, which
expand existing self-storage facilities and enhance their visual appeal for a
total estimated cost of $90.8 million and expansion of one European facility
located in London (37,000 net rentable square feet and total estimated costs of
$6.6 million) that was not included in the Shurgard Europe transaction discussed
above. 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:
- ------------------
As disclosed previously, 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. On May 8, 2008, the Board of Trustees
authorized an increase in the total repurchase authorization from 25,000,000
common shares to 35,000,000 common shares.
From January 1, 2008 through May 8, 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 May 8, 2008, we have repurchased a
total of 23,721,916 common shares at an aggregate cost of approximately $679.1
million.
DISTRIBUTIONS DECLARED:
- -----------------------
On May 8, 2008 the Board of Trustees declared a quarterly distribution of $0.55
per regular common 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 June 30, 2008 to shareholders of record as
of June 13, 2008.
5
FIRST QUARTER CONFERENCE CALL:
- ------------------------------
A conference call is scheduled for Friday, May 9, 2008 at 10:00 a.m. (PDT) to
discuss the first quarter ended March 31, 2008 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
44438021). A simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations"
(conference ID number 44438021). A replay of the conference call may be accessed
through May 23, 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 44438021.
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. At March 31, 2008,
the Company had interests in 2,012 self-storage facilities located in 38 states
with approximately 126 million net rentable square feet in the United States and
177 storage facilities located in seven Western European nations with
approximately nine million net rentable square feet.
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, 2007 and Form 10-Q for the period ended March 31, 2008 expected to be filed
on or before May 12, 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 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.
6
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Three Months Ended
March 31, (a)
----------------------------------
2008 2007
-------------- ---------------
(Amounts in thousands, except
per share data)
Revenues:
Self-storage rental income................................... $ 424,820 $ 398,608
Ancillary operations......................................... 35,100 32,825
Interest and other income.................................... 2,844 2,125
-------------- ---------------
462,764 433,558
-------------- ---------------
Expenses:
Cost of operations:
Self-storage facilities ................................... 156,915 148,692
Ancillary operations ...................................... 17,468 19,309
Depreciation and amortization (b)............................ 122,486 176,366
General and administrative (c)............................... 14,916 16,516
Interest expense............................................. 16,487 16,808
-------------- ---------------
328,272 377,691
-------------- ---------------
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, expense from
derivatives and minority interest in income................... 134,492 55,867
Equity in earnings of real estate entities ...................... 2,729 3,977
Gain on disposition of real estate investments (d)............... 341,865 -
Casualty gain ................................................... - 2,665
Foreign currency exchange gain (e)............................... 41,014 5,040
Expense from derivatives, net.................................... (43) (762)
Minority interest in income allocable to:
Preferred minority interests.................................... (5,403) (5,403)
Other partnership interests .................................... (2,196) (380)
-------------- ---------------
Income from continuing operations................................ 512,458 61,004
Discontinued operations ......................................... (116) (1,226)
-------------- ---------------
Net income....................................................... $ 512,342 $ 59,778
============== ===============
Net income (loss) allocation:
Allocable to preferred shareholders based on distribution paid $ 60,333 $ 58,776
Allocable to Equity Shares, Series A......................... 5,356 5,356
Allocable to common shareholders............................. 446,653 (4,354)
-------------- ---------------
$ 512,342 $ 59,778
============== ===============
Per common share:
Net income (loss) per share - Basic.......................... $ 2.65 $ (0.03)
============== ===============
Net income (loss) per share - Diluted........................ $ 2.64 $ (0.03)
============== ===============
Weighted average common shares - Basic....................... 168,586 169,229
============== ===============
Weighted average common shares - Diluted..................... 169,230 169,229
============== ===============
(a) Commencing March 31, 2008, we account for our investment in Shurgard Europe
on the equity method of accounting. Accordingly, we will no longer present
Shurgard Europe's revenues, expenses and other operating items with respect
to periods after March 31, 2008, and will instead reflect our pro-rata
share of Shurgard Europe's operations as "equity in earnings of real estate
entities".
(b) Depreciation and amortization expense for the quarter ended March 31, 2008
decreased by $53.9 million, as compared to the same period in 2007. This
decrease is primarily due to a reduction in amortization expense related to
intangible assets that we obtained in the Shurgard Merger. For the three
months ended March 31, 2008, amortization expense related to our intangible
assets totaled $28.4 million as compared to $85.8 million for the same
period in 2007.
7
(c) For the three months ended March 31, 2008, general and administrative
expense includes additional incentive compensation totaling $2.5 million.
In addition, for the three months ended March 31, 2007, we incurred
additional expenses in connection with the Shurgard Merger totaling
approximately $4.0 million.
(d) On March 31, 2008, an institutional investor acquired a 51% interest in our
European operations. As a result of the transaction, we recognized a gain
on disposition of $341.9 million.
(e) We recorded foreign exchange gains aggregating approximately $41.0 million
in the three months ended March 31, 2008, related to our intercompany loans
to Shurgard Europe, representing the impact of the fluctuation of the
exchange rate in US Dollars to the Euro.
8
PUBLIC STORAGE
SELECTED FINANCIAL DATA
March 31, December 31,
2008 2007
(unaudited) (a)
------------------ -------------------
(Amounts in thousands, except
share and per share data)
ASSETS
Cash and cash equivalents .................................... $ 726,932 $ 245,444
Operating real estate facilities:
Land and buildings, at cost................................ 10,038,333 11,658,807
Accumulated depreciation................................... (2,152,723) (2,128,225)
------------------ -------------------
7,885,610 9,530,582
Construction in process....................................... 35,901 60,324
------------------ -------------------
7,921,511 9,590,906
Investment in real estate entities............................ 625,172 306,743
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 71,728 173,745
Note receivable from Shurgard Europe.......................... 618,822 -
Restricted cash............................................... 18,602 18,972
Other assets.................................................. 90,364 132,658
------------------ -------------------
Total assets........................................... $ 10,247,765 $ 10,643,102
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable and debt due to joint venture partner........... $ 682,916 $ 1,069,928
Accrued and other liabilities................................. 206,607 303,357
------------------ -------------------
Total liabilities...................................... 889,523 1,373,285
Minority interest - preferred partnership interests........... 325,000 325,000
Minority interest - other partnership interests............... 37,711 181,688
Shareholders' equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value,
100,000,000 shares authorized, 1,739,500 shares issued (in series)
and outstanding (1,739,500 at December
31, 2007), at liquidation preference..................... 3,527,500 3,527,500
Common Shares of beneficial interest, $0.10 par value,
650,000,000 shares authorized, 167,993,060 shares issued and
outstanding (169,422,475 at December 31, 2007)........... 16,800 16,943
Equity Shares of beneficial interest, Series A, $0.01 par
value, 100,000,000 shares authorized, 8,744.193 shares
issued and outstanding at March 31, 2008 and December 31,
2007..................................................... - -
Paid-in capital............................................ 5,545,253 5,653,975
Cumulative net income...................................... 4,473,169 3,960,827
Cumulative distributions paid.............................. (4,604,653) (4,446,181)
Accumulated other comprehensive income (b)................. 37,462 50,065
------------------ -------------------
Total shareholders' equity............................... 8,995,531 8,763,129
------------------ -------------------
Total liabilities and shareholders' equity............. $ 10,247,765 $ 10,643,102
================== ===================
(a) On March 31, 2008, an institutional investor acquired a 51% interest in our
European operations. As a result of the transaction, effective March 31,
2008 we no longer consolidate the accounts of Shurgard Europe and account
for our investment on the equity method.
(b) The decrease at March 31, 2008 as compared to the balance at December 31,
2007 principally reflects the disposition of our investment in Europe. As a
result of the disposition, we recognized into income $37.9 million of
previously recorded other comprehensive income and included this amount in
the line item "Gain on disposition of real estate investments".
9
Public Storage Legacy Same Store Selected Operating Data
- --------------------------------------------------------
We increased the number of facilities included in the Public Storage Legacy Same
Store Facilities from 1,316 facilities at December 31, 2007 to 1,373 facilities
at March 31, 2008. The increase in the Same Store pool of facilities is due to
the inclusion of 80 facilities previously classified as Acquired, Developed or
Expansion facilities and the removal of 23 facilities that are now classified as
Expansion facilities. The 80 facilities were added to the Same Store pool
because they are all stabilized and owned since January 1, 2006 and will
therefore provide meaningful comparative data for 2006, 2007 and 2008. The 23
facilities that were removed are facilities that are either currently undergoing
repackaging activities or are expected to commence such activities during 2008
and accordingly, will no longer provide meaningful comparative data for 2006,
2007 and 2008.
The Public Storage Legacy Same Store Facilities contain approximately 82.3
million net rentable square feet, representing approximately 66% of the
aggregate net rentable square feet in the U.S. of our consolidated self-storage
portfolio at March 31, 2008. The following table summarizes the historical
operating results of the Public Storage Legacy Same Store Facilities:
Selected Operating Data for the Public Storage
---------------------------------------------------
Legacy Same Store Facilities (1,373 Facilities):
--------------------------------------------------
(unaudited)
-----------
Three Months Ended March 31,
----------------------------------------
Percentage
2008 2007 Change
------------- ------------ -----------
(Dollar amounts in thousands, except
weighted average data)
Revenues:
Rental income................................. $ 234,742 $ 229,201 2.4%
Late charges and administrative fees collected 10,787 10,448 3.2%
------------- ------------ -----------
Total revenues (a)............................ 245,529 239,649 2.5%
Cost of operations (excluding depreciation):
Property taxes ............................... 25,192 24,198 4.1%
Direct property payroll....................... 17,550 16,883 4.0%
Media advertising............................. 4,811 3,617 33.0%
Other advertising and promotion............... 3,190 3,554 (10.2)%
Utilities..................................... 6,239 5,911 5.5%
Repairs and maintenance....................... 8,280 7,470 10.8%
Telephone reservation center.................. 2,237 2,192 2.1%
Property insurance............................ 2,229 2,584 (13.7)%
Other costs of management..................... 16,977 15,835 7.2%
------------- ------------ -----------
Total cost of operations (a).................... 86,705 82,244 5.4%
------------- ------------ -----------
Net operating income (before depreciation) (b).... 158,824 157,405 0.9%
Depreciation expense.............................. (44,375) (44,314) 0.1%
------------- ------------ -----------
Operating income.................................. $ 114,449 $ 113,091 1.2%
============= =========== ===========
Gross margin (before depreciation)................ 64.7% 65.7% (1.5)%
Weighted average for the period:
Square foot occupancy (c)....................... 89.0% 89.7% (0.8)%
Realized annual rent per occupied
square foot (d)(f).............................. $ 12.81 $ 12.41 3.2%
REVPAF (e) (f).................................. $ 11.40 $ 11.14 2.3%
Weighted average at March 31:
Square foot occupancy........................... 89.5% 90.1% (0.7)%
In place annual rent per occupied square foot (g) $ 13.82 $ 13.32 3.8%
Total net rentable square feet (in thousands)..... 82,333 82,333 -
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
10
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 before late charges and administrative fees
divided by total available net rentable square feet. Rental income is also
net of promotional discounts and collection costs, including bad debt
expense and credit card fees.
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 the Public Storage Legacy Same Store Facilities (unaudited):
For the Quarter Ended
-----------------------------------------------------------------------
March 31 June 30 September 30 December 31 Entire Year
------------- -------------- --------------- -------------- -------------
(Amounts in thousands, except for per square foot amount)
Total rental income:
2008 $ 245,529
2007 $ 239,649 $ 244,592 $ 252,567 $ 246,534 $ 983,342
Total cost of operations (excluding
depreciation and amortization expense):
2008 $ 86,705
2007 $ 82,244 $ 82,737 $ 79,859 $ 73,297 $ 318,137
Property tax expense:
2008 $ 25,192
2007 $ 24,198 $ 22,987 $ 24,062 $ 18,937 $ 90,184
Media Advertising expense:
2008 $ 4,811
2007 $ 3,617 $ 5,748 $ 3,098 $ 2,019 $ 14,482
Other Advertising and promotion expense:
2008 $ 3,190
2007 $ 3,554 $ 4,003 $ 3,221 $ 2,969 $ 13,747
REVPAF:
2008 $ 11.40
2007 $ 11.14 $ 11.37 $ 11.73 $ 11.47 $ 11.42
Weighted average realized annual rent
per occupied square foot:
2008 $ 12.81
2007 $ 12.41 $ 12.44 $ 12.97 $ 12.94 $ 12.69
Weighted average occupancy levels
for the period:
2008 89.0%
2007 89.7% 91.4% 90.4% 88.6% 90.0%
11
Shurgard Domestic Same Store Selected Operating Data
- ----------------------------------------------------
We increased the number of facilities included in the Shurgard Same Store
acilities from 343 facilities at December 31, 2007 to 416 facilities at March
31, 2008. The increase in the Same Store pool of facilities is due to the
inclusion of 80 facilities previously classified as Acquired, Developed or
Expansion facilities and the removal of seven facilities that are now classified
as Expansion facilities. The seven facilities that have been classified as
Expansion facilities are facilities that are either currently undergoing
repackaging activities or are expected to commence such activities during 2008
and accordingly, will no longer provide meaningful comparative data for 2006,
2007 and 2008.
The Shurgard Domestic Same Store pool of 416 facilities with 27.1 million net
rentable square feet are all stabilized since January 1, 2006 and will therefore
provide meaningful comparative data for 2006, 2007 and 2008.
Selected Operating Data for the Shurgard Domestic
- -------------------------------------------------
Same Store Facilities (416 Facilities): (unaudited)
- ---------------------------------------------------
Three Months Ended March 31,
-------------------------------------------
Percentage
2008 2007 Change
-------------- ------------- ------------
(Dollar amounts in thousands, except
weighted average data)
Revenues:
Rental income................................. $ 78,500 $ 74,953 4.7%
Late charges and administrative fees collected 2,752 2,567 7.2%
-------------- ------------- ------------
Total revenues (a)............................ 81,252 77,520 4.8%
Cost of operations (excluding depreciation):
Property taxes................................ 8,513 8,120 4.8%
Direct property payroll....................... 5,294 5,683 (6.8)%
Media advertising............................. 1,555 1,203 29.3%
Other advertising and promotion............... 940 1,079 (12.9)%
Utilities..................................... 2,384 2,504 (4.8)%
Repairs and maintenance....................... 2,442 2,521 (3.1)%
Telephone reservation center.................. 677 665 1.8%
Property insurance............................ 765 865 (11.6)%
Other costs of management..................... 6,072 5,639 7.7%
-------------- ------------- ------------
Total cost of operations (a).................... 28,642 28,279 1.3%
-------------- ------------- ------------
Net operating income (excluding depreciation) (b). 52,610 49,241 6.8%
Depreciation and amortization expense (c)......... (36,838) (71,803) (48.7)%
-------------- ------------- ------------
Operating income (loss)........................... $ 15,772 $ (22,562) (169.9)%
============== ============= ============
Gross margin (before depreciation)................ 64.7% 63.5% 1.9%
Weighted average for the period:
Square foot occupancy (d)....................... 88.4% 86.3% 2.4%
Realized annual rent per occupied
square foot (e) (g)............................. $ 13.11 $ 12.82 2.3%
REVPAF (f) (g).................................. $ 11.59 $ 11.06 4.8%
Weighted average at March 31:
Square foot occupancy........................... 88.9% 87.1% 2.1%
In place annual rent per occupied square foot (h) $ 14.04 $ 13.76 2.0%
Total net rentable square feet (in thousands)..... 27,103 27,103 -
(a) 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) Depreciation and amortization expense for the quarter ended March 31, 2008
decreased primarily due to a reduction in amortization expense related to
intangible assets that we obtained in the Shurgard Merger.
12
(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 which excludes late charges and administrative
fees divided by total available net rentable square feet. Rental income is
also net of promotional discounts and collection costs, including bad debt
expense and credit card fees.
(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.
The following table summarizes additional selected financial data with respect
to the Shurgard Domestic Same Store facilities (unaudited):
For the Quarter Ended
-----------------------------------------------------------------------
March 31 June 30 September 30 December 31 Entire Year
-------------- -------------- ---------------- --------------- --------------
(Amounts in thousands, except for per square foot amount)
Total rental income:
2008 $ 81,252
2007 $ 77,520 $ 80,552 $ 83,550 $ 81,351 $ 322,973
Total cost of operations (excluding
depreciation and amortization expense):
2008 $ 28,642
2007 $ 28,279 $ 27,743 $ 26,809 $ 25,260 $ 108,091
Property tax expense:
2008 $ 8,513
2007 $ 8,120 $ 8,123 $ 8,278 $ 7,452 $ 31,973
Media Advertising expense:
2008 $ 1,555
2007 $ 1,203 $ 1,841 $ 946 $ 603 $ 4,593
Other Advertising and promotion expense:
2008 $ 940
2007 $ 1,079 $ 1,024 $ 959 $ 905 $ 3,967
REVPAF:
2008 $ 11.59
2007 $ 11.06 $ 11.49 $ 11.91 $ 11.61 $ 11.52
Weighted average realized annual rent per
occupied square foot:
2008 $ 13.11
2007 $ 12.82 $ 12.87 $ 13.37 $ 13.26 $ 13.08
Weighted average occupancy levels for the
period:
2008 88.4%
2007 86.3% 89.3% 89.1% 87.6% 88.1%
13
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.
Selected Operating Data for the 96 facilities operated
--------------------------------------------------------
by Shurgard Europe on a stabilized basis since January
--------------------------------------------------------
1, 2006 ("Europe Same Store Facilities"): (unaudited)
------------------------------------------------------
Three Months Ended March 31,
-----------------------------------------
Percentage
2008 2007 (a) Change
-------------- ------------- -----------
(Dollar amounts in thousands, except
weighted average data, utilizing
constant exchange rates) (b)
Revenues:
Rental income................................. $ 34,432 $ 32,649 5.5%
Late charges and administrative fees collected 588 314 87.3%
-------------- ------------- -----------
Total revenues (b)............................ 35,020 32,963 6.2%
Cost of operations (excluding depreciation):
Property taxes ............................... 1,582 1,326 19.3%
Direct property payroll....................... 3,898 4,018 (3.0)%
Advertising and promotion..................... 899 1,368 (34.3)%
Utilities..................................... 875 947 (7.6)%
Repairs and maintenance....................... 929 922 0.8%
Property insurance............................ 215 400 (46.3)%
Other costs of management..................... 4,921 5,119 (3.9)%
-------------- ------------- -----------
Total cost of operations (b).................... 13,319 14,100 (5.5)%
-------------- ------------- -----------
Net operating income (excluding depreciation) (c) $ 21,701 $ 18,863 15.0%
============== ============= ===========
Gross margin (before depreciation)................ 62.0% 57.2% 8.4%
Weighted average for the period:
Square foot occupancy (d)....................... 88.2% 88.5% (0.3)%
Realized annual rent per occupied square foot (e) $ 29.54 $ 27.92 5.8%
REVPAF (f) (g).................................. $ 26.06 $ 24.71 5.5%
Weighted average at March 31:
Square foot occupancy........................... 87.3% 89.0% (1.9)%
In place annual rent per occupied square foot (h) $ 31.62 $ 29.55 7.0%
Total net rentable square feet (in thousands)..... 5,286 5,286 -
(a) For comparative purposes, these amounts are presented on a constant
exchange rate basis. The amounts for the three months ended March 31, 2007
have been restated using the actual exchange rate for the same period in
2008. The exchange rate for the Euro relative to the U.S. Dollar averaged
1.496 for the three months ended March 31, 2008.
(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.
14
(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.
(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 which excludes late charges and administrative
fees divided by total available net rentable square feet. Rental income is
also net of promotional discounts and collection costs, including bad debt
expense and credit card fees.
(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.
15
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations (a)
(Unaudited)
Three Months Ended
March 31,
------------------------------
2008 2007
-------------- ---------------
(Amounts in thousands,
except per share data)
Computation of Funds from Operations (FFO) allocable to Common Shares
Net Income............................................................. $ 512,342 $ 59,778
Add back - depreciation and amortization........................... 122,486 176,366
Add back - depreciation and amortization included in Discontinued
Operations..................................................... 5 115
Eliminate - depreciation with respect to non-real estate assets.... (61) (98)
Eliminate - gain on sale of real estate assets..................... (341,865) -
Add back - Depreciation from unconsolidated real estate investments 12,172 9,755
Add back - minority interest share of income....................... 7,599 5,783
-------------- ---------------
Consolidated FFO....................................................... 312,678 251,699
Allocable to preferred minority interests............................. (5,403) (5,403)
Allocable to other minority interests.................................. (6,164) (3,803)
-------------- ---------------
Remaining FFO allocable to our shareholders............................ 301,111 242,493
Less: allocations to preferred and equity shareholders:
Preferred shareholder distributions ............................... (60,333) (58,776)
Equity Shares, Series A distributions.............................. (5,356) (5,356)
-------------- ---------------
Remaining FFO allocable to Common Shares (a)........................... $ 235,422 $ 178,361
============== ===============
Weighted average shares:
Regular common shares.............................................. 168,586 169,229
Weighted average stock options and restricted share units
outstanding using treasury method .............................. 644 1,107
-------------- ---------------
Weighted average common shares for purposes of computing fully-diluted
FFO per common share................................................... 169,230 170,336
============== ===============
FFO per diluted common share (a)....................................... $ 1.39 $ 1.05
============== ===============
(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.
16
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
Three Months Ended
March 31,
-------------------------
2008 2007
----------- -----------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to Common Shares (a)....................... $ 235,422 $ 178,361
Add: Non-cash share-based compensation expense........... 2,774 2,508
Less: Non-cash foreign exchange and derivative gains..... (40,971) (4,278)
Less: Aggregate capital expenditures..................... (6,874) (8,307)
Add back: Capital expenditures for Shurgard rebranding
effort............................................... - 3,600
----------- -----------
Funds available for distribution ("FAD") (b)............. $ 190,351 $ 171,884
=========== ===========
Distribution to common shareholders...................... $ 92,783 $ 84,993
=========== ===========
Distribution payout ratio (c)............................ 48.7% 49.4%
=========== ===========
(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.
17
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Combined Domestic Same Store Revenues and Cost of Operations
To Consolidated Self-Storage Rental Income and Cost of Operations
(Unaudited)
Three Months Ended
March 31,
-------------------------
2008 2007
------------ ------------
(Amounts in thousands)
Revenues for the Combined Domestic Same Store
facilities........................................... $ 326,781 $ 317,169
Revenues for other facilities (a):
Development facilities (year opened):
2007.......................................... 224 8
2006.......................................... 1,617 857
2004 and 2005................................. 3,084 2,593
Expansion facilities.......................... 21,320 19,557
Acquisition facilities (year acquired):
2007.......................................... 1,129 12
2006 (b)...................................... 15,075 13,361
Deconsolidated U.S. Shurgard facilities (c)...... - 859
Reconsolidated U.S. Shurgard facilities (c)...... 527 503
European Shurgard facilities .................... 55,063 43,689
------------ ------------
Consolidated self-storage revenues (d)............... $ 424,820 $ 398,608
============ ============
Cost of operations for the Combined Domestic Same
Store facilities..................................... $ 115,347 $ 110,523
Cost of operations for other facilities (a):
Development facilities (year opened):
2007.......................................... 225 41
2006.......................................... 655 536
2004 and 2005................................. 1,234 1,100
Expansion facilities.......................... 7,891 7,175
Acquisition facilities (year acquired):
2007.......................................... 557 3
2006 (b)...................................... 5,985 5,882
Deconsolidated U.S. Shurgard facilities (c)...... - 333
Reconsolidated U.S. Shurgard facilities (c)...... 261 273
European Shurgard facilities .................... 24,760 22,826
------------ ------------
Consolidated self-storage cost of operations (d)..... $ 156,915 $ 148,692
============ ============
(a) We consolidate the operating results of additional self-storage facilities
that are not Combined Domestic Same Store facilities.
(b) Includes the operations of the domestic facilities acquired in the Shurgard
Merger which are not included in the Combined Domestic Same Store
facilities, which remain consolidated, for the period from January 1, 2007
through March 31, 2008. Also includes the operations of an additional 12
facilities that were acquired, in separate transactions, during 2006.
(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 January 1, 2007 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.
18