News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
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For Release: Immediately
Date: February 26, 2009
Contact: Clemente Teng
(818) 244-8080
PUBLIC STORAGE REPORTS RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2008
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the fourth quarter ended December 31, 2008.
OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2008:
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Net income for the three months ended December 31, 2008 was $151.7 million
compared to $167.9 million for the same period in 2007, representing a decrease
of $16.2 million. This decrease is primarily due to the impact of a $13.2
million foreign exchange loss during the quarter ended December 31, 2008 as
compared to a foreign currency exchange gain of $16.3 million in the same period
in 2007, offset by a reduction in amortization of intangible assets and
improvements in operating income with respect to our domestic self-storage
facilities.
The foreign currency exchange gains and losses relate primarily to a Euro
denominated loan receivable from Shurgard Europe. The foreign currency gains and
losses were due to changes in the value of the U.S. Dollar relative to the Euro
during each period when converting this Euro denominated loan to U.S. Dollars
for financial reporting purposes. See "Shurgard Europe" below for further
information.
Net operating income with respect to our domestic operations increased $11.8
million in the three months ended December 31, 2008 as compared to the same
period in 2007 due to an increase of $6.5 million with respect to our domestic
same-store operations combined with an increase of $5.3 million with respect to
our non-stabilized facilities.
For the three months ended December 31, 2008 and 2007, we allocated $24.9
million and $60.3 million, respectively, of our net income to our preferred
shareholders, representing a decrease of $35.4 million. This decrease is
primarily due to preferred share repurchases that we completed in the fourth
quarter of 2008 at an aggregate cost that was $33.9 million less than the
original net proceeds from the issuance of such shares. This benefit to our
common shareholders did not impact our net income, but has been reflected as a
reduction in the allocation of net income to our preferred shareholders and a
corresponding increase in the allocation of net income to our common
shareholders (see "Share Repurchases and Debt Tender" below).
For the three months ended December 31, 2008, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $121.7 million or $0.72 per common share on a diluted basis
compared to $102.2 million or $0.60 per common share for the same period in
2007, representing an increase of $19.5 million or $0.12 per common share on a
diluted basis. These increases are due primarily to the aforementioned reduction
in the allocation of net income to our preferred shareholders and corresponding
increase in allocation to our common shareholders of $33.9 million in connection
with the repurchase of preferred securities, offset by the aforementioned
decline in our net income.
Weighted average diluted common shares were 168,565,000 and 170,089,000,
respectively, for the three months ended December 31, 2008 and 2007. The decline
is due to common share repurchases in the first quarter of 2008.
OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2008:
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Net income for the year ended December 31, 2008 was $935.2 million compared to
$457.5 million for the same period in 2007, representing an improvement of
$477.7 million. This improvement is primarily due to a gain of $344.7 million
recognized on the disposition of a 51% interest in Shurgard Europe on March 31,
2008, improvements in net operating income with respect to our domestic
self-storage facilities and a reduction in amortization of intangible assets,
offset by a foreign currency exchange loss of $25.4 million for the year ended
December 31, 2008 as compared to a foreign exchange gain of $58.4 million in
2007.
Net operating income with respect to our domestic operations increased $49.7
million in the year ended December 31, 2008 as compared to 2007 due to an
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increase of $28.7 million with respect to our same-store operations combined
with an increase of $21.0 million with respect to our non-stabilized facilities.
For the years ended December 31, 2008 and 2007, we allocated $205.9 million and
$236.8 million of our net income, respectively, to our preferred shareholders.
The year-over-year decrease is due primarily to the aforementioned reduction in
the allocation of net income to our preferred shareholders and corresponding
increase in allocation to our common shareholders of $33.9 million in connection
with repurchases of preferred securities.
For the year ended December 31, 2008, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $708.1 million or $4.19 per common share on a diluted basis
compared to $199.4 million or $1.17 per common share for the same period in
2007, representing an improvement of $508.7 million or $3.02 per common share.
These increases are due primarily to the aforementioned reduction in the
allocation of net income to our preferred shareholders in connection with the
repurchase of securities, along with the impact of the factors described above
with respect to the increase in our net income.
Weighted average diluted common shares were 168,883,000 and 170,147,000,
respectively, for the years ended December 31, 2008 and 2007. The decline is due
primarily to common share repurchases in the first quarter of 2008.
FUNDS FROM OPERATIONS:
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For the three months ended December 31, 2008, funds from operations ("FFO")
increased to $1.49 per common share on a diluted basis as compared to $1.40 per
common share for the same period in 2007, representing an increase of $0.09 per
common share or 6.4%. For the year ended December 31, 2008, FFO was $5.07 per
common share on a diluted basis as compared to $4.97 per common share in 2007,
representing an increase of $0.10 per common share or 2.0%.
For the three months ended December 31, 2008, FFO was impacted by (i) a foreign
currency exchange loss totaling $13.2 million (compared to a gain of $16.3
million for the same period in 2007), (ii) a change in accounting estimate with
respect to our tenant insurance operations resulting in a $1.2 million increase
to ancillary operating expenses, (iii) a reduction in the allocation of net
income to our preferred shareholders pursuant to the aforementioned preferred
share repurchases, combined with our equity share of PSB's preferred stock
repurchases, aggregating $35.8 million, and (iv) write-offs of development costs
for cancelled projects included in general and administrative expense totaling
$1.5 million, along with our equity share of Shurgard Europe's development cost
write-offs totaling $1.2 million.
For the year ended December 31, 2008, FFO has been impacted by (i) a foreign
currency exchange loss totaling $25.4 million (a gain of $58.4 million for
2007), (ii) changes in accounting estimates associated with our tenant insurance
operations resulting in a $5.8 million reduction in ancillary operating
expenses, (iii) the aforementioned reduction in the allocation of net income to
our preferred shareholders combined with our equity share of PSB's preferred
stock repurchases of $35.8 million, (iv) write-offs of development costs for
cancelled projects included in general and administrative expense totaling $1.5
million ($2.1 million for 2007), along with our equity share of Shurgard
Europe's development cost write-offs totaling $1.2 million, (v) incentive
compensation with respect to our disposition of an interest in Shurgard Europe
included in general and administrative expense totaling $27.9 million, and (vi)
a loss with respect to damage to our facilities, and tenant insurance claims
expense, caused by Hurricane Ike aggregating $1.1 million (an increase in
insurance proceeds with respect to Hurricane Katrina of $2.7 million in 2007).
FFO for the year ended December 31, 2007 was also impacted by (i) expenses
related to our terminated offering of shares in our European business totaling
$9.6 million, (ii) expenses incurred in connection with the Shurgard Merger
totaling approximately $5.3 million, (iii) expenses related to our
reorganization as a Maryland REIT totaling approximately $2.0 million, and (iv)
an impairment charge included in discontinued operations with respect to the
closure of a containerized storage facility totaling $0.9 million.
The following table provides a summary of the impact of these items that have
occurred during the three months and years ended December 31, 2008 and 2007:
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Three Months Ended December 31, Year Ended December 31,
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Percentage Percentage
2008 2007 Change 2008 2007 Change
---------- -------- ------------- --------- --------- ------------
FFO per common share prior to adjustments for the
following items............................... $ 1.39 $ 1.30 6.9% $ 5.18 $ 4.73 9.5%
Foreign currency exchange gain (loss), net....... (0.08) 0.10 (0.15) 0.34
Change in accounting estimates - ancillary
operations.................................... (0.01) - 0.03 -
Reduction in the allocation of net income to
preferred shareholders to common shareholders
pursuant to preferred redemptions, including
our equity share from PSB..................... 0.21 - 0.21 -
Cancellation of development projects............. (0.02) - (0.02) (0.01)
Incremental incentive compensation............... - - (0.17) -
Impact associated with hurricanes ............... - - (0.01) 0.02
Costs and expenses incurred in connection with the
terminated public offering of shares in
Shurgard Europe............................... - - - (0.06)
Costs and expenses incurred in connection with the
Shurgard Merger............................... - - - (0.03)
Costs to reorganize as a Maryland REIT........ - - - (0.01)
Impairment charges on containerized storage
operations.................................... - - - (0.01)
---------- -------- --------- ---------
FFO per common share, as reported................ $ 1.49 $ 1.40 6.4% $ 5.07 $ 4.97 2.0%
========== ======== ========= =========
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.
As previously noted, we received net proceeds totaling approximately $609.1
million in connection with our March 31, 2008 disposition of a 51% interest in
Shurgard Europe. These funds were invested in short-term liquid investments
earning interest at rates averaging approximately 2% during the quarter ended
December 31, 2008.
Property Operations - Same Store Facilities:
The following table summarizes the historical operating results of 1,789
facilities that were all stabilized as of January 1, 2006 and contain
approximately 109.4 million net rentable square feet, representing approximately
87% of the aggregate net rentable square feet of our U.S. consolidated
self-storage portfolio at December 31, 2008. These facilities include 416
facilities acquired in August 2006 in connection with the Shurgard Merger.
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SELECTED OPERATING DATA FOR THE SAME STORE
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FACILITIES (1,789 FACILITIES):
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Three Months Ended December 31, Year Ended December 31,
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Percentage Percentage
2008 2007 Change 2008 2007 Change
------------ ------------ ----------- ------------ ------------ ----------
(Dollar amounts in thousands, except weighted average data)
Revenues:
Rental income................................. $ 318,888 $ 314,689 1.3% $ 1,283,015 $ 1,252,752 2.4%
Late charges and administrative fees collected 14,192 13,196 7.5% 56,291 53,563 5.1%
------------ ------------ ----------- ------------ ------------ ----------
Total revenues (a)............................ 333,080 327,885 1.6% 1,339,306 1,306,315 2.5%
Cost of operations:
Property taxes................................ 26,000 26,389 (1.5)% 125,696 122,157 2.9%
Direct property payroll....................... 22,251 21,432 3.8% 88,468 87,516 1.1%
Media advertising............................. 874 2,622 (66.7)% 18,386 19,075 (3.6)%
Other advertising and promotion............... 3,957 3,874 2.1% 17,168 17,714 (3.1)%
Utilities..................................... 7,689 7,532 2.1% 33,270 31,949 4.1%
Repairs and maintenance....................... 10,145 9,844 3.1% 39,949 39,980 (0.1)%
Telephone reservation center.................. 2,758 3,179 (13.2)% 11,744 11,798 (0.5)%
Property insurance............................ 2,444 2,742 (10.9)% 10,611 12,572 (15.6)%
Other costs of management..................... 21,108 20,943 0.8% 85,277 83,467 2.2%
------------ ------------ ----------- ------------ ------------ ----------
Total cost of operations (a).................... 97,226 98,557 (1.4)% 430,569 426,228 1.0%
------------ ------------ ----------- ------------ ------------ ----------
Net operating income (b) ......................... 235,854 229,328 2.8% 908,737 880,087 3.3%
Depreciation and amortization expense (c)......... (83,912) (87,804) (4.4)% (318,696) (407,962) (21.9)%
------------ ------------ ----------- ------------ ------------ ----------
Operating income.................................. $ 151,942 $ 141,524 7.4% $ 590,041 $ 472,125 25.0%
============ ============ =========== ============ ============ ==========
Gross margin...................................... 70.8% 69.9% 1.3% 67.9% 67.4% 0.7%
Weighted average for the period:
Square foot occupancy (d)....................... 87.8% 88.3% (0.6)% 89.5% 89.5% 0.0%
Realized annual rent per occupied square foot
(e) (g)...................................... $ 13.28 $ 13.03 1.9% $ 13.10 $ 12.79 2.4%
REVPAF (f) (g).................................. $ 11.66 $ 11.50 1.4% $ 11.72 $ 11.45 2.4%
Weighted average at December 31:
Square foot occupancy........................... 87.1% 87.9% (0.9)%
In place annual rent per occupied square foot (h) $ 14.03 $ 13.93 0.7%
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 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 three months and year ended
December 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 and other items 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.
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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 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 $ 335,412 $ 344,033 $ 333,080 $ 1,339,306
2007..................................... $ 317,169 $ 325,144 $ 336,117 $ 327,885 $ 1,306,315
Total cost of operations (in 000's):
2008..................................... $ 115,347 $ 112,182 $ 105,814 $ 97,226 $ 430,569
2007..................................... $ 110,523 $ 110,480 $ 106,668 $ 98,557 $ 426,228
Property taxes (in 000's):
2008..................................... $ 33,705 $ 32,526 $ 33,465 $ 26,000 $ 125,696
2007..................................... $ 32,318 $ 31,110 $ 32,340 $ 26,389 $ 122,157
Media advertising (in 000's):
2008..................................... $ 6,366 $ 9,148 $ 1,998 $ 874 $ 18,386
2007..................................... $ 4,820 $ 7,589 $ 4,044 $ 2,622 $ 19,075
Other advertising and promotion
(in 000's):
2008..................................... $ 4,130 $ 4,733 $ 4,348 $ 3,957 $ 17,168
2007..................................... $ 4,633 $ 5,027 $ 4,180 $ 3,874 $ 17,714
REVPAF:
2008..................................... $ 11.45 $ 11.75 $ 12.04 $ 11.66 $ 11.72
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 $ 12.92 $ 13.30 $ 13.28 $ 13.10
2007..................................... $ 12.52 $ 12.54 $ 13.06 $ 13.03 $ 12.79
Weighted average square foot occupancy levels
for the period:
2008..................................... 88.8% 91.0% 90.5% 87.8% 89.5%
2007..................................... 88.8% 90.9% 90.1% 88.3% 89.5%
SHURGARD EUROPE:
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As previously announced, on March 31, 2008, an institutional investor acquired a
51% interest in Shurgard Europe's operations. We own the remaining 49% interest
and we are the managing member of the newly formed joint venture that now owns
Shurgard Europe's operations. As a result of this transaction we began
accounting for our investment in Shurgard Europe under the equity method
effective March 31, 2008.
During the year ended December 31, 2008, we incurred $27.9 million of incentive
compensation expense with respect to the March 31, 2008 Shurgard Europe
transaction. This amount is included in our general and administrative expense.
No such incentive compensation amounts were incurred in the quarter ended
December 31, 2008.
Shurgard Europe has an interest in 180 facilities (9.5 million net rentable
square feet) located in seven Western European countries. Included in this total
are 72 facilities (3.6 million net rentable square feet) that are owned in two
joint ventures in which Shurgard Europe has a 20% interest.
As previously disclosed, in January 2007 we filed an arbitration action with our
joint venture partner related to our intention to terminate the joint venture
early. The arbitration panel issued its decision denying Shurgard Europe's
request to terminate the joint venture early, however, the panel also found that
Shurgard Europe had acted reasonably and ruled that each party share in the
costs.
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The two joint ventures collectively had approximately (euro)250 million ($355
million) of outstanding debt payable to third parties at December 31, 2008,
which is non-recourse to Shurgard Europe. One of the loans totaling (euro)120
million ($170 million) is due May 2009 and the other loan totaling (euro)130
million ($185 million) is due in June 2009. Shurgard Europe is currently
negotiating terms to extend the maturities of these joint venture loans out one
to three years. We expect Shurgard Europe to finalize these extensions within
the next 90 days, although there can be no assurance that such extensions will
actually be completed.
At December 31, 2008, Shurgard Europe had seven newly developed facilities and
two expansions to existing facilities under construction (483,000 net rentable
square feet), with costs incurred of $51.2 million and $30.6 million in costs to
complete. The development of these facilities is subject to various risks and
contingencies.
During the quarter ended December 31, 2008, Shurgard Europe terminated its
development pipeline for projects that had not commenced construction, and
incurred approximately $2.6 million in additional general and administrative
expense for the projects that were terminated.
Our existing (euro)391.9 million ($552.4 million at December 31, 2008) loan to
Shurgard Europe was extended pursuant to Shurgard Europe's option under the
terms of the original note for an additional year to March 31, 2010 and will
continue to accrue interest at 7.5% per annum. The loan currently is not hedged
for future currency exchange fluctuations; accordingly, the amount of U.S.
Dollars that will be received on repayment will depend upon the currency
exchange rates at the time. In addition, Shurgard Europe exercised its option
and extended our commitment through March 31, 2010 to provide up to (euro)305
million of additional loans to Shurgard Europe. Borrowings are to be used to
either fund the acquisition of Shurgard Europe's partner's interest in the joint
ventures and/or repay Shurgard Europe's pro rata share of the joint ventures'
debt. The acquisitions of the joint venture partners' interests are subject to
our approval and Shurgard Europe's pro rata share of the aggregate joint venture
debt is approximately (euro)50 million. As a result of these extensions, we will
receive a fee of approximately (euro)3.5 million from Shurgard Europe in March
2009.
DEVELOPMENT AND ASSET ACQUISITION ACTIVITIES:
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During the fourth quarter of 2008, we acquired one self-storage facility in
California with net rentable square feet of 38,000 for an aggregate purchase
price of $5.3 million. We also completed a newly developed facility with 55,000
net rentable square feet at a total cost of $7.9 million and six expansion
projects at a total cost of $22.1 million adding 253,000 net rentable square
feet.
At December 31, 2008, we had five expansion projects under construction (189,000
net additional rentable square feet) in the United States, which expand existing
self-storage facilities and enhance their visual appeal with costs incurred of
$20.3 million and $6.8 million in costs to complete. Opening dates for these
facilities are estimated through the next 12 months. The development of these
facilities is subject to various risks and contingencies.
During the quarter ended December 31, 2008, we terminated our development
pipeline for projects that had not yet commenced construction, and incurred
general and administrative expense totaling $1.5 million for the projects that
were terminated.
During the quarter ended December 31, 2008, we recorded a disposition of an
equity interest we had in certain partnerships, in exchange for a note
receivable from the buyer valued at approximately $5.3 million. We recorded a
loss on disposition totaling $9.3 million in connection with this transaction.
SHARE REPURCHASES AND DEBT TENDER:
- ----------------------------------
As disclosed previously, our Board of Trustees has authorized the repurchase
from time to time of up to 35,000,000 of our common shares on the open market or
in privately negotiated transactions.
During the first quarter of 2008, we repurchased a total of 1,520,196 common
shares for an aggregate of approximately $111.9 million. No further common
shares have been repurchased since the first quarter of 2008 through February
26, 2009. We have 11,278,084 common shares remaining on our repurchase
authorization at February 26, 2009.
During the fourth quarter of 2008, we repurchased shares of our preferred
securities in privately negotiated transactions as follows: Series Y - 849,100
Cumulative Preferred Shares at a total cost of $14,091,000, Series K - 1,409,756
Cumulative Preferred Shares at a total cost of $23,786,000, Series L - 933,400
Cumulative Preferred Shares at a total cost of $14,626,000 and Series M -
934,647 Cumulative Preferred Shares at a total cost of $14,375,000. The
aggregate amount paid of $66.9 million was approximately $33.9 million less than
the original net proceeds from issuance of the respective preferred shares and,
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accordingly, we reflected an allocation of income from the preferred
shareholders to the common shareholders of $33.9 million. Our ongoing
distributions paid to preferred shareholders were reduced approximately $1.6
million during the quarter ended December 31, 2008 as a result of these
repurchases, and we expect an ongoing annualized reduction in dividends to our
preferred shareholders of $7.1 million.
During the fourth quarter of 2008, we also repurchased 367,000 shares of our
Equity Shares, Series A in a privately negotiated transaction, for an aggregate
of $7,707,000. Distributions paid to equity share shareholders were reduced
$225,000 during the quarter as a result of this transaction, and we expect an
ongoing annualized reduction in dividends on our Equity Shares, Series A of
$900,000.
As previously announced, on February 12, 2009, pursuant to a tender offer, we
acquired $96.7 million principal amount of our 7.75% senior unsecured notes due
in 2011 at par, and $13.5 million face amount of our 5.875% senior unsecured
notes due in 2013 at 92.5% of par. As a result, we expect to record a gain of
approximately $4.5 million on the extinguishment of debt in the first quarter of
2009 and we expect annualized interest payments to decline by approximately $8.3
million.
LIQUIDITY POSITION:
- -------------------
At December 31, 2008, we have approximately $681 million of unrestricted cash on
hand ($572 million, after the expenditure to acquire our senior unsecured notes
described above) and have access to an additional $300 million line of credit.
The line of credit does not expire until March 27, 2012. We have no significant
capital commitments at December 31, 2008 other than outstanding debt maturities.
At December 31, 2008, outstanding debt totaled $644 million ($533 million,
adjusted for the expenditure to acquire our senior notes described above). After
adjusting for the aforementioned extinguishments in early 2009, we have no
significant maturities until 2011 ($130 million of maturities) and 2013 ($252
million of maturities).
Our retained operating cash flow continues to provide a significant source of
capital to fund our activities. During the year ended December 31, 2008, our
funds from operations available to distribute to common shareholders ("FAD")
exceeded our regular common distributions (which excludes a $101 million special
dividend paid in the fourth quarter that was driven primarily by our gain on
sale of an interest in Shurgard Europe) by approximately $410 million. Our
ability to continue to retain operating cash flow in the future will be
contingent upon a number of factors including, but not limited to, the growth in
our operations and our distribution requirements to maintain our REIT status.
DISTRIBUTIONS DECLARED:
- -----------------------
On February 26, 2009 our Board of Trustees declared a regular common dividend of
$0.55 per common share, a dividend of $0.6125 per share on the Equity Shares,
Series A and dividends with respect to our various series of preferred shares.
All the dividends are payable on March 31, 2009 to shareholders of record as of
March 16, 2009.
FOURTH QUARTER CONFERENCE CALL:
- -------------------------------
A conference call is scheduled for Friday, February 27, 2009 at 10:00 a.m. (PST)
to discuss the fourth quarter ended December 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
81759006). A simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Corporate Information, Investor Relations"
(conference ID number 81759006). A replay of the conference call may be accessed
through March 20, 2009, 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 81759006.
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 December 31,
2008, the Company had interests in 2,018 self-storage facilities located in 38
states with approximately 127 million net rentable square feet in the United
States and 181 storage facilities located in seven Western European nations with
approximately ten million net rentable square feet.
Additional information about Public Storage is available on our website,
www.publicstorage.com.
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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-K for the period ended December 31, 2008 expected to be
filed on or before March 1, 2009, our other 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.
8
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Comparisons of our revenues and expenses for the three and twelve months ended
December 31, 2008 to the same periods in 2007 are significantly impacted by the
acquisition by an institutional investor of a 51% interest in Shurgard Europe on
March 31, 2008, which resulted in the deconsolidation of Shurgard Europe.
Shurgard Europe's revenues and expenses after March 31, 2008 are excluded from
our statement of operations and, instead, our 49% equity share of Shurgard
Europe's operating results are included in the line item "equity in earnings of
real estate entities" and we also record interest and other income with respect
to (i) the interest received on our intercompany loan from Shurgard Europe and
(ii) license fee income.
Three Months Ended Year Ended
December 31, (a) December 31, (a)
------------------------------ ------------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
(Amounts in thousands, except per share data)
Revenues:
Self-storage rental income...................... $ 381,808 $ 425,076 $ 1,581,299 $ 1,662,454
Ancillary operations............................ 29,195 34,376 128,153 140,628
Interest and other income (a)................... 10,812 5,080 36,155 11,417
------------- ------------- ------------- -------------
421,815 464,532 1,745,607 1,814,499
------------- ------------- ------------- -------------
Expenses:
Cost of operations:
Self-storage facilities ...................... 112,974 139,027 520,076 580,227
Ancillary operations (b)..................... 15,088 15,706 60,501 77,516
Depreciation and amortization (c)............... 104,288 130,783 414,188 622,400
General and administrative (d).................. 5,841 10,352 62,809 59,749
Interest expense................................ 8,757 14,899 43,944 63,671
------------- ------------- ------------- -------------
246,948 310,767 1,101,518 1,403,563
------------- ------------- ------------- -------------
Income from continuing operations before equity in
earnings of real estate entities, gain (loss) on
disposition of real estate investments, casualty
gain (loss), foreign currency exchange gain
(loss), and minority interest in income......... 174,867 153,765 644,089 410,936
Equity in earnings of real estate entities (a)...... 6,712 2,555 20,391 12,738
Gain (loss) on disposition of real estate (6,252) 217 336,545 2,547
investments (e)..................................
Casualty gain (loss)................................ - - (525) 2,665
Foreign currency exchange gain (loss) (f)........... (13,159) 16,341 (25,362) 58,444
Minority interest in income allocable to:
Preferred minority interests....................... (5,403) (5,403) (21,612) (21,612)
Other partnership interests ....................... (4,941) (2,529) (17,084) (7,931)
------------- ------------- ------------- -------------
Income from continuing operations................... 151,824 164,946 936,442 457,787
Discontinued operations ............................ (134) 2,941 (1,266) (252)
------------- ------------- ------------- -------------
Net income.......................................... $ 151,690 $ 167,887 $ 935,176 $ 457,535
============= ============= ============= ==============
Net income allocation:
Allocable to preferred shareholders based on
distribution paid............................. $ 58,722 $ 60,333 $ 239,721 $ 236,757
Allocable from preferred shareholders based on
redemptions (g)............................... (33,851) - (33,851) -
Allocable to Equity Shares, Series A............ 5,131 5,356 21,199 21,424
Allocable to common shareholders................ 121,688 102,198 708,107 199,354
------------- ------------- ------------- -------------
$ 151,690 $ 167,887 $ 935,176 $ 457,535
============= ============= ============= ==============
Per common share:
Net income per share - Basic.................... $ 0.72 $ 0.60 $ 4.21 $ 1.18
============= ============= ============= ==============
Net income per share - Diluted.................. $ 0.72 $ 0.60 $ 4.19 $ 1.17
============= ============= ============= ==============
Weighted average common shares - Basic.......... 168,254 169,415 168,250 169,342
============= ============= ============= ==============
Weighted average common shares - Diluted........ 168,565 170,089 168,883 170,147
============= ============= ============= ==============
9
(a) Commencing March 31, 2008, we account for our investment in Shurgard Europe
using the equity method of accounting. Accordingly, we no longer present
Shurgard Europe's revenues, expenses and other operating items with respect
to periods after March 31, 2008, and we instead reflect our pro-rata share
of Shurgard Europe's operations as "equity in earnings of real estate
entities" along with interest and other income related to the loan
receivable from Shurgard Europe. For the three months and year ended
December 31, 2008, included in equity in earnings of real estate entities
is $417,000 and $4,134,000, respectively, related to our investment in
Shurgard Europe. These earnings are comprised of our 49% equity share of
Shurgard Europe's net loss, combined with $5,365,000 and $17,774,000 for
the three months and year ended December 31, 2008, respectively,
representing 49% of the aggregate interest and trademark license income
received from Shurgard Europe after March 31, 2008. Included in interest
and other income for the three months and year ended December 31, 2008, is
an aggregate of $5,584,000 and $18,496,000, respectively, with respect to
the loan receivable from Shurgard Europe and trademark license fees,
representing 51% of the aggregate interest and trademark license income
received from Shurgard Europe after March 31, 2008.
(b) Ancillary cost of operations have increased $1.2 million for the three
months ended December 31, 2008, and decreased $5.8 million for the year
ended December 31, 2008 as a result of changes in accounting estimates
related to our tenant insurance operations.
(c) Depreciation and amortization expense for the three months and year ended
December 31, 2008 decreased when compared to the same periods in 2007
primarily due to reductions in amortization expense related to domestic
intangible assets, primarily those obtained in the Shurgard Merger,
combined with the impact of the deconsolidation of Shurgard Europe.
(d) For the year ended December 31, 2008, general and administrative expense
includes additional incentive compensation totaling $27.9 million
associated with the disposition of an interest in Shurgard Europe. In
addition, for the year ended December 31, 2007, we incurred additional
expenses in connection with the proposed offering of shares of Shurgard
Europe totaling approximately $9.6 million.
(e) Gain on disposition of real estate investments for the year ended December
31, 2008 includes a $344.7 million gain on our disposition of a 51%
interest in Shurgard Europe, as well as a $9.3 million loss upon
disposition of an equity investment recorded in the quarter ended December
31, 2008.
(f) Our foreign currency exchange gains and losses are primarily related to our
intercompany loan to Shurgard Europe, representing the impact of the
fluctuation in the exchange rate between the value of the U.S. Dollar and
the Euro.
(g) During the quarter ended December 31, 2008, we repurchased various series
of our preferred shares for an aggregate of $66.9 million. This amount paid
was approximately $33.9 million lower than the original issue proceeds of
the preferred shares acquired and, accordingly, we recorded an allocation
of income from the preferred shareholders to the common shareholders of
$33.9 million. These repurchases are expected to reduce ongoing
distributions to the preferred shareholders by $7.1 million per year.
10
PUBLIC STORAGE
SELECTED FINANCIAL DATA
December 31, December 31,
2008 2007
(Unaudited) (a)
------------------ ----------------
(Amounts in thousands, except
share and per share data)
ASSETS
Cash and cash equivalents .................................... $ 680,701 $ 245,444
Operating real estate facilities:
Land and buildings, at cost................................ 10,207,022 11,658,807
Accumulated depreciation................................... (2,405,473) (2,128,225)
------------------ ----------------
7,801,549 9,530,582
Construction in process....................................... 20,340 51,972
------------------ ----------------
7,821,889 9,582,554
Investment in real estate entities............................ 544,598 306,743
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 52,005 173,745
Loan receivable from Shurgard Europe.......................... 552,361 -
Other assets.................................................. 109,857 159,982
------------------ ----------------
Total assets........................................... $ 9,936,045 $ 10,643,102
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable................................................. $ 643,811 $ 1,069,928
Accrued and other liabilities................................. 212,353 303,357
------------------ ----------------
Total liabilities...................................... 856,164 1,373,285
Minority interest ............................................ 364,417 506,688
Shareholders' equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value,
100,000,000 shares authorized, 887,122 shares issued (in series) and
outstanding (1,739,500 at December 31,
2007), at liquidation preference......................... 3,424,327 3,527,500
Common Shares of beneficial interest, $0.10 par value,
650,000,000 shares authorized, 168,279,732 shares issued and
outstanding (169,422,475 at December 31, 2007)........... 16,829 16,943
Equity Shares of beneficial interest, Series A, $0.01 par
value, 100,000,000 shares authorized, 8,377.193 shares
issued and outstanding at December 31, 2008 (8,744.193
shares at December 31, 2007)............................. - -
Paid-in capital............................................ 5,590,093 5,653,975
Cumulative net income...................................... 4,896,003 3,960,827
Cumulative distributions paid.............................. (5,179,857) (4,446,181)
Accumulated other comprehensive (loss) income.............. (31,931) 50,065
------------------ ----------------
Total shareholders' equity............................... 8,715,464 8,763,129
------------------ ----------------
Total liabilities and shareholders' equity............. $ 9,936,045 $ 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 of accounting.
11
Shurgard Europe Same Store Selected Operating Data
- --------------------------------------------------
The operating data presented in the table below for each period reflects the
historical data for the Europe Same Store Portfolio of 96 facilities that have
been operated on a stabilized basis since January 1, 2006. As described more
fully in "Shurgard Europe" above, we deconsolidated Shurgard Europe effective
March 31, 2008 and, accordingly, the revenues and cost of operations for the
quarter ended December 31, 2008 are not included in our income statements.
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 December 31, Year Ended December 31,
- ------------------------- --------------------------------------- -------------------------------------
Percentage Percentage
2008 2007 (a) Change 2008 2007 (a) Change
------------ ------------ ------------ ------------ ------------ ----------
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates) (a)
Revenues:
Rental income..................................... $ 29,150 $ 29,991 (2.8)% $ 133,924 $ 131,876 1.6%
Late charges and administrative fees collected.... 456 319 42.9% 2,278 1,335 70.6%
------------ ------------ ------------ ------------ ------------ ----------
Total revenues (b)................................ 29,606 30,310 (2.3)% 136,202 133,211 2.2%
------------ ------------ ------------ ------------ ------------ ----------
Cost of operations:
Property taxes ................................... 1,267 1,332 (4.9)% 6,085 5,851 4.0%
Direct property payroll........................... 3,507 3,645 (3.8)% 15,474 15,739 (1.7)%
Advertising and promotion......................... 879 687 27.9% 4,109 4,327 (5.0)%
Utilities......................................... 699 687 1.7% 3,194 3,126 2.2%
Repairs and maintenance........................... 914 901 1.4% 3,659 3,510 4.2%
Property insurance................................ 187 241 (22.4)% 845 1,274 (33.7)%
Other costs of management......................... 4,192 4,385 (4.4)% 18,584 19,807 (6.2)%
------------ ------------ ------------ ------------ ------------ ----------
Total cost of operations (b).................... 11,645 11,878 (2.0)% 51,950 53,634 (3.1)%
------------ ------------ ------------ ------------ ------------ ----------
Net operating income (excluding depreciation and
amortization) (c)................................. $ 17,961 $ 18,432 (2.6)% $ 84,252 $ 79,577 5.9%
============ ============ ============ ============ ============ ==========
Gross margin...................................... 60.7% 60.8% (0.2)% 61.9% 59.7% 3.7%
Weighted average for the period:
Square foot occupancy (d)....................... 85.9% 90.4% (5.0)% 86.5% 89.8% (3.7)%
Realized annual rent per occupied square foot (e) $ 25.68 $ 25.10 2.3% $ 29.29 $ 27.78 5.4%
(g)...............................................
REVPAF (f) (g).................................. $ 22.06 $ 22.69 (2.8)% $ 25.34 $ 24.95 1.6%
Weighted average at December 31:
Square foot occupancy........................... 84.3% 89.0% (5.3)%
In place annual rent per occupied square foot (h) $ 27.41 $ 26.72 2.6%
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 and year ended
December 31, 2007 have been restated using the actual exchange rate for the
same periods in 2008. The exchange rate for the Euro relative to the U.S.
Dollar averaged 1.316 and 1.470 for the three months and year ended
December 31, 2008, respectively, as compared to 1.448 and 1.370 for the
same periods in 2007, respectively.
(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.
12
(c) Net operating income (before depreciation and amortization) 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 and other items 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.
(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.
13
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations (a)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
--------------------------- ------------------------------
2008 2007 2008 2007
------------- ------------ ------------- --------------
(Amounts in thousands, except per share data)
Computation of Funds from Operations (FFO) allocable to Common Shares:
Net Income............................................................. $ 151,690 $ 167,887 $ 935,176 $ 457,535
Add back - depreciation and amortization........................... 104,288 130,783 414,188 622,400
Add back - depreciation and amortization included in Discontinued
Operations..................................................... 2 81 13 494
Eliminate - depreciation with respect to non-real estate assets.... (62) (89) (253) (406)
Eliminate - (gain) loss on sale of real estate investments......... 6,252 (217) (336,545) (2,547)
Eliminate - gain on sale of real estate assets included in
Discontinued Operations........................................ - (4,336) - (4,336)
Add back - Depreciation from unconsolidated real estate investments 18,727 12,754 74,918 45,307
Add back - minority interest share of income....................... 10,344 7,932 38,696 29,543
------------- ------------ ------------- --------------
Consolidated FFO....................................................... 291,241 314,795 1,126,193 1,147,990
Allocable to preferred minority interests.............................. (5,403) (5,403) (21,612) (21,612)
Allocable to other minority interests.................................. (5,114) (6,421) (21,904) (21,989)
------------- ------------ ------------- --------------
Remaining FFO allocable to our shareholders............................ 280,724 302,971 1,082,677 1,104,389
Less: allocations to preferred and equity shareholders:
Allocable to preferred shareholders based upon dividends paid ..... (58,722) (60,333) (239,721) (236,757)
Allocable from preferred shareholders based upon redemptions ...... 33,851 - 33,851 -
Allocable to Equity Shares, Series A based upon dividends paid..... (5,131) (5,356) (21,199) (21,424)
------------- ------------ ------------- --------------
Remaining FFO allocable to Common Shares (a)........................... $ 250,722 $ 237,282 $ 855,608 $ 846,208
============= ============ ============= ==============
Weighted average shares:
Regular common shares.............................................. 168,254 169,415 168,250 169,342
Weighted average stock options and restricted share units
outstanding using treasury method .............................. 311 674 633 805
------------- ------------ ------------- --------------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share.............................. 168,565 170,089 168,883 170,147
============= ============ ============= ==============
FFO per diluted common share (a)....................................... $ 1.49 $ 1.40 $ 5.07 $ 4.97
============= ============ ============= ==============
(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.
14
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
---------------------------- -----------------------------
2008 2007 2008 2007
----------- ------------- ------------ --------------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to Common Shares (a)....................... $ 250,722 $ 237,282 $ 855,608 $ 846,208
Add: Non-cash share-based compensation expense........... 2,828 1,197 12,591 8,511
Eliminate: Non-cash foreign currency exchange losses (gains) 13,159 (16,341) 25,362 (58,444)
Less: FFO allocated from preferred shareholders to common
shareholders pursuant to preferred repurchase,
including our equity share of PSB.................... (35,774) - (35,774) -
Less: Aggregate capital expenditures..................... (3,682) (19,649) (76,311) (69,102)
Add back: Capital expenditures for Shurgard rebranding
effort............................................... - - - 3,600
----------- ------------- ------------ --------------
Funds available for distribution ("FAD") (b)............. $ 227,253 $ 202,489 $ 781,476 $ 730,773
=========== ============= ============ ==============
Distribution to common shareholders:
Regular............................................... $ 93,296 $ 84,980 $ 371,798 $ 340,002
Special (c)........................................... 100,958 - 100,958 -
----------- ------------- ------------ --------------
Total distribution to common shareholders................ $ 194,254 $ 84,980 $ 472,756 $ 340,002
=========== ============= ============ ==============
Distribution payout ratio (b) ........................... 85.5% 42.0% 60.5% 46.5%
=========== ============= ============ ==============
Distribution payout ratio (on regular dividends only) (d) 41.1% 42.0% 47.6% 46.5%
=========== ============= ============ ==============
(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) noncash allocations to
or from preferred equity holders, less capital expenditures to maintain our
facilities and (iv) elimination of any gain or loss on foreign exchange.
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.
(c) The Board of Trustees declared a special dividend of $0.60 per share on
November 6, 2008 which was paid on December 30, 2008. This payout was
primarily due to the gain on sale of 51% of our interest in Shurgard
Europe.
(d) Supplemental payout ratio, excluding the impact of the special dividend,
which was primarily due to the gain on sale of 51% of our interest in
Shurgard Europe. This supplemental measure is presented to portray ongoing
dividends, excluding the dividend due to the gain on sale of Shurgard,
because FAD excludes the gain on sale of an interest in Shurgard Europe.
15
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Same Store Revenues and Cost of Operations
To Consolidated Self-Storage Rental Income and Cost of Operations
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------------------- ----------------------------
2008 2007 2008 2007
------------- ------------ ------------- -------------
(Amounts in thousands)
Revenues for the Same Store facilities............... $ 333,080 $ 327,885 $ 1,339,306 $ 1,306,315
Revenues for other facilities (a):
Newly acquired or developed facilities put into
service during:
2008.......................................... 1,265 - 2,628 -
2007.......................................... 1,879 1,145 6,586 2,334
2004, 2005, and 2006 (b)...................... 22,379 20,446 87,520 78,342
Expansion facilities............................. 23,205 21,423 90,537 82,956
Shurgard Europe's facilities, which were
deconsolidated March 31, 2008 ................... - 54,177 54,722 192,507
------------- ------------ ------------- -------------
Consolidated self-storage revenues (c)................ $ 381,808 $ 425,076 $ 1,581,299 $ 1,662,454
============= ============ ============= =============
Cost of operations for the Same Store facilities...... $ 97,226 $ 98,557 $ 430,569 $ 426,228
Cost of operations for other facilities (a):
Newly acquired or developed facilities put
into service during:
2008.......................................... 507 - 1,041 -
2007.......................................... 740 738 2,962 1,351
2004, 2005, and 2006 (b)...................... 6,898 7,243 30,880 31,358
Expansion facilities.............................. 7,603 7,356 29,970 29,601
Shurgard Europe's facilities, which were
deconsolidated March 31, 2008.................... - 25,133 24,654 91,689
------------- ------------ ------------- -------------
Consolidated self-storage cost of operations (c)...... $ 112,974 $ 139,027 $ 520,076 $ 580,227
============= ============ ============= =============
(a) We consolidate the operating results of additional self-storage facilities
that are not Same Store facilities.
(b) Includes 66 facilities which we acquired in the merger with Shurgard that
are not included in the Same Store facilities and are not owned by Shurgard
Europe, along with 12 additional facilities acquired in 2006.
(c) 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.
16