News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
- --------------------------------------------------------------------------------
For Release: Immediately
Date: May 7, 2009
Contact: Clemente Teng
(818) 244-8080
PUBLIC STORAGE REPORTS RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2009
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the first quarter ended March 31, 2009.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2009
- -----------------------------------------------------------
Net income to Public Storage shareholders for the three months ended March 31,
2009 was $217.0 million compared to $512.3 million for the same period in 2008,
representing a decrease of $295.3 million. This decrease is primarily due to (i)
a gain of $341.9 million in the quarter ended March 31, 2008 related to our
disposition of an interest in Shurgard Europe, combined with (ii) a $34.7
million foreign exchange loss during the quarter ended March 31, 2009 as
compared to an exchange gain of $41.0 million in the same period in 2008,
partially offset by (iii) a $72.0 million reduction in earnings allocated to our
preferred partnership unitholders in the quarter ended March 31, 2009 described
below.
The foreign currency exchange gains and losses relate primarily to a Euro
denominated loan receivable from Shurgard Europe and were due to changes in the
value of the U.S. Dollar relative to the Euro during each period. See "Shurgard
Europe" below for further information.
During the first quarter of 2009, we repurchased preferred partnership units at
an aggregate acquisition cost of $153.0 million which was approximately $72.0
million less than the original net proceeds from issuance of the respective
units. The $72.0 million benefit to our common shareholders is reflected as a
reduction in the amount of net income allocated to these preferred unitholders
and a corresponding increase in income allocation to our common shareholders.
Net operating income with respect to our domestic operations increased by $0.2
million in the three months ended March 31, 2009 as compared to the same period
in 2008 due to an increase of $4.2 million with respect to our non-stabilized
facilities combined with a decrease of $4.0 million with respect to our Same
Store operations (see table below).
During the first quarter of 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
plus accrued interest, and $13.5 million face amount of our 5.875% senior
unsecured notes due in 2013 at 92.5% of par plus accrued interest. We recorded a
related gain on early redemption of debt of approximately $4.1 million in the
quarter ended March 31, 2009.
During the first quarter of 2009, we repurchased preferred shares at an
acquisition cost of $17.5 million which was approximately $6.2 million less than
the original net proceeds from issuance of the respective preferred securities.
The $6.2 million benefit to our common shareholders is reflected as a decrease
in income allocated to our preferred shareholders and a corresponding increase
in the amount of net income allocated to our common shareholders.
For the three months ended March 31, 2009, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $159.5 million or $0.95 per common share on a diluted basis
compared to $444.8 million or $2.63 per common share on a diluted basis for the
same period in 2008, representing a decrease of $285.3 million or $1.68 per
common share on a diluted basis. These decreases are primarily due to the impact
of the factors described above.
Weighted average diluted common shares were 168,473,000 and 168,982,000,
respectively, for the three months ended March 31, 2009 and 2008.
1
FUNDS FROM OPERATIONS
- ---------------------
For the three months ended March 31, 2009, funds from operations ("FFO")
increased to $1.51 per common share on a diluted basis as compared to $1.39 per
common share for the same period in 2008, representing an increase of $0.12 per
common share on a diluted basis or 8.6%.
For the three months ended March 31, 2009, FFO was impacted by (i) a foreign
currency exchange loss totaling $34.7 million (compared to an exchange gain of
$41.0 million for the same period in 2008), (ii) $3.5 million of costs incurred
related to the discontinuance of our truck rental operations, which is included
in discontinued operations, (iii) a $78.2 million reduction in the allocation of
net income to our preferred shareholders and unitholders pursuant to the
aforementioned preferred equity repurchases, combined with our pro rata share
($16.3 million) of PS Business Park's earnings representing the benefit from its
preferred share repurchases, and included in equity in earnings of real estate
entities, and (iv) a $4.1 million gain on the early extinguishment of debt. For
the three months ended March 31, 2008, FFO was further impacted by costs and
expenses incurred in connection with the disposition of an interest in Shurgard
Europe totaling $2.5 million.
The following table provides a summary of the impact of these items that
occurred during the three months ended March 31, 2009 and 2008:
Three Months Ended March 31,
----------------------------
Percentage
2009 2008 Change
-------- -------- ----------
FFO per common share prior to adjustments for the
following items............................... $ 1.16 $ 1.16 -
Foreign currency exchange (loss) gain, net....... (0.21) 0.24
Costs incurred to terminate truck rental
operations.................................... (0.02) -
Increased income allocated to common
shareholders, and from preferred equity
shareholders, pursuant to preferred
redemptions, including our equity share from
PSB........................................... 0.56 -
Gain on early extinguishment of debt............. 0.02 -
Costs and expenses incurred in connection with
the disposition of an interest in Shurgard
Europe........................................ - (0.01)
-------- --------
FFO per common share, as reported................ $ 1.51 $ 1.39 8.6%
======== ========
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 - SAME STORE FACILITIES
- -------------------------------------------
The Same Store Pool represents those 1,899 facilities that are stabilized and
owned since January 1, 2007 and therefore provide meaningful comparisons for
2007, 2008, and 2009. The Same Store Pool increased from 1,789 at December 31,
2008 to 1,899 at March 31, 2009, as we added facilities that are now stabilized
and owned since January 1, 2007, and removed facilities from the previous Same
Store Pool that, due primarily to construction activities, are no longer
expected to be stabilized through December 31, 2009. The following table
summarizes the historical operating results of these 1,899 facilities (117.5
million net rentable square feet) that represent approximately 93% of the
aggregate net rentable square feet of our U.S. consolidated self-storage
portfolio at March 31, 2009.
2
Selected Operating Data for the Same Store
------------------------------------------
Facilities (1,899 Facilities): Three Months Ended March 31,
----------------------------- ---------------------------------------
Percentage
2009 2008 Change
------------- ------------ -----------
(Dollar amounts in thousands, except
for weighted average data)
Revenues:
Rental income................................. $ 331,539 $ 335,553 (1.2)%
Late charges and administrative fees collected 15,646 14,438 8.4%
------------- ------------ -----------
Total revenues (a).............................. 347,185 349,991 (0.8)%
------------- ------------ -----------
Cost of operations:
Property taxes................................ 37,762 36,349 3.9%
Direct property payroll....................... 24,360 24,377 (0.1)%
Media advertising............................. 8,158 6,947 17.4%
Other advertising and promotion............... 4,614 4,426 4.2%
Utilities..................................... 9,598 9,437 1.7%
Repairs and maintenance....................... 10,716 11,398 (6.0)%
Telephone reservation center.................. 2,794 3,123 (10.5)%
Property insurance............................ 2,698 3,213 (16.0)%
Other costs of management..................... 24,307 24,586 (1.1)%
------------- ------------ -----------
Total cost of operations (a).................... 125,007 123,856 0.9%
------------- ------------ -----------
Net operating income before depreciation and
amortization expense (b)....................... 222,178 226,135 (1.7)%
Depreciation and amortization expense (c)......... (75,286) (89,358) 15.7%
------------- ------------ -----------
Operating income.................................. $ 146,892 $ 136,777 7.4%
============= ============ ===========
Gross margin...................................... 64.0% 64.6% (0.9)%
Weighted average for the period:
Square foot occupancy (d)....................... 87.9% 88.8% (1.0)%
Realized annual rent per occupied square foot
(e) (g)...................................... $ 12.84 $ 12.87 (0.2)%
REVPAF (f) (g).................................. $ 11.29 $ 11.43 (1.2)%
Weighted average at March 31:
Square foot occupancy........................... 88.2% 89.3% (1.2)%
In place annual rent per occupied square foot (h)$ 13.57 $ 13.86 (2.1)%
Total net rentable square feet (in thousands)..... 117,462 117,462 -
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 ended March 31,
2009 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.
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 Same Store Facilities (unaudited):
Three Months Ended
---------------------------------------------------------
March 31 June 30 September 30 December 31 Full Year
------------ ----------- ------------ ------------- -------------
Total revenues (in 000's):
2009..................................... $ 347,185
2008..................................... $ 349,991 $ 359,461 $ 368,976 $ 357,202 $ 1,435,630
Total cost of operations (in 000's):
2009..................................... $ 125,007
2008..................................... $ 123,856 $ 120,526 $ 113,972 $ 104,442 $ 462,796
Property taxes (in 000's):
2009..................................... $ 37,762
2008..................................... $ 36,349 $ 35,156 $ 36,161 $ 28,159 $ 135,825
Media advertising (in 000's):
2009..................................... $ 8,158
2008..................................... $ 6,947 $ 9,836 $ 2,148 $ 922 $ 19,853
Other advertising and promotion (in 000's):
2009..................................... $ 4,614
2008..................................... $ 4,426 $ 5,027 $ 4,645 $ 4,137 $ 18,235
REVPAF:
2009..................................... $ 11.29
2008..................................... $ 11.43 $ 11.74 $ 12.03 $ 11.65 $ 11.71
Weighted average realized annual rent per
occupied square foot for the period:
2009..................................... $ 12.84
2008..................................... $ 12.87 $ 12.90 $ 13.29 $ 13.27 $ 13.08
Weighted average square foot occupancy levels
for the period:
2009..................................... 87.9%
2008..................................... 88.8% 91.0% 90.5% 87.8% 89.5%
SHURGARD EUROPE
- ---------------
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.
Shurgard Europe has an interest in 182 facilities (9.6 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 by two
joint ventures in which Shurgard Europe has a 20% interest.
The two joint ventures collectively had approximately (euro)238 million ($314
million) of outstanding debt payable to banks at March 31, 2009, which is
non-recourse to Shurgard Europe. One of the JV loans, totaling (euro)117 million
($154 million), is due May 2009 and the other JV loan, totaling (euro)121
million ($160 million), is due June 2010. We expect Shurgard Europe will
finalize a loan extension of the JV loan that matures in May 2009 within the
next 30 days, although there can be no assurance that such extension will
actually be completed.
4
At March 31, 2009, Shurgard Europe had five newly developed facilities and two
expansions to existing facilities under construction (373,000 net rentable
square feet), with costs incurred of $43.5 million and $18.9 million in costs to
complete. The development of these facilities is subject to various risks and
contingencies.
Our existing (euro)391.9 million ($517.5 million at March 31, 2009) loan to
Shurgard Europe was extended 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.
DEVELOPMENT AND ASSET ACQUISITION ACTIVITIES
- --------------------------------------------
During the three months ended March 31, 2009, we completed three expansion
projects at a total cost of $13.4 million adding 75,000 net rentable square
feet. Our pipeline of future development and expansions is nominal.
EQUITY REPURCHASES AND DEBT TENDER
- ----------------------------------
During the first quarter of 2009, we repurchased shares of our preferred
securities in privately negotiated transactions as follows: Series V - 700,000
Cumulative Preferred Shares at a total cost of $13.2 million, Series C - 175,000
Cumulative Preferred Shares at a total cost of $2.7 million, Series F - 107,000
Cumulative Preferred Shares at a total cost of $1.6 million, Series NN -
8,000,000 preferred units at a cost of $128.0 million and Series Z - 1,000,000
preferred units at a total cost of $25.0 million. Our ongoing distributions paid
to preferred shareholders and unitholders were reduced approximately $1.8
million during the quarter ended March 31, 2009, and we expect an ongoing
annualized reduction in dividends of $16.1 million as a result of these
repurchases.
As previously disclosed, 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 plus accrued interest, and $13.5 million face amount of our
5.875% senior unsecured notes due in 2013 at 92.5% of par plus accrued interest.
As a result, annualized interest payments will decline by approximately $8.3
million. We recorded a gain on early redemption of debt of approximately $4.1
million in the quarter ended March 31, 2009.
LIQUIDITY POSITION
- ------------------
At March 31, 2009, we had approximately $500 million of unrestricted cash on
hand 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 March 31, 2009, other than outstanding debt maturities.
At March 31, 2009, outstanding debt totaled $527 million. We have no significant
debt maturities until 2011 ($131 million of maturities) and 2013 ($251 million
of maturities).
Our retained operating cash flow continues to provide a significant source of
capital to fund our activities. During the quarter ended March 31, 2009, our
funds from operations available to distribute to common shareholders ("FAD")
exceeded our regular common distributions by approximately $100 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.
DISCONTINUED OPERATIONS
- -----------------------
During the three months ended March 31, 2009, we decided to discontinue our
containerized storage and truck rental operations due to poor economic
performance.
The truck rental operations ceased as of March 31, 2009, and we recorded losses
for the disposal of trucks of approximately $3.5 million in the quarter ended
March 31, 2009. We expect to either sell the existing containerized operations
or wind operations down by December 31, 2009.
In addition, as of March 31, 2009, we discontinued two self-storage facilities
that contained an aggregate of 105,000 net rentable square feet. A facility
located in Missouri is held for sale and the other facility, located in
Colorado, was the subject of a condemnation proceeding. We received gross
proceeds of $7.5 million for the condemned facility and recorded a gain of
approximately $4.2 million during the quarter ended March 31, 2009.
5
Our truck and containerized storage operations, which were previously presented
as a component of ancillary operations and the operating results of the two
self-storage facilities (including the related gain on sale) have been
reclassified for all periods presented as "discontinued operations."
DISTRIBUTIONS DECLARED
- ----------------------
On May 7, 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 June 30, 2009 to shareholders of record as of
June 15, 2009.
CHANGES IN ACCOUNTING PRESENTATION
- ----------------------------------
Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS No.
160") and other accounting standards implemented by the Financial Accounting
Standards Board and the Securities and Exchange Commission, became effective
January 1, 2009. As a result, we have reclassified equity interests that were
formerly referred to as "minority interests" either as "redeemable
noncontrolling equity interests in subsidiaries" or "permanent noncontrolling
equity interests in subsidiaries." Where such interests have the ability to
require us to redeem those securities in cash, they are classified as
"redeemable noncontrolling equity interests in subsidiaries" and presented on
the balance sheet between equity and liabilities, and adjusted each period to
their estimated redemption value. All other former minority interests have been
reclassified to equity on our balance sheet. These adjustments increased total
equity $351.6 million and redeemable noncontrolling interests in subsidiaries
$12.8 million, and decreased minority interest by $364.4 million, from amounts
previously presented.
Our income statement has also been reclassified based upon these newly effective
accounting standards. Income allocations to interests formerly referred to as
"minority interest" are no longer reflected as a reduction in net income, but
are reflected as an allocation of net income in calculating net income allocable
to common shareholders. These reclassifications increased net income by $7.6
million for the three months ended March 31, 2008 and increased income allocated
to noncontrolling equity interests by a corresponding amount. These
reclassifications had no impact upon net income allocable to common shareholders
or earnings per share, as compared to amounts previously presented.
In addition, EITF 03-6-1, "Participating Securities and the Two-Class Method
under FASB Statement No. 128," became effective January 1, 2009, resulting in
our commencing allocation of income to holders of restricted share units. Such
amounts allocated are presented as "income allocated to restricted share units"
on our income statement. This adjustment resulted in a decrease in income
allocable to common shareholders and Funds from Operations allocable to common
shareholders, respectively, of approximately $1.8 million and $0.9 million for
the quarter ended March 31, 2008, as compared to amounts previously presented.
FIRST QUARTER CONFERENCE CALL
- -----------------------------
A conference call is scheduled for Friday, May 8, 2009, at 10:00 a.m. (PDT) to
discuss the first quarter ended March 31, 2009 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
94885827). A simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Company Info, Investor Relations" or "Corporate
Information, Investor Relations" (conference ID number 94885827). A replay of
the conference call may be accessed through May 23, 2009 by calling (800)
642-1687 (domestic) or (706) 645-9291 (international) or by using the link at
www.publicstorage.com under "Company Info, Investor Relations" or "Corporate
Information, Investor Relations." All forms of replay utilize conference ID
number 94885827.
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, 2009,
the Company had interests in 2,010 self-storage facilities located in 38 states
with approximately 127 million net rentable square feet in the United States and
183 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.
6
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, 2008, Form 10-Q for the period ended March 31, 2009 expected to be filed on
or before May 11, 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.
7
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Comparisons of our revenues and expenses for the three months ended March 31,
2009 to the same period in 2008 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.
See "Changes in Accounting Presentation" above for further discussion of
reclassifications made to amounts previously reported for the three months ended
March 31, 2008.
Three Months Ended March 31,
-------------------------------
2009 2008 (a)
------------- --------------
(Amounts in thousands, except
per share amounts)
REVENUES:
Self-storage rental income............................... $ 371,598 $ 424,606
Ancillary operations (b)................................. 25,835 30,037
Interest and other income (a)............................ 7,633 2,844
------------- --------------
405,066 457,487
------------- --------------
EXPENSES:
Cost of operations:
Self-storage facilities ............................... 133,641 156,815
Ancillary operations (b)............................... 9,653 11,304
Depreciation and amortization (c)........................ 85,167 122,441
General and administrative (d)........................... 9,679 14,916
Interest expense......................................... 8,128 16,487
------------- --------------
246,268 321,963
------------- --------------
Income from continuing operations before equity in earnings
of real estate entities, gain on disposition of real estate
investments or early redemption of debt, and
foreign currency exchange (loss) gain..................... 158,798 135,524
Equity in earnings of real estate entities (a)............... 22,811 2,729
Gain on disposition of real estate investments............... 2,722 341,865
Gain on early redemption of debt............................. 4,114 -
Foreign currency exchange (loss) gain (e).................... (34,733) 40,971
------------- --------------
Income from continuing operations............................ 153,712 521,089
Discontinued operations (b).................................. (283) (1,148)
------------- --------------
NET INCOME................................................... 153,429 519,941
Net income allocable (to) from noncontrolling equity interests:
- ---------------------------------------------------------------
Preferred unitholders, based upon distributions paid (g).. (4,017) (5,403)
Preferred unitholders, based upon redemptions (f) (g).... 72,000 -
Other noncontrolling interests in subsidiaries (g)........ (4,410) (2,196)
------------- --------------
NET INCOME ALLOCABLE TO PUBLIC STORAGE SHAREHOLDERS.......... $ 217,002 $ 512,342
============= ==============
Allocation of net income to Public Storage Shareholders:
Preferred shareholders, based on distribution paid....... $ 58,108 $ 60,333
Preferred shareholders, based on redemptions (f)......... (6,218) -
Equity Shares, Series A.................................. 5,131 5,356
Restricted share units................................... 486 1,825
Common shareholders...................................... 159,495 444,828
------------- --------------
$ 217,002 $ 512,342
============= ==============
PER COMMON SHARE:
Net income per share - Basic............................. $ 0.95 $ 2.64
============= ==============
Net income per share - Diluted........................... $ 0.95 $ 2.63
============= ==============
Weighted average common shares - Basic................... 168,312 168,586
============= ==============
Weighted average common shares - Diluted................. 168,473 168,982
============= ==============
8
(a).Equity in earnings of real estate entities for the three months ended March
31, 2009 includes $16.3 million related to PS Business Parks' repurchases
of its preferred securities.
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 ended March 31, 2009,
included in equity in earnings of real estate entities is $1,901,000
related to our investment in Shurgard Europe. These earnings are comprised
of our 49% equity share of Shurgard Europe's net loss, combined with
$5,152,000 representing 49% of the aggregate interest and trademark license
income received from Shurgard Europe for the three months ended March 31,
2009. Included in interest and other income is an aggregate of $5,361,000,
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 for the three months ended
March 31, 2009.
(b) During the first quarter of 2009, we discontinued the containerized storage
and truck rental operations and, accordingly, the historical operations
from these activities have been reclassified from ancillary operations to
discontinued operations. Discontinued operations for the quarter ended
March 31, 2009 includes $3.5 million in costs associated with the disposal
of trucks, as well as a gain on disposition of a discontinued self-storage
facility of approximately $4.2 million.
(c) Depreciation and amortization expense for the three months ended March 31,
2009 decreased when compared to the same period in 2008 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 three months ended March 31, 2008, general and administrative
expense includes additional incentive compensation totaling $2.5 million
associated with the disposition of an interest in Shurgard Europe.
(e) 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.
(f) During the three months ended March 31, 2009, we repurchased various series
of our preferred shares and units for an aggregate of $170.5 million. This
amount paid was approximately $78.2 million lower than the original issue
proceeds of the preferred equity acquired and, accordingly, we recorded an
allocation of income from the preferred shareholders and unitholders to the
common shareholders of $78.2 million. These repurchases are expected to
reduce ongoing distributions to the preferred shareholders and unitholders
by $16.1 million per year.
(g) Represents amounts previously classified as "minority interest in income"
as a reduction in net income, prior to the reclassifications described
above under "Changes in Accounting Presentation."
9
PUBLIC STORAGE
SELECTED FINANCIAL DATA
March 31, December 31,
2009 2008
----------------- -----------------
(Amounts in thousands, except share
and per share data)
(Unaudited)
ASSETS
Cash and cash equivalents .................................... $ 493,400 $ 680,701
Operating real estate facilities:
Land and buildings, at cost................................ 10,223,507 10,207,022
Accumulated depreciation................................... (2,485,242) (2,405,473)
----------------- -----------------
7,738,265 7,801,549
Construction in process....................................... 9,317 20,340
----------------- -----------------
7,747,582 7,821,889
Investment in real estate entities............................ 545,224 544,598
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 49,748 52,005
Loan receivable from Shurgard Europe.......................... 517,497 552,361
Other assets.................................................. 98,412 109,857
----------------- -----------------
Total assets........................................... $ 9,626,497 $ 9,936,045
================= =================
LIABILITIES AND EQUITY
Notes payable................................................. $ 527,235 $ 643,811
Accrued and other liabilities................................. 210,573 212,353
----------------- -----------------
Total liabilities...................................... 737,808 856,164
Redeemable noncontrolling interests in subsidiaries (a)....... 12,798 12,777
Equity:
Public Storage shareholders' equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value,
100,000,000 shares authorized, 886,140 shares issued (in series)
and outstanding (887,122 at December 31, 2008),
at liquidation preference................................ 3,399,777 3,424,327
Common Shares of beneficial interest, $0.10 par value,
650,000,000 shares authorized, 168,343,759 shares issued and
outstanding (168,279,732 at December 31, 2008)........... 16,835 16,829
Equity Shares of beneficial interest, Series A, $0.01 par
value, 100,000,000 shares authorized, 8,377.193 shares
issued and outstanding................................... - -
Paid-in capital............................................ 5,669,796 5,590,093
Retained earnings.......................................... (301,582) (290,323)
Accumulated other comprehensive loss....................... (42,134) (31,931)
----------------- -----------------
Total Public Storage shareholders' equity................ 8,742,692 8,708,995
----------------- -----------------
Equity of permanent noncontrolling interests in subsidiaries (a):
Preferred partnership units............................ 100,000 325,000
Other interests........................................ 33,199 33,109
----------------- -----------------
Total equity............................................. 8,875,891 9,067,104
----------------- -----------------
Total liabilities and equity........................... $ 9,626,497 $ 9,936,045
================= =================
(a) These amounts were previously classified as "minority interest." See
"Changes in Accounting Presentation" above for further discussion of
restatements made to amounts previously reported as of December 31, 2008.
10
SHURGARD EUROPE SAME STORE SELECTED OPERATING DATA
- --------------------------------------------------
The Shurgard Europe Same Store Pool represents those 94 facilities that are
stabilized and owned since January 1, 2007 and therefore provide meaningful
comparisons for 2007, 2008, and 2009. The number of facilities in the Shurgard
Europe Same Store Pool declined from 96 at December 31, 2008 to 94 at March 31,
2009, as we removed facilities from the previous Shurgard Europe Same Store Pool
that, due primarily to construction activities, are no longer expected to be
stabilized through December 31, 2009, and added facilities that are now
stabilized and owned since January 1, 2007. The following table reflects the
operating results of these 94 facilities. As described more fully in "Shurgard
Europe" above, we deconsolidated Shurgard Europe as of March 31, 2008.
SELECTED OPERATING DATA FOR THE 94 FACILITIES
---------------------------------------------------
OPERATED BY SHURGARD EUROPE ON A STABILIZED BASIS
----------------------------------------------------
SINCE JANUARY 1, 2007: (unaudited) Three Months Ended March 31,
----------------------------------- -------------------------------------
Percentage
2009 2008 (a) Change
----------- ----------- -----------
(Dollar amounts in thousands, except
weighted average data, utilizing
constant exchange rates)
Revenues:
Rental income..................................... $ 26,607 $ 27,828 (4.4)%
Late charges and administrative fees collected.... 435 479 (9.2)%
----------- ----------- -----------
Total revenues (b)................................ 27,042 28,307 (4.5)%
----------- ----------- -----------
Cost of operations:
Property taxes ................................... 1,373 1,326 3.5%
Direct property payroll........................... 3,284 3,153 4.2%
Advertising and promotion......................... 1,443 729 97.9%
Utilities......................................... 864 670 29.0%
Repairs and maintenance........................... 802 759 5.7%
Property insurance................................ 164 175 (6.3)%
Other costs of management......................... 3,733 3,937 (5.2)%
----------- ----------- -----------
Total cost of operations (b).................... 11,663 10,749 8.5%
----------- ----------- -----------
Net operating income (excluding depreciation and
amortization) (c)................................. $ 15,379 $ 17,558 (12.4)%
=========== =========== ===========
Gross margin...................................... 56.9% 62.0% (8.2)%
Weighted average for the period:
Square foot occupancy (d)....................... 84.7% 88.3% (4.1)%
Realized annual rent per occupied square foot (e)
(g)............................................... $ 24.35 $ 24.43 (0.3)%
REVPAF (f) (g).................................. $ 20.63 $ 21.57 (4.4)%
Weighted average at March 31:
Square foot occupancy........................... 85.1% 87.5% (2.7)%
In place annual rent per occupied square foot (h) $ 25.96 $ 26.24 (1.1)%
Total net rentable square feet (in thousands)..... 5,160 5,160 -
(a) For comparative purposes, these amounts are presented on a constant
exchange rate basis. The amounts for the three months March 31, 2008 have
been restated using the actual exchange rate for the same period in 2009.
The exchange rate for the Euro relative to the U.S. Dollar averaged 1.306
for the three months ended March 31, 2009, as compared to 1.496 for the
same period in 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.
11
(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.
12
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations (a)
(Unaudited)
Three Months Ended
--------------------------
March 31,
2009 2008
------------ -------------
(Amounts in thousands,
except per share data)
COMPUTATION OF FUNDS FROM OPERATIONS ("FFO") ALLOCABLE TO COMMON SHARES:
------------------------------------------------------------------------
Net Income............................................................. $ 153,429 $ 519,941
Add back - depreciation and amortization........................... 85,167 122,441
Add back - depreciation and amortization included in Discontinued
Operations..................................................... 33 50
Eliminate - depreciation with respect to non-real estate assets.... (60) (61)
Eliminate - gain on sale of real estate investments................ (2,722) (341,865)
Eliminate - gain on sale of real estate included in Discontinued
Operations..................................................... (4,181) -
Add back - Depreciation from unconsolidated real estate investments 17,632 12,172
------------ -------------
Consolidated FFO allocable to our equity holders....................... 249,298 312,678
Less: allocations of FFO (to) from noncontrolling equity interests:
Preferred unitholders, based upon distributions paid............... (4,017) (5,403)
Preferred unitholders, based upon redemptions...................... 72,000 -
Other noncontrolling equity interests in subsidiaries.............. (4,879) (6,164)
------------ -------------
Consolidated FFO allocable to Public Storage shareholders 312,402 301,111
Less: allocations of FFO (to) from:
Preferred shareholders, based on distributions paid................ (58,108) (60,333)
Preferred shareholders, based on redemptions ...................... 6,218 -
Restricted share unit holders...................................... (836) (904)
Equity Shares, Series A............................................ (5,131) (5,356)
------------ -------------
Remaining FFO allocable to Common Shares (a)........................... $ 254,545 $ 234,518
============ =============
WEIGHTED AVERAGE SHARES:
-----------------------
Regular common shares.............................................. 168,312 168,586
Weighted average share options outstanding using treasury method .. 161 396
------------ -------------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share.............................. 168,473 168,982
============ =============
FFO per diluted common share (a)....................................... $ 1.51 $ 1.39
============ =============
(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.
13
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
Three Months Ended
March 31,
--------------------------
2009 2008
----------- ------------
(Amounts in thousands)
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to Common Shares (a)....................... $ 254,545 $ 234,518
Add: Non-cash share-based compensation expense........... 2,613 2,774
Eliminate: Non-cash foreign currency exchange losses
(gains).............................................. 34,733 (40,971)
Less: Allocation of FFO from preferred unitholders and
preferred shareholders based upon redemptions,
including our equity share of PSB's redemption
activities........................................... (94,502) -
Less: Aggregate capital expenditures..................... (8,499) (6,874)
----------- ------------
Funds available for distribution ("FAD") (b)............. $ 188,890 $ 189,447
=========== ============
Distribution to common shareholders...................... $ 92,582 $ 92,377
=========== ============
Distribution payout ratio (b) ........................... 49.0% 48.8%
=========== ============
(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 share-based compensation expense, (iii) non-cash allocations to
or from preferred equity holders, less (iv) capital expenditures to
maintain our facilities and (v) 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.
14
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
March 31,
--------------------------
2009 2008
------------ ------------
(Amounts in thousands)
Revenues for the Same Store facilities............... $ 347,185 $ 349,991
Revenues for other domestic facilities (a) .......... 24,413 19,893
Revenues for Shurgard Europe's facilities, which
were deconsolidated March 31, 2008 .................. - 54,722
------------ ------------
Consolidated self-storage revenues (b)............... $ 371,598 $ 424,606
============ ============
Cost of operations for the Same Store facilities..... $ 125,007 $ 123,856
Cost of operations for other facilities (a) ......... 8,634 8,305
Cost of operations for Shurgard Europe's facilities,
which were deconsolidated March 31, 2008............. - 24,654
------------ ------------
Consolidated self-storage cost of operations (b)..... $ 133,641 $ 156,815
============ ============
(a) We consolidate the operating results of additional self-storage facilities
that are not Same Store facilities.
(b) 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.
15