Exhibit 99.1
News Release
Public Storage
701 Western Avenue
Glendale, CA 91201-2349
www.publicstorage.com
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For Release: Immediately
Date: August 6, 2009
Contact: Clemente Teng
(818) 244-8080
Public Storage Reports Results for the Second Quarter Ended June 30, 2009
GLENDALE, California - Public Storage (NYSE:PSA) announced today operating
results for the second quarter ended June 30, 2009.
OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2009
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Net income to our shareholders for the three months ended June 30, 2009 was
$199.2 million compared to $133.8 million for the same period in 2008,
representing an increase of $65.4 million. This increase is primarily due to (i)
a $33.2 million foreign exchange gain during the quarter ended June 30, 2009,
(ii) a $25.4 million reduction in general and administrative expenses due to
incentive compensation incurred in the quarter ended June 30, 2008 related to
our disposition of an interest in Shurgard Europe, and (iii) an $11.0 million
reduction in depreciation and amortization, primarily due to reduced intangible
amortization, offset by (iv) a reduction in Same Store facility operations and
(v) an impairment charge included in discontinued operations with respect to
intangible assets totaling $8.2 million in the quarter ended June 30, 2009.
Revenues for the Same Store Facilities decreased 3.5% or $12.6 million in the
quarter ended June 30, 2009 as compared to the same period in 2008, due to a
2.9% reduction in realized rent per occupied square foot, combined with a 1.1%
reduction in average occupancies. Cost of operations for the Same Store
Facilities declined 3.4% or $4.1 million in the quarter ended June 30, 2009 as
compared to the same period in 2008, due primarily to a $2.6 million reduction
in media advertising and a $1.5 million reduction in repairs and maintenance,
offset by a 4.3% ($1.5 million) increase in property tax expense.
For the three months ended June 30, 2009, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
shareholders) was $135.5 million or $0.80 per common share on a diluted basis
compared to $68.0 million or $0.40 per common share on a diluted basis for the
same period in 2008, representing an increase of $67.5 million or $0.40 per
common share on a diluted basis. These increases are primarily due to the impact
of the factors described above.
Weighted average diluted common shares were 168,528,000 and 168,479,000,
respectively, for the three months ended June 30, 2009 and 2008.
OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2009
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Net income to our shareholders for the six months ended June 30, 2009 was $416.2
million compared to $646.2 million for the same period in 2008, representing a
decrease of $230.0 million. This decrease is primarily due to (i) a gain of
$341.8 million in the six months ended June 30, 2008 related to our disposition
of an interest in Shurgard Europe and (ii) an impairment charge included in
discontinued operations with respect to intangible assets totaling $8.2 million
in the six months ended June 30, 2009, (iii) a foreign exchange gain of $41.0
million during the same period in 2008, and (iv) a reduction in Same Store
operations, partially offset by (v) a $72.0 million reduction in earnings
allocated to our preferred partnership unitholders in the first quarter of 2009
associated with the redemption of securities, (vi) a reduction in general and
administrative expenses due to $27.9 million in incentive compensation incurred
in the six months ended June 30, 2008 related to our disposition of an interest
in Shurgard Europe, and (vii) a $26.5 million reduction in depreciation and
amortization related to our domestic assets, primarily representing reduced
intangible amortization.
Revenues for the Same Store Facilities decreased 2.2% or $15.4 million in the
six months ended June 30, 2009 as compared to the same period in 2008, due to a
1.5% reduction in realized rent per occupied square foot, combined with a 1.1%
reduction in average occupancies. Cost of operations for the Same Store
Facilities declined 1.2% or $2.9 million in the six months ended June 30, 2009
as compared to the same period in 2008, due primarily to a $1.4 million
reduction in media advertising and a $2.2 million reduction in repairs and
maintenance, offset by a 4.1% ($2.9 million) increase in property tax expense.
For the six months ended June 30, 2009, net income allocable to our common
shareholders (after allocating net income to our preferred and equity
1
shareholders) was $295.0 million or $1.75 per common share on a diluted basis
compared to $512.8 million or $3.04 per common share on a diluted basis for the
same period in 2008, representing a decrease of $217.8 million or $1.29 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 168,501,000 and 168,731,000,
respectively, for the six months ended June 30, 2009 and 2008.
FUNDS FROM OPERATIONS
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For the three months ended June 30, 2009, funds from operations ("FFO")
increased to $1.40 per common share on a diluted basis as compared to $1.10 per
common share for the same period in 2008, representing an increase of $0.30 per
common share, or 27.3%.
For the three months ended June 30, 2009, FFO was impacted by (i) a foreign
currency exchange gain totaling $33.2 million (compared to an exchange loss of
$2,000 for the same period in 2008) and (ii) an impairment charge with respect
to an intangible asset resulting from an eminent domain proceeding totaling $8.2
million. For the three months ended June 30, 2008, FFO was impacted as a result
of incentive compensation with respect to our disposition of an interest in
Shurgard Europe included in general and administrative expense totaling $25.4
million.
For the six months ended June 30, 2009, FFO increased to $2.91 per common share
on a diluted basis as compared to $2.49 per common share for the same period in
2008, representing an increase of $0.42 per share, or 16.9%.
For the six months ended June 30, 2009, FFO has been impacted by (i) a foreign
currency exchange loss totaling $1.5 million (compared to a gain of $41.0
million for the same period in 2008), (ii) an impairment charge with respect to
an intangible asset resulting from an eminent domain proceeding totaling $8.2
million, (iii) costs incurred to terminate and wind down our truck rental
operations of $3.5 million, (iv) a $78.2 million reduction in the allocation of
net income to our preferred shareholders and unitholders pursuant to the
redemption of our preferred securities, combined with our pro-rata share ($16.3
million) of PS Business Park's ("PSB") earnings representing the benefit from
its preferred securities repurchases which is included in equity in earnings,
and (v) a gain on the early redemption of debt totaling $4.1 million. FFO for
the six months ended June 30, 2008 was also impacted by incentive compensation
with respect to our disposition of an interest in Shurgard Europe included in
general and administrative expense totaling $27.9 million.
The following table provides a summary of the impact of these items that
occurred during the three and six months ended June 30, 2009 and 2008:
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
Percentage Percentage
2009 2008 Change 2009 2008 Change
---------- --------- ---------- --------- --------- ----------
FFO per common share prior to adjustments for the
following items............................... $ 1.25 $ 1.25 - $ 2.41 $ 2.42 (0.4)%
Foreign currency exchange (loss) gain, net....... 0.20 - (0.01) 0.24
Impairment charge on intangible asset resulting
from an eminent domain proceeding............. (0.05) - (0.05) -
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 redemption of debt................. - - 0.02 -
Incremental incentive compensation incurred in
connection with the disposition of an interest
in Shurgard Europe............................ - (0.15) - (0.17)
---------- --------- ---------- --------- --------- ----------
FFO per common share, as reported................ $ 1.40 $ 1.10 27.3% $ 2.91 $ 2.49 16.9%
========== ========= ========== ========= ========= ==========
PROPERTY OPERATIONS - SAME STORE FACILITIES
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The Same Store group of facilities represents those 1,899 facilities that we
have owned, and have been operated on a stabilized basis, since January 1, 2007
and therefore provide meaningful comparisons for 2007, 2008, and 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 June 30, 2009.
2
SELECTED OPERATING DATA FOR THE SAME STORE
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FACILITIES (1,899 FACILITIES): Three Months Ended June 30, Six Months Ended June 30,
- ------------------------------ ---------------------------------------- ------------------------------------
Percentage Percentage
2009 2008 Change 2009 2008 Change
-------------- ------------- ---------- ------------ ------------ ----------
(Dollar amounts in thousands, except for weighted average data)
Revenues:
Rental income............................... $ 330,854 $ 344,703 (4.0) $ 662,393 $ 680,256 (2.6)%
Late charges and admin fees collected....... 15,985 14,758 8.3% 31,631 29,196 8.3%
-------------- ------------- ---------- ------------ ------------ ----------
Total revenues (a)....................... 346,839 359,461 (3.5)% 694,024 709,452 (2.2)%
-------------- ------------- ---------- ------------ ------------ ----------
Cost of operations:
Property taxes.............................. 36,659 35,156 4.3% 74,421 71,505 4.1%
Direct property payroll..................... 23,339 23,329 0.0% 47,699 47,706 0.0%
Media advertising........................... 7,224 9,836 (26.6)% 15,382 16,783 (8.3)%
Other advertising and promotion............. 5,967 5,027 18.7% 10,581 9,453 11.9%
Utilities................................... 7,899 8,360 (5.5)% 17,497 17,797 (1.7)%
Repairs and maintenance..................... 9,159 10,679 (14.2)% 19,875 22,077 (10.0)%
Telephone reservation center................ 2,817 3,318 (15.1)% 5,611 6,441 (12.9)%
Property insurance.......................... 2,566 2,911 (11.9)% 5,264 6,124 (14.0)%
Other costs of management................... 20,796 21,910 (5.1)% 45,103 46,496 (3.0)%
-------------- ------------- ---------- ------------ ------------ ----------
Total cost of operations (a)............. 116,426 120,526 (3.4)% 241,433 244,382 (1.2)%
-------------- ------------- ---------- ------------ ------------ ----------
Net operating income............................ $ 230,413 $ 238,935 (3.6)% $ 452,591 $ 465,070 (2.7)%
============== ============= ========== ============ ============ ==========
Gross margin.................................... 66.4% 66.5% (0.2)% 65.2% 65.6% (0.6)%
Weighted average for the period:
Square foot occupancy (b)..................... 90.0% 91.0% (1.1)% 88.9% 89.9% (1.1)%
Realized annual rent per occupied square foot
(c)(d)..................................... $ 12.52 $ 12.90 (2.9)% $ 12.69 $ 12.88 (1.5)%
REVPAF (e)(d)................................. $ 11.27 $ 11.74 (4.0)% $ 11.28 $ 11.58 (2.6)%
Weighted average June 30:
Square foot occupancy........................... 90.7% 91.7% (1.1)%
In place annual rent per occupied square foot (f) $ 13.61 $ 14.20 (4.2)%
Total net rentable square feet (in thousands)..... 117,462 117,462 -
a) Seeattached reconciliation of these amounts to our consolidated
self-storage revenues and operating expenses. Revenues and cost of
operations do not include ancillary revenues and expenses generated at the
facilities with respect to tenant reinsurance, retail sales and truck
rentals. "Other costs of management" included in cost of operations
principally represents all the indirect costs incurred in the operations of
the facilities. Indirect costs principally include supervisory costs and
corporate overhead cost incurred to support the operating activities of the
facilities.
b) Square foot occupancies represent weighted average occupancy levels over
the entire period.
c) Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income (which excludes late charges and
administrative fees) by the weighted average occupied square feet 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.
d) Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF. 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.
e) Realized annual rent per available foot or "REVPAF" is computed by dividing
rental income (which excludes late charges and administrative fees) by the
total available net rentable square feet for the period.
f) 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.
3
The following table summarizes additional selected financial data with respect
to the Same Store Facilities (unaudited):
Three Months Ended
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March 31 June 30 September 30 December 31 Full Year
----------- ------------ ------------ -------------- --------------
Total revenues (in 000's):
2009..................................... $ 347,185 $ 346,839 $ 694,024
2008..................................... $ 349,991 $ 359,461 $ 368,976 $ 357,202 $ 1,435,630
Total cost of operations (in 000's):
2009..................................... $ 125,007 $ 116,426 $ 241,433
2008..................................... $ 123,856 $ 120,526 $ 113,972 $ 104,442 $ 462,796
Property taxes (in 000's):
2009..................................... $ 37,762 $ 36,659 $ 74,421
2008..................................... $ 36,349 $ 35,156 $ 36,161 $ 28,159 $ 135,825
Media advertising (in 000's):
2009..................................... $ 8,158 $ 7,224 $ 15,382
2008..................................... $ 6,947 $ 9,836 $ 2,148 $ 922 $ 19,853
Other advertising and promotion (in 000's):
2009..................................... $ 4,614 $ 5,967 $ 10,581
2008..................................... $ 4,426 $ 5,027 $ 4,645 $ 4,137 $ 18,235
REVPAF:
2009..................................... $ 11.29 $ 11.27 $ 11.28
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 $ 12.52 $ 12.69
2008..................................... $ 12.87 $ 12.90 $ 13.29 $ 13.27 $ 13.08
Weighted average square foot occupancy levels
for the period:
2009..................................... 87.9% 90.0% 88.9%
2008..................................... 88.8% 91.0% 90.5% 87.8% 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.
Shurgard Europe has an interest in 184 facilities (9.8 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)233 million ($328
million) of outstanding debt at June 30, 2009. The loans are payable to various
banks and are non-recourse to Shurgard Europe. The maturity dates of each of the
JV loans were recently extended. One of the JV loans, totaling (euro)112 million
($158 million), is now due May 2012 and the other JV loan, totaling (euro)121
million ($170 million), is due July 2010.
Our existing (euro)391.9 million ($550.5 million at June 30, 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 which has since been reduced to
(euro)185 million due to the refinancing of one of the JV loans. 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 partner's
interests are subject to our approval and Shurgard Europe's pro rata share of
the aggregate joint venture debt is approximately (euro)50 million. In March
2009, Shurgard Europe's joint venture partner gave us its exit notice indicating
its intent to sell its interest in one of the joint ventures. In June 2009, the
joint venture partner withdrew its exit notice.
4
LIQUIDITY POSITION
- ------------------
At June 30, 2009, we had approximately $585 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 June 30, 2009, other than outstanding debt maturities.
At June 30, 2009, outstanding debt totaled $524 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 six months ended June 30, 2009, our
funds from operations available to distribute to common shareholders ("FAD")
exceeded our regular common distributions by approximately $193 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 August 6, 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 September 30, 2009 to shareholders of record as
of September 15, 2009.
SECOND QUARTER CONFERENCE CALL
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A conference call is scheduled for Friday, August 7, 2009, at 10:00 a.m. (PDT)
to discuss the second quarter ended June 30, 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
18935172). A simultaneous audio web cast may be accessed by using the link at
www.publicstorage.com under "Company Info, Investor Relations" (conference ID
number 18935172). A replay of the conference call may be accessed through August
21, 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." All forms of replay utilize conference ID number 18935172.
ABOUT PUBLIC STORAGE
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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 June 30, 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
185 storage facilities located in seven Western European nations with
approximately ten million net rentable square feet. The Company also owns a 46%
common equity interest in PS Business Parks (NYSE:PSB) which owned and operated
approximately 19.6 million rentable square feet of commercial space, primarily
flex, multitenant office and industrial space, at June 30, 2009.
Additional information about Public Storage is available on our website,
www.publicstorage.com.
FORWARD-LOOKING STATEMENTS
- --------------------------
All statements in this press release, other than statements of historical fact,
are forward-looking statements which may be identified by the use of the words
"expects," "believes," "anticipates," "should," "estimates" and similar
expressions. These forward-looking statements involve known and unknown risks
and uncertainties, which may cause Public Storage's actual results and
performance to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact future results and
performance are described from time to time in Public Storage's filings with the
Securities and Exchange Commission, including in Item 1A, "Risk Factors" in
Public Storage's Annual Report on Form 10-K for the fiscal year ended December
31, 2008, Form 10-Q for the period ended June 30, 2009 expected to be filed on
or before August 10, 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
5
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 filling
up our newly-developed facilities; and economic uncertainty due to the impact of
war or terrorism. Public Storage disclaims any obligation to update publicly or
otherwise revise any forward-looking statements, whether as a result of new
information, new estimates, or other factors, events or circumstances after the
date of this press release, except where expressly required by law.
6
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Comparisons of our revenues and expenses for the six months ended June 30, 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 as of that date.
Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51", EITF 03-6-1,
"Participating Securities and the Two-Class Method under FASB Statement No.
128", and certain other associated standards became effective January 1, 2009.
As a result, adjustments have been made from the amounts previously presented
for the three and six months ended June 30, 2008. The nature of these
adjustments are described more fully in Note 2 to our March 31, 2009 Financial
Statements included in our Form 10-Q for the quarter ended March 31, 2009.
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- --------------------------------
2009 2008 2009 2008
-------------- -------------- --------------- --------------
(Amounts in thousands, except per share amounts)
REVENUES:
Self-storage............................................. $ 371,630 $ 380,770 $ 742,869 $ 805,043
Ancillary operations (b)................................. 28,106 26,710 53,941 56,747
Interest and other income (a)............................ 7,516 11,014 15,149 13,858
-------------- -------------- --------------- --------------
407,252 418,494 811,959 875,648
-------------- -------------- --------------- --------------
EXPENSES:
Cost of operations:
Self-storage........................................... 124,478 128,124 257,952 284,779
Ancillary operations (b)............................... 10,374 12,064 20,027 23,368
Depreciation and amortization (c)........................ 83,796 94,829 168,762 217,069
General and administrative (d)........................... 8,199 33,173 17,878 48,089
Interest expense......................................... 7,288 9,601 15,416 26,088
-------------- -------------- --------------- --------------
234,135 277,791 480,035 599,393
-------------- -------------- --------------- --------------
Income from continuing operations before equity in earnings of
real estate entities, gain (loss) on disposition of real estate
investments or early redemption of debt and foreign currency
exchange gain (loss)...................................... 173,117 140,703 331,924 276,255
Equity in earnings of real estate entities (a)............... 7,398 4,632 30,209 7,361
Gain (loss) on disposition of real estate investments........ - (92) 2,722 341,773
Gain on early redemption of debt............................. - - 4,114 -
Foreign currency exchange gain (loss) (e).................... 33,205 (2) (1,528) 40,969
-------------- -------------- --------------- --------------
Income from continuing operations............................ 213,720 145,241 367,441 666,358
Discontinued operations (b).................................. (8,333) (1,286) (8,625) (2,462)
-------------- -------------- --------------- --------------
NET INCOME................................................... 205,387 143,955 358,816 663,896
Net income allocable (to) from noncontrolling equity
- -----------------------------------------------------------
interests:
- ----------
Preferred unitholders, based upon distributions paid...... (1,813) (5,403) (5,830) (10,806)
Preferred unitholders, based upon redemptions (f)........ - - 72,000 -
Other noncontrolling interests in subsidiaries............ (4,402) (4,739) (8,812) (6,935)
-------------- -------------- --------------- --------------
NET INCOME ALLOCABLE TO PUBLIC STORAGE SHAREHOLDERS.......... $ 199,172 $ 133,813 $ 416,174 $ 646,155
============== ============== =============== ==============
Allocation of net income to Public Storage Shareholders:
Preferred shareholders, based on distributions paid...... $ 58,108 $ 60,333 $ 116,216 $ 120,666
Preferred shareholders, based on redemptions............. - - (6,218) -
Equity Shares, Series A.................................. 5,131 5,356 10,262 10,712
Restricted share units................................... 446 146 932 1,971
Common shareholders...................................... 135,487 67,978 294,982 512,806
-------------- -------------- --------------- --------------
$ 199,172 $ 133,813 $ 416,174 $ 646,155
============== ============== =============== ==============
PER COMMON SHARE:
- -----------------
Net income per share - Basic............................. $ 0.80 $ 0.40 $ 1.75 $ 3.05
============== ============== =============== ==============
Net income per share - Diluted........................... $ 0.80 $ 0.40 $ 1.75 $ 3.04
============== ============== =============== ==============
Weighted average common shares - Basic................... 168,348 168,028 168,330 168,307
============== ============== =============== ==============
Weighted average common shares - Diluted................. 168,528 168,479 168,501 168,731
============== ============== =============== ==============
7
(a) Commencing March 31, 2008, we account for our investment in Shurgard Europe
using the equity method of accounting. Our equity in earnings of Shurgard
Europe for the three and six months ended June 30, 2009 and the six months
ended June 30, 2008 totaling $1,709,000, $3,608,000 and $1,457,000,
respectively, are comprised of (i) losses of $4,049,000, $7,300,000 and
$4,819,000, respectively, representing our 49% pro-rata share of Shurgard
Europe's net loss for the respective periods and (ii) income of $5,758,000,
$10,908,000, and $6,276,000, respectively, representing our 49% pro-rata
share of the interest income and trademark license fees received from
Shurgard Europe for the respective periods (such amounts are presented as
equity in earnings of real estate entities rather than interest and other
income). Equity in earnings for the six months ended June 30, 2009 includes
$16.3 million in income related to PS Business Parks' repurchases of its
preferred securities.
(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 for all periods presented from
ancillary operations to discontinued operations. During the second quarter
of 2009, we reclassified the historical operations of a self-storage
facility that is expected to be disposed of pursuant to a condemnation
proceeding within the next year. In addition to the historical revenues and
expenses of this self-storage facility, discontinued operations includes an
impairment charge totaling $8.2 million related to the intangible assets of
this facility recorded in the quarter ended June 30, 2009. Discontinued
operations for the six months ended June 30, 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 and six months ended
June 30, 2009 decreased when compared to the same periods in 2008 primarily
due to reductions in amortization expense related to domestic intangible
assets, primarily those obtained in the Shurgard Merger. In addition,
depreciation and amortization expense for the six months ended June 30,
2009 compared to the same period in 2008, was impacted by the
deconsolidation of Shurgard Europe. (d) For the three and six months ended
June 30, 2008, general and administrative expense includes additional
incentive compensation totaling $25.4 million and $27.9 million,
respectively, associated with the disposition of an interest in Shurgard
Europe.
(e) Our foreign currency exchange gains and losses are primarily related to our
loan to Shurgard Europe which is denominated in Euros. When converting the
Euro denominated loan to U.S. Dollars, exchange gains or losses may arise
due to fluctuation in the exchange rates between the value of the U.S.
Dollar and the Euro.
(f) During the six months ended June 30, 2009, we repurchased various series of
our preferred shares and units for an aggregate of $170.5 million. This
amount 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.
8
PUBLIC STORAGE
SELECTED FINANCIAL DATA
June 30, December 31,
2009 2008
----------------- ------------------
(Amounts in thousands, except share
and per share data)
ASSETS (Unaudited)
Cash and cash equivalents .................................... $ 584,860 $ 680,701
Operating real estate facilities:
Land and buildings, at cost................................ 10,250,653 10,207,022
Accumulated depreciation................................... (2,568,215) (2,405,473)
----------------- ------------------
7,682,438 7,801,549
Construction in process....................................... 12,703 20,340
----------------- ------------------
7,695,141 7,821,889
Investment in real estate entities............................ 562,732 544,598
Goodwill...................................................... 174,634 174,634
Intangible assets, net........................................ 40,511 52,005
Loan receivable from Shurgard Europe.......................... 550,499 552,361
Other assets.................................................. 95,459 109,857
----------------- ------------------
Total assets........................................... $ 9,703,836 $ 9,936,045
================= ==================
LIABILITIES AND EQUITY
Notes payable................................................. $ 524,440 $ 643,811
Accrued and other liabilities................................. 219,697 212,353
----------------- ------------------
Total liabilities...................................... 744,137 856,164
Redeemable noncontrolling interests in subsidiaries .......... 12,872 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, 168,355,703 shares issued and
outstanding (168,279,732 at December 31, 2008)........... 16,837 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............................................ 5,673,201 5,590,093
Retained earnings (deficit)................................ (258,732) (290,323)
Accumulated other comprehensive loss....................... (18,090) (31,931)
----------------- ------------------
Total Public Storage shareholders' equity................ 8,812,993 8,708,995
----------------- ------------------
Equity of permanent noncontrolling interests in subsidiaries:
Preferred partnership units............................ 100,000 325,000
Other interests........................................ 33,834 33,109
----------------- ------------------
Total equity............................................. 8,946,827 9,067,104
----------------- ------------------
Total liabilities and equity........................... $ 9,703,836 $ 9,936,045
================= ==================
9
SHURGARD EUROPE SAME STORE SELECTED OPERATING DATA
- --------------------------------------------------
The Shurgard Europe Same Store represents those 94 facilities that they have
owned and have been operated on a stabilized basis since January 1, 2007 and
therefore provide meaningful comparisons for 2007, 2008, and 2009. 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 June 30, Six Months Ended June 30,
- ----------------------------------- ---------------------------------------- -------------------------------------
Percentage Percentage
2009 2008(a) Change 2009 2008 (a) Change
------------ ------------- ---------- ------------ ------------- ----------
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates)
Revenues:
Rental income..................................... $ 27,815 $ 29,224 (4.8)% $ 54,422 $ 57,052 (4.6)%
Late charges and admin fees collected............. 451 517 (12.8)% 886 996 (11.0)%
------------ ------------- ---------- ------------ ------------- ----------
Total revenues ................................ 28,266 29,741 (5.0)% 55,308 58,048 (4.7)%
------------ ------------- ---------- ------------ ------------- ----------
Cost of operations:
Property taxes ................................... 1,460 1,422 2.7% 2,833 2,748 3.1%
Direct property payroll........................... 3,387 3,315 2.2% 6,671 6,468 3.1%
Advertising and promotion......................... 1,498 1,073 39.6% 2,941 1,802 63.2%
Utilities......................................... 640 694 (7.8)% 1,504 1,364 10.3%
Repairs and maintenance........................... 725 803 (9.7)% 1,527 1,562 (2.2)%
Property insurance................................ 179 188 (4.8)% 343 363 (5.5)%
Other costs of management......................... 4,127 3,986 3.5% 7,860 7,923 (0.8)%
------------ ------------- ---------- ------------ ------------- ----------
Total cost of operations ...................... 12,016 11,481 4.7% 23,679 22,230 6.5%
------------ ------------- ---------- ------------ ------------- ----------
Net operating income ............................. 16,250 18,260 (11.0)% 31,629 35,818 (11.7)%
============ ============= ========== ============ ============= ==========
Gross margin...................................... 57.5% 61.4% (6.4)% 57.2% 61.7% (7.3)%
Weighted average for the period:
Square foot occupancy (b)....................... 86.1% 86.9% (0.9)% 85.4% 87.3% (2.2)%
Realized annual rent per occupied square
foot (c)(d).................................... $ 25.04 $ 26.07 (4.0)% $ 24.70 $ 25.33 (2.5)%
REVPAF (d)(e)................................... $ 21.56 $ 22.65 (4.8)% $ 21.09 $ 22.11 (4.6)%
Weighted average at June 30:
Square foot occupancy........................... 87.0% 87.4% (0.5)%
In place annual rent per occupied square foot (f) $ 26.63 $ 27.66 (3.7)%
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 and six months ended June
30, 2008 have been restated using the actual exchange rate for the same
periods in 2009. The exchange rate for the Euro relative to the U.S. Dollar
averaged 1.361 and 1.334 for the three and six months ended June 30, 2009,
respectively, as compared to 1.563 and 1.530, respectively, for the same
periods in 2008.
(b) Square foot occupancies represent weighted average occupancy levels over
the entire period.
(c) Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income before late charges and administrative
fees by the weighted average occupied square feet 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.
(d) Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF. 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.
(e) Realized annual rent per available foot or "REVPAF" is computed by dividing
rental income before late charges and admin fees by the total available net
rentable square feet for the period.
(f) 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.
10
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations
(Unaudited)
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. The following table
reconciles from net income to Funds from Operations, and sets forth the
computation of Funds from Operations per share:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2009 2008 2009 2008
------------ ------------ ----------- ------------
(Amounts in thousands, except per share data)
Computation of Funds from Operations ("FFO") allocable to Common Shares:
Net Income............................................................. $ 205,387 $ 143,955 $ 358,816 $ 663,896
Add back - depreciation and amortization........................... 83,796 94,829 168,762 217,069
Add back - depreciation and amortization included in Discontinued
Operations..................................................... 488 557 722 808
Eliminate - depreciation with respect to non-real estate assets.... (54) (64) (114) (125)
Eliminate - loss (gain) on sale of real estate investments......... - 92 (2,722) (341,773)
Eliminate - equity share of PSB's real estate gain................. (675) - (675) -
Eliminate - gain on sale of real estate included in Discontinued
Operations..................................................... - - (4,181) -
Add back - Depreciation from unconsolidated real estate investments 16,939 22,821 34,571 34,993
------------ ------------ ----------- ------------
Consolidated FFO allocable to our equity holders....................... 305,881 262,190 555,179 574,868
Less: allocations of FFO (to) from noncontrolling equity interests:
Preferred unitholders, based upon distributions paid............... (1,813) (5,403) (5,830) (10,806)
Preferred unitholders, based upon redemptions...................... - - 72,000 -
Other noncontrolling equity interests in subsidiaries.............. (4,862) (4,949) (9,741) (11,113)
------------ ------------ ----------- ------------
Consolidated FFO allocable to Public Storage shareholders.............. 299,206 251,838 611,608 552,949
Less: allocations of FFO (to) from:
Preferred shareholders, based on distributions paid................ (58,108) (60,333) (116,216) (120,666)
Preferred shareholders, based on redemptions ...................... - - 6,218 -
Restricted share unit holders...................................... (834) (643) (1,670) (1,547)
Equity Shares, Series A............................................ (5,131) (5,356) (10,262) (10,712)
------------ ------------ ----------- ------------
Remaining FFO allocable to Common Shares............................... $ 235,133 $ 185,506 $ 489,678 $ 420,024
============ ============ =========== ============
Weighted average shares:
Regular common shares.............................................. 168,348 168,028 168,330 168,307
Weighted average share options outstanding using treasury method .. 180 451 171 424
------------ ------------ ----------- ------------
Weighted average common shares for purposes of computing
fully-diluted FFO per common share.............................. 168,528 168,479 168,501 168,731
============ ============ =========== ============
FFO per diluted common share........................................... $ 1.40 $ 1.10 $ 2.91 $ 2.49
============ ============ =========== ============
11
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
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. The following table reconciles from FFO to FAD, and sets forth the
computation of our distribution payout ratio:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
2009 2008 2009 2008
------------- ------------- -------------- --------------
(Amounts in thousands)
COMPUTATION OF FUNDS AVAILABLE FOR DISTRIBUTION ("FAD"):
- --------------------------------------------------------
FFO allocable to Common Shares .......................... $ 235,133 $ 185,506 $ 489,678 $ 420,024
Add: Non-cash share-based compensation expense........... 3,480 3,484 6,093 6,258
Eliminate: Non-cash foreign currency exchange losses (gains) (33,205) 2 1,528 (40,969)
Eliminate: Non-cash intangible impairment charge included in
discontinued operations.............................. 8,205 - 8,205 -
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..................... (24,076) (24,697) (32,575) (31,571)
------------- ------------- -------------- --------------
Funds available for distribution ("FAD") ................ $ 189,537 $ 164,295 $ 378,427 $ 353,742
============= ============= ============== ==============
Distribution to common shareholders...................... $ 92,594 $ 92,432 $ 185,176 $ 184,809
============= ============= ============== ==============
Distribution payout ratio................................ 48.9% 56.3% 48.9% 52.2%
============= ============= ============== ==============
12
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Same Store revenues, cost of operations, and
net operating income to Total Self-Storage revenues, Self-Storage
cost of operations, and net income of the Company
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------------
2009 2008 2009 2008
-------------- ------------- --------------- ----------------
(Amounts in thousands)
Revenues for:
Same Store facilities............................. $ 346,839 $ 359,461 $ 694,024 $ 709,452
Other domestic facilities (a) .................... 24,791 21,309 48,845 40,869
Shurgard Europe's facilities, which were
deconsolidated March 31, 2008 .................... - - - 54,722
-------------- ------------- --------------- ----------------
Self-storage revenues (b)............................ $ 371,630 $ 380,770 $ 742,869 $ 805,043
-------------- ------------- --------------- ----------------
Self-storage cost of operations for:
Same Store facilities............................. $ 116,426 $ 120,526 $ 241,433 $ 244,382
Other facilities (a) ............................. 8,052 7,598 16,519 15,743
Shurgard Europe's facilities, which were
deconsolidated March 31, 2008..................... - - - 24,654
-------------- ------------- --------------- ----------------
Self-storage cost of operations (b).................. $ 124,478 $ 128,124 $ 257,952 $ 284,779
-------------- ------------- --------------- ----------------
Net operating income for:
Same Store facilities............................. $ 230,413 $ 238,935 $ 452,591 $ 465,070
Other facilities (a) ............................. 16,739 13,711 32,326 25,126
Shurgard Europe's facilities, which were
deconsolidated March 31, 2008..................... - - - 30,068
-------------- ------------- --------------- ----------------
Consolidated net operating income (c)................ 247,152 252,646 484,917 520,264
Ancillary revenues................................... 28,106 26,710 53,941 56,747
Interest and other income............................ 7,516 11,014 15,149 13,858
Ancillary cost of operations......................... (10,374) (12,064) (20,027) (23,368)
Depreciation and amortization........................ (83,796) (94,829) (168,762) (217,069)
General and administrative expense................... (8,199) (33,173) (17,878) (48,089)
Interest expense..................................... (7,288) (9,601) (15,416) (26,088)
Equity in earnings of real estate entities........... 7,398 4,632 30,209 7,361
Gain (loss) on disposition of real estate investments - (92) 2,722 341,773
Gain on redemption of debt........................... - - 4,114 -
Foreign exchange gain (loss)......................... 33,205 (2) (1,528) 40,969
Discontinued operations.............................. (8,333) (1,286) (8,625) (2,462)
-------------- ------------- --------------- ----------------
Consolidated net income of the Company............... $ 205,387 $ 143,955 $ 358,816 $ 663,896
============== ============= =============== ================
(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.
(c) We present net operating income "NOI", which is a non-GAAP (generally
accepted accounting principles) financial measure that excludes the impact
of depreciation and amortization expense. Although depreciation and
amortization is a component of GAAP net income, we believe that NOI is a
meaningful measure of operating performance, because we utilize NOI in
making decisions with respect to capital allocations, segment performance,
and comparing period-to-period and market-to-market property operating
results. In addition, the investment community utilizes NOI in determining
real estate values, and does not consider depreciation expense as it is
based upon historical cost. NOI is not a substitute for net operating
income after depreciation and amortization in evaluating our operating
results.
13