GLENDALE, Calif.--(BUSINESS WIRE)--
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.
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,
2009 2008 Percentage
Change
FFO per common share prior to
adjustments for the following $ 1.16 $ 1.16 -
items
Foreign currency exchange (0.21 ) 0.24
(loss) gain, net
Costs incurred to terminate (0.02 ) -
truck rental operations
Increased income allocated to
common shareholders, and from
preferred equity shareholders, 0.56 -
pursuant to preferred
redemptions, including our
equity share from PSB
Gain on early extinguishment 0.02 -
of debt
Costs and expenses incurred in
connection with the - (0.01 )
disposition of an interest in
Shurgard Europe
FFO per common share, as $ 1.51 $ 1.39 8.6 %
reported
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.
Selected
Operating Data
for the Same Three Months Ended March 31,
Store Facilities
(1,899
Facilities):
2009 2008 Percentage
Change
(Dollar amounts in thousands, except for weighted
average data)
Revenues:
Rental income $ 331,539 $ 335,553 (1.2 )%
Late charges and
administrative 15,646 14,438 8.4 %
fees collected
Total revenues 347,185 349,991 (0.8 )%
(a)
Cost of
operations:
Property taxes 37,762 36,349 3.9 %
Direct property 24,360 24,377 (0.1 )%
payroll
Media advertising 8,158 6,947 17.4 %
Other advertising 4,614 4,426 4.2 %
and promotion
Utilities 9,598 9,437 1.7 %
Repairs and 10,716 11,398 (6.0 )%
maintenance
Telephone
reservation 2,794 3,123 (10.5 )%
center
Property 2,698 3,213 (16.0 )%
insurance
Other costs of 24,307 24,586 (1.1 )%
management
Total cost of 125,007 123,856 0.9 %
operations (a)
Net operating
income before
depreciation and 222,178 226,135 (1.7 )%
amortization
expense (b)
Depreciation and
amortization (75,286 ) (89,358 ) 15.7 %
expense (c)
Operating income $ 146,892 $ 136,777 7.4 %
Gross margin 64.0 % 64.6 % (0.9 )%
Weighted average
for the period:
Square foot 87.9 % 88.8 % (1.0 )%
occupancy (d)
Realized annual
rent per occupied $ 12.84 $ 12.87 (0.2 )%
square foot (e)
(g)
REVPAF (f) (g) $ 11.29 $ 11.43 (1.2 )%
Weighted average
at March 31:
Square foot 88.2 % 89.3 % (1.2 )%
occupancy
In place annual
rent per occupied $ 13.57 $ 13.86 (2.1 )%
square foot (h)
Total net
rentable square 117,462 117,462 -
feet (in
thousands)
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
a) 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.
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
b) is a meaningful measure of operating performance, because we utilize NOI in
making decisions with respect to capital allocations, in determining current
property values, segment performance and comparing period-to-period and
market-to-market property operating results. NOI is not a substitute for net
operating income after depreciation in evaluating our operating results.
Depreciation and amortization expense for the three months ended March 31,
c) 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.
Realized annual rent per occupied square foot is computed by annualizing the
result of dividing rental income by the weighted average occupied square
e) 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.
Annualized rental income per available square foot ("REVPAF") represents
annualized rental income which excludes late charges and administrative fees
f) divided by total available net rentable square feet. Rental income is also
net of promotional discounts and collection costs, including bad debt
expense.
Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF because exclusion
g) 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.
In place annual rent per occupied square foot represents annualized
h) 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 December 31 Full Year
30
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 EUR238 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 EUR117
million ($154 million), is due May 2009 and the other JV loan, totaling
EUR121 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.
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 EUR391.9 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 EUR305 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 EUR50 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.
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.
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.
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 $ 371,598 $ 424,606
income
Ancillary operations 25,835 30,037
(b)
Interest and other 7,633 2,844
income (a)
405,066 457,487
Expenses:
Cost of operations:
Self-storage 133,641 156,815
facilities
Ancillary operations 9,653 11,304
(b)
Depreciation and 85,167 122,441
amortization (c)
General and 9,679 14,916
administrative (d)
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 158,798 135,524
real estate
investments or early
redemption of debt,
and foreign currency
exchange (loss) gain
Equity in earnings of
real estate entities 22,811 2,729
(a)
Gain on disposition of
real estate 2,722 341,865
investments
Gain on early 4,114 -
redemption of debt
Foreign currency
exchange (loss) gain (34,733 ) 40,971
(e)
Income from continuing 153,712 521,089
operations
Discontinued (283 ) (1,148 )
operations (b)
Net income 153,429 519,941
Net income allocable
(to) from
noncontrolling equity
interests:
Preferred unitholders,
based upon (4,017 ) (5,403 )
distributions paid (g)
Preferred unitholders,
based upon redemptions 72,000 -
(f) (g)
Other noncontrolling
interests in (4,410 ) (2,196 )
subsidiaries (g)
Net income allocable
to Public Storage $ 217,002 $ 512,342
Shareholders
Allocation of net
income to Public
Storage Shareholders:
Preferred
shareholders, based on $ 58,108 $ 60,333
distribution paid
Preferred
shareholders, based on (6,218 ) -
redemptions (f)
Equity Shares, Series 5,131 5,356
A
Restricted share units 486 1,825
Common shareholders 159,495 444,828
$ 217,002 $ 512,342
Per common share:
Net income per share - $ 0.95 $ 2.64
Basic
Net income per share - $ 0.95 $ 2.63
Diluted
Weighted average 168,312 168,586
common shares - Basic
Weighted average
common shares - 168,473 168,982
Diluted
Equity in earnings of real estate entities for the three months ended March
(a) 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.
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
(b) 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.
Depreciation and amortization expense for the three months ended March 31,
2009 decreased when compared to the same period in 2008 primarily due to
(c) 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.
For the three months ended March 31, 2008, general and administrative
(d) expense includes additional incentive compensation totaling $2.5 million
associated with the disposition of an interest in Shurgard Europe.
Our foreign currency exchange gains and losses are primarily related to our
(e) 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.
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
(f) 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.
Represents amounts previously classified as "minority interest in income"
(g) as a reduction in net income, prior to the reclassifications described
above under "Changes in Accounting Presentation."
PUBLIC STORAGE
SELECTED FINANCIAL DATA
March 31, December 31,
2009 2008
(Amounts in thousands, except share and per share
data)
ASSETS (Unaudited)
Cash and cash $ 493,400 $ 680,701
equivalents
Operating real
estate
facilities:
Land and
buildings, at 10,223,507 10,207,022
cost
Accumulated (2,485,242 ) (2,405,473 )
depreciation
7,738,265 7,801,549
Construction in 9,317 20,340
process
7,747,582 7,821,889
Investment in
real estate 545,224 544,598
entities
Goodwill 174,634 174,634
Intangible 49,748 52,005
assets, net
Loan receivable
from Shurgard 517,497 552,361
Europe
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 210,573 212,353
liabilities
Total liabilities 737,808 856,164
Redeemable
noncontrolling 12,798 12,777
interests in
subsidiaries (a)
Equity:
Public Storage
shareholders'
equity:
Cumulative
Preferred Shares
of beneficial
interest, $0.01
par value,
100,000,000
shares
authorized,
886,140 shares 3,399,777 3,424,327
issued (in
series) and
outstanding
(887,122 at
December 31,
2008), at
liquidation
preference
Common Shares of
beneficial
interest, $0.10
par value,
650,000,000
shares
authorized, 16,835 16,829
168,343,759
shares issued and
outstanding
(168,279,732 at
December 31,
2008)
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 (42,134 ) (31,931 )
loss
Total Public
Storage 8,742,692 8,708,995
shareholders'
equity
Equity of
permanent
noncontrolling
interests in
subsidiaries (a):
Preferred 100,000 325,000
partnership units
Other interests 33,199 33,109
Total equity 8,875,891 9,067,104
Total liabilities $ 9,626,497 $ 9,936,045
and equity
These amounts were previously classified as "minority interest." See
(a) "Changes in Accounting Presentation" above for further discussion of
restatements made to amounts previously reported as of December 31, 2008.
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 Three Months Ended March 31,
Shurgard Europe on
a stabilized basis
since January 1,
2007: (unaudited)
2009 2008 (a) Percentage
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 435 479 (9.2 )%
fees collected
Total revenues (b) 27,042 28,307 (4.5 )%
Cost of
operations:
Property taxes 1,373 1,326 3.5 %
Direct property 3,284 3,153 4.2 %
payroll
Advertising and 1,443 729 97.9 %
promotion
Utilities 864 670 29.0 %
Repairs and 802 759 5.7 %
maintenance
Property insurance 164 175 (6.3 )%
Other costs of 3,733 3,937 (5.2 )%
management
Total cost of 11,663 10,749 8.5 %
operations (b)
Net operating
income (excluding $ 15,379 $ 17,558 (12.4 )%
depreciation and
amortization) (c)
Gross margin 56.9 % 62.0 % (8.2 )%
Weighted average
for the period:
Square foot 84.7 % 88.3 % (4.1 )%
occupancy (d)
Realized annual
rent per occupied $ 24.35 $ 24.43 (0.3 )%
square foot (e)
(g)
REVPAF (f) (g) $ 20.63 $ 21.57 (4.4 )%
Weighted average
at March 31:
Square foot 85.1 % 87.5 % (2.7 )%
occupancy
In place annual
rent per occupied $ 25.96 $ 26.24 (1.1 )%
square foot (h)
Total net rentable
square feet (in 5,160 5,160 -
thousands)
For comparative purposes, these amounts are presented on a constant
exchange rate basis. The amounts for the three months March 31, 2008 have
(a) 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.
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
(b) 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.
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
(c) 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.
Realized annual rent per occupied square foot is computed by annualizing
the result of dividing rental income by the weighted average occupied
(e) 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.
Annualized rental income per available square foot ("REVPAF") represents
annualized rental income which excludes late charges and administrative
(f) fees divided by total available net rentable square feet. Rental income is
also net of promotional discounts and collection costs, including bad debt
expense.
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,
(g) 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.
In place annual rent per occupied square foot represents annualized
(h) contractual rents per occupied square foot without reductions for
promotional discounts and excludes late charges and administrative fees.
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 85,167 122,441
amortization
Add back -
depreciation and
amortization included 33 50
in Discontinued
Operations
Eliminate -
depreciation with (60 ) (61 )
respect to non-real
estate assets
Eliminate - gain on
sale of real estate (2,722 ) (341,865 )
investments
Eliminate - gain on
sale of real estate
included in (4,181 ) -
Discontinued
Operations
Add back -
Depreciation from 17,632 12,172
unconsolidated real
estate investments
Consolidated FFO
allocable to our 249,298 312,678
equity holders
Less: allocations of
FFO (to) from
noncontrolling equity
interests:
Preferred
unitholders, based (4,017 ) (5,403 )
upon distributions
paid
Preferred
unitholders, based 72,000 -
upon redemptions
Other noncontrolling
equity interests in (4,879 ) (6,164 )
subsidiaries
Consolidated FFO
allocable to Public 312,402 301,111
Storage shareholders
Less: allocations of
FFO (to) from:
Preferred
shareholders, based (58,108 ) (60,333 )
on distributions paid
Preferred
shareholders, based 6,218 -
on redemptions
Restricted share unit (836 ) (904 )
holders
Equity Shares, Series (5,131 ) (5,356 )
A
Remaining FFO
allocable to Common $ 254,545 $ 234,518
Shares (a)
Weighted average
shares:
Regular common shares 168,312 168,586
Weighted average
share options 161 396
outstanding using
treasury method
Weighted average
common shares for
purposes of computing 168,473 168,982
fully-diluted FFO per
common share
FFO per diluted $ 1.51 $ 1.39
common share (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
(a) 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.
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 2,613 2,774
expense
Eliminate: Non-cash foreign currency 34,733 (40,971 )
exchange losses (gains)
Less: Allocation of FFO from preferred
unitholders and preferred shareholders
based upon redemptions, including our (94,502 ) -
equity share of PSB's redemption
activities
Less: Aggregate capital expenditures (8,499 ) (6,874 )
Funds available for distribution ("FAD") $ 188,890 $ 189,447
(b)
Distribution to common shareholders $ 92,582 $ 92,377
Distribution payout ratio (b) 49.0 % 48.8 %
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
(a) 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.
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
(b) 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.
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, - 54,722
which were deconsolidated March 31, 2008
Consolidated self-storage revenues (b) $ 371,598 $ 424,606
Cost of operations for the Same Store $ 125,007 $ 123,856
facilities
Cost of operations for other facilities (a) 8,634 8,305
Cost of operations for Shurgard Europe's
facilities, which were deconsolidated March - 24,654
31, 2008
Consolidated self-storage cost of operations $ 133,641 $ 156,815
(b)
(a) We consolidate the operating results of additional self-storage facilities
that are not Same Store facilities.
Self-storage revenues and cost of operations do not include revenues and
(b) expenses generated at the facilities with respect to tenant reinsurance,
retail sales and truck rentals.
Source: Public Storage
Contact: Public Storage
Clemente Teng
(818) 244-8080