GLENDALE, Calif.--(BUSINESS WIRE)--
Public Storage (NYSE:PSA) announced today operating results for the
third quarter ended September 30, 2009.
Operating Results for the Three Months
Ended September 30, 2009
Net income for the three months ended September 30, 2009 was $244.0
million compared to $147.9 million for the same period in 2008,
representing an increase of $96.1 million. This increase is primarily
due to a foreign currency exchange gain totaling $21.4 million in the
three months ended September 30, 2009 as compared to a foreign currency
exchange loss totaling $53.2 million in the same period in 2008 and a
gain on disposition of $30.3 million related to an equity offering by PS
Business Parks, Inc. ("PSB") described below, offset partially by a
$16.2 million reduction in net operating income with respect to our Same
Store Facilities described below.
Revenues for the Same Store Facilities decreased 4.6% or $16.9 million
in the quarter ended September 30, 2009 as compared to the same period
in 2008, due to a 4.2% reduction in realized rent per occupied square
foot, combined with a 1.0% reduction in average occupancies. Cost of
operations for the Same Store Facilities declined 0.6% or $0.7 million
in the quarter ended September 30, 2009 as compared to the same period
in 2008. Net operating income for our Same Store Facilities decreased
6.3% or $16.2 million in the quarter ended September 30, 2009 as
compared to the same period in 2008.
For the three months ended September 30, 2009, net income allocable to
our common shareholders (after allocating net income to our
noncontrolling interests, preferred and equity stock shareholders, and
holders of restricted stock units) was $173.5 million or $1.03 per
common share on a diluted basis compared to $71.5 million or $0.42 per
common share for the same period in 2008, representing an increase of
$102.0 million or $0.61 per common share on a diluted basis. These
increases are primarily due to the net impact of the factors described
above.
Operating Results for the Nine Months
Ended September 30, 2009
Net income for the nine months ended September 30, 2009 was $602.8
million compared to $811.8 million for the same period in 2008,
representing a decrease of $209.0 million. This decrease is primarily
due to (i) a gain of $341.8 million in the nine months ended September
30, 2008 related to our disposition of an interest in Shurgard Europe,
(ii) a $28.6 million reduction in net operating income with respect to
our Same Store Facilities described below, and (iii) an impairment
charge included in discontinued operations with respect to intangible
assets totaling $8.2 million in the nine months ended September 30,
2009, partially offset by (iv) a gain on disposition of $30.3 million
related to an equity offering by PSB described below, (v) a foreign
exchange gain of $19.9 million during the nine months ended September
30, 2009 as compared to a loss of $12.2 million during the same period
in 2008, (vi) a $31.6 million reduction in depreciation and amortization
related to our domestic assets, primarily representing reduced
intangible amortization, and (vii) a reduction in general and
administrative expenses due to $27.9 million in incentive compensation
incurred in the nine months ended September 30, 2008 related to our
disposition of an interest in Shurgard Europe.
Revenues for the Same Store Facilities decreased 3.0% or $32.3 million
in the nine months ended September 30, 2009 as compared to the same
period in 2008, due to a 2.5% reduction in realized rent per occupied
square foot, combined with a 1.0% reduction in average occupancies. Cost
of operations for the Same Store Facilities declined 1.0% or $3.6
million in the nine months ended September 30, 2009 as compared to the
same period in 2008. Net operating income for our Same Store Facilities
decreased 4.0% or $28.6 million for the nine months ended September 30,
2009 as compared to the same period in 2008.
For the nine months ended September 30, 2009, net income allocable to
our common shareholders (after allocating net income to our
noncontrolling interests, preferred and equity stock shareholders, and
holders of restricted stock units) was $468.5 million or $2.78 per
common share on a diluted basis compared to $584.3 million or $3.46 per
common share for the same period in 2008, representing a decrease of
$115.8 million or $0.68 per common share on a diluted basis. These
decreases are primarily due to the net impact of the factors described
above, offset by a $78.2 million reduction in earnings allocated to our
preferred partnership unitholders and preferred shareholders in the nine
months ended September 30, 2009 associated with the repurchase of
securities.
Funds from Operations
For the three months ended September 30, 2009, funds from operations
("FFO") increased to $1.44 per common share as compared to $1.08 per
common share for the same period in 2008, representing an increase of
$0.36 per common share.
For the three months ended September 30, 2009, FFO was impacted by (i) a
foreign currency exchange gain totaling $21.4 million (compared to an
exchange loss of $53.2 million for the same period in 2008) and (ii)
changes in accounting estimates with respect to our tenant insurance
operations reflected as a reduction in ancillary cost of operations
totaling $2.0 million ($7.0 million for the same period in 2008). FFO
for the three months ended September 30, 2008 was also impacted by a
loss with respect to damage to our facilities, and tenant insurance
claims expense, caused by Hurricane Ike aggregating $1.1 million.
For the nine months ended September 30, 2009, FFO increased to $4.35 per
common share on a diluted basis as compared to $3.57 per common share
for the same period in 2008, representing an increase of $0.78 per share.
For the nine months ended September 30, 2009, FFO has been impacted by
(i) a foreign currency exchange gain totaling $19.9 million (compared to
a loss of $12.2 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) changes in accounting
estimates with respect to our tenant insurance operations reflected as a
reduction in ancillary cost of operations totaling $2.0 million ($7.0
million for the same period in 2008), (iv) costs incurred to terminate
and wind down our truck rental operations of $3.5 million, (v) a $78.2
million reduction in the allocation of net income to our preferred
shareholders and unitholders pursuant to the repurchase of our preferred
securities, and our pro-rata share ($16.3 million) of PSB's earnings
from preferred securities repurchases which is included in equity in
earnings, and (vi) a gain on the early retirement of debt totaling $4.1
million. FFO for the nine months ended September 30, 2008 was also
impacted by (i) incentive compensation with respect to our disposition
of an interest in Shurgard Europe included in general and administrative
expense totaling $27.9 million and (ii) a loss with respect to damage to
our facilities, and tenant insurance claims expense, caused by Hurricane
Ike aggregating $1.1 million.
The following table provides a summary of the impact of these items that
occurred during the three and nine months ended September 30, 2009 and
2008:
Three Months Ended September Nine Months Ended September 30,
30,
2009 2008 Percentage 2009 2008 Percentage
Change Change
FFO per
common share
prior to
adjustments $ 1.30 $ 1.37 (5.1 ) % $ 3.71 $ 3.78 (1.9 )%
for the
following
items
Foreign
currency 0.13 (0.32 ) 0.12 (0.07 )
exchange gain
(loss), net
Change in
accounting
estimate - 0.01 0.04 0.01 0.04
ancillary
operations
Impairment
charge on
intangible
asset
resulting - - (0.05 ) -
from an
eminent
domain
proceeding
Casualty loss
and tenant
insurance
loss - (0.01 ) - (0.01 )
associated
with
Hurricane Ike
Costs
incurred to
terminate - - (0.02 ) -
truck rental
operations
Increased
income
allocated to
common
shareholders,
and from
preferred
equity - - 0.56 -
shareholders,
pursuant to
preferred
repurchases,
including our
equity share
from PSB
Gain on early
retirement of - - 0.02 -
debt
Incremental
incentive
compensation
incurred in
connection
with the - - - (0.17 )
disposition
of an
interest in
Shurgard
Europe
FFO per
common share, $ 1.44 $ 1.08 33.3 % $ 4.35 $ 3.57 21.8 %
as reported
Property Operations - Same Store
Facilities
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 September
30, 2009.
Selected
Operating Data
for the Same Three Months Ended September 30, Nine Months Ended September 30,
StoreFacilities
(1,899
Facilities):
2009 2008 Percentage 2009 2008 Percentage
Change Change
(Dollar amounts in thousands, except for weighted average data)
Revenues:
Rental income $ 334,953 $ 353,200 (5.2 )% $ 997,346 $ 1,033,456 (3.5 )%
Late charges
and admin fees 17,168 15,776 8.8 % 48,799 44,972 8.5 %
collected (a)
Total revenues 352,121 368,976 (4.6 )% 1,046,145 1,078,428 (3.0 )%
(b)
Cost of
operations:
Property taxes 37,137 36,161 2.7 % 111,558 107,666 3.6 %
Direct property 23,321 22,862 2.0 % 71,020 70,568 0.6 %
payroll
Media 3,430 2,148 59.7 % 18,812 18,931 (0.6 )%
advertising
Other
advertising and 4,942 4,645 6.4 % 15,523 14,098 10.1 %
promotion
Utilities 9,235 10,238 (9.8 )% 26,732 28,035 (4.6 )%
Repairs and 8,992 9,765 (7.9 )% 28,867 31,842 (9.3 )%
maintenance
Telephone
reservation 2,890 3,183 (9.2 )% 8,501 9,624 (11.7 )%
center
Property 2,240 2,642 (15.2 )% 7,504 8,766 (14.4 )%
insurance
Other costs of 21,099 22,328 (5.5 )% 66,202 68,824 (3.8 )%
management
Total cost of 113,286 113,972 (0.6 )% 354,719 358,354 (1.0 )%
operations (b)
Net operating $ 238,835 $ 255,004 (6.3 )% $ 691,426 $ 720,074 (4.0 )%
income
Gross margin 67.8 % 69.1 % (1.9 )% 66.1 % 66.8 % (1.0 )%
Weighted
average for the
period:
Square foot 89.6 % 90.5 % (1.0 )% 89.2 % 90.1 % (1.0 )%
occupancy (c)
Realized annual
rent per $ 12.73 $ 13.29 (4.2 )% $ 12.69 $ 13.02 (2.5 )%
occupied square
foot (d)(e)
REVPAF (f)(e) $ 11.41 $ 12.03 (5.2 )% $ 11.32 $ 11.73 (3.5 )%
Weighted
average
September 30:
Square foot 88.7 % 89.4 % (0.8 )%
occupancy
In place annual
rent per $ 13.65 $ 14.37 (5.0 )%
occupied square
foot (g)
Total net
rentable square 117,462 117,462 -
feet (in
thousands)
Late charges and administrative fees have increased primarily due to
a) increases in the related fee rates rather than any increase in tenant
delinquency.
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
b) 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.
c) 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 (which excludes late charges and
d) 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.
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
e) excluding the volatility of late charges, which are dependent principally
upon the level of tenant delinquency and the associated fee rates, and
administrative fees, which are dependent principally upon the absolute level
of move-ins for a period.
Realized annual rent per available foot or "REVPAF" is computed by dividing
f) rental income (which excludes late charges and administrative fees) by the
total available net rentable square feet for the period.
In place annual rent per occupied square foot represents annualized
g) 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 Total
30
Total
revenues
(in 000's):
2009 $ 347,185 $ 346,839 $ 352,121 $ 1,046,145
2008 $ 349,991 $ 359,461 $ 368,976 $ 357,202 $ 1,435,630
Total cost
of
operations
(in 000's):
2009 $ 125,007 $ 116,426 $ 113,286 $ 354,719
2008 $ 123,856 $ 120,526 $ 113,972 $ 104,442 $ 462,796
Property
taxes (in
000's):
2009 $ 37,762 $ 36,659 $ 37,137 $ 111,558
2008 $ 36,349 $ 35,156 $ 36,161 $ 28,159 $ 135,825
Media
advertising
(in 000's):
2009 $ 8,158 $ 7,224 $ 3,430 $ 18,812
2008 $ 6,947 $ 9,836 $ 2,148 $ 922 $ 19,853
Other
advertising
and
promotion
(in 000's):
2009 $ 4,614 $ 5,967 $ 4,942 $ 15,523
2008 $ 4,426 $ 5,027 $ 4,645 $ 4,137 $ 18,235
REVPAF:
2009 $ 11.29 $ 11.27 $ 11.41 $ 11.32
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 $ 12.73 $ 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 % 89.6 % 89.2 %
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 joint
venture that 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 186 facilities (9.9 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 EUR230 million ($336
million) of outstanding debt at September 30, 2009. The loans are
payable to various banks and are non-recourse to Shurgard Europe. One of
the JV loans, totaling EUR110 million ($161 million), is due May 2011 and
the other JV loan, totaling EUR120 million ($175 million), is due July
2010.
Effective October 31, 2009, we extended the maturity date to March 31,
2013 for our existing EUR391.9 million ($571.8 million at September 30,
2009) loan to Shurgard Europe. Under the terms of the extension, the
existing 7.5% rate of interest increased to 9.0% per annum (effective
November 1, 2009). All other material terms and covenants remain the
same. 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.
Our existing commitment to provide up to EUR185 million to 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, remains in place until March 31, 2010. 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 EUR46 million.
Liquidity Position
At September 30, 2009, we had approximately $671 million of unrestricted
cash and have access to an additional $300 million line of credit. The
line of credit expires March 27, 2012. We have no significant capital
commitments at September 30, 2009, other than outstanding debt
maturities.
At September 30, 2009, outstanding debt totaled $522 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 nine months ended
September 30, 2009, our funds from operations available to distribute to
common shareholders ("FAD") exceeded our regular common distributions by
approximately $306 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.
Equity Issuance of PS Business Parks,
Inc.
On August 14, 2009, PSB completed a public offering of 3,450,000 shares
of its common stock. Concurrent with the offering, we acquired 383,333
shares from PSB at the same price as offered to the public ($46.50 a
share). As a result of these transactions, our ownership interest in PSB
decreased from approximately 46% at June 30, 2009 to 41% at September
30, 2009. In applying Item 9 of EITF 08-6, "Equity Method Investment
Considerations," we recognized a gain on disposition of $30.3 million.
This gain was recorded as a gain on disposition of real estate
investments in the three months ended September 30, 2009, and had no
impact on our FFO.
Distributions Declared
On November 5, 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 December
30, 2009 to shareholders of record as of December 15, 2009.
Third Quarter Conference Call
A conference call is scheduled for Friday, November 6, 2009, at 10:00
a.m. (PST) to discuss the third quarter ended September 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 35067204). A simultaneous audio web
cast may be accessed by using the link at www.publicstorage.com
under "Company Info, Investor Relations" (conference ID number
35067204). A replay of the conference call may be accessed through
November 20, 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 35067204.
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 September 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 187
storage facilities located in seven Western European nations with
approximately ten million net rentable square feet operated under the
"Shurgard" brand. The Company also owns a 41% 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 September 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 September
30, 2009 expected to be filed on or before November 9, 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 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.
PUBLIC STORAGE
SELECTED FINANCIAL DATA
(Unaudited)
Comparisons of our revenues and expenses for the nine months ended September
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.
On January 1, 2009, accounting standards promulgated by the FASB became
effective which affected the classification of ownership interests other than
those of the Company, such as limited partnership interests in entities that
are consolidated in the financial statements of the Company. As a result, we
have reclassified these equity interests previously referred to as minority
interests on our balance sheet at December 31, 2008 to "permanent
noncontrolling interests in subsidiaries" or "redeemable noncontrolling
interests in subsidiaries." The nature of these adjustments is described more
fully in Note 2 to our June 30, 2009 Financial Statements included in our Form
10-Q for the quarter ended June 30, 2009.
Three Months Ended September Nine Months Ended September 30,
30,
2009 2008 2009 2008
(Amounts in thousands, except per share amounts)
Revenues:
Self-storage $ 378,207 $ 392,738 $ 1,121,076 $ 1,197,781
Ancillary 27,800 26,946 81,741 83,693
operations (a)
Interest and
other income 6,857 11,485 22,006 25,343
(b)
412,864 431,169 1,224,823 1,306,817
Expenses:
Cost of
operations:
Self-storage 121,261 121,579 379,213 406,358
Ancillary
operations (a) 7,493 3,756 27,520 27,124
(c)
Depreciation
and 85,908 91,084 254,670 308,153
amortization
(d)
General and
administrative 8,654 8,879 26,532 56,968
(e)
Interest 7,289 9,099 22,705 35,187
expense
230,605 234,397 710,640 833,790
Income from
continuing
operations
before equity
in earnings of
real estate
entities,
gains on
disposition of
real estate 182,259 196,772 514,183 473,027
investments,
net, gain on
early
retirement of
debt, foreign
currency
exchange gain
(loss) and
casualty loss
Equity in
earnings of
real estate 8,824 6,318 39,033 13,679
entities (b)
(f)
Gains on
disposition of
real estate 30,573 1,024 33,295 342,797
investments,
net (i)
Gain on early
retirement of - - 4,114 -
debt
Foreign
currency 21,429 (53,172 ) 19,901 (12,203 )
exchange gain
(loss) (g)
Casualty loss - (525 ) - (525 )
Income from
continuing 243,085 150,417 610,526 816,775
operations
Discontinued 866 (2,475 ) (7,759 ) (4,937 )
operations (a)
Net income 243,951 147,942 602,767 811,838
Net income
allocable (to)
from
noncontrolling
equity
interests:
Preferred
unitholders,
based upon (1,813 ) (5,403 ) (7,643 ) (16,209 )
distributions
paid
Preferred
unitholders,
based upon - - 72,000 -
repurchases
(h)
Other
noncontrolling (4,829 ) (5,208 ) (13,641 ) (12,143 )
interests in
subsidiaries
Net income
allocable to $ 237,309 $ 137,331 $ 653,483 $ 783,486
Public Storage
Shareholders
Allocation of
net income to
Public Storage
Shareholders:
Preferred
shareholders,
based on $ 58,108 $ 60,333 $ 174,324 $ 180,999
distributions
paid
Preferred
shareholders,
based on - - (6,218 ) -
repurchases
(h)
Equity Shares, 5,131 5,356 15,393 16,068
Series A
Restricted 577 183 1,509 2,154
share units
Common 173,493 71,459 468,475 584,265
shareholders
$ 237,309 $ 137,331 $ 653,483 $ 783,486
Per common
share:
Net income per $ 1.03 $ 0.43 $ 2.78 $ 3.47
share - Basic
Net income per
share - $ 1.03 $ 0.42 $ 2.78 $ 3.46
Diluted
Weighted
average common 168,373 168,133 168,344 168,248
shares - Basic
Weighted
average common 169,043 168,560 168,681 168,673
shares -
Diluted
During the first nine months of 2009, we discontinued the containerized
storage and truck rental operations as well as a self-storage facility that
is expected to be disposed of pursuant to a condemnation proceeding within
the next year. As a result, the historical operations from these activities
have been reclassified for all periods presented from ancillary or
(a) self-storage operations to discontinued operations. Included in
discontinued operations for the nine months ended September 30, 2009 is a
$8.2 million impairment charge with respect to intangible self-storage
assets, gains on disposition of storage facilities of approximately $6.0
million ($1.8 million for the three months ended September 30, 2009), as
well as $3.5 million in costs associated with the disposal of trucks.
Commencing March 31, 2008, we account for our investment in Shurgard Europe
using the equity method of accounting. In addition to our 49% pro-rata
share of the net loss of Shurgard Europe, our equity in earnings of
Shurgard Europe includes our 49% pro-rata share of the interest income on
(b) the EUR391.9 million note due from Shurgard Europe as well as trademark
license fees received from Shurgard Europe for the respective periods after
March 31, 2008. Interest and other income includes 51% of the interest
income and trademark license fees received from Shurgard Europe for the
respective periods after March 31, 2008.
Included in ancillary cost of operations is a reduction due to changes in
(c) accounting estimates, totaling $2.0 million and $7.0 million, respectively,
in each of the three and nine months ended September 30, 2009 and 2008.
Depreciation and amortization expense for the three and nine months ended
(d) September 30, 2009 decreased when compared to the same periods in 2008
primarily due to reductions in amortization expense related to domestic
intangible assets obtained in the Shurgard Merger.
For the nine months ended September 30, 2008, general and administrative
(e) expense includes additional incentive compensation totaling $27.9 million
associated with the disposition of an interest in Shurgard Europe.
Equity in earnings for the nine months ended September 30, 2009 includes
(f) $16.3 million in additional equity income related to PSB's repurchases of
its preferred securities.
Our foreign currency exchange gains and losses are primarily related to our
loan to Shurgard Europe which is denominated in Euros. When converting the
(g) Euro denominated loan to U.S. Dollars, exchange gains or losses arise due
to fluctuation in the exchange rates between the value of the U.S. Dollar
and the Euro.
During the nine months ended September 30, 2009, we repurchased various
series of our preferred shares and units for an amount that was
(h) 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.
In applying Item 9 of EITF 08-6, "Equity Method Investment Considerations,"
(i) we recognized a $30.3 million gain associated with PSB's common equity
issuance during the three months ended September 30, 2009.
PUBLIC STORAGE
SELECTED FINANCIAL DATA
September 30,
December 31, 2008
2009
(Amounts in thousands, except share and per share
data)
ASSETS (Unaudited)
Cash and cash $ 670,928 $ 680,701
equivalents
Operating real estate
facilities:
Land and buildings, at 10,267,030 10,207,022
cost
Accumulated depreciation (2,650,793 ) (2,405,473 )
7,616,237 7,801,549
Construction in process 17,735 20,340
7,633,972 7,821,889
Investment in real 613,800 544,598
estate entities
Goodwill 174,634 174,634
Intangible assets, net 39,366 52,005
Loan receivable from 571,783 552,361
Shurgard Europe
Other assets 104,892 109,857
Total assets $ 9,809,375 $ 9,936,045
LIABILITIES AND EQUITY
Notes payable $ 521,662 $ 643,811
Accrued and other 236,461 212,353
liabilities
Total liabilities 758,123 856,164
Redeemable
noncontrolling interests 12,810 12,777
in subsidiaries
Equity:
Public Storage
shareholders' equity:
Cumulative Preferred
Shares of beneficial
interest, $0.01 par
value, 100,000,000
shares authorized, 3,399,777 3,424,327
886,140 shares 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 16,840 16,829
authorized, 168,392,420
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 5,677,367 5,590,093
Retained deficit (177,603 ) (290,323 )
Accumulated other (12,275 ) (31,931 )
comprehensive loss
Total Public Storage 8,904,106 8,708,995
shareholders' equity
Equity of permanent
noncontrolling interests
in subsidiaries:
Preferred partnership 100,000 325,000
units
Other interests 34,336 33,109
Total equity 9,038,442 9,067,104
Total liabilities and $ 9,809,375 $ 9,936,045
equity
Shurgard Europe Same Store Selected
Operating Data
The Shurgard Europe Same Store properties 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.
Three Months Ended September 30, Nine Months Ended September 30,
Selected
Operating
Data for
the 94
facilities
operated by Percentage Percentage
Shurgard 2009 2008(a) Change 2009 2008 (a) Change
Europe on a
stabilized
basis since
January 1,
2007:
(unaudited)
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates)
Revenues:
Rental $ 30,315 $ 31,298 (3.1 )% $ 84,736 $ 88,349 (4.1 )%
income
Late
charges and 513 539 (4.8 )% 1,400 1,535 (8.8 )%
admin fees
collected
Total 30,828 31,837 (3.2 )% 86,136 89,884 (4.2 )%
revenues
Cost of
operations:
Property 1,562 1,478 5.7 % 4,395 4,226 4.0 %
taxes
Direct
property 3,459 3,613 (4.3 )% 10,129 10,081 0.5 %
payroll
Advertising
and 1,130 911 24.0 % 4,071 2,713 50.1 %
promotion
Utilities 632 712 (11.2 )% 2,135 2,076 2.8 %
Repairs and 839 765 9.7 % 2,365 2,327 1.6 %
maintenance
Property 173 194 (10.8 )% 516 557 (7.4 )%
insurance
Other costs
of 4,262 4,081 4.4 % 12,125 12,004 1.0 %
management
Total cost
of 12,057 11,754 2.6 % 35,736 33,984 5.2 %
operations
Net
operating $ 18,771 $ 20,083 (6.5 )% $ 50,400 $ 55,900 (9.8 )%
income
Gross 60.9 % 63.1 % (3.5 )% 58.5 % 62.2 % (5.9 )%
margin
Weighted
average for
the period:
Square foot
occupancy 87.2 % 87.7 % (0.6 )% 85.9 % 87.4 % (1.7 )%
(b)
Realized
annual rent
per $ 26.95 $ 27.66 (2.6 )% $ 25.49 $ 26.12 (2.4 )%
occupied
square foot
(c)(d)
REVPAF (d) $ 23.50 $ 24.26 (3.1 )% $ 21.90 $ 22.83 (4.1 )%
(e)
Weighted
average at
September
30:
Square foot 87.2 % 88.1 % (1.0 )%
occupancy
In place
annual rent
per $ 28.48 $ 29.09 (2.1 )%
occupied
square foot
(f)
Total net
rentable
square feet 5,160 5,160 -
(in
thousands)
Average
Euro to
U.S. Dollar
exchange
rates: (a)
Constant
exchange 1.428 1.428 - 1.365 1.365 -
rates used
herein
Actual
historical 1.428 1.504 (5.1 )% 1.365 1.521 (10.3 %)
exchange
rates
In order to isolate changes in the underlying operations from the impact of
exchange rates, the amounts in this table are presented on a constant
exchange rate basis. The amounts for the three and nine months ended
(a) September 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 1.428 and 1.365 for the three and nine months ended
September 30, 2009, respectively, as compared to 1.504 and 1.521,
respectively, for the same periods in 2008.
(b) 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 before late charges and administrative
(c) 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.
Late charges and administrative fees are excluded from the computation of
realized annual rent per occupied square foot and REVPAF. Exclusion of
(d) 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.
Realized annual rent per available foot or "REVPAF" is computed by dividing
(e) rental income before late charges and admin fees by the total available net
rentable square feet for the period.
In place annual rent per occupied square foot represents annualized
(f) 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
(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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Amounts in thousands, except per share data)
Computation of Funds
from Operations
("FFO") allocable to
Common Shares:
Net Income $ 243,951 $ 147,942 $ 602,767 $ 811,838
Add back -
depreciation and 85,908 91,084 254,670 308,153
amortization
Add back -
depreciation and
amortization included 716 950 1,438 1,758
in Discontinued
Operations
Eliminate -
depreciation with (36 ) (66 ) (150 ) (191 )
respect to non-real
estate assets
Eliminate - gain on
disposition of real (30,573 ) (1,024 ) (33,295 ) (342,797 )
estate investments
Eliminate - equity
share of PSB's real - - (675 ) -
estate gain
Eliminate - gain on
sale of real estate
included in (1,837 ) - (6,018 ) -
Discontinued
Operations
Add back -
Depreciation from 16,458 21,198 51,029 56,191
unconsolidated real
estate investments
Consolidated FFO
allocable to our 314,587 260,084 869,766 834,952
equity holders
Less: allocations of
FFO (to) from
noncontrolling equity
interests:
Preferred unitholders,
based upon (1,813 ) (5,403 ) (7,643 ) (16,209 )
distributions paid
Preferred unitholders, - - 72,000 -
based upon repurchases
Other noncontrolling
equity interests in (5,276 ) (5,677 ) (15,017 ) (16,790 )
subsidiaries
Consolidated FFO
allocable to Public 307,498 249,004 919,106 801,953
Storage shareholders
Less: allocations of
FFO (to) from:
Preferred
shareholders, based on (58,108 ) (60,333 ) (174,324 ) (180,999 )
distributions paid
Preferred
shareholders, based on - - 6,218 -
repurchases
Restricted share unit (847 ) (653 ) (2,517 ) (2,200 )
holders
Equity Shares, Series (5,131 ) (5,356 ) (15,393 ) (16,068 )
A
Remaining FFO
allocable to Common $ 243,412 $ 182,662 $ 733,090 $ 602,686
Shares
Weighted average
shares:
Regular common shares 168,373 168,133 168,344 168,248
Weighted average share
options outstanding 670 427 337 425
using treasury method
Weighted average
common shares for
purposes of computing 169,043 168,560 168,681 168,673
fully-diluted FFO per
common share
FFO per diluted common $ 1.44 $ 1.08 $ 4.35 $ 3.57
share
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
Funds available for distribution ("FAD") represents FFO, (i) adding back
impairment charges with respect to real estate assets, (ii) adding back the
non-cash portion of share-based compensation expense, (iii) eliminating non-cash
allocations to or from preferred equity holders, (iv) deducting capital
expenditures to maintain our facilities and (v) eliminating gains and losses on
foreign exchange. The distribution payout ratio is computed by dividing the
distribution paid to common shareholders, 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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Amounts in thousands)
Computation of Funds
Available for
Distribution ("FAD"):
FFO allocable to Common $ 243,412 $ 182,662 $ 733,090 $ 602,686
Shares
Add: Non-cash
share-based compensation 3,360 3,505 9,453 9,763
expense
Eliminate: Non-cash
foreign currency (21,429 ) 53,172 (19,901 ) 12,203
exchange (gain) loss
Eliminate: Non-cash
intangible impairment - - 8,205 -
charge included in
discontinued operations
Less: Allocation of FFO
from preferred
unitholders and
preferred shareholders - - (94,502 ) -
based upon repurchases,
including our equity
share of PSB's
repurchase activities
Less: Aggregate capital (19,874 ) (41,058 ) (52,449 ) (72,629 )
expenditures
Funds available for $ 205,469 $ 198,281 $ 583,896 $ 552,023
distribution ("FAD")
Distribution to common $ 92,608 $ 92,506 $ 277,784 $ 277,315
shareholders
Distribution payout 45.1 % 46.7 % 47.6 % 50.2 %
ratio
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Same Store Data to
Consolidated Data of the Company
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Amounts in thousands)
Revenues for:
Same Store $ 352,121 $ 368,976 $ 1,046,145 $ 1,078,428
facilities
Other domestic 26,086 23,762 74,931 64,631
facilities (a)
Shurgard Europe's
facilities, which - - - 54,722
were deconsolidated
March 31, 2008
Self-storage $ 378,207 $ 392,738 $ 1,121,076 $ 1,197,781
revenues (b)
Self-storage cost of
operations for:
Same Store $ 113,286 $ 113,972 $ 354,719 $ 358,354
facilities
Other facilities (a) 7,975 7,607 24,494 23,350
Shurgard Europe's
facilities, which - - - 24,654
were deconsolidated
March 31, 2008
Self-storage cost of $ 121,261 $ 121,579 $ 379,213 $ 406,358
operations (b)
Net operating income
for:
Same Store $ 238,835 $ 255,004 $ 691,426 $ 720,074
facilities
Other facilities (a) 18,111 16,155 50,437 41,281
Shurgard Europe's
facilities, which - - - 30,068
were deconsolidated
March 31, 2008
Consolidated net 256,946 271,159 741,863 791,423
operating income (c)
Ancillary revenues 27,800 26,946 81,741 83,693
Interest and other 6,857 11,485 22,006 25,343
income
Ancillary cost of (7,493 ) (3,756 ) (27,520 ) (27,124 )
operations
Depreciation and (85,908 ) (91,084 ) (254,670 ) (308,153 )
amortization
General and
administrative (8,654 ) (8,879 ) (26,532 ) (56,968 )
expense
Interest expense (7,289 ) (9,099 ) (22,705 ) (35,187 )
Equity in earnings
of real estate 8,824 6,318 39,033 13,679
entities
Gain on disposition
of real estate 30,573 1,024 33,295 342,797
investments, net
Gain on early - - 4,114 -
retirement of debt
Foreign currency 21,429 (53,172 ) 19,901 (12,203 )
exchange gain (loss)
Casualty loss - (525 ) - (525 )
Discontinued 866 (2,475 ) (7,759 ) (4,937 )
operations
Consolidated net
income of the $ 243,951 $ 147,942 $ 602,767 $ 811,838
Company
(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.
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
(c) 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.
Source: Public Storage
Contact: Public Storage
Clemente Teng, 818-244-8080