Public Storage Reports Results for the Fourth Quarter and Year Ended December 31, 2011 and Increases Quarterly Common Dividend by 16% to $1.10 Per Share

GLENDALE, Calif.--(BUSINESS WIRE)-- Public Storage (NYSE:PSA) announced today operating results for the fourth quarter and year ended December 31, 2011.

Operating Results for the Three Months Ended December 31, 2011

For the three months ended December 31, 2011, net income allocable to our common shareholders was $164.2 million or $0.96 per diluted common share, compared to $121.4 million or $0.71 per diluted common share for the same period in 2010, representing an increase of $42.8 million or $0.25 per diluted common share. This increase is due to (i) improved property operations, (ii) increased equity in earnings from Shurgard Europe, due primarily to Shurgard Europe’s acquisition of its joint venture partner’s interests on March 2, 2011, (iii) reduced income allocations to our preferred shareholders, partially offset by (iv) an increased foreign currency exchange loss of $20.8 million during the quarter ended December 31, 2011 as compared to $13.7 million for the same period in 2010.

Revenues for the Same Store Facilities (see table below) increased 5.0% or $18.2 million in the quarter ended December 31, 2011 as compared to the same period in 2010, primarily due to a 1.3% increase in average occupancy and a 3.4% increase in realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.1% or $2.2 million in the quarter ended December 31, 2011 as compared to the same period in 2010. Net operating income for our Same Store Facilities increased 6.1% or $16.0 million in the quarter ended December 31, 2011 as compared to the same period in 2010.

Operating Results for the Year Ended December 31, 2011

For the year ended December 31, 2011, net income allocable to our common shareholders was $561.7 million or $3.29 per diluted common share, compared to $399.2 million or $2.35 per diluted common share for the same period in 2010, representing an increase of $162.5 million or $0.94 per diluted common share. This increase is due to (i) improved property operations, (ii) decreased foreign currency exchange loss of $7.3 million during the year ended December 31, 2011 as compared to $42.3 million for the same period in 2010, (iii) increased equity in earnings and interest and other income from Shurgard Europe, due primarily to Shurgard Europe’s acquisition of its joint venture partner’s interests on March 2, 2011, and (iv) reduced income allocations to our Equity Shares, Series A.

Revenues for the Same Store Facilities (see table below) increased 4.6% or $65.8 million in the year ended December 31, 2011 as compared to the same period in 2010, primarily due to a 1.4% increase in average occupancy and a 2.8% increase in realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 0.4% or $1.9 million in the year ended December 31, 2011 as compared to the same period in 2010. Net operating income for our Same Store Facilities increased 6.6% or $64.0 million in the year ended December 31, 2011 as compared to the same period in 2010.

Funds from Operations

For the three months ended December 31, 2011, funds from operations (“FFO”) was $1.50 per common share on a diluted basis as compared to $1.33 per diluted common share for the same period in 2010, representing an increase of $0.17 per diluted common share.

For the three months ended December 31, 2011, FFO was impacted by a foreign currency exchange loss of $20.8 million (compared to a loss of $13.7 million for the same period in 2010) and a $3.5 million charge related to our redemptions of preferred shares in applying EITF D-42 (compared to similar charges totaling $4.7 million for the same period in 2010 for redemptions of our preferred units, preferred shares and our pro rata share from PS Business Parks, Inc. ("PSB")).

For the year ended December 31, 2011, FFO was $5.67 per common share on a diluted basis as compared to $4.72 per diluted common share for the same period in 2010, representing an increase of $0.95 per diluted common share.

For the year ended December 31, 2011, FFO was impacted by a foreign currency exchange loss of $7.3 million (compared to a $42.3 million loss for the same period in 2010) and a $32.6 million net charge related to our redemptions of equity securities, including our equity share from PSB, in applying EITF D-42 (compared to $35.8 million for the same period in 2010).

Our FFO for each period was also impacted by various items such as impairment charges, acquisition due diligence costs, changes in accounting estimates, gains and losses on early redemption of debt (including our equity share from PSB and Shurgard Europe), as well as our equity share of PSB’s lease termination fees received from tenants. The net impact of these items reduced FFO by $0.02 and $0.01 per diluted share for the three months ended December 31, 2011 and 2010, respectively, and reduced FFO by $0.03 and $0.04 per diluted share for the years ended December 31, 2011 and 2010, respectively.

The following table provides a summary of the per-share impact of the items noted above (unaudited):

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 Facilities represent those 1,931 facilities that are stabilized and owned since January 1, 2009 and therefore provide meaningful comparisons for 2010 and 2011. The following table summarizes the historical operating results of these 1,931 facilities (121.6 million net rentable square feet) that represent approximately 94% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2011.

The following table summarizes additional selected financial data with respect to the Same Store Facilities (unaudited):

Shurgard Europe

We own a 49% equity interest in Shurgard Europe, with the remaining 51% equity interest owned by an institutional investor. We account for our investment in Shurgard Europe under the equity method. At December 31, 2011, Shurgard Europe had an interest in 188 facilities (10 million net rentable square feet) located in seven Western European countries.

In the fourth quarter of 2011, Shurgard Europe used the proceeds from a new €215 million term loan with Wells Fargo (the “Wells Fargo Loan”) to repay two existing loans totaling €183 million and repay a portion, €32 million, on our 9.0% loan to Shurgard Europe. The Wells Fargo Loan, which matures in November 2014, has a lower interest rate than the repaid loans, and allows Shurgard Europe to simplify its ownership structure and eliminate various costs associated with the former joint ventures. Shurgard Europe is obligated to utilize most of its available cash flow to make principal payments on the Wells Fargo Loan.

In connection with the Wells Fargo financing, we extended the maturity date for our 9.0% loan to Shurgard Europe to February 15, 2015, which has a balance of €311.0 million ($402.7 million) at December 31, 2011. The loan is denominated in Euros and 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. Future prepayments on our loan will be dependent upon Shurgard Europe’s management’s evaluation of uses for the cash flow retained from operations after making principal payments on the Wells Fargo Loan.

Investing Activities

During the three months ended December 31, 2011, we acquired two properties, one in California and another in Texas, for approximately $16.0 million that added 155,000 net rentable square feet to our portfolio.

In addition, during October 2011, we acquired the remaining interests we did not own in two consolidated partnerships for $6.3 million in cash.

We have also entered into a contract to acquire a portfolio of six self-storage properties, located in California, Florida (two), Massachusetts, New Jersey and Pennsylvania, for an aggregate purchase price of $42 million in cash. The pending acquisition is subject to various conditions and contingencies and there can be no assurance that it will be completed.

Capital Activities

On November 28, 2011, we redeemed all of our outstanding 6.95% Series H Preferred Shares for an aggregate of $105 million, excluding accrued dividends.

On January 12, 2012, we issued 18,400,000 depositary shares of our 5.90% Series S Preferred Shares for $460 million in gross proceeds.

On February 9, 2012 and February 21, 2012, we redeemed all of our 6.75% Series L Preferred Shares and our 6.75% Series E Preferred Shares, respectively, for an aggregate of approximately $347.9 million excluding accrued dividends. In addition, we called for redemption our 6.85% Series Y Preferred Shares, which will be redeemed on March 19, 2012 for approximately $8.8 million excluding accrued dividends. PSB has announced the redemption of various series of preferred shares in the quarter ending March 31, 2012. In connection with these redemptions, including our pro rata share of PSB's amounts, we expect to incur approximately $13 million of EITF D-42 charges during the quarter ending March 31, 2012.

Distributions Declared

On February 23, 2012, our Board of Trustees declared a regular common dividend of $1.10 per common share which is an increase of $0.15 per share, or 16%, over the previous quarter’s distribution. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on March 29, 2012, to shareholders of record as of March 14, 2012.

Fourth Quarter Conference Call

A conference call is scheduled for Friday, February 24, 2012 at 10:00 a.m. (PST) to discuss the fourth quarter and year ended December 31, 2011 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 45750119). A simultaneous audio web cast may be accessed by using the link at www.publicstorage.com under “Company Info, Investor Relations, Upcoming Events.” A replay of the conference call may be accessed through March 2, 2012 by calling (800) 585-8367 (domestic) or (404) 537-3406 (international) or by using the link at www.publicstorage.com under “Company Info, Investor Relations, Webcasts.” All forms of replay utilize conference ID number 45750119.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a fully integrated, self-administered and self-managed real estate investment trust that primarily acquires, develops, owns and operates self-storage facilities. The Company’s headquarters are located in Glendale, California. At December 31, 2011, the Company had interests in 2,058 self-storage facilities located in 38 states with approximately 131 million net rentable square feet in the United States and 189 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 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 27.2 million rentable square feet of commercial space, primarily flex, multitenant office and industrial space, at December 31, 2011.

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, 2010, Form 10-K for the fiscal year ended December 31, 2011 expected to be filed on or before February 29, 2012, 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.

Shurgard Europe Same Store Selected Operating Data

The Shurgard Europe Same Store Pool presented below represents those 150 facilities that are wholly-owned and have been operated by Shurgard Europe at a stabilized occupancy level since January 1, 2009 and therefore provide meaningful comparisons for 2009, 2010 and 2011. We account for our investment in Shurgard Europe under the equity method of accounting; accordingly, our pro-rata share of the operating results for these facilities is included in “equity in earnings of unconsolidated real estate entities” on our income statement.

Public Storage
Clemente Teng
(818) 244-8080, Ext. 1141

Source: Public Storage