Public Storage Reports Results for the Third Quarter Ended September 30, 2009
http://www.businesswire.com/news/home/20091105006609/en
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 30, Nine Months Ended September 30,
2009 2008 Percentage 2009 2008 Percentage
Change Change
FFO per common share prior to adjustments for the following items $ 1.30 $ 1.37 (5.1 ) % $ 3.71 $ 3.78 (1.9 )%
Foreign currency exchange gain (loss), net 0.13 (0.32 ) 0.12 (0.07 )
Change in accounting estimate - ancillary operations 0.01 0.04 0.01 0.04
Impairment charge on intangible asset resulting from an eminent domain proceeding - - (0.05 ) -
Casualty loss and tenant insurance loss associated with Hurricane Ike - (0.01 ) - (0.01 )
Costs incurred to terminate truck rental operations - - (0.02 ) -
Increased income allocated to common shareholders, and from preferred equity shareholders, pursuant to preferred repurchases, including our equity share from PSB - - 0.56 -
Gain on early retirement of debt - - 0.02 -
Incremental incentive compensation incurred in connection with the disposition of an interest in Shurgard Europe - - - (0.17 )
FFO per common share, as reported $ 1.44 $ 1.08 33.3 % $ 4.35 $ 3.57 21.8 %
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 StoreFacilities (1,899 Facilities): Three Months Ended September 30, Nine Months Ended September 30,
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 collected (a) 17,168 15,776 8.8 % 48,799 44,972 8.5 %
Total revenues (b) 352,121 368,976 (4.6 )% 1,046,145 1,078,428 (3.0 )%
Cost of operations:
Property taxes 37,137 36,161 2.7 % 111,558 107,666 3.6 %
Direct property payroll 23,321 22,862 2.0 % 71,020 70,568 0.6 %
Media advertising 3,430 2,148 59.7 % 18,812 18,931 (0.6 )%
Other advertising and promotion 4,942 4,645 6.4 % 15,523 14,098 10.1 %
Utilities 9,235 10,238 (9.8 )% 26,732 28,035 (4.6 )%
Repairs and maintenance 8,992 9,765 (7.9 )% 28,867 31,842 (9.3 )%
Telephone reservation center 2,890 3,183 (9.2 )% 8,501 9,624 (11.7 )%
Property insurance 2,240 2,642 (15.2 )% 7,504 8,766 (14.4 )%
Other costs of management 21,099 22,328 (5.5 )% 66,202 68,824 (3.8 )%
Total cost of operations (b) 113,286 113,972 (0.6 )% 354,719 358,354 (1.0 )%
Net operating income $ 238,835 $ 255,004 (6.3 )% $ 691,426 $ 720,074 (4.0 )%
Gross margin 67.8 % 69.1 % (1.9 )% 66.1 % 66.8 % (1.0 )%
Weighted average for the period:
Square foot occupancy (c) 89.6 % 90.5 % (1.0 )% 89.2 % 90.1 % (1.0 )%
Realized annual rent per occupied square foot (d)(e) $ 12.73 $ 13.29 (4.2 )% $ 12.69 $ 13.02 (2.5 )%
REVPAF (f)(e) $ 11.41 $ 12.03 (5.2 )% $ 11.32 $ 11.73 (3.5 )%
Weighted average September 30:
Square foot occupancy 88.7 % 89.4 % (0.8 )%
In place annual rent per occupied square foot (g) $ 13.65 $ 14.37 (5.0 )%
Total net rentable square feet (in thousands) 117,462 117,462 -
a) Late charges and administrative fees have increased primarily due to increases in the related fee rates rather than any increase in tenant delinquency.
b) See attached reconciliation of these amounts to our consolidated self-storage revenues and operating expenses. Revenues and cost of operations do not include ancillary
revenues and expenses generated at the facilities with respect to tenant reinsurance, retail sales and truck rentals. "Other costs of management" included in cost of
operations principally represents all the indirect costs incurred in the operations of the facilities. Indirect costs principally include supervisory costs and corporate
overhead cost incurred to support the operating activities of the facilities.
c) Square foot occupancies represent weighted average occupancy levels over the entire period.
d) Realized annual rent per occupied square foot is computed by annualizing the result of dividing rental income (which excludes late charges and administrative fees) by the
weighted average occupied square feet for the period. Realized annual rent per occupied square foot takes into consideration promotional discounts and other items that
reduce rental income from the contractual amounts due.
e) Late charges and administrative fees are excluded from the computation of realized annual rent per occupied square foot and REVPAF. Exclusion of these amounts provides a
better measure of our ongoing level of revenue, by excluding the volatility of late charges, which are dependent principally upon the level of tenant delinquency and the
associated fee rates, and administrative fees, which are dependent principally upon the absolute level of move-ins for a period.
f) Realized annual rent per available foot or "REVPAF" is computed by dividing rental income (which excludes late charges and administrative fees) by the total available net
rentable square feet for the period.
g) In place annual rent per occupied square foot represents annualized contractual rents per occupied square foot without reductions for promotional discounts and excludes
late charges and administrative fees.
The following table summarizes additional selected financial data with respect
to the Same Store Facilities (unaudited):
Three Months Ended
March 31 June 30 September 30 December 31 Total
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 €230 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 €110 million ($161 million), is due May 2011 and the other JV loan,
totaling €120 million ($175 million), is due July 2010.
Effective October 31, 2009, we extended the maturity date to March 31, 2013 for
our existing €391.9 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 €185 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 €46 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 30, Nine Months Ended September 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 operations (a) 27,800 26,946 81,741 83,693
Interest and other income (b) 6,857 11,485 22,006 25,343
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) (c) 7,493 3,756 27,520 27,124
Depreciation and amortization (d) 85,908 91,084 254,670 308,153
General and administrative (e) 8,654 8,879 26,532 56,968
Interest expense 7,289 9,099 22,705 35,187
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 investments, net, gain on early retirement of debt, foreign currency exchange gain (loss) and casualty loss 182,259 196,772 514,183 473,027
Equity in earnings of real estate entities (b) (f) 8,824 6,318 39,033 13,679
Gains on disposition of real estate investments, net (i) 30,573 1,024 33,295 342,797
Gain on early retirement of debt - - 4,114 -
Foreign currency exchange gain (loss) (g) 21,429 (53,172 ) 19,901 (12,203 )
Casualty loss - (525 ) - (525 )
Income from continuing operations 243,085 150,417 610,526 816,775
Discontinued operations (a) 866 (2,475 ) (7,759 ) (4,937 )
Net income 243,951 147,942 602,767 811,838
Net income allocable (to) from noncontrolling equity interests:
Preferred unitholders, based upon distributions paid (1,813 ) (5,403 ) (7,643 ) (16,209 )
Preferred unitholders, based upon repurchases (h) - - 72,000 -
Other noncontrolling interests in subsidiaries (4,829 ) (5,208 ) (13,641 ) (12,143 )
Net income allocable to Public Storage Shareholders $ 237,309 $ 137,331 $ 653,483 $ 783,486
Allocation of net income to Public Storage Shareholders:
Preferred shareholders, based on distributions paid $ 58,108 $ 60,333 $ 174,324 $ 180,999
Preferred shareholders, based on repurchases (h) - - (6,218 ) -
Equity Shares, Series A 5,131 5,356 15,393 16,068
Restricted share units 577 183 1,509 2,154
Common shareholders 173,493 71,459 468,475 584,265
$ 237,309 $ 137,331 $ 653,483 $ 783,486
Per common share:
Net income per share - Basic $ 1.03 $ 0.43 $ 2.78 $ 3.47
Net income per share - Diluted $ 1.03 $ 0.42 $ 2.78 $ 3.46
Weighted average common shares - Basic 168,373 168,133 168,344 168,248
Weighted average common shares - Diluted 169,043 168,560 168,681 168,673
(a) 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 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.
(b) 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 the €391.9 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.
(c) Included in ancillary cost of operations is a reduction due to changes in 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.
(d) Depreciation and amortization expense for the three and nine months ended 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.
(e) For the nine months ended September 30, 2008, general and administrative expense includes additional incentive compensation totaling $27.9 million associated with the
disposition of an interest in Shurgard Europe.
(f) Equity in earnings for the nine months ended September 30, 2009 includes $16.3 million in additional equity income related to PSB`s repurchases of its preferred
securities.
(g) Our foreign currency exchange gains and losses are primarily related to our loan to Shurgard Europe which is denominated in Euros. When converting the Euro denominated
loan to U.S. Dollars, exchange gains or losses arise due to fluctuation in the exchange rates between the value of the U.S. Dollar and the Euro.
(h) During the nine months ended September 30, 2009, we repurchased various series of our preferred shares and units for an amount that was approximately $78.2 million lower
than the original issue proceeds of the preferred equity acquired and, accordingly, we recorded an allocation of income from the preferred shareholders and unitholders to
the common shareholders of $78.2 million.
(i) In applying Item 9 of EITF 08-6, "Equity Method Investment Considerations," 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 equivalents $ 670,928 $ 680,701
Operating real estate facilities:
Land and buildings, at cost 10,267,030 10,207,022
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 estate entities 613,800 544,598
Goodwill 174,634 174,634
Intangible assets, net 39,366 52,005
Loan receivable from Shurgard Europe 571,783 552,361
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 liabilities 236,461 212,353
Total liabilities 758,123 856,164
Redeemable noncontrolling interests in subsidiaries 12,810 12,777
Equity:
Public Storage shareholders` equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value, 100,000,000 shares authorized, 886,140 shares issued (in series) and outstanding (887,122 at December 31, 2008), at liquidation preference 3,399,777 3,424,327
Common Shares of beneficial interest, $0.10 par value, 650,000,000 shares authorized, 168,392,420 shares issued and outstanding (168,279,732 at December 31, 2008) 16,840 16,829
Equity Shares of beneficial interest, Series A, $0.01 par value, 100,000,000 shares authorized, 8,377.193 shares issued and outstanding - -
Paid-in capital 5,677,367 5,590,093
Retained deficit (177,603 ) (290,323 )
Accumulated other comprehensive loss (12,275 ) (31,931 )
Total Public Storage shareholders` equity 8,904,106 8,708,995
Equity of permanent noncontrolling interests in subsidiaries:
Preferred partnership units 100,000 325,000
Other interests 34,336 33,109
Total equity 9,038,442 9,067,104
Total liabilities and equity $ 9,809,375 $ 9,936,045
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 Shurgard Europe on a stabilized basis since January 1, 2007: (unaudited) 2009 2008(a) Percentage Change 2009 2008 (a) Percentage Change
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates)
Revenues:
Rental income $ 30,315 $ 31,298 (3.1 )% $ 84,736 $ 88,349 (4.1 )%
Late charges and admin fees collected 513 539 (4.8 )% 1,400 1,535 (8.8 )%
Total revenues 30,828 31,837 (3.2 )% 86,136 89,884 (4.2 )%
Cost of operations:
Property taxes 1,562 1,478 5.7 % 4,395 4,226 4.0 %
Direct property payroll 3,459 3,613 (4.3 )% 10,129 10,081 0.5 %
Advertising and promotion 1,130 911 24.0 % 4,071 2,713 50.1 %
Utilities 632 712 (11.2 )% 2,135 2,076 2.8 %
Repairs and maintenance 839 765 9.7 % 2,365 2,327 1.6 %
Property insurance 173 194 (10.8 )% 516 557 (7.4 )%
Other costs of management 4,262 4,081 4.4 % 12,125 12,004 1.0 %
Total cost of operations 12,057 11,754 2.6 % 35,736 33,984 5.2 %
Net operating income $ 18,771 $ 20,083 (6.5 )% $ 50,400 $ 55,900 (9.8 )%
Gross margin 60.9 % 63.1 % (3.5 )% 58.5 % 62.2 % (5.9 )%
Weighted average for the period:
Square foot occupancy (b) 87.2 % 87.7 % (0.6 )% 85.9 % 87.4 % (1.7 )%
Realized annual rent per occupied square foot (c)(d) $ 26.95 $ 27.66 (2.6 )% $ 25.49 $ 26.12 (2.4 )%
REVPAF (d)(e) $ 23.50 $ 24.26 (3.1 )% $ 21.90 $ 22.83 (4.1 )%
Weighted average at September 30:
Square foot occupancy 87.2 % 88.1 % (1.0 )%
In place annual rent per occupied square foot (f) $ 28.48 $ 29.09 (2.1 )%
Total net rentable square feet (in thousands) 5,160 5,160 -
Average Euro to U.S. Dollar exchange rates: (a)
Constant exchange rates used herein 1.428 1.428 - 1.365 1.365 -
Actual historical exchange rates 1.428 1.504 (5.1 )% 1.365 1.521 (10.3 %)
(a) 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 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.
(c) Realized annual rent per occupied square foot is computed by annualizing the result of dividing rental income before late charges and administrative fees by the weighted average occupied square feet for the period. Realized annual rent per occupied square foot takes into consideration promotional discounts and other items that reduce rental income from the contractual amounts due.
(d) Late charges and administrative fees are excluded from the computation of realized annual rent per occupied square foot and REVPAF. Exclusion of these amounts provides a better measure of our ongoing level of revenue, by excluding the volatility of late charges, which are dependent principally upon the level of tenant delinquency, and administrative fees, which are dependent principally upon the absolute level of move-ins for a period.
(e) Realized annual rent per available foot or "REVPAF" is computed by dividing rental income before late charges and admin fees by the total available net rentable square feet for the period.
(f) In place annual rent per occupied square foot represents annualized contractual rents per occupied square foot without reductions for promotional discounts and excludes late charges and administrative fees.
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 amortization 85,908 91,084 254,670 308,153
Add back - depreciation and amortization included in Discontinued Operations 716 950 1,438 1,758
Eliminate - depreciation with respect to non-real estate assets (36 ) (66 ) (150 ) (191 )
Eliminate - gain on disposition of real estate investments (30,573 ) (1,024 ) (33,295 ) (342,797 )
Eliminate - equity share of PSB`s real estate gain - - (675 ) -
Eliminate - gain on sale of real estate included in Discontinued Operations (1,837 ) - (6,018 ) -
Add back - Depreciation from unconsolidated real estate investments 16,458 21,198 51,029 56,191
Consolidated FFO allocable to our equity holders 314,587 260,084 869,766 834,952
Less: allocations of FFO (to) from noncontrolling equity interests:
Preferred unitholders, based upon distributions paid (1,813 ) (5,403 ) (7,643 ) (16,209 )
Preferred unitholders, based upon repurchases - - 72,000 -
Other noncontrolling equity interests in subsidiaries (5,276 ) (5,677 ) (15,017 ) (16,790 )
Consolidated FFO allocable to Public Storage shareholders 307,498 249,004 919,106 801,953
Less: allocations of FFO (to) from:
Preferred shareholders, based on distributions paid (58,108 ) (60,333 ) (174,324 ) (180,999 )
Preferred shareholders, based on repurchases - - 6,218 -
Restricted share unit holders (847 ) (653 ) (2,517 ) (2,200 )
Equity Shares, Series A (5,131 ) (5,356 ) (15,393 ) (16,068 )
Remaining FFO allocable to Common Shares $ 243,412 $ 182,662 $ 733,090 $ 602,686
Weighted average shares:
Regular common shares 168,373 168,133 168,344 168,248
Weighted average share options outstanding using treasury method 670 427 337 425
Weighted average common shares for purposes of computing fully-diluted FFO per common share 169,043 168,560 168,681 168,673
FFO per diluted common share $ 1.44 $ 1.08 $ 4.35 $ 3.57
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 Shares $ 243,412 $ 182,662 $ 733,090 $ 602,686
Add: Non-cash share-based compensation expense 3,360 3,505 9,453 9,763
Eliminate: Non-cash foreign currency exchange (gain) loss (21,429 ) 53,172 (19,901 ) 12,203
Eliminate: Non-cash intangible impairment charge included in discontinued operations - - 8,205 -
Less: Allocation of FFO from preferred unitholders and preferred shareholders based upon repurchases, including our equity share of PSB`s repurchase activities - - (94,502 ) -
Less: Aggregate capital expenditures (19,874 ) (41,058 ) (52,449 ) (72,629 )
Funds available for distribution ("FAD") $ 205,469 $ 198,281 $ 583,896 $ 552,023
Distribution to common shareholders $ 92,608 $ 92,506 $ 277,784 $ 277,315
Distribution payout ratio 45.1 % 46.7 % 47.6 % 50.2 %
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 facilities $ 352,121 $ 368,976 $ 1,046,145 $ 1,078,428
Other domestic facilities (a) 26,086 23,762 74,931 64,631
Shurgard Europe`s facilities, which were deconsolidated March 31, 2008 - - - 54,722
Self-storage revenues (b) $ 378,207 $ 392,738 $ 1,121,076 $ 1,197,781
Self-storage cost of operations for:
Same Store facilities $ 113,286 $ 113,972 $ 354,719 $ 358,354
Other facilities (a) 7,975 7,607 24,494 23,350
Shurgard Europe`s facilities, which were deconsolidated March 31, 2008 - - - 24,654
Self-storage cost of operations (b) $ 121,261 $ 121,579 $ 379,213 $ 406,358
Net operating income for:
Same Store facilities $ 238,835 $ 255,004 $ 691,426 $ 720,074
Other facilities (a) 18,111 16,155 50,437 41,281
Shurgard Europe`s facilities, which were deconsolidated March 31, 2008 - - - 30,068
Consolidated net operating income (c) 256,946 271,159 741,863 791,423
Ancillary revenues 27,800 26,946 81,741 83,693
Interest and other income 6,857 11,485 22,006 25,343
Ancillary cost of operations (7,493 ) (3,756 ) (27,520 ) (27,124 )
Depreciation and amortization (85,908 ) (91,084 ) (254,670 ) (308,153 )
General and administrative expense (8,654 ) (8,879 ) (26,532 ) (56,968 )
Interest expense (7,289 ) (9,099 ) (22,705 ) (35,187 )
Equity in earnings of real estate entities 8,824 6,318 39,033 13,679
Gain on disposition of real estate investments, net 30,573 1,024 33,295 342,797
Gain on early retirement of debt - - 4,114 -
Foreign currency exchange gain (loss) 21,429 (53,172 ) 19,901 (12,203 )
Casualty loss - (525 ) - (525 )
Discontinued operations 866 (2,475 ) (7,759 ) (4,937 )
Consolidated net income of the Company $ 243,951 $ 147,942 $ 602,767 $ 811,838
(a) We consolidate the operating results of additional self-storage facilities that are not Same Store Facilities.
(b) Self-storage revenues and cost of operations do not include revenues and expenses generated at the facilities with respect to tenant reinsurance, retail sales and truck
rentals.
(c) We present net operating income "NOI", which is a non-GAAP (generally accepted accounting principles) financial measure that excludes the impact of depreciation and
amortization expense. Although depreciation and amortization is a component of GAAP net income, we believe that NOI is a meaningful measure of operating performance,
because we utilize NOI in making decisions with respect to capital allocations, segment performance, and comparing period-to-period and market-to-market property
operating results. In addition, the investment community utilizes NOI in determining real estate values, and does not consider depreciation expense as it is based upon
historical cost. NOI is not a substitute for net operating income after depreciation and amortization in evaluating our operating results.
Public Storage
Clemente Teng, 818-244-8080
Copyright Business Wire 2009
