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Operating Results for the Three Months Ended June 30, 2009
Net income to our shareholders for the three months ended June 30, 2009 was $199.2 million compared to $133.8 million for the same period in 2008, representing an increase of $65.4 million. This increase is primarily due to (i) a $33.2 million foreign exchange gain during the quarter ended June 30, 2009, (ii) a $25.4 million reduction in general and administrative expenses due to incentive compensation incurred in the quarter ended June 30, 2008 related to our disposition of an interest in Shurgard Europe, and (iii) an $11.0 million reduction in depreciation and amortization, primarily due to reduced intangible amortization, offset by (iv) a reduction in Same Store facility operations and (v) an impairment charge included in discontinued operations with respect to intangible assets totaling $8.2 million in the quarter ended June 30, 2009.
Revenues for the Same Store Facilities decreased 3.5% or $12.6 million in the quarter ended June 30, 2009 as compared to the same period in 2008, due to a 2.9% reduction in realized rent per occupied square foot, combined with a 1.1% reduction in average occupancies. Cost of operations for the Same Store Facilities declined 3.4% or $4.1 million in the quarter ended June 30, 2009 as compared to the same period in 2008, due primarily to a $2.6 million reduction in media advertising and a $1.5 million reduction in repairs and maintenance, offset by a 4.3% ($1.5 million) increase in property tax expense.
For the three months ended June 30, 2009, net income allocable to our common shareholders (after allocating net income to our preferred and equity shareholders) was $135.5 million or $0.80 per common share on a diluted basis compared to $68.0 million or $0.40 per common share on a diluted basis for the same period in 2008, representing an increase of $67.5 million or $0.40 per common share on a diluted basis. These increases are primarily due to the impact of the factors described above.
Weighted average diluted common shares were 168,528,000 and 168,479,000, respectively, for the three months ended June 30, 2009 and 2008.
Operating Results for the Six Months Ended June 30, 2009
Net income to our shareholders for the six months ended June 30, 2009 was $416.2 million compared to $646.2 million for the same period in 2008, representing a decrease of $230.0 million. This decrease is primarily due to (i) a gain of $341.8 million in the six months ended June 30, 2008 related to our disposition of an interest in Shurgard Europe and (ii) an impairment charge included in discontinued operations with respect to intangible assets totaling $8.2 million in the six months ended June 30, 2009, (iii) a foreign exchange gain of $41.0 million during the same period in 2008, and (iv) a reduction in Same Store operations, partially offset by (v) a $72.0 million reduction in earnings allocated to our preferred partnership unitholders in the first quarter of 2009 associated with the redemption of securities, (vi) a reduction in general and administrative expenses due to $27.9 million in incentive compensation incurred in the six months ended June 30, 2008 related to our disposition of an interest in Shurgard Europe, and (vii) a $26.5 million reduction in depreciation and amortization related to our domestic assets, primarily representing reduced intangible amortization.
Revenues for the Same Store Facilities decreased 2.2% or $15.4 million in the six months ended June 30, 2009 as compared to the same period in 2008, due to a 1.5% reduction in realized rent per occupied square foot, combined with a 1.1% reduction in average occupancies. Cost of operations for the Same Store Facilities declined 1.2% or $2.9 million in the six months ended June 30, 2009 as compared to the same period in 2008, due primarily to a $1.4 million reduction in media advertising and a $2.2 million reduction in repairs and maintenance, offset by a 4.1% ($2.9 million) increase in property tax expense.
For the six months ended June 30, 2009, net income allocable to our common shareholders (after allocating net income to our preferred and equity shareholders) was $295.0 million or $1.75 per common share on a diluted basis compared to $512.8 million or $3.04 per common share on a diluted basis for the same period in 2008, representing a decrease of $217.8 million or $1.29 per common share on a diluted basis. These decreases are primarily due to the impact of the factors described above.
Weighted average diluted common shares were 168,501,000 and 168,731,000, respectively, for the six months ended June 30, 2009 and 2008.
Funds from Operations
For the three months ended June 30, 2009, funds from operations ("FFO") increased to $1.40 per common share on a diluted basis as compared to $1.10 per common share for the same period in 2008, representing an increase of $0.30 per common share, or 27.3%.
For the three months ended June 30, 2009, FFO was impacted by (i) a foreign currency exchange gain totaling $33.2 million (compared to an exchange loss of $2,000 for the same period in 2008) and (ii) an impairment charge with respect to an intangible asset resulting from an eminent domain proceeding totaling $8.2 million. For the three months ended June 30, 2008, FFO was impacted as a result of incentive compensation with respect to our disposition of an interest in Shurgard Europe included in general and administrative expense totaling $25.4 million.
For the six months ended June 30, 2009, FFO increased to $2.91 per common share on a diluted basis as compared to $2.49 per common share for the same period in 2008, representing an increase of $0.42 per share, or 16.9%.
For the six months ended June 30, 2009, FFO has been impacted by (i) a foreign currency exchange loss totaling $1.5 million (compared to a gain of $41.0 million for the same period in 2008), (ii) an impairment charge with respect to an intangible asset resulting from an eminent domain proceeding totaling $8.2 million, (iii) costs incurred to terminate and wind down our truck rental operations of $3.5 million, (iv) a $78.2 million reduction in the allocation of net income to our preferred shareholders and unitholders pursuant to the redemption of our preferred securities, combined with our pro-rata share ($16.3 million) of PS Business Park's ("PSB") earnings representing the benefit from its preferred securities repurchases which is included in equity in earnings, and (v) a gain on the early redemption of debt totaling $4.1 million. FFO for the six months ended June 30, 2008 was also impacted by incentive compensation with respect to our disposition of an interest in Shurgard Europe included in general and administrative expense totaling $27.9 million.
The following table provides a summary of the impact of these items that occurred during the three and six months ended June 30, 2009 and 2008:
Three Months Ended June 30, Six Months Ended June 30,
Percentage Percentage
2009 2008 Change 2009 2008 Change
FFO per common share prior to adjustments for the following items $ 1.25 $ 1.25 - $ 2.41 $ 2.42 (0.4 )%
Foreign currency exchange (loss) gain, net 0.20 - (0.01 ) 0.24
Impairment charge on intangible asset resulting from an eminent (0.05 ) - (0.05 ) -
domain proceeding
Costs incurred to terminate truck rental operations - - (0.02 ) -
Increased income allocated to common shareholders, and from - - 0.56 -
preferred equity shareholders, pursuant to preferred redemptions,
including our equity share from PSB
Gain on early redemption of debt - - 0.02 -
Incremental incentive compensation incurred in connection with the - (0.15 ) - (0.17 )
disposition of an interest in Shurgard Europe
FFO per common share, as reported $ 1.40 $ 1.10 27.3 % $ 2.91 $ 2.49 16.9 %
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 June 30, 2009.
Selected Operating Data for the
Same Store
Facilities (1,899 Facilities): Three Months Ended June 30, Six Months Ended June 30,
2009 2008 Percentage 2009 2008 Percentage
Change Change
(Dollar amounts in thousands, except for weighted average data)
Revenues:
Rental income $ 330,854 $ 344,703 (4.0 )% $ 662,393 $ 680,256 (2.6 )%
Late charges and admin fees collected 15,985 14,758 8.3 % 31,631 29,196 8.3 %
Total revenues (a) 346,839 359,461 (3.5 )% 694,024 709,452 (2.2 )%
Cost of operations:
Property taxes 36,659 35,156 4.3 % 74,421 71,505 4.1 %
Direct property payroll 23,339 23,329 0.0 % 47,699 47,706 0.0 %
Media advertising 7,224 9,836 (26.6 )% 15,382 16,783 (8.3 )%
Other advertising and promotion 5,967 5,027 18.7 % 10,581 9,453 11.9 %
Utilities 7,899 8,360 (5.5 )% 17,497 17,797 (1.7 )%
Repairs and maintenance 9,159 10,679 (14.2 )% 19,875 22,077 (10.0 )%
Telephone reservation center 2,817 3,318 (15.1 )% 5,611 6,441 (12.9 )%
Property insurance 2,566 2,911 (11.9 )% 5,264 6,124 (14.0 )%
Other costs of management 20,796 21,910 (5.1 )% 45,103 46,496 (3.0 )%
Total cost of operations (a) 116,426 120,526 (3.4 )% 241,433 244,382 (1.2 )%
Net operating income $ 230,413 $ 238,935 (3.6 )% $ 452,591 $ 465,070 (2.7 )%
Gross margin 66.4 % 66.5 % (0.2 )% 65.2 % 65.6 % (0.6 )%
Weighted average for the period:
Square foot occupancy (b) 90.0 % 91.0 % (1.1 )% 88.9 % 89.9 % (1.1 )%
Realized annual rent per occupied square foot (c)(d) $ 12.52 $ 12.90 (2.9 )% $ 12.69 $ 12.88 (1.5 )%
REVPAF (e)(d) $ 11.27 $ 11.74 (4.0 )% $ 11.28 $ 11.58 (2.6 )%
Weighted average June 30:
Square foot occupancy 90.7 % 91.7 % (1.1 )%
In place annual rent per occupied square foot (f) $ 13.61 $ 14.20 (4.2 )%
Total net rentable square feet (in thousands) 117,462 117,462 -
a) 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.
b) Square foot occupancies represent weighted average occupancy levels
over the entire period.
c) Realized annual rent per occupied square foot is computed by
annualizing the result of dividing rental income (which excludes
late charges and administrative fees) by the weighted average
occupied square feet for the period. Realized annual rent per
occupied square foot takes into consideration promotional
discounts and other items that reduce rental income from the
contractual amounts due.
d) Late charges and administrative fees are excluded from the
computation of realized annual rent per occupied square foot and
REVPAF. Exclusion of these amounts provides a better measure of
our ongoing level of revenue, by excluding the volatility of late
charges, which are dependent principally upon the level of tenant
delinquency, and administrative fees, which are dependent
principally upon the absolute level of move-ins for a period.
e) Realized annual rent per available foot or "REVPAF" is computed by
dividing rental income (which excludes late charges and
administrative fees) by the total available net rentable square feet
for the period.
f) In place annual rent per occupied square foot represents annualized
contractual rents per occupied square foot without reductions for
promotional discounts and excludes late charges and administrative
fees.
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 Full Year
Total revenues (in 000's):
2009 $ 347,185 $ 346,839 $ 694,024
2008 $ 349,991 $ 359,461 $ 368,976 $ 357,202 $ 1,435,630
Total cost of operations (in 000's):
2009 $ 125,007 $ 116,426 $ 241,433
2008 $ 123,856 $ 120,526 $ 113,972 $ 104,442 $ 462,796
Property taxes (in 000's):
2009 $ 37,762 $ 36,659 $ 74,421
2008 $ 36,349 $ 35,156 $ 36,161 $ 28,159 $ 135,825
Media advertising (in 000's):
2009 $ 8,158 $ 7,224 $ 15,382
2008 $ 6,947 $ 9,836 $ 2,148 $ 922 $ 19,853
Other advertising and promotion (in 000's):
2009 $ 4,614 $ 5,967 $ 10,581
2008 $ 4,426 $ 5,027 $ 4,645 $ 4,137 $ 18,235
REVPAF:
2009 $ 11.29 $ 11.27 $ 11.28
2008 $ 11.43 $ 11.74 $ 12.03 $ 11.65 $ 11.71
Weighted average realized annual rent per occupied square foot for
the period:
2009 $ 12.84 $ 12.52 $ 12.69
2008 $ 12.87 $ 12.90 $ 13.29 $ 13.27 $ 13.08
Weighted average square foot occupancy levels for the period:
2009 87.9 % 90.0 % 88.9 %
2008 88.8 % 91.0 % 90.5 % 87.8 % 89.5 %
Shurgard Europe
As previously announced, on March 31, 2008, an institutional investor acquired a 51% interest in Shurgard Europe's operations. We own the remaining 49% interest and we are the managing member of the newly formed joint venture that now owns Shurgard Europe's operations. As a result of this transaction, we began accounting for our investment in Shurgard Europe under the equity method effective March 31, 2008.
Shurgard Europe has an interest in 184 facilities (9.8 million net rentable square feet) located in seven Western European countries. Included in this total are 72 facilities (3.6 million net rentable square feet) that are owned by two joint ventures in which Shurgard Europe has a 20% interest.
The two joint ventures collectively had approximately EUR 233 million ($328 million) of outstanding debt at June 30, 2009. The loans are payable to various banks and are non-recourse to Shurgard Europe. The maturity dates of each of the JV loans were recently extended. One of the JV loans, totaling EUR 112 million ($158 million), is now due May 2012 and the other JV loan, totaling EUR 121 million ($170 million), is due July 2010.
Our existing EUR 391.9 million ($550.5 million at June 30, 2009) loan to Shurgard Europe was extended for an additional year to March 31, 2010 and will continue to accrue interest at 7.5% per annum. The loan currently is not hedged for future currency exchange fluctuations; accordingly, the amount of U.S. Dollars that will be received on repayment will depend upon the currency exchange rates at the time. In addition, Shurgard Europe exercised its option and extended our commitment through March 31, 2010 to provide up to EUR 305 million of additional loans to Shurgard Europe which has since been reduced to EUR 185 million due to the refinancing of one of the JV loans. Borrowings are to be used to either fund the acquisition of Shurgard Europe's partner's interest in the joint ventures and/or repay Shurgard Europe's pro rata share of the joint ventures' debt. The acquisitions of the joint venture partner's interests are subject to our approval and Shurgard Europe's pro rata share of the aggregate joint venture debt is approximately EUR 50 million. In March 2009, Shurgard Europe's joint venture partner gave us its exit notice indicating its intent to sell its interest in one of the joint ventures. In June 2009, the joint venture partner withdrew its exit notice.
Liquidity Position
At June 30, 2009, we had approximately $585 million of unrestricted cash on hand and have access to an additional $300 million line of credit. The line of credit does not expire until March 27, 2012. We have no significant capital commitments at June 30, 2009, other than outstanding debt maturities.
At June 30, 2009, outstanding debt totaled $524 million. We have no significant debt maturities until 2011 ($131 million of maturities) and 2013 ($251 million of maturities).
Our retained operating cash flow continues to provide a significant source of capital to fund our activities. During the six months ended June 30, 2009, our funds from operations available to distribute to common shareholders ("FAD") exceeded our regular common distributions by approximately $193 million. Our ability to continue to retain operating cash flow in the future will be contingent upon a number of factors including, but not limited to, the growth in our operations and our distribution requirements to maintain our REIT status.
Distributions Declared
On August 6, 2009, our Board of Trustees declared a regular common dividend of $0.55 per common share, a dividend of $0.6125 per share on the Equity Shares, Series A and dividends with respect to our various series of preferred shares. All the dividends are payable on September 30, 2009 to shareholders of record as of September 15, 2009.
Second Quarter Conference Call
A conference call is scheduled for Friday, August 7, 2009, at 10:00 a.m. (PDT) to discuss the second quarter ended June 30, 2009 earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 18935172). A simultaneous audio web cast may be accessed by using the link at www.publicstorage.com under "Company Info, Investor Relations" (conference ID number 18935172). A replay of the conference call may be accessed through August 21, 2009 by calling (800) 642-1687 (domestic) or (706) 645-9291 (international) or by using the link at www.publicstorage.com under "Company Info, Investor Relations." All forms of replay utilize conference ID number 18935172.
About Public Storage
Public Storage, a member of the S&P 500 and The Forbes Global 2000, is a fully integrated, self-administered and self-managed real estate investment trust that primarily acquires, develops, owns and operates self-storage facilities. The Company's headquarters are located in Glendale, California. At June 30, 2009, the Company had interests in 2,010 self-storage facilities located in 38 states with approximately 127 million net rentable square feet in the United States and 185 storage facilities located in seven Western European nations with approximately ten million net rentable square feet. The Company also owns a 46% common equity interest in PS Business Parks (NYSE:PSB) which owned and operated approximately 19.6 million rentable square feet of commercial space, primarily flex, multitenant office and industrial space, at June 30, 2009.
Additional information about Public Storage is available on our website, www.publicstorage.com.
Forward-Looking Statements
All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words "expects," "believes," "anticipates," "should," "estimates" and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause Public Storage's actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Factors and risks that may impact future results and performance are described from time to time in Public Storage's filings with the Securities and Exchange Commission, including in Item 1A, "Risk Factors" in Public Storage's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, Form 10-Q for the period ended June 30, 2009 expected to be filed on or before August 10, 2009, our other Quarterly Reports on Form 10-Q and current reports on Form 8-K. These risks include, but are not limited to, the following: general risks associated with the ownership and operation of real estate, including changes in demand for our storage facilities, potential liability for environmental contamination, adverse changes in tax, real estate and zoning laws and regulations, and the impact of natural disasters; risks associated with downturns in the national and local economies in the markets in which we operate; the impact of competition from new and existing storage and commercial 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 six months ended
June 30, 2009 to the same period in 2008 are significantly
impacted by the acquisition by an institutional investor of a 51%
interest in Shurgard Europe on March 31, 2008, which resulted in
the deconsolidation of Shurgard Europe as of that date.
Statement of Financial Accounting Standards No. 160,
"Noncontrolling Interests in Consolidated Financial Statements -
an amendment of ARB No. 51", EITF 03-6-1, "Participating
Securities and the Two-Class Method under FASB Statement No. 128",
and certain other associated standards became effective January 1,
2009. As a result, adjustments have been made from the amounts
previously presented for the three and six months ended June 30,
2008. The nature of these adjustments are described more fully in
Note 2 to our March 31, 2009 Financial Statements included in our
Form 10-Q for the quarter ended March 31, 2009.
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
(Amounts in thousands, except per share amounts)
Revenues:
Self-storage $ 371,630 $ 380,770 $ 742,869 $ 805,043
Ancillary operations (b) 28,106 26,710 53,941 56,747
Interest and other income (a) 7,516 11,014 15,149 13,858
407,252 418,494 811,959 875,648
Expenses:
Cost of operations:
Self-storage 124,478 128,124 257,952 284,779
Ancillary operations (b) 10,374 12,064 20,027 23,368
Depreciation and amortization (c) 83,796 94,829 168,762 217,069
General and administrative (d) 8,199 33,173 17,878 48,089
Interest expense 7,288 9,601 15,416 26,088
234,135 277,791 480,035 599,393
Income from continuing operations before equity in earnings of 173,117 140,703 331,924 276,255
real estate entities, gain (loss) on disposition of real estate
investments or early redemption of debt and foreign currency
exchange gain (loss)
Equity in earnings of real estate entities (a) 7,398 4,632 30,209 7,361
Gain (loss) on disposition of real estate investments - (92 ) 2,722 341,773
Gain on early redemption of debt - - 4,114 -
Foreign currency exchange gain (loss) (e) 33,205 (2 ) (1,528 ) 40,969
Income from continuing operations 213,720 145,241 367,441 666,358
Discontinued operations (b) (8,333 ) (1,286 ) (8,625 ) (2,462 )
Net income 205,387 143,955 358,816 663,896
Net income allocable (to) from
noncontrolling equity interests:
Preferred unitholders, based upon distributions paid (1,813 ) (5,403 ) (5,830 ) (10,806 )
Preferred unitholders, based upon redemptions (f) - - 72,000 -
Other noncontrolling interests in subsidiaries (4,402 ) (4,739 ) (8,812 ) (6,935 )
Net income allocable to Public Storage Shareholders $ 199,172 $ 133,813 $ 416,174 $ 646,155
Allocation of net income to Public Storage Shareholders:
Preferred shareholders, based on distributions paid $ 58,108 $ 60,333 $ 116,216 $ 120,666
Preferred shareholders, based on redemptions - - (6,218 ) -
Equity Shares, Series A 5,131 5,356 10,262 10,712
Restricted share units 446 146 932 1,971
Common shareholders 135,487 67,978 294,982 512,806
$ 199,172 $ 133,813 $ 416,174 $ 646,155
Per common share:
Net income per share - Basic $ 0.80 $ 0.40 $ 1.75 $ 3.05
Net income per share - Diluted $ 0.80 $ 0.40 $ 1.75 $ 3.04
Weighted average common shares - Basic 168,348 168,028 168,330 168,307
Weighted average common shares - Diluted 168,528 168,479 168,501 168,731
(a) Commencing March 31, 2008, we account for our investment in Shurgard
Europe using the equity method of accounting. Our equity in earnings
of Shurgard Europe for the three and six months ended June 30, 2009
and the six months ended June 30, 2008 totaling $1,709,000,
$3,608,000 and $1,457,000, respectively, are comprised of (i) losses
of $4,049,000, $7,300,000 and $4,819,000, respectively, representing
our 49% pro-rata share of Shurgard Europe's net loss for the
respective periods and (ii) income of $5,758,000, $10,908,000, and
$6,276,000, respectively, representing our 49% pro-rata share of the
interest income and trademark license fees received from Shurgard
Europe for the respective periods (such amounts are presented as
equity in earnings of real estate entities rather than interest and
other income). Equity in earnings for the six months ended June 30,
2009 includes $16.3 million in income related to PS Business Parks'
repurchases of its preferred securities.
(b) During the first quarter of 2009, we discontinued the containerized
storage and truck rental operations and, accordingly, the historical
operations from these activities have been reclassified for all
periods presented from ancillary operations to discontinued
operations. During the second quarter of 2009, we reclassified the
historical operations of a self-storage facility that is expected to
be disposed of pursuant to a condemnation proceeding within the next
year. In addition to the historical revenues and expenses of this
self-storage facility, discontinued operations includes an
impairment charge totaling $8.2 million related to the intangible
assets of this facility recorded in the quarter ended June 30, 2009.
Discontinued operations for the six months ended June 30, 2009
includes $3.5 million in costs associated with the disposal of
trucks, as well as a gain on disposition of a discontinued
self-storage facility of approximately $4.2 million.
(c) Depreciation and amortization expense for the three and six months
ended June 30, 2009 decreased when compared to the same periods in
2008 primarily due to reductions in amortization expense related to
domestic intangible assets, primarily those obtained in the Shurgard
Merger. In addition, depreciation and amortization expense for the
six months ended June 30, 2009 compared to the same period in 2008,
was impacted by the deconsolidation of Shurgard Europe.
(d) For the three and six months ended June 30, 2008, general and
administrative expense includes additional incentive compensation
totaling $25.4 million and $27.9 million, respectively, associated
with the disposition of an interest in Shurgard Europe.
(e) Our foreign currency exchange gains and losses are primarily
related to our loan to Shurgard Europe which is denominated in
Euros. When converting the Euro denominated loan to U.S. Dollars,
exchange gains or losses may arise due to fluctuation in the
exchange rates between the value of the U.S. Dollar and the Euro.
(f) During the six months ended June 30, 2009, we repurchased various
series of our preferred shares and units for an aggregate of
$170.5 million. This amount was approximately $78.2 million lower
than the original issue proceeds of the preferred equity acquired
and, accordingly, we recorded an allocation of income from the
preferred shareholders and unitholders to the common shareholders
of $78.2 million. These repurchases are expected to reduce ongoing
distributions to the preferred shareholders and unitholders by
$16.1 million per year.
PUBLIC STORAGE
SELECTED FINANCIAL DATA
June 30, December 31,
2009 2008
(Amounts in thousands, except share and per share data)
(Unaudited)
ASSETS
Cash and cash equivalents $ 584,860 $ 680,701
Operating real estate facilities:
Land and buildings, at cost 10,250,653 10,207,022
Accumulated depreciation (2,568,215 ) (2,405,473 )
7,682,438 7,801,549
Construction in process 12,703 20,340
7,695,141 7,821,889
Investment in real estate entities 562,732 544,598
Goodwill 174,634 174,634
Intangible assets, net 40,511 52,005
Loan receivable from Shurgard Europe 550,499 552,361
Other assets 95,459 109,857
Total assets $ 9,703,836 $ 9,936,045
LIABILITIES AND EQUITY
Notes payable $ 524,440 $ 643,811
Accrued and other liabilities 219,697 212,353
Total liabilities 744,137 856,164
Redeemable noncontrolling interests in subsidiaries 12,872 12,777
Equity:
Public Storage shareholders' equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par 3,399,777 3,424,327
value, 100,000,000 shares authorized, 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 16,837 16,829
shares authorized, 168,355,703 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 5,673,201 5,590,093
Retained earnings (deficit) (258,732 ) (290,323 )
Accumulated other comprehensive loss (18,090 ) (31,931 )
Total Public Storage shareholders' equity 8,812,993 8,708,995
Equity of permanent noncontrolling interests in subsidiaries:
Preferred partnership units 100,000 325,000
Other interests 33,834 33,109
Total equity 8,946,827 9,067,104
Total liabilities and equity $ 9,703,836 $ 9,936,045
Shurgard Europe Same Store Selected Operating Data
The Shurgard Europe Same Store represents those 94 facilities that they have owned, and have been operated on a stabilized basis, since January 1, 2007 and therefore provide meaningful comparisons for 2007, 2008, and 2009. The following table reflects the operating results of these 94 facilities. As described more fully in "Shurgard Europe" above, we deconsolidated Shurgard Europe as of March 31, 2008.
Selected Operating Data for the Three Months Ended June 30, Six Months Ended June 30,
94 facilities operated by Shurgard Europe on a stabilized basis
since January 1, 2007: (unaudited)
2009 2008(a) Percentage 2009 2008 (a) Percentage
Change Change
(Dollar amounts in thousands, except weighted average data,
utilizing constant exchange rates)
Revenues:
Rental income $ 27,815 $ 29,224 (4.8 )% $ 54,422 $ 57,052 (4.6 )%
Late charges and admin fees collected 451 517 (12.8 )% 886 996 (11.0 )%
Total revenues 28,266 29,741 (5.0 )% 55,308 58,048 (4.7 )%
Cost of operations:
Property taxes 1,460 1,422 2.7 % 2,833 2,748 3.1 %
Direct property payroll 3,387 3,315 2.2 % 6,671 6,468 3.1 %
Advertising and promotion 1,498 1,073 39.6 % 2,941 1,802 63.2 %
Utilities 640 694 (7.8 )% 1,504 1,364 10.3 %
Repairs and maintenance 725 803 (9.7 )% 1,527 1,562 (2.2 )%
Property insurance 179 188 (4.8 )% 343 363 (5.5 )%
Other costs of management 4,127 3,986 3.5 % 7,860 7,923 (0.8 )%
Total cost of operations 12,016 11,481 4.7 % 23,679 22,230 6.5 %
Net operating income 16,250 18,260 (11.0 )% 31,629 35,818 (11.7 )%
Gross margin 57.5 % 61.4 % (6.4 )% 57.2 % 61.7 % (7.3 )%
Weighted average for the period:
Square foot occupancy (b) 86.1 % 86.9 % (0.9 )% 85.4 % 87.3 % (2.2 )%
Realized annual rent per occupied square foot (c)(d) $ 25.04 $ 26.07 (4.0 )% $ 24.70 $ 25.33 (2.5 )%
REVPAF (d)(e) $ 21.56 $ 22.65 (4.8 )% $ 21.09 $ 22.11 (4.6 )%
Weighted average at June 30:
Square foot occupancy 87.0 % 87.4 % (0.5 )%
In place annual rent per occupied square foot (f) $ 26.63 $ 27.66 (3.7 )%
Total net rentable square feet (in thousands) 5,160 5,160 -
(a) For comparative purposes, these amounts are presented on a
constant exchange rate basis. The amounts for the three and six
months ended June 30, 2008 have been restated using the actual
exchange rate for the same periods in 2009. The exchange rate for
the Euro relative to the U.S. Dollar averaged 1.361 and 1.334 for
the three and six months ended June 30, 2009, respectively, as
compared to 1.563 and 1.530, respectively, for the same periods in
2008.
(b) Square foot occupancies represent weighted average occupancy levels
over the entire period.
(c) Realized annual rent per occupied square foot is computed by
annualizing the result of dividing rental income before late
charges and administrative fees by the weighted average occupied
square feet for the period. Realized annual rent per occupied
square foot takes into consideration promotional discounts and
other items that reduce rental income from the contractual amounts
due.
(d) Late charges and administrative fees are excluded from the
computation of realized annual rent per occupied square foot and
REVPAF. Exclusion of these amounts provides a better measure of
our ongoing level of revenue, by excluding the volatility of late
charges, which are dependent principally upon the level of tenant
delinquency, and administrative fees, which are dependent
principally upon the absolute level of move-ins for a period.
(e) Realized annual rent per available foot or "REVPAF" is computed by
dividing rental income before late charges and admin fees by the
total available net rentable square feet for the period.
(f) In place annual rent per occupied square foot represents annualized
contractual rents per occupied square foot without reductions for
promotional discounts and excludes late charges and administrative
fees.
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations
(Unaudited)
Funds from operations ("FFO") is a term defined by the National
Association of Real Estate Investment Trusts ("NAREIT"). FFO is a
non-GAAP (generally accepted accounting principles) financial
measure. FFO is generally defined as net income before
depreciation with respect to real estate assets and gains and
losses on real estate assets. FFO is presented because management
and many analysts consider FFO to be one measure of the
performance of real estate companies. In addition, we believe that
FFO is helpful to investors as an additional measure of the
performance of a REIT, because net income includes the impact of
depreciation, which assumes that the value of real estate
diminishes predictably over time, while we believe that the value
of real estate fluctuates due to market conditions and in response
to inflation. FFO computations do not consider scheduled principal
payments on debt, capital improvements, distributions, and other
obligations of the Company. FFO is not a substitute for our cash
flow or net income as a measure of our liquidity or operating
performance or our ability to pay dividends. Other REITs may not
compute FFO in the same manner; accordingly, FFO may not be
comparable among REITs. The following table reconciles from net
income to Funds from Operations, and sets forth the computation of
Funds from Operations per share:
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
(Amounts in thousands, except per share data)
Computation of Funds from
Operations ("FFO") allocable to Common Shares:
Net Income $ 205,387 $ 143,955 $ 358,816 $ 663,896
Add back - depreciation and amortization 83,796 94,829 168,762 217,069
Add back - depreciation and amortization included in Discontinued 488 557 722 808
Operations
Eliminate - depreciation with respect to non-real estate assets (54 ) (64 ) (114 ) (125 )
Eliminate - loss (gain) on sale of real estate investments - 92 (2,722 ) (341,773 )
Eliminate - equity share of PSB's real estate gain (675 ) - (675 ) -
Eliminate - gain on sale of real estate included in Discontinued - - (4,181 ) -
Operations
Add back - Depreciation from unconsolidated real estate investments 16,939 22,821 34,571 34,993
Consolidated FFO allocable to our equity holders 305,881 262,190 555,179 574,868
Less: allocations of FFO (to) from noncontrolling equity interests:
Preferred unitholders, based upon distributions paid (1,813 ) (5,403 ) (5,830 ) (10,806 )
Preferred unitholders, based upon redemptions - - 72,000 -
Other noncontrolling equity interests in subsidiaries (4,862 ) (4,949 ) (9,741 ) (11,113 )
Consolidated FFO allocable to Public Storage shareholders 299,206 251,838 611,608 552,949
Less: allocations of FFO (to) from:
Preferred shareholders, based on distributions paid (58,108 ) (60,333 ) (116,216 ) (120,666 )
Preferred shareholders, based on redemptions - - 6,218 -
Restricted share unit holders (834 ) (643 ) (1,670 ) (1,547 )
Equity Shares, Series A (5,131 ) (5,356 ) (10,262 ) (10,712 )
Remaining FFO allocable to Common Shares $ 235,133 $ 185,506 $ 489,678 $ 420,024
Weighted average shares:
Regular common shares 168,348 168,028 168,330 168,307
Weighted average share options outstanding using treasury method 180 451 171 424
Weighted average common shares for purposes of computing 168,528 168,479 168,501 168,731
fully-diluted FFO per common share
FFO per diluted common share $ 1.40 $ 1.10 $ 2.91 $ 2.49
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds Available for Distribution
(Unaudited)
Funds available for distribution ("FAD") represents FFO, plus (i)
impairment charges with respect to real estate assets, (ii) the
non-cash portion of share-based compensation expense, (iii)
non-cash allocations to or from preferred equity holders, less
(iv) capital expenditures to maintain our facilities and (v)
elimination of any gain or loss on foreign exchange. The
distribution payout ratio is computed by dividing the distribution
paid by FAD. FAD is presented because many analysts consider it to
be a measure of the performance and liquidity of real estate
companies and because we believe that FAD is helpful to investors
as an additional measure of the performance of a REIT. FAD is not
a substitute for our cash flow or net income as a measure of our
liquidity, operating performance, or our ability to pay dividends.
FAD does not take into consideration required principal payments
on debt. Other REITs may not compute FAD in the same manner;
accordingly, FAD may not be comparable among REITs. The following
table reconciles from FFO to FAD, and sets forth the computation
of our distribution payout ratio:
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
(Amounts in thousands)
Computation of Funds Available
for Distribution ("FAD"):
FFO allocable to Common Shares $ 235,133 $ 185,506 $ 489,678 $ 420,024
Add: Non-cash share-based compensation expense 3,480 3,484 6,093 6,258
Eliminate: Non-cash foreign currency exchange losses (gains) (33,205 ) 2 1,528 (40,969 )
Eliminate: Non-cash intangible impairment charge included in 8,205 - 8,205 -
discontinued operations
Less: Allocation of FFO from preferred unitholders and preferred - - (94,502 ) -
shareholders based upon redemptions, including our equity share of
PSB's redemption activities
Less: Aggregate capital expenditures (24,076 ) (24,697 ) (32,575 ) (31,571 )
Funds available for distribution ("FAD") $ 189,537 $ 164,295 $ 378,427 $ 353,742
Distribution to common shareholders $ 92,594 $ 92,432 $ 185,176 $ 184,809
Distribution payout ratio 48.9 % 56.3 % 48.9 % 52.2 %
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Same Store revenues, cost of operations, and
net operating income to
Total Self-Storage revenues, Self-Storage cost of operations,
and net income of the Company
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
(Amounts in thousands)
Revenues for:
Same Store facilities $ 346,839 $ 359,461 $ 694,024 $ 709,452
Other domestic facilities (a) 24,791 21,309 48,845 40,869
Shurgard Europe's facilities, which were deconsolidated March 31, - - - 54,722
2008
Self-storage revenues (b) $ 371,630 $ 380,770 $ 742,869 $ 805,043
Self-storage cost of operations for:
Same Store facilities $ 116,426 $ 120,526 $ 241,433 $ 244,382
Other facilities (a) 8,052 7,598 16,519 15,743
Shurgard Europe's facilities, which were deconsolidated March 31, - - - 24,654
2008
Self-storage cost of operations (b) $ 124,478 $ 128,124 $ 257,952 $ 284,779
Net operating income for:
Same Store facilities $ 230,413 $ 238,935 $ 452,591 $ 465,070
Other facilities (a) 16,739 13,711 32,326 25,126
Shurgard Europe's facilities, which were deconsolidated March 31, - - - 30,068
2008
Consolidated net operating income (c) 247,152 252,646 484,917 520,264
Ancillary revenues 28,106 26,710 53,941 56,747
Interest and other income 7,516 11,014 15,149 13,858
Ancillary cost of operations (10,374 ) (12,064 ) (20,027 ) (23,368 )
Depreciation and amortization (83,796 ) (94,829 ) (168,762 ) (217,069 )
General and administrative expense (8,199 ) (33,173 ) (17,878 ) (48,089 )
Interest expense (7,288 ) (9,601 ) (15,416 ) (26,088 )
Equity in earnings of real estate entities 7,398 4,632 30,209 7,361
Gain (loss) on disposition of real estate investments - (92 ) 2,722 341,773
Gain on redemption of debt - - 4,114 -
Foreign exchange gain (loss) 33,205 (2 ) (1,528 ) 40,969
Discontinued operations (8,333 ) (1,286 ) (8,625 ) (2,462 )
Consolidated net income of the Company $ 205,387 $ 143,955 $ 358,816 $ 663,896
(a) We consolidate the operating results of additional self-storage
facilities that are not Same Store Facilities.
(b) Self-storage revenues and cost of operations do not include revenues
and expenses generated at the facilities with respect to tenant
reinsurance, retail sales and truck rentals.
(c) We present net operating income "NOI," which is a non-GAAP
(generally accepted accounting principles) financial measure that
excludes the impact of depreciation and amortization expense.
Although depreciation and amortization is a component of GAAP net
income, we believe that NOI is a meaningful measure of operating
performance, because we utilize NOI in making decisions with
respect to capital allocations, segment performance, and comparing
period-to-period and market-to-market property operating results.
In addition, the investment community utilizes NOI in determining
real estate values, and does not consider depreciation expense as
it is based upon historical cost. NOI is not a substitute for net
operating income after depreciation and amortization in evaluating
our operating results.
SOURCE: Public Storage
Public Storage Clemente Teng, 818-244-8080
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