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Public Storage Reports Results For The Third Quarter Ended September 30, 2012

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, 2011, Form 10-Q for the period ended September 30, 2012 expected to be filed on or before November 9, 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.

           

PUBLIC STORAGE

SELECTED INCOME STATEMENT DATA

(Unaudited)

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

     

2011

2012

     

2011

(Amounts in thousands, except per share data)

Operating Revenues:
Self-storage facilities $ 440,918 $ 415,552 $ 1,268,256 $ 1,194,753
Ancillary operations   32,013     30,011     93,022     85,817  
  472,931     445,563     1,361,278     1,280,570  
Operating Expenses:
Self-storage cost of operations 127,367 128,787 395,381 393,446
Ancillary cost of operations 9,857 9,793 29,156 28,304
Depreciation and amortization 89,897 90,821 265,195 268,254
General and administrative 15,298 14,116 44,117 40,944
Asset impairment charges (a)   -     2,186     -     2,186  
  242,419     245,703     733,849     733,134  
Operating income   230,512     199,860     627,429     547,436  
 
Other income (expense):
Interest and other income 5,444 6,875 16,639 25,218
Interest expense (4,926 ) (5,862 ) (15,327 ) (18,779 )
Equity in earnings of unconsolidated real estate entities (b) 12,642 15,269 30,353 41,755
Foreign currency exchange gain (loss) 9,019 (28,253 ) (2,481 ) 13,495
Gain on real estate sales and debt retirement   193     4,983     1,456     5,111  
Income from continuing operations 252,884 192,872 658,069 614,236
Discontinued operations (c)   11,935     1,641     12,403     1,786  
Net income 264,819 194,513 670,472 616,022
Allocation to noncontrolling interests   (927 )   (3,374 )   (2,585 )   (12,331 )
Net income allocable to Public Storage shareholders 263,892 191,139 667,887 603,691
Allocation of net income to:
Preferred shareholders - distributions (49,267 ) (56,670 ) (156,272 ) (172,926 )
Preferred shareholders - redemptions (11,350 ) (16,178 ) (49,677 ) (32,077 )
Restricted share units   (810 )   (341 )   (1,787 )   (1,164 )
Net income allocable to common shareholders $ 202,465   $ 117,950   $ 460,151   $ 397,524  
 

Per common share:

Net income per common share – Basic $ 1.19   $ 0.69   $ 2.70   $ 2.35  
Net income per common share – Diluted $ 1.18   $ 0.69   $ 2.68   $ 2.33  
Weighted average common shares - Basic   170,576     169,728     170,460     169,512  
Weighted average common shares - Diluted   171,700     170,830     171,558     170,538  
 
    (a)     Impairment charges relate to non-real estate assets.
 
(b) Due to the application of EITF D-42 to PSB’s preferred equity redemptions, equity in earnings of unconsolidated real estate entities has been reduced by $1.6 million and $7.2 million for the three and nine months ended September 30, 2012, respectively, and increased $3.0 million in the nine months ended September 30, 2011.
 
(c)

Discontinued operations for the three and nine months ended September 30, 2012 includes an aggregate gain of $11.7 million on disposition of three self-storage facilities that were condemned through eminent domain proceedings, as well as the revenues and expenses generated by these facilities for all periods presented.

 
 
 

PUBLIC STORAGE

SELECTED BALANCE SHEET DATA

 
 
     

September 30, 2012

(unaudited)

                 

December 31, 2011

(Amounts in thousands, except share and per share data)

ASSETS
Cash and cash equivalents $ 535,752 $ 139,008
Operating real estate facilities:
Land and buildings, at cost 10,980,706 10,777,576
Accumulated depreciation   (3,650,000 )   (3,398,379 )
7,330,706 7,379,197
 
Investment in unconsolidated real estate entities 716,401 714,627
Goodwill and other intangible assets, net 210,148 209,833
Loan receivable from unconsolidated real estate entity 399,794 402,693
Other assets   95,319     87,204  
Total assets $ 9,288,120   $ 8,932,562  
 
LIABILITIES AND EQUITY
Notes payable $ 347,943 $ 398,314
Preferred shares called for redemption 367,325 -
Accrued and other liabilities   242,706     210,966  
Total liabilities 957,974 609,280
 
Redeemable noncontrolling interests - 12,355
 
Equity:
Public Storage shareholders’ equity:
Cumulative Preferred Shares of beneficial interest, $0.01 par value, 100,000,000 shares authorized, 128,000 shares issued (in series) and outstanding (475,000 at December 31, 2011), at liquidation preference

3,200,000

3,111,271

Common Shares of beneficial interest, $0.10 par value, 650,000,000 shares authorized, 170,634,560 shares issued and outstanding (170,238,805 at December 31, 2011) 17,064 17,024
Paid-in capital 5,411,623 5,442,506
Accumulated deficit (312,690 ) (259,578 )
Accumulated other comprehensive loss   (15,371 )   (23,014 )
Total Public Storage shareholders’ equity 8,300,626 8,288,209
Permanent noncontrolling interests   29,520     22,718  
Total equity   8,330,146     8,310,927  
Total liabilities and equity $ 9,288,120   $ 8,932,562  
 
 

Shurgard Europe Same Store Selected Operating Data

The Shurgard Europe Same Store Pool represents the 162 facilities (8.6 million net rentable square feet) that have been consolidated and operated by Shurgard Europe on a stabilized basis since January 1, 2010 and therefore provide meaningful comparisons for 2011 and 2012. 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.

           

Selected Operating Data for the Shurgard Europe

Same Store Pool (162 facilities) (unaudited):

Three Months Ended September 30,

Nine Months Ended September 30,

2012

     

2011

      PercentageChange

2012

     

2011

      PercentageChange

(Dollar amounts in thousands, except weighted average data, utilizing constant exchange rates (a))

 
Rental income, late charges, and administrative fees $ 46,953 $ 47,891 (2.0 )% $ 140,871 $ 141,676 (0.6 )%
 
Cost of operations   19,250     20,758   (7.3 )%   59,970     62,012   (3.3 )%
 
Net operating income $ 27,703   $ 27,133   2.1 % $ 80,901   $ 79,664   1.6 %
 
Gross margin 59.0 % 56.7 % 4.1 % 57.4 % 56.2 % 2.1 %
Weighted average for the period:
Square foot occupancy (b) 83.5 % 86.1 % (3.0 )% 83.5 % 85.3 % (2.1 )%
Realized annual rent per occupied square foot (c) (d) $ 25.65 $ 25.32 1.3 % $ 25.63 $ 25.19 1.7 %
REVPAF (d) (e) $ 21.42 $ 21.80 (1.7 )% $ 21.40 $ 21.49 (0.4 )%
 
Weighted average at September 30:
Square foot occupancy 83.3 % 86.0 % (3.1 )%
In place annual rent per occupied square foot (f) $ 28.14 $ 27.19 3.5 %
Total net rentable square feet (in thousands) 8,627 8,627 -
 
Average Euro to U.S. Dollar exchange rates: (a)
Constant exchange rates used herein 1.251 1.251 - 1.282 1.282 -
Actual historical exchange rates 1.251 1.415 (11.6 )% 1.282 1.406 (8.8 )%
 
          (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, 2011 have been restated using the actual exchange rates for the three and nine months ended September 30, 2012, respectively.
 
(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 by the weighted average occupied square footage for the period. Realized annual rent per occupied square foot takes into consideration promotional discounts, which 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 because exclusion of these amounts provides a better measure of our ongoing level of revenue.
 
(e) REVPAF represents annualized rental income which excludes late charges and administrative fees divided by total available net rentable square feet. REVPAF takes into consideration promotional discounts that reduce rental income from the contractual amounts due.
 
(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 and Funds Available for Distribution

(Unaudited)

 
Three Months EndedSeptember 30, Nine Months EndedSeptember 30,
2012       2011 2012       2011
(Amounts in thousands, except per share data)

Computation of FFO Allocable to Common Shares:

Net Income $ 264,819 $ 194,513 $ 670,472 $ 616,022
Add back – depreciation and amortization, including amounts classified as discontinued operations

89,991

90,956

265,517

268,695

Add back – depreciation from unconsolidated real estate investments

18,391

17,925

56,955

52,351

Eliminate – gains on sale of real estate investments, including discontinued operations and from unconsolidated real estate investments  

(13,010

)

 

(5,943

)

 

(14,273

)

 

(5,818

)

FFO allocable to equity holders 360,191 297,451 978,671 931,250
Less allocation of FFO to:
Noncontrolling equity interests (1,730 ) (3,784 ) (4,950 ) (13,696 )
Preferred shareholders - distributions (49,267 ) (56,670 ) (156,272 ) (172,926 )
Preferred shareholders - redemptions (11,350 ) (16,178 ) (49,677 ) (32,077 )
Restricted share unitholders   (1,198 )   (641 )   (2,990 )   (2,060 )

FFO allocable to Common Shares

$ 296,646  

$

220,178

 

$

764,782

 

$

710,491

 
 
Diluted weighted average common shares outstanding   171,700     170,830     171,558     170,538  
FFO per diluted common share $ 1.73   $ 1.29  

$

4.46

 

$

4.17

 
 

Computation of Funds Available for Distribution (“FAD”):

FFO allocable to Common Shares $ 296,646 $ 220,178 $ 764,782 $ 710,491
Eliminate effect of non-cash items on FFO:
Share-based compensation expense 7,111 6,147 18,394 17,968
Asset impairment charges - 2,186 - 2,186
Foreign currency exchange (gain) loss (9,019 ) 28,253 2,481 (13,495 )
Application of EITF D-42 12,941 16,178 56,856 29,060
Less: Capital improvements to real estate facilities   (18,344 )   (12,734 )   (58,642 )   (57,026 )
 
FAD (a) $ 289,335   $ 260,208   $ 783,871   $ 689,184  
 

Distribution paid to common shareholders

$ 187,629   $ 161,526   $ 562,625   $ 458,062  
 
Distribution payout ratio (b)   64.8 %   62.1 %   71.8 %   66.5 %
 
Distributions per Common Share $ 1.10   $ 0.95   $ 3.30   $ 2.70  
    (a)     Funds available for distribution (“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.
 
(b) The distribution payout ratio is computed by dividing the distribution paid by FAD.
 
 
           

PUBLIC STORAGE

SELECTED FINANCIAL DATA

Reconciliation of Same Store Data and Net Operating Income to

Consolidated Data of the Company

(Unaudited)

 
Three Months EndedSeptember 30, Nine Months EndedSeptember 30,
2012       2011 2012       2011
(Amounts in thousands)
Revenues for:
Same Store Facilities $ 412,641 $ 393,819 $ 1,191,269 $ 1,135,859
Non Same Store Facilities (a)   28,277     21,733     76,987     58,894  
 
Self-storage revenues   440,918     415,552     1,268,256     1,194,753  
 
Self-storage cost of operations for:
Same Store Facilities 118,566 121,338 370,291 372,409
Non Same Store Facilities (a)   8,801     7,449     25,090     21,037  
 
Self-storage cost of operations   127,367     128,787     395,381     393,446  
Net operating income for:
Same Store Facilities 294,075 272,481 820,978 763,450
Non Same Store Facilities (a)   19,476     14,284     51,897     37,857  
 
Self-storage net operating income 313,551 286,765 872,875 801,307
Ancillary revenues 32,013 30,011 93,022 85,817
Ancillary cost of operations (9,857 ) (9,793 ) (29,156 ) (28,304 )
Depreciation and amortization (89,897 ) (90,821 ) (265,195 ) (268,254 )
General and administrative expense (15,298 ) (14,116 ) (44,117 ) (40,944 )
Asset impairment charges - (2,186 ) - (2,186 )
Interest and other income 5,444 6,875 16,639 25,218
Interest expense (4,926 ) (5,862 ) (15,327 ) (18,779 )
Equity in earnings of unconsolidated real estate entities 12,642 15,269 30,353 41,755
Foreign currency exchange gain (loss) 9,019 (28,253 ) (2,481 ) 13,495
Gain on real estate sales and debt retirement 193 4,983 1,456 5,111
Discontinued operations   11,935     1,641     12,403     1,786  
Net income $ 264,819   $ 194,513   $ 670,472   $ 616,022  
 
    (a)     We consolidate the operating results of 114 additional self-storage facilities that are not Same Store Facilities. Since January 1, 2012, we have acquired 14 self-storage facilities from third parties, and on June 1, 2012, we commenced consolidating three self-storage facilities that we previously accounted for on the equity method. Included in the table above for the three and nine months ended September 30, 2012, are revenues totaling $2,806,000 and $4,417,000, respectively, and cost of operations totaling $1,228,000 and $1,962,000, respectively, for these 17 facilities.




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