Public Storage Reports Results for the Fourth Quarter and Year Ended December 31, 2016

GLENDALE, Calif.--()--Public Storage (NYSE:PSA) announced today operating results for the quarter and year ended December 31, 2016.

“Company Info, Investor Relations, News and Events, Events Calendar.”

Operating Results for the Three Months Ended December 31, 2016

For the three months ended December 31, 2016, net income allocable to our common shareholders was $352.8 million or $2.03 per diluted common share, compared to $303.0 million or $1.74 per share in 2015 representing an increase of $49.8 million or $0.29 per share. The increase is due primarily to a $32.0 million increase in self-storage net operating income (described below) and a $23.3 million increase in foreign exchange translation gains associated with our euro denominated debt.

The $32.0 million increase in self-storage net operating income is a result of a $20.6 million increase in our Same Store Facilities (as defined below) and an $11.4 million increase in our Non Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 4.6% or $23.5 million in the three months ended December 31, 2016 as compared to 2015, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.7% or $2.9 million in the three months ended December 31, 2016 as compared to 2015, due primarily to increased property taxes, repairs and maintenance and advertising and selling costs, offset partially by reduced allocated overhead costs. The increase in net operating income for the Non Same Store Facilities is due primarily to the impact of 337 self-storage facilities acquired, developed or expanded since January 2013.

Operating Results for the Year Ended December 31, 2016

For the year ended December 31, 2016, net income allocable to our common shareholders was $1,183.9 million or $6.81 per diluted common share, compared to $1,053.1 million or $6.07 per share in 2015 representing an increase of $130.8 million or $0.74 per share. The increase is primarily due to (i) a $139.1 million increase in self-storage net operating income and (ii) a $17.3 million increase in foreign exchange translation gains associated with our euro denominated debt offset partially by (iii) a $29.0 million reduction in gains on sales of real estate investments, including our equity share and (iv) a $20.0 million increase in EITF D-42 charges, including our equity share, as a result of preferred redemption activities.

The $139.1 million increase in self-storage net operating income is a result of a $96.9 million increase in our Same Store Facilities and a $42.2 million increase in our Non Same Store Facilities. Revenues for the Same Store Facilities increased 5.5% or $110.0 million in the year ended December 31, 2016 as compared to 2015, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.5% or $13.1 million in the year ended December 31, 2016 as compared to 2015, due primarily to increased property taxes, on-site property manager payroll and repairs and maintenance, offset partially by lower snow removal costs. The increase in net operating income for the Non Same Store Facilities is due primarily to the impact of 337 self-storage facilities acquired, developed or expanded since January 2013.

Funds from Operations

For the three months ended December 31, 2016, funds from operations (“FFO”) was $2.77 per diluted common share, as compared to $2.46 in 2015, representing an increase of 12.6%. FFO is a non-GAAP (generally accepted accounting principles) term defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation, gains and losses and impairment charges with respect to real estate assets.

For the year ended December 31, 2016, FFO was $9.70 per diluted common share, as compared to $8.79 in 2015, representing an increase of 10.4%.

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) EITF D-42 charges related to the redemption of preferred securities, (iii) general and administrative expenses associated with the acquisition of self-storage facilities and (iv) certain other non-cash and/or nonrecurring income or expense items. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

 
  Three Months Ended December 31,   Year Ended December 31,
    Percentage     Percentage
2016 2015 Change 2016 2015 Change
 
FFO per share $ 2.77 $ 2.46 12.6 % $ 9.70 $ 8.79 10.4 %

Eliminate the per share impact of items excluded from Core FFO, including our equity share from investments:

Foreign currency exchange gain (0.14 ) - (0.11 ) -
Application of EITF D-42 0.02 - 0.17 0.06
Property acquisition costs - - 0.01 0.04
Other items   -     (0.01 )   0.02     0.01
Core FFO per share $ 2.65   $ 2.45   8.2 % $ 9.79   $ 8.90 10.0 %
 

Property Operations – Same Store Facilities

The Same Store Facilities represent those facilities that have been owned and operated on a stabilized level of occupancy, revenues and cost of operations since January 1, 2014. We review the operations of our Same Store Facilities, which excludes facilities whose operating trends are significantly affected by factors such as casualty events, as well as recently developed or acquired facilities, to more effectively evaluate the ongoing performance of our self-storage portfolio in 2014, 2015 and 2016. We believe the Same Store information is used by investors and analysts in a similar manner. The following table summarizes the historical operating results of these 2,000 facilities (127.2 million net rentable square feet) that represent approximately 83% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2016.

           

Selected Operating Data for the Same

Store Facilities (2,000 facilities)

(unaudited):

Three Months Ended December 31, Year Ended December 31,
Percentage Percentage
2016 2015 Change 2016 2015 Change
 
(Dollar amounts in thousands, except for per square foot amounts)
Revenues:
Rental income $ 506,335 $ 483,230 4.8 % $ 2,001,608 $ 1,895,352 5.6 %
Late charges and administrative fees   24,038     23,639   1.7 %   96,088     92,373   4.0 %
Total revenues (a)   530,373     506,869   4.6 %   2,097,696     1,987,725   5.5 %
 
Cost of operations:
Property taxes 29,073 27,845 4.4 % 187,351 178,706 4.8 %
On-site property manager payroll 22,910 22,795 0.5 % 104,120 100,661 3.4 %
Supervisory payroll 8,387 8,040 4.3 % 36,217 35,092 3.2 %
Repairs and maintenance 9,998 9,096 9.9 % 38,845 35,994 7.9 %
Snow removal 803 1,204 (33.3 )% 4,135 9,677 (57.3 )%
Utilities 8,807 8,914 (1.2 )% 37,918 39,287 (3.5 )%
Advertising and selling expense 7,115 6,432 10.6 % 25,320 25,119 0.8 %
Other direct property costs 13,720 12,910 6.3 % 54,322 52,372 3.7 %
Allocated overhead   9,194     9,844   (6.6 )%   39,113     37,329   4.8 %
Total cost of operations (a)   110,007     107,080   2.7 %   527,341     514,237   2.5 %
Net operating income (b) $ 420,366   $ 399,789   5.1 % $ 1,570,355   $ 1,473,488   6.6 %
 
Gross margin 79.3 % 78.9 % 0.5 % 74.9 % 74.1 % 1.1 %
 
Weighted average for the period:
Square foot occupancy 93.7 % 93.9 % (0.2 )% 94.5 % 94.5 % 0.0 %
Realized annual rental income per (c):
Occupied square foot $ 16.99 $ 16.19 4.9 % $ 16.65 $ 15.77 5.6 %
Available square foot (“REVPAF”) $ 15.92 $ 15.19 4.8 % $ 15.73 $ 14.90 5.6 %
At December 31:
Square foot occupancy 92.3 % 92.8 % (0.5 )%

Annual contract rent per occupied square foot (d)

$ 17.55 $ 16.76 4.7 %
 
(a)     Revenues and cost of operations do not include ancillary revenues and expenses generated at the facilities with respect to tenant reinsurance and retail sales.
(b) See attached reconciliation of self-storage net operating income (“NOI”) to operating income.
(c) Realized annual rent per occupied square foot is computed by dividing annualized rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing annualized rental income, before late charges and administrative fees, by the total available rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
(d) Contract rent represents the applicable contractual monthly rent charged to our tenants, excluding the impact of promotional discounts, late charges and administrative fees.
 

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

         
For the Quarter Ended
March 31 June 30 September 30 December 31 Entire Year
 
(Amounts in thousands, except for per square foot amounts)
Total revenues:
  2016 $ 504,952 $ 520,099 $ 542,272 $ 530,373 $ 2,097,696
2015 $ 474,337 $ 490,806 $ 515,713 $ 506,869 $ 1,987,725
 
Total cost of operations:
2016 $ 139,511 $ 135,843 $ 141,980 $ 110,007 $ 527,341
2015 $ 143,301 $ 130,370 $ 133,486 $ 107,080 $ 514,237
 
Property taxes:
2016 $ 52,720 $ 52,929 $ 52,629 $ 29,073 $ 187,351
2015 $ 50,508 $ 50,407 $ 49,946 $ 27,845 $ 178,706
 

Repairs and maintenance, including snow removal expenses:

2016 $ 11,111 $ 10,308 $ 10,760 $ 10,801 $ 42,980
2015 $ 16,167 $ 9,025 $ 10,179 $ 10,300 $ 45,671
 
Advertising and selling expense:
2016 $ 5,080 $ 5,552 $ 7,573 $ 7,115 $ 25,320
2015 $ 6,192 $ 5,541 $ 6,954 $ 6,432 $ 25,119
 
REVPAF:
2016 $ 15.13 $ 15.63 $ 16.25 $ 15.92 $ 15.73
2015 $ 14.22 $ 14.73 $ 15.44 $ 15.19 $ 14.90
 

Weighted average realized annual rent per occupied square foot:

2016 $ 16.17 $ 16.39 $ 17.06 $ 16.99 $ 16.65
2015 $ 15.23 $ 15.45 $ 16.21 $ 16.19 $ 15.77
 

Weighted average occupancy levels for the period:

2016 93.6 % 95.4 % 95.3 % 93.7 % 94.5 %
2015 93.4 % 95.4 % 95.3 % 93.9 % 94.5 %
 

Property Operations – Non Same Store Facilities

The Non Same Store Facilities at December 31, 2016 represent 337 facilities that were not stabilized with respect to occupancies or rental rates since January 1, 2014 or that we did not own as of January 1, 2014. The following table summarizes operating data with respect to the Non Same Store Facilities (unaudited):

           
NON SAME STORE Three Months Ended December 31, Year Ended December 31,
FACILITIES 2016 2015 Change 2016 2015 Change
 
(Dollar amounts in thousands, except for per square foot amounts)
Revenues:
2016 acquisitions $ 7,779 $ - $ 7,779 $ 18,174 $ - $ 18,174
2015 acquisitions 4,126 2,752 1,374 15,574 6,255 9,319
2014 acquisitions 11,912 10,929 983 46,428 41,972 4,456
2013 acquisitions 25,353 23,765 1,588 99,390 91,481 7,909
Developed facilities 7,375 3,602 3,773 23,405 9,460 13,945
Other facilities   26,780   24,967   1,813     105,161     98,632     6,529  
Total revenues   83,325   66,015   17,310     308,132     247,800     60,332  
 

Cost of operations before depreciation and amortization expense:

2016 acquisitions 2,793 - 2,793 6,455 - 6,455
2015 acquisitions 1,081 915 166 5,010 2,067 2,943
2014 acquisitions 3,254 3,001 253 12,845 12,304 541
2013 acquisitions 6,761 6,854 (93 ) 28,508 28,017 491
Developed facilities 3,510 1,234 2,276 10,932 3,934 6,998
Other facilities   7,044   6,534   510     26,814     26,137     677  
Total cost of operations   24,443   18,538   5,905     90,564     72,459     18,105  
 
Net operating income:
2016 acquisitions 4,986 - 4,986 11,719 - 11,719
2015 acquisitions 3,045 1,837 1,208 10,564 4,188 6,376
2014 acquisitions 8,658 7,928 730 33,583 29,668 3,915
2013 acquisitions 18,592 16,911 1,681 70,882 63,464 7,418
Developed facilities 3,865 2,368 1,497 12,473 5,526 6,947
Other facilities   19,736   18,433   1,303     78,347     72,495     5,852  
Net operating income (a) $ 58,882 $ 47,477 $ 11,405   $ 217,568   $ 175,341   $ 42,227  
 

At December 31:

Square foot occupancy:
2016 acquisitions 82.9 % - -
2015 acquisitions 90.8 % 85.3 % 6.4 %
2014 acquisitions 92.0 % 91.1 % 1.0 %
2013 acquisitions 92.4 % 92.2 % 0.2 %
Developed facilities 58.6 % 70.0 % (16.3 )%
Other facilities   88.2 %   88.2 %   0.0 %
  84.6 %   88.2 %   (4.1 )%
Annual contract rent per occupied square foot:
2016 acquisitions $ 9.99 $ - -
2015 acquisitions 13.77 12.87 7.0 %
2014 acquisitions 14.47 13.51 7.1 %
2013 acquisitions 15.50 14.68 5.6 %
Developed facilities 12.96 12.45 4.1 %
Other facilities   18.04     16.82     7.3 %
$ 14.80   $ 14.88     (0.5 )%
 
 
 
 

At December 31:

Number of facilities:
2016 acquisitions 55 - 55
2015 acquisitions 17 17 -
2014 acquisitions 44 44 -
2013 acquisitions 105 105 -
Developed facilities 36 20 16
Other facilities   80     80     -  
  337     266     71  
Net rentable square feet (in thousands):
2016 acquisitions 4,121 - 4,121
2015 acquisitions 1,285 1,285 -
2014 acquisitions 3,457 3,457 -
2013 acquisitions 6,906 6,906 -
Developed facilities 4,019 1,878 2,141
Other facilities   6,748     6,614     134  
  26,536     20,140     6,396  
 
(a)     See attached reconciliation of self-storage NOI to operating income.
 

Investing and Capital Markets Activities

During the three months ended December 31, 2016, we acquired 23 self-storage facilities (13 located in Oklahoma, four each in Ohio and Tennessee and one each in California and Texas) with 1.8 million net rentable square feet for $159 million. For the year ended December 31, 2016, we acquired 55 self-storage facilities with 4.1 million net rentable square feet for $429 million. Subsequent to December 31, 2016, we acquired or were under contract to acquire five self-storage facilities (two in Ohio and one each in Minnesota, New York and North Carolina) with 0.3 million net rentable square feet for $26 million.

During the three months ended December 31, 2016, we completed six newly developed facilities and various expansion projects (0.8 million net rentable square feet) costing $107 million. For the year ended December 31, 2016, we completed 16 newly developed facilities and various expansion projects (2.3 million net rentable square feet) costing an aggregate of $269 million. At December 31, 2016, we had various facilities in development (4.2 million net rentable square feet) estimated to cost $520 million and various expansion projects (1.1 million net rentable square feet) estimated to cost $140 million. The remaining $430 million of development costs for these projects is expected to be incurred primarily in the next 18 months.

On October 14, 2016, we issued our 4.90% Series E Preferred Shares for gross proceeds of $350 million.

During the year ended December 31, 2016, we issued four series of Preferred Shares for total gross proceeds of $1,175 million and an average coupon rate of 5.1%. During 2016, we also issued €100 million ($113.6 million) of Euro denominated Senior Unsecured Notes to an institutional investor, bearing interest at a fixed rate of 1.54% and maturing in eight years.

During 2016, we redeemed two series of Preferred Shares with an average coupon rate of 6.4% at par for a total of $862.5 million.

Distributions Declared

On February 22, 2017, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on March 30, 2017 to shareholders of record as of March 15, 2017.

Fourth Quarter Conference Call

A conference call is scheduled for February 23, 2017 at 10:00 a.m. (PST) to discuss the fourth quarter 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 60310587). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “Company Info, Investor Relations, News and Events, Events Calendar.” A replay of the conference call may be accessed through March 9, 2017 by calling (800) 585-8367 (domestic) or (404) 537-3406 (international) or by using the link at www.publicstorage.com under “Company Info, Investor Relations, News and Events, Events Calendar.” All forms of replay utilize conference ID number 60310587.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns and operates self-storage facilities. The Company’s headquarters are located in Glendale, California. At December 31, 2016, we had interests in 2,348 self-storage facilities located in 38 states with approximately 154 million net rentable square feet in the United States and 219 storage facilities located in seven Western European nations with approximately 12 million net rentable square feet operated under the “Shurgard” brand. We also own a 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at December 31, 2016.

Additional information about Public Storage is available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 our 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 include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2016 and in our other filings with the SEC and the following: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; the impact of competition from new and existing self-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 associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws, and local and global economic uncertainty that could adversely affect our earnings and cash flows; risks related to our participation in joint ventures; the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental, taxes, our tenant reinsurance business and labor, and risks related to the impact of new laws and regulations; risks of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; changes in federal or state tax laws related to the taxation of REITs and other corporations; security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; difficulties in raising capital at a reasonable cost; delays in the development process; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this statement. We expressly disclaim 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. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, as predictions of future events nor guarantees of future performance.

 
PUBLIC STORAGE
SELECTED INCOME STATEMENT DATA
(Amounts in thousands, except per share data)
(Unaudited)
 
  Three Months Ended   Year Ended
December 31, December 31,
2016   2015 2016   2015
 
Revenues:
Self-storage facilities $ 613,698 $ 572,884 $ 2,405,828 $ 2,235,525
Ancillary operations   37,729     36,446     154,721     146,171  
  651,427     609,330     2,560,549     2,381,696  
 
Expenses:
Self-storage cost of operations 134,450 125,618 617,905 586,696
Ancillary cost of operations 10,716 12,091 51,178 48,806
Depreciation and amortization 111,741 106,307 433,314 426,008
General and administrative   20,148     19,456     83,656     88,177  
  277,055     263,472     1,186,053     1,149,687  
 
Operating income 374,372 345,858 1,374,496 1,232,009
 
Other income (expense):
Interest and other income 3,524 5,035 15,138 16,544
Interest expense (900 ) (610 ) (4,210 ) (610 )
Equity in earnings of unconsolidated real estate entities 15,128 14,670 56,756 50,937
Gain on real estate investment sales - - 689 18,503
Foreign currency exchange gain   23,557     306     17,570     306  
Net income 415,681 365,259 1,460,439 1,317,689
Allocation to noncontrolling interests   (1,942 )   (1,769 )   (6,863 )   (6,445 )
Net income allocable to Public Storage shareholders 413,739 363,490 1,453,576 1,311,244
Allocation of net income to:
Preferred shareholders – distributions (59,548 ) (59,031 ) (238,214 ) (245,097 )
Preferred shareholders – redemptions - - (26,873 ) (8,897 )
Restricted share units   (1,379 )   (1,456 )   (4,610 )   (4,200 )
Net income allocable to common shareholders $ 352,812   $ 303,003   $ 1,183,879   $ 1,053,050  
 

Per common share:

Net income per common share – Basic $ 2.04   $ 1.75   $ 6.84   $ 6.10  
Net income per common share – Diluted $ 2.03   $ 1.74   $ 6.81   $ 6.07  
Weighted average common shares – Basic   173,190     172,877     173,091     172,699  
Weighted average common shares – Diluted   173,812     173,759     173,878     173,510  
 
 
PUBLIC STORAGE
SELECTED BALANCE SHEET DATA

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

 
  December 31, 2016   December 31, 2015
ASSETS (Unaudited)
 
Cash and cash equivalents $ 183,688 $ 104,285
 
Operating real estate facilities:
Land and buildings, at cost 13,963,229 13,205,261
Accumulated depreciation   (5,270,963 )   (4,866,738 )
8,692,266 8,338,523
Construction in process 230,310 219,190
Investments in unconsolidated real estate entities 689,207 809,308
Goodwill and other intangible assets, net 212,719 211,458
Other assets   122,148     95,468  
Total assets $ 10,130,338   $ 9,778,232  
 
 
 
LIABILITIES AND EQUITY
 
Senior unsecured notes $ 359,810 $ 263,940
Mortgage notes 30,939 55,076
Accrued and other liabilities   297,935     261,578  
Total liabilities 688,684 580,594
 
Equity:
Public Storage shareholders’ equity:

Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares authorized, 174,700 shares issued (in series) and outstanding (162,200 at December 31, 2015), at liquidation preference

4,367,500 4,055,000

Common Shares, $0.10 par value, 650,000,000 shares authorized, 173,288,787 shares issued and outstanding, (172,921,241 shares at December 31, 2015)

17,329 17,293
Paid-in capital 5,609,768 5,601,506
Accumulated deficit (487,581 ) (434,610 )
Accumulated other comprehensive loss   (95,106 )   (68,548 )
Total Public Storage shareholders’ equity 9,411,910 9,170,641
Noncontrolling interests   29,744     26,997  
Total equity   9,441,654     9,197,638  
Total liabilities and equity $ 10,130,338   $ 9,778,232  
 
 
PUBLIC STORAGE
SELECTED FINANCIAL DATA
 
Computation of Funds from Operations and Funds Available for Distribution

(Unaudited – amounts in thousands, except per share data)

 
  Three Months Ended   Year Ended
December 31, December 31,
2016   2015 2016   2015
 

Computation of FFO per Share:

 
Net income allocable to common shareholders $ 352,812 $ 303,003 $ 1,183,879 $ 1,053,050
Eliminate items excluded from FFO:
Depreciation and amortization 111,741 106,307 433,314 426,008
Depreciation from unconsolidated real estate investments 17,088 19,893 74,407 78,985

Depreciation allocated to noncontrolling interests and restricted share unitholders

(907 ) (887 ) (3,549 ) (3,519 )

Gains on sale of real estate investments, including our equity share from investments

  (1 )   (888 )   (768 )   (29,721 )
FFO allocable to common shares (a) $ 480,733   $ 427,428   $ 1,687,283   $ 1,524,803  
Diluted weighted average common shares   173,812     173,759     173,878     173,510  
FFO per share (a) $ 2.77   $ 2.46   $ 9.70   $ 8.79  
 

Reconciliation of Earnings per Share to FFO per Share:

 
Earnings per share - diluted $ 2.03 $ 1.74 $ 6.81 $ 6.07
Eliminate per share amounts excluded from FFO:

Depreciation and amortization, including amounts from investments and excluding amounts allocated to noncontrolling interests and restricted share unitholders

0.74 0.72 2.90 2.89

Gains on sale of real estate investments, including our equity share from investments, and other

  -     -     (0.01 )   (0.17 )
FFO per share (a) $ 2.77   $ 2.46   $ 9.70   $ 8.79  
 

Computation of Funds Available for Distribution ("FAD"):

 
FFO allocable to common shares $ 480,733 $ 427,428 $ 1,687,283 $ 1,524,803
Eliminate effect of items included in FFO but not FAD:
Non-cash share-based compensation expense 7,524 6,147 20,765 15,793

Foreign currency exchange gain, including our equity share from investments

(23,557 ) (1,773 ) (18,511 ) (1,773 )

Application of EITF D-42, including our equity share from investments

3,067 - 29,940 9,944
Less: Capital expenditures to maintain real estate facilities   (18,268 )   (10,194 )   (86,047 )   (63,069 )
 
FAD (a) $ 449,499   $ 421,608   $ 1,633,430   $ 1,485,698  
 
Distributions paid to common shareholders and restricted share units $ 347,447   $ 294,674   $ 1,267,544   $ 1,125,934  
 
Distribution payout ratio   77.3 %   69.9 %   77.6 %   75.8 %
 
Distributions per common share $ 2.00   $ 1.70   $ 7.30   $ 6.50  
 
(a)     FFO and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and, along with the non-GAAP measure FAD, are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents net income before real estate depreciation, gains or losses and impairment charges, which are excluded because they are based upon historical real estate costs and assume that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FAD represents FFO adjusted to exclude certain non-cash charges and to deduct capital expenditures. We utilize FAD in evaluating our ongoing cash flow available for investment, debt repayment, and common distributions. We believe investors and analysts utilize FAD in a similar manner. FFO and FFO per share are not a substitute for net income or earnings per share. FFO and FAD are not substitutes for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because they exclude investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.
 
 
PUBLIC STORAGE
SELECTED FINANCIAL DATA
 
Reconciliation of Self-Storage Net Operating Income to
Operating Income

(Unaudited – amounts in thousands)

 
  Three Months Ended   Year Ended
December 31, December 31,
2016   2015 2016   2015
 
Self-storage revenues for:
Same Store Facilities $ 530,373 $ 506,869 $ 2,097,696 $ 1,987,725
Non Same Store Facilities   83,325     66,015     308,132     247,800  
Self-storage revenues 613,698 572,884 2,405,828 2,235,525
 
Self-storage cost of operations for:
Same Store Facilities 110,007 107,080 527,341 514,237
Non Same Store Facilities   24,443     18,538     90,564     72,459  
Self-storage cost of operations 134,450 125,618 617,905 586,696
 
Self-storage net operating income for:
Same Store Facilities 420,366 399,789 1,570,355 1,473,488
Non Same Store Facilities   58,882     47,477     217,568     175,341  
Self-storage net operating income (a) 479,248 447,266 1,787,923 1,648,829
Ancillary operating revenues 37,729 36,446 154,721 146,171
Ancillary cost of operations (10,716 ) (12,091 ) (51,178 ) (48,806 )
Depreciation and amortization (111,741 ) (106,307 ) (433,314 ) (426,008 )
General and administrative expense   (20,148 )   (19,456 )   (83,656 )   (88,177 )
Operating income on our income statement $ 374,372   $ 345,858   $ 1,374,496   $ 1,232,009  
 
(a)     Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, net operating cash flow, or other related GAAP financial measures, in evaluating our operating results. This table reconciles from NOI for our self-storage facilities to the operating income presented on our income statement.
 

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

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