Public Storage 1997 Annual Report Download - page 8

Public Storage, Inc. 1997 Annual Report
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Future Opportunities
Community commitment
We recognize the importance of community relations. Our efforts
to give back to the communities that support us is good for those
communities, our operations and our employees. It is important
to the quality of life in communities supporting our operations.
For example, PSPUD helped the Marine Corps’ Toys for Tots
program celebrate its 50th anniversary during the 1997 holiday
season. PSPUD provided modified Pak & Store™ self-storage
containers for holiday toy collection at select Public Storage
facilities in Southern California. PSPUD also arranged to display
self-storage containers outside 30 Target Stores throughout the
Southern California region to collect toys. PSPUD provided the
self-storage containers for charitable events ranging from celebrity
basketball games to fun runs to parades. These efforts raised
PSPUD’s visibility in the communities served and helped brighten
the holidays for deserving young people.
Joint venture
In April 1997, we formed a joint venture partnership with a state
pension fund to develop up to $220 million of self-storage facil-
ities. The partnership is funded solely with equity capital pro-
vided 30 percent by the Company and 70 percent by the state
pension fund. Initially, we contributed eight facilities which
were under development to the joint venture partnership. We
had invested approximately $32 million in the joint venture as
of December 31, 1997.
Self-storage property acquisitions and development
During 1997, we purchased four self-storage facilities containing
approximately 241,000 net rentable square feet of storage space
for an aggregate cost of approximately $18.1 million. In addition,
an affiliate of the Company acquired 10 commercial properties
with approximately 2.7 million net rentable square feet, for an
aggregate acquisition cost of approximately $166.4 million.
The Company and the construction joint venture partnership
also opened nine new self-storage facilities during 1997 that we
had developed. Collectively, these facilities encompass 530,000
net rentable square feet. As of December 31, 1997, the Company
and the construction joint venture partnership had 21 self-storage
facilities (1,442,000 net rentable square feet) in various stages of
development and had identified 17 additional facilities (1,031,000
net rentable square feet) which we expect to begin constructing
during 1998.
Telecommunications
On December 31, 1996, our national reservation center consisted of
87 representatives. One year later, there were 249 individuals on
staff. The national reservation center has evolved into an important
linchpin in our marketing strategies. The center helps us raise
occupancy and increase market share. We are realizing the benefits
of marketing and inventory management techniques with our
national reservation center at the hub. We are properly staffed to
receive an anticipated 250,000 calls per month during the peak
spring and summer periods. In addition to self-storage, the center
markets portable self-storage, truck rentals and retail stores. We are
aggressively responding to the customer demand we are generating
through various media, enabling us to support favorable occu-
pancy trends and rental rates.
Revenues for 1997 increased to $470,844,000 compared to
$338,951,000 in 1996, representing an increase of $131,893,000
or 38.9 percent. Net income for 1997 was $178,649,000 com-
pared to $153,549,000 in 1996, representing an increase of
$25,100,000 or 16.4 percent. The increase in net income for 1997
compared to 1996 was primarily the result of improved property
operations, the acquisition of additional real estate facilities during
1997 and 1996, and the acquisition of additional partnership
interests during 1997 and 1996, offset partially by start-up oper-
ating losses in PSPUD’s portable self-storage business.
Net income allocable to common shareholders was
$90,256,000 or $.91 per common share on a diluted basis
(based on 98,961,000 weighted average shares) for 1997 com-
pared to $84,950,000 or $1.10 per common share on a diluted
basis (based on 77,358,000 weighted average shares) for 1996.
In computing net income per common share, dividends to the
Company’s preferred shareholders ($88,393,000 and $68,599,000
for 1997 and 1996, respectively) have been deducted from net
income in determining net income allocable to the Company’s
common shareholders. Net income allocable to common share-
holders has been negatively impacted by losses generated from
PSPUD’s portable self-storage business which generated operating
losses of $31,665,000 or approximately $.32 per common share
on a diluted basis in 1997 ($826,000, or approximately $.01 per
common share on a diluted basis in 1996).
In addition, net income allocable to the common share-
holders for 1997 was negatively affected by a special dividend
totaling $13,412,000 paid to the Company’s Series CC Convertible
Preferred Stock during the first quarter of 1997. As a result of the
special dividend, the Company would not have to pay another
dividend on this stock until the quarter ended March 31, 1999.
During the second quarter of 1997, the Series CC Convertible
Preferred Stock converted into common stock of the Company.
Accordingly, all of the $13,412,000 ($.14 per common share on
a diluted basis) of dividends were treated during 1997 as an
allocation of net income to the preferred shareholders in deter-
mining the allocation of net income to the common shareholders.
The special dividend eliminated the quarterly dividend of
$1.9 million and annual fixed charges of $7.6 million.
Funds from operations per common share on a fully-
diluted basis for 1997 were $1.97, compared to $1.98 for 1996,
decreasing $.01 per common share. Funds from operations per
common share on a fully-diluted basis for 1997 were negatively
impacted by the dilutive effects of start-up losses from PSPUD’s
portable self-storage operations which resulted in a reduction
of $.32 per common share for 1997. In addition, funds from
operations for 1996 were negatively impacted by the effect of
the Company’s Series CC Convertible Preferred Stock.
Same Stores
For 1997, occupancy at the self-storage properties on a Same Store
basis averaged 91.8 percent, compared to 91.2 percent during
1996. Same Store average annual realized rents were $9.24 per
square foot for 1997, a 5.5 percent increase compared to
Financial Review