Public Storage 2000 Annual Report Download - page 35

33
P
UBLIC S TORAGE , I NC . 2000 A NNUAL R EPORT
completion of approximately $174 million) and 32 expansions of existing self-storage facilities (total estimated costs upon
completion of $86 million). Generally, the construction period takes nine to 12 months, followed by an 18 to 24 month fill-up
process. Throughout the fill-up period, we experience earnings dilution to the extent of our interest in the developed properties.
• We will acquire facilities from third parties and affiliated entities when appropriate. During 2000, we acquired a total of 8 storage
properties and two commercial properties from third parties. In addition, during 2000, we acquired 4 storage properties as well
as the remaining partnership interest in 13 properties that we did not already own from affiliated entities. We believe that our
national telephone reservation system and marketing organization present an opportunity for increased revenues through higher
occupancies of the properties acquired, as well as cost efficiencies through greater critical mass.
• We will continue to focus on improving the operations of the containerized storage operations. The Company is developing
facilities that combine containerized storage and traditional self-storage (“Combination Facilities”) which will replace existing third-
party leased facilities and reduce third-party lease expense. We believe that Combination Facilities offer efficiencies and a more
effective method to meet customers’ needs than a stand-alone containerized storage facility. We expect that, upon completion
of our combination facility development program, substantially all of the containerized storage facilities will be operated in
Combination Facilities.
• Through our investment in PS Business Parks, Inc., we will continue to participate in the growth of this company’s investment
in approximately 140 commercial properties.
R ESULTS OF O PERATIONS
Net income and earnings per common share: Net income for 2000, 1999 and 1998 was $297,088,000, $287,885,000 and
$227,019,000 respectively. The increase in net income was primarily the result of improved property operations, reduced operating
losses from the containerized storage business, and the acquisition of additional real estate investments during 1999 and 2000
(including the acquisition of Storage Trust). The impact of these items was offset partially by an increased allocation of income to
minority interests (as a result of the issuance of preferred operating partnership units, referred to below) combined with an increase
in general and administration expense.
During 2000, our capital raising activities included the issuance of approximately $365.0 million in preferred operating partnership
units in one of our controlled partnerships. Unlike distributions to preferred shareholders, distributions to preferred unitholders are
presented as minority interest in income and a reduction in computing the Company’s net income. As a result of these preferred
distributions, minority interest in income increased $24,859,000 in the year ended December 31, 2000 as compared to 1999 and 1998.
Net income allocable to common shareholders for 2000, 1999 and 1998 was $185,908,000, $193,092,000 and $148,644,000,
respectively. On a diluted basis, net income was $1.41 per common share (based on weighted average shares outstanding of
131,657,000) for 2000, $1.52 per common share (based on weighted average shares outstanding of 126,669,000) for 1999 and
$1.30 per common share (based on weighted average shares outstanding of 114,357,000) for 1998. The decrease in net income per
common share in 2000 as compared to 1999 reflects the inclusion of 6,790,000 common equivalent shares related to the Company’s
Class B common shares in 2000, but not in 1999 or 1998, as described more fully below. The decrease in net income per share also
includes increased dilution from uninvested proceeds from the Company’s issuance of fixed-rate preferred securities, increased
dilution from development activities, increased general and administrative expense, and the impact of the Company’s issuance of
the Equity Stock, Series A. These factors were offset partially by improved property operations and reduced operating losses from the
containerized storage business. The increase in net income per share for 1999 compared to 1998 was principally the result of improved
real estate operations and the impact of decreased operating losses of the containerized storage business.
In computing net income allocable to common shareholders for each period, aggregate dividends paid to the holders of the Equity
Stock, Series A and preferred equity securities have been deducted in determining net income allocable to the common shareholders.
Distributions paid to the holders of the Equity Stock, Series A totaled $11,042,000 in 2000 (none in 1999 or 1998). Distributions paid
to preferred shareholders totaled $100,138,000 in 2000, $94,793,000 in 1999 and $78,375,000 in 1998.
Commencing January 1, 2000, the Company’s 7,000,000 Class B common shares outstanding began to participate in distributions
of the Company’s earnings. Distributions per share of Class B common stock are equal to 97% of the per share distribution paid to the
Company’s regular common shares. As a result of this participation in distributions of earnings, for purposes of computing net income