Public Storage 2010 Annual Report Download - page 61

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Commercial property operations are included in our Commercial segment, and the merchandise and tenant
reinsurance operations conducted by Shurgard Europe are included in our Europe Self-Storage segment to the extent
consolidated in our financial statements. All other ancillary revenues and costs of operations are not allocated to any
segment. See Note 11 to our December 31, 2010 consolidated financial statements for further information regarding
our segments and for a reconciliation of these ancillary revenues and cost of operations to our net income.
The following table sets forth our ancillary operations as presented on our consolidated statements of
income.
Year Ended December 31 Year Ended December 31,
2010 2009 Change 2009 2008 Change
(Amounts in thousands)
Ancillary Revenues:
Tenant reinsurance premiums ................ $ 65,484 $ 62,644 $ 2,840 $ 62,644 $ 57,280 $ 5,364
Commercial ............................................. 14,261 14,982 (721) 14,982 15,326 (344)
Merchandise and other ............................ 24,636 29,971 (5,335) 29,971 30,902 (931)
Shurgard Europe merchandise and tenant
insurance ............................................ - - - - 4,913 (4,913)
Total revenues.................................... 104,381 107,597 (3,216) 107,597 108,421 (824)
Ancillary Cost of Operations:
Tenant reinsurance .................................. 10,552 9,789 763 9,789 6,734 3,055
Commercial ............................................ 5,748 5,759 (11) 5,759 6,292 (533)
Merchandise and other ............................ 17,389 20,463 (3,074) 20,463 22,093 (1,630)
Shurgard Europe merchandise and tenant
insurance ............................................ - - - - 1,409 (1,409)
Total cost of operations...................... 33,689 36,011 (2,322) 36,011 36,528 (517)
Depreciation ± commercial operations: 2,620 2,958 (338) 2,958 2,900 58
Ancillary net income:
Tenant reinsurance .................................. 54,932 52,855 2,077 52,855 50,546 2,309
Commercial ............................................ 5,893 6,265 (372) 6,265 6,134 131
Merchandise and other ............................ 7,247 9,508 (2,261) 9,508 8,809 699
Shurgard Europe merchandise and tenant
reinsurance ......................................... - - - - 3,504 (3,504)
Total ancillary net income ................. $ 68,072
$ 68,628 $ (556) $ 68,628 $ 68,993 $ (365)
Tenant reinsurance operations: We reinsure policies offered through a non-affiliated insurance company
against losses to goods stored by tenants, primarily in our domestic self-storage facilities. The revenues that we
record are based upon premiums that we reinsure. Cost of operations primarily includes claims paid that are not
covered by our outside third-party insurers, as well as claims adjustment expenses. Included in cost of operations
for the years ended December 31, 2010, 2009 and 2008 were (increases) reductions of ($250,000), $2,771,000 and
$5,800,000, respectively, related to changes in accounting estimates.
The increase in tenant reinsurance revenues over the past year was primarily attributable to an increase in
the percentage of our existing tenants retaining such policies, as well as an increase in the number of facilities due to
the acquisition of 42 facilities in the year ended December 31, 2010. On average, approximately 58.2%, 56.8%,
and 52.3% of our tenants had such policies during 2010, 2009, and 2008, respectively. We believe that the growth
in tenant reinsurance revenues in 2011 may not be as high as experienced in 2010 because we expect less growth in
the percentage of tenants retaining insurance policies.
The future level of tenant reinsurance revenues is largely dependent upon the number of new tenants
electing to purchase policies, the level of premiums charged for such insurance, and the number of tenants that
continue participating in the insurance program. Future cost of operations will be dependent primarily upon the