Public Storage 1997 Annual Report Download - page 41

39
Public Storage, Inc. 1997 Annual Report
The project is expected to be completed by March 31, 1999 which is prior to any anticipated impact on operating systems. The Company
believes that with modifications to existing software and, in some instances, the conversion to new software, the Year 2000 issue will not
pose significant operational problems. However, if such modifications are not made, or are not completed timely, the Year 2000 issue could
have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on
management’s best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee that these
estimates will be achieved and actual results could differ materially from those anticipated.
Supplemental Property Data and Trends
There are approximately 69 ownership entities owning in aggregate 1,073 self-storage facilities, including the facilities which the Company
owns and/or operates. At December 31, 1997, 179 of these facilities were owned by Unconsolidated Entities, entities in which the Company
has an ownership interest and uses the equity method for financial statement presentation. The remaining 894 facilities are owned by the
Company and Consolidated Entities, many of which were acquired through business combinations with affiliates during 1997, 1996 and 1995.
In order to evaluate how the Company’s overall portfolio has performed, management analyzes the operating performance of a consistent
group of self-storage facilities representing 951 (55.8 million net rentable square feet) of the 1,073 self-storage facilities (herein referred to as
“Same Store” self-storage facilities). The 951 facilities represents a consistent pool of properties which have been operated under the “Public
Storage” name, at a stabilized level, by the Company since January 1, 1993. The Same Store group of properties includes 780 consolidated
facilities (many of which were not included in the Company’s consolidated financial statements throughout each of the three years presented)
and 171 facilities owned by Unconsolidated Entities. The following table summarizes the pre-depreciation historical operating results of the
Same Store self-storage facilities:
Same Store Self-Storage Facilities:
(Historical property operations) Year Ended December 31, Year Ended December 31,
Percentage Percentage
(Dollar amounts in thousands, except rent per square foot) 1997 1996 Change 1996 1995 Change
Rental income $475,171 $445,586 6.6% $445,586 $422,933 5.4%
Cost of operations
(1)
167,650 158,212 6.0% 158,212 149,660 5.7%
Net operating income $307,521 $287,374 7.0% $287,374 $273,273 5.2%
Gross profit margin
(3)
64.7% 64.5% 0.2% 64.5% 64.6% (0.1)%
Weighted avg. occupancy 91.8% 91.2% 0.6% 91.2% 90.1% 1.1%
Weighted avg. realized annual rent per sq. ft.
(2)
$9.24 $8.76 5.5% $8.76 $8.40 4.3%
Weighted avg. scheduled annual rent per sq. ft.
(2)
$9.84 $9.00 9.3% $9.00 $8.16 10.3%
1. Assumes payment of property management fees on all facilities, including those facilities owned by the Company for which effective November 16, 1995 no
fee is paid. Cost of operations consists of the following:
1997 1996 1995
Payroll expense $ 44,233 $ 43,490 $ 42,545
Property taxes 44,476 40,799 38,325
Property management fees 28,490 26,139 25,391
Advertising 4,859 3,851 3,502
Telephone center costs 4,506 1,956 –
Other
(4)
41,086 41,977 39,897
$167,650 $158,212 $149,660
2. Realized rent per square foot as presented throughout this report represents the actual revenue earned per occupied square foot. Management believes this is
a more relevant measure than the scheduled rental rates, since scheduled rates can be discounted through the use of promotions.
3. Gross profit margin is computed by dividing property net operating income (before depreciation expense) by rental revenues. Cost of operations includes
a 6% management fee. The gross profit margin excluding the facility management fee was 70.7%, 70.5% and 70.6% in 1997, 1996 and 1995, respectively.
On November 16, 1995, the Company acquired its facility manager and no longer incurs such fees on the properties it owns.
4. Other expenses principally include utilities, repairs and maintenance, and other items such as office expenses.