Public Storage 1998 Annual Report Download - page 37

Public Storage, Inc. 1998 Annual Report
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In order to enhance the year-over-year comparisons, the following table summarizes the operating results (before depreciation) of (i) the 546 self-
storage facilities (which includes the 520 facilities owned at the end of 1995 as well as facilities which were acquired on January 1, 1996) that were
reflected in the Company’s financial statements for the entire three years ended December 31, 1998 (the “Consistent Group”) and (ii) all other facilities
for which operations were not reflected in the Company’s financial statement for the entire three years ended December 31, 1998 (the “Other Facilities”):
Self-storage operations:
(dollar amounts in thousands, Year Ended December 31, Percentage Year Ended December 31, Percentage
except rents per square foot) 1998 1997 Change 1997 1996 Change
Rental income:
Consistent Group $271,922 $254,489 6.9% $254,489 $239,717 6.2%
Other Facilities 216,369 131,051 65.1% 131,051 30,712 326.7%
488,291 385,540 26.7% 385,540 270,429 42.6%
Cost of operations:
Consistent Group 81,235 76,591 6.1% 76,591 72,983 4.9%
Other Facilities 68,141 41,372 64.7% 41,372 9,511 335.0%
149,376 117,963 26.6% 117,963 82,494 43.0%
Net operating income:
Consistent Group 190,687 177,898 7.2% 177,898 166,734 6.7%
Other Facilities 148,228 89,679 65.3% 89,679 21,201 323.0%
$338,915 $267,577 26.7% $267,577 $187,935 42.4%
Consistent Group data:
Gross margin 70.1% 69.9% 0.2% 69.9% 69.6% 0.3%
Weighted average :
Occupancy 91.9% 91.4% 0.5% 91.4% 90.6% 0.8%
Realized annual rent per square foot $9.25 $8.69 6.4% $8.69 $8.26 5.2%
Scheduled annual rent per square foot $9.57 $9.21 3.9% $9.21 $8.47 8.7%
Number of facilities:
Consistent Group 546 546 — 546 546 —
Other Facilities 405 348 16.4% 348 175 98.9%
Net rentable sq. ft.:
Consistent Group 31,979 31,979 — 31,979 31,979 —
Other Facilities 25,130 21,592 16.4% 21,592 11,438 88.8%
For the Consistent Group of facilities, year-over-year improvements in rental income of 6.9% in 1998 and 6.2% in 1997 are the result of increases in
realized rent per square foot and weighted average occupancy levels, as reflected in the table above. The Company believes that the improvement in
each of these areas is due to (i) the national telephone reservation system which was implemented during 1996 and the first part of 1997, (ii) increased
scheduled rental rates, and (iii) media advertising and promotional activities.
As indicated above, the Company implemented a national telephone reservation system to provide added customer service. Customers calling either
the Company’s toll-free telephone referral system, (800) 44-STORE, or a local Public Storage facility, are directed to the national reservation system
where a trained representative discusses with the customer space requirements, price and location preferences and also informs the customer of other
products and services provided by the Company and its subsidiaries. Total cost of operations includes expenses with respect to the national telephone
reservation center totaling $7,021,000 in 1998, $3,875,000 in 1997, and $1,257,000 in 1996.
In the second half of 1996, the Company began to increase its scheduled rents charged to new customers (prior to promotional discounts) and
to existing tenants where warranted. As a result, for fiscal 1997, scheduled rents per square foot increased compared to 1996. In connection with
the national telephone reservation system, the Company experimented with pricing and promotional discounts designed to increase rental activity.
Consistent Group promotional discounts (which are included as a reduction to gross rents to arrive at rental income) were $3,401,000 in 1996,
$9,587.000 in 1997, and $8,724,000 in 1998. Despite the impact of discounts, the Consistent Group of facilities experienced increased realized rents
per square foot of 6.4% in 1998 compared to 1997 and 5.2% in 1997 compared to 1996.
In 1996, 1997, and 1998, the Company acquired a total of 431 self-storage facilities. Eight of these acquired facilities were newly developed facilities
and 390 of these facilities were existing mature facilities that the Company previously managed. The Company has knowledge of the historical operations
of the facilities it acquired that it previously managed, and has information as to the historical operating results of the 33 facilities (substantially all of
which were existing mature facilities) it acquired that it did not previously manage. The following table summarizes the pro forma operating results of all
of the Company’s self-storage facilities at December 31, 1998 assuming that the Company owned all of the facilities as of January 1, 1996: