Public Storage 2004 Annual Report Download - page 6

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In 2005, we will undertake new initiatives to improve and standardize how we hire, manage,
train and retain our personnel. These efforts, along with others already in place, are designed
to further reduce field personnel and supervisory staff turnover, increase productivity and
improve customer service. The action words in our organization with respect to people are
standardization, enhanced training and increased accountability. In the near term, we expect
an above inflation rate increase in personnel costs.
Development Properties
Our development properties continued their lease-up. Returns on our invested capital are
still relatively modest, but improved to 5.5 percent. We anticipate our development
property yields and income will improve for the next couple of years as we increase rates
and continue to drive occupancies. We are hopeful of expanded growth in this area in
future years.
(Dollar amounts in thousands) 2002 2003 2004
NOI (before depreciation)* $ 9,120 $ 18,575 $ 32,278
Invested capital $ 396,010 $ 509,414 $ 584,599
Yield 2.3% 3.6% 5.5%
*This non-GAAP number is used by us, and we believe it is used by many investors, to better
understand our underlying operational results and trends. Net operating income before depreciation
is reconciled to GAAP for 2003 and 2004 in the table on page 1 of this letter. Total earnings
from self-storage in 2002 was $340,344, including net operating income from self-storage
properties other than development properties of $502,111 and depreciation of $170,887.
Longer term, we hope to start expanding our development pipeline. The challenges are great
and the competition is fierce.
Expansion Properties and Pick-Up and Delivery Conversions
We have 20 former Pick-Up and Delivery (PUD) locations being converted to self-storage.
These are great locations where we already own the land and building and for marginal