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The three “Same Store” portfolios performed like this during 2005:
P
ublic Stora
g
e Shur
g
ard - U.S. Shu
g
ard - Europe
R
ealized rent per avg sq. ft.
$
11.61
$
12.13
$
22.1
9
Average occupancy 91% 86% 78%
Gross profit mar
g
in 66.8% 59.5% 44.2%
W
h
at s
h
ou
ld
b
e c
l
ear is t
h
at t
h
e S
h
urgar
d
properties
h
ave signi
f
icant “upsi
d
e”
b
ot
h
in terms o
f
occupancies an
d
operatin
g
mar
g
ins. So o
f
ten t
h
ese “potentia
l
b
ene
f
its” are pai
d
to t
h
e se
ll
er i
n
m
er
g
ers t
h
rou
gh
premiums a
b
ove “intrinsic va
l
ue.” As you can see, t
h
e
b
ene
f
its wi
ll
b
e s
h
are
d
23
%
to the former Shur
g
ard shareholders who are now Public Stora
g
e shareholders and 77% to the Public
S
torage shareholders.
Let’s review how we are achieving these “potential benefits” and improving our intrinsic value
.
Domestic
O
peration
s
With respect to our domestic operations, we had four objectives at the time the merger closed
.
F
irst, com
b
ine our corporate o
ff
ices an
d
re
d
uce G&A costs. S
h
urgar
d
’s corporate sta
ff
h
as
b
een re
d
uce
d
f
rom a
b
out 150 at t
h
e time o
f
t
h
e merger to a
b
out 20 to
d
ay. T
h
e remaining corporate sta
ff
is expecte
d
to terminate
b
y Apri
l
30t
h
. We expect to a
dd
l
ess t
h
an ten peop
l
e to t
h
e Pu
bl
ic Stora
g
e corporate sta
ff
as a result of the mer
g
er. Overall, we should have well over $30 million in annual savin
g
s
.
S
econd, we wanted to rebrand and mi
g
rate the Shur
g
ard properties onto our operatin
g
platform.
Immediately after consummating the merger in late August, the Shurgard properties were converted to
our centralized operating system, WebChamp. We promptly started selling space through our three
d
istri
b
ution c
h
anne
l
s an
d
using our pricing an
d
me
d
ia programs to improve occupancies. Pu
bl
ic Storage
si
g
na
g
e
h
as
b
een insta
ll
e
d
at a
ll
b
ut a
h
an
df
u
l
o
f
S
h
ur
g
ar
d
properties. We wi
ll
continue to improve “Pu
bl
ic
S
tora
g
e
b
ran
d
in
g
” at a
ll
f
aci
l
ities in 2007
.
The third ob
j
ective was to reduce operatin
g
costs and eliminate redundancies. Althou
g
h we hired about
1
,100 Shurgard field employees, over the last five months approximately 600 have left the company. W
e
were prepared for this turnover and quickly accelerated our recruiting efforts, hiring new employees at our
l
ower wage rates. We a
l
so imp
l
emente
d
a sing
l
e compensation an
d
b
ene
f
it p
l
an
f
or a
ll
f
ie
ld
personne
l
,
effective January 1. We expect annual savings in employee costs in excess of $5 million. By combinin
g
Yellow Pa
g
e advertisin
g
and terminatin
g
Shur
g
ard’s marketin
g
pro
g
rams, we expect to save $5 million per
y
ear in our marketin
g
costs, exclusive of media and internet advertisin
g
.
The fourth ob
j
ective was to drive Shur
g
ard property occupancies to the 91% level historically experienced
b
y Public Storage’s properties. Our marketing and pricing programs have begun to have a positive effec
t
o
f
improving t
h
e occupancy o
f
S
h
urgar
d
Same Store properties. Since t
h
e c
l
ose o
f
t
h
e merger in August,
occu
p
ancy an
d
renta
l
rates
h
ave
b
ot
h
im
p
rove
d.
T
h
e com
b
ine
d
d
omestic operations present a si
g
ni
f
icant opportunity. Durin
g
t
h
e
f
ourt
h
quarter, our
combined domestic business
g
enerated about $1.5 billion in annualized revenues with an avera
ge