Public Storage 2009 Annual Report Download - page 54

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36
annual rent per occupied square foot takes into consideration promotional discounts and other items that reduce rental
income from the contractual amounts due.
(f) Late charges and administrative fees are excluded from the computation of realized annual rent per occupied square
foot and REVPAF. Exclusion of these amounts provides a better measure of our ongoing level of revenue, by
excluding the volatility of late charges, which are dependent principally upon the level of tenant delinquency, and
administrative fees, which are dependent principally upon the absolute level of move-ins for a period.
(g) Realized annual rent per available foot or “REVPAF” is computed by dividing rental income (which excludes late
charges and administrative fees) by the total available net rentable square feet for the period.
(h) In place annual rent per occupied square foot represents annualized contractual rents per occupied square foot without
reductions for promotional discounts and excludes late charges and administrative fees.
Revenues generated by our Same Store facilities decreased approximately 3.2% for the year ended
December 31, 2009 compared to the same period in 2008. This decrease was primarily caused by lower rental
income as a result of lower average realized annual rental rates per occupied square foot combined with lower
average occupancy levels. For 2009, average realized annual rental rates per occupied square foot were 2.8% lower
and average occupancy levels were 0.9% lower as compared to the same period in 2008, resulting in a 3.7%
reduction in rental income.
Revenues generated by our Same Store facilities increased approximately 2.8% for the year ended
December 31, 2008 compared to the same period in 2007. This increase was primarily caused by higher rental
income as a result of higher average realized annual rental rates per occupied square foot combined with higher
average occupancy levels. For 2008, average realized annual rental rates per occupied square foot were 2.4% higher
and average occupancy levels were 0.2% higher as compared to the same period in 2008, resulting in a 2.7%
increase in rental income.
Our operating strategy is to maintain occupancy levels for our Same Store facilities at approximately 90%
throughout the year. In order to achieve this strategy, we adjusted rental rates and promotional discounts offered to
new tenants as well as the frequency of television advertising, increasing or decreasing each, depending on traffic
patterns of new tenants renting space offset by existing tenants vacating. We experience seasonal fluctuations in the
occupancy levels with occupancies generally higher in the summer months than in the winter months.
Consequently, rates charged new tenants are typically higher in the summer months than in the winter months.
Over the past two years, demand for self-storage space has been negatively impacted by recessionary
pressures, including increased unemployment, reduced housing sales, and reduced moving activity, in each of the
markets in which we operate.
As indicated in the table below, during the first three quarters of 2008, we generated relatively strong year-
over-year revenue growth. Beginning in September 2008, we began to experience a notable decline in year-over-
year move-ins that continued through October 2008, which we believe reflected general economic conditions. To
offset the decline in new rentals, we significantly reduced rental rates, increased promotional discounts to new
incoming tenants, and increased marketing efforts. We believe these actions have stabilized move-in volumes on a
year-over-year basis; however, we have not yet been able to restore rental rates to the levels experienced in the prior
year. We believe overall demand for self-storage space in virtually all of our markets in which we operate has
decreased due to current economic conditions, and coupled with an increase in the number of self-storage operators
over the past 10 years, will continue to foster a very difficult operating environment, at least in the near term. In
addition, increased move-out activity beginning in August 2008 exacerbated the downward pressure on occupancy
levels created by reduced demand. In March 2009, the increase in move-out activity began to subside to more
normalized levels.