Public Storage 2012 Annual Report Download - page 49

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f) Realized annual rent per available square foot (“REVPAF”) is computed by dividing annualized rental income, before
late charges and administrative fees, by the total available net rentable square feet for the period.
g) In place annual rent per occupied square foot represents annualized contractual rents per occupied square foot before
any reductions for promotional discounts, and excludes late charges and administrative fees.
Analysis of Revenue
Revenues generated by our Same Store Facilities increased by 4.9% in 2012 as compared to 2011 due
primarily to increased average rental rates charged to our tenants. This increase was due primarily to annual rent
increases for tenants that have been renting longer than one year combined with a reduction in promotional
discounts given to new tenants from $96.5 million in 2011 to $87.8 million in 2012.
Revenues generated by our Same Store Facilities increased by 4.6% in 2011 as compared to 2010. The
increase was due primarily to a 1.6% increase in weighted average square foot occupancy and a 2.7% increase in
realized rent per occupied square foot, as well as an 11.2% increase in late charges and administrative fees due
primarily to increases in the fee levels charged for late payments. The increase in realized annual rent per occupied
square foot includes the impact of more aggressive increases in rents charged to existing tenants in the last two
quarters of 2011.
Our future rental growth will be dependent upon many factors including the level of new supply of self-
storage space in the markets in which we operate, demand for self-storage space, our ability to increase rental rates,
the level of promotional activities, and our ability to maintain or improve our occupancy levels.
We seek to maintain an average occupancy level of at least 90% throughout the year, which we believe
maximizes the realized rent per available foot. We maintain occupancy by regularly adjusting rental rates and
promotions offered, in order to generate sufficient move-ins to replace tenants that vacate. Demand fluctuates due
to various local and regional factors, including the overall economy. Demand is higher in the summer months than
in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months
than in the winter months.
Our Same Store average occupancy levels increased 0.7% in 2012 as compared to 2011, due primarily to a
1.8% increase in average occupancy in the fourth quarter of 2012 as compared to the same period in 2011. This
increase was driven by (i) increased move-in volumes, primarily due to more aggressive pricing in the seasonally
slow fourth quarter of 2012 combined with (ii) reduced levels of tenants moving out, as compared to the same
period in 2011. We expect to continue to implement aggressive pricing strategies during the first quarter of 2013 to
increase occupancy levels as compared to the same period in 2012. However, we expect occupancy levels in the
second, third and fourth quarters of 2013 to be flat as compared to the same periods in 2012 due to more difficult
year-over-year comparisons.
Increasing rental rates to tenants having a tenancy longer than one year is a key part of our rental growth.
At each of December 31, 2012, 2011 and 2010, approximately 55% of our tenants had a tenancy of a year or
longer. For these tenants, in place rent per occupied square foot at December 31, 2012 increased 4.1% as compared
to December 31, 2011 and 4.3% at December 30, 2011 as compared to December 31, 2010. These increases were
due to rate increases passed to these tenants. We expect to pass similar rate increases to long-term tenants in 2013
as we did in 2012.
Based upon current trends, we expect positive year-over-year growth in rental income to continue
throughout 2013, due to improved occupancy and realized rents during the first quarter of the year and primarily
from increases in realized rents during the remainder of 2013.