Public Storage 2013 Annual Report Download - page 56

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The decreases in 2013 as compared to 2012, and 2012 as compared to 2011, are due primarily to
repayments on our unsecured senior notes in 2013 and 2011, along with principal repayments on our
secured mortgage debt. During 2013, 2012 and 2011, we capitalized interest of $2.9 million, $0.4 million
and $0.4 million, respectively, associated with our development activities. See Note 6 to our December 31,
2013 financial statements for a schedule of our notes payable balances, principal repayment requirements
and average interest rates. The level of interest expense that we incur in 2014 will be dependent upon the
source of funds used to refinance our term loan that matures on December 2, 2014, and when such
refinance is expected to occur.
Foreign Exchange Gain (Loss): We recorded foreign currency translation gains of $17.1 million
and $8.9 million in 2013 and 2012, respectively, and a loss $7.3 million in 2011, representing primarily the
change in the U.S. Dollar equivalent of our Euro-based Shareholder Loan due to fluctuations in exchange
rates. We have not entered into any agreements to mitigate the impact of currency exchange fluctuations
between the U.S. Dollar and the Euro, therefore the amount of U.S. Dollars we will receive on repayment
will depend upon the currency exchange rates at that time. We record the exchange gains or losses into net
income each period because of our continued expectation of repayment of the Shareholder Loan in the
foreseeable future. The U.S. Dollar exchange rate relative to the Euro was approximately 1.377, 1.322 and
1.295 at December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
Future foreign exchange gains or losses will be dependent primarily upon the movement of the
Euro relative to the U.S. Dollar, the amount of the Shareholder Loan and our continued expectation of
collecting the principal on the loan in the foreseeable future. As noted above, On January 28, 2014, our
joint venture partner in Shurgard Europe acquired 51% of the Shareholder Loan at face value for
€158.6 million ($216.2 million) in cash and the maturity date of the Shareholder Loan was extended to
April 2019.
Net Income Allocable to Preferred Shareholders: Allocations of net income to our preferred
shareholders generally consists of allocations (i) based on distributions and (ii) in applying EITF D-42
when we redeem preferred shares. During 2012 and 2011, we redeemed certain existing series of preferred
shares and issued additional preferred shares at lower coupon rates. Net income allocable to preferred
shareholders in applying EITF D-42 totaled $61.7 million and $35.6 million in 2012 and 2011,
respectively, (there were no redemptions of preferred securities and as a result, no EITF D-42 allocations in
2013). Net income allocable to preferred shareholders associated with distributions decreased during 2013
as compared to 2012, and 2012 as compared to 2011, due primarily to lower average dividend rates and
lower average outstanding preferred shares. Based upon our preferred shares outstanding at December 31,
2013, our quarterly distribution to our preferred shareholders is expected to be approximately
$51.9 million.
Net Operating Income
In our discussions above, we refer to net operating income or “NOI,” which is a non-GAAP
(generally accepted accounting principles) financial measure that excludes the impact of depreciation and
amortization expense. We believe that NOI is a meaningful measure of operating performance, because we
utilize NOI in making decisions with respect to capital allocations, in determining current property values,
in evaluating property performance and in comparing period-to-period and market-to-market property
operating results. In addition, we believe the investment community utilizes NOI in determining operating
performance and real estate values, and does not consider depreciation expense because it is based upon
historical cost. NOI is not a substitute for net income, net operating cash flow, or other related GAAP
financial measures, in evaluating our operating results. The following table reconciles NOI generated by
our self-storage facilities to our operating income: