Public Storage Reports Results for the Three and Six Months Ended June 30, 2019

Public Storage (NYSE:PSA) announced today operating results for the three and six months ended June 30, 2019.

Operating Results for the Three Months Ended June 30, 2019

For the three months ended June 30, 2019, net income allocable to our common shareholders was $306.4 million or $1.76 per diluted common share, compared to $348.3 million or $2.00 per diluted common share in 2018 representing a decrease of $41.9 million or $0.24 per diluted common share. The decrease is due primarily to (i) a $27.2 million decrease due to the impact of foreign currency exchange gains and losses associated with our euro denominated debt, (ii) our $24.0 million equity share of a gain on sale of assets recorded by PS Business Parks in the three months ended June 30, 2018, and (iii) an $8.9 million allocation to our preferred shareholders associated with our preferred share redemption activities in the three months ended June 30, 2019. These decreases were offset partially by (iv) a $7.9 million increase in self-storage net operating income (described below), and (v) a reduction in general and administrative expense attributable to $7.8 million in incremental share-based compensation expense in the three months ended June 30, 2018 for the planned retirement of our former CEO and CFO.

The $7.9 million increase in self-storage net operating income is a result of a $3.4 million increase in our Same Store Facilities (as defined below) and a $4.5 million increase in our Non Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 1.9% or $11.5 million in the three months ended June 30, 2019 as compared to 2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 5.1% or $8.1 million in the three months ended June 30, 2019 as compared to 2018, due primarily to increased property taxes and higher marketing expenses. The increase in net operating income of $4.5 million for the Non Same Store Facilities is due primarily to the impact of facilities acquired in 2018 and 2019 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2019

For the six months ended June 30, 2019, net income allocable to our common shareholders was $608.2 million or $3.49 per diluted common share, compared to $636.1 million or $3.65 per diluted common share in 2018 representing a decrease of $27.9 million or $0.16 per diluted common share. The decrease is due primarily to (i) our $34.9 million equity share of gains recorded by PS Business Parks in the six months ended June 30, 2018, (ii) a $17.4 million allocation to our preferred shareholders associated with our preferred share redemption activities in the six months ended June 30, 2019 and (iii) a $7.6 million decrease due to the impact of foreign currency exchange gains associated with our euro denominated debt. These decreases were offset partially by (iv) a $15.3 million increase in self-storage net operating income (described below) and (v) a reduction in general and administrative expense attributable to $15.6 million in incremental share-based compensation expense in the six months ended June 30, 2018 for the planned retirement of our former CEO and CFO.

The $15.3 million increase in self-storage net operating income is a result of a $5.7 million increase in our Same Store Facilities and a $9.6 million increase in our Non Same Store Facilities. Revenues for the Same Store Facilities increased 1.7% or $20.2 million in the six months ended June 30, 2019 as compared to 2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 4.5% or $14.4 million in the six months ended June 30, 2019 as compared to 2018, due primarily to increased property taxes and higher marketing expenses. The increase in net operating income of $9.6 million for the Non Same Store Facilities is due primarily to the impact of facilities acquired in 2018 and 2019 and the fill-up of recently developed and expanded facilities.

Funds from Operations

For the three months ended June 30, 2019, funds from operations (“FFO”) was $2.57 per diluted common share, as compared to $2.65 in the same period in 2018, representing a decrease of 3.0%. FFO is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation and amortization expense, gains and losses and impairment charges with respect to real estate assets. A reconciliation of GAAP diluted net income per share to FFO per share, and additional descriptive information regarding this non-GAAP measure, is attached.

For the six months ended June 30, 2019, FFO was $5.09 per diluted common share, as compared to $5.02 in the same period in 2018, representing an increase of 1.4%.

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) EITF D-42 charges related to the redemption of preferred securities, (iii) accelerations of accruals or reductions in accruals due to the departure of senior executives and (iv) certain other non-cash and/or nonrecurring income or expense items. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

		Three Months Ended June 30,								Six Months Ended June 30,
								Percentage								Percentage
			2019			2018		Change			2019			2018		Change
FFO per share		$	2.57		$	2.65		(3.0)%		$	5.09		$	5.02		1.4%
Eliminate the per share impact of
items excluded from Core FFO, including
our equity share from investments:
Foreign currency exchange loss (gain)			0.03			(0.13)					(0.01)			(0.06)
Application of EITF D-42			0.05			-					0.10			-
(Forfeiture)/Acceleration of share-based
compensation expense due to the
departure of senior executives			(0.01)			0.04					(0.01)			0.09
Other items			-			0.01					0.01			-
Core FFO per share		$	2.64		$	2.57		2.7%		$	5.18		$	5.05		2.6%

Property Operations – Same Store Facilities

The Same Store Facilities represent the 2,165 facilities that have been owned and operated on a stabilized level of occupancy, revenues and cost of operations since January 1, 2017. Accordingly, our Same Store Facilities exclude (i) facilities acquired after December 31, 2016, (ii) newly developed or expanded facilities, (iii) facilities where expansion is under construction or that we expect to commence by December 31, 2019, (iv) facilities whose operating trends are significantly affected by factors such as casualty events, and (v) facilities which were otherwise not stabilized at December 31, 2016 (such as recently developed facilities acquired from third parties before December 31, 2016). The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2017, 2018, and 2019 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and REIT analysts in a similar manner. The following table summarizes the historical operating results of these 2,165 facilities (139.8 million net rentable square feet) that represent approximately 84% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2019.

Selected Operating Data for the Same
Store Facilities (2,165 facilities)
(unaudited):
	Three Months Ended June 30,								Six Months Ended June 30,
							Percentage								Percentage
		2019			2018		Change			2019			2018		Change
	(Dollar amounts in thousands, except for per square foot amounts)
Revenues:
Rental income	$	576,681		$	565,717		1.9%		$	1,139,311		$	1,119,833		1.7%
Late charges and administrative fees		25,374			24,868		2.0%			51,491			50,809		1.3%
Total revenues (a)		602,055			590,585		1.9%			1,190,802			1,170,642		1.7%
Cost of operations:
Property taxes		66,076			62,940		5.0%			131,429			125,166		5.0%
On-site property manager payroll		30,283			29,461		2.8%			60,546			59,757		1.3%
Supervisory payroll		9,937			9,826		1.1%			19,717			19,958		(1.2)%
Repairs and maintenance		11,434			11,478		(0.4)%			22,047			21,440		2.8%
Snow removal		301			661		(54.5)%			3,102			2,880		7.7%
Utilities		9,670			10,152		(4.7)%			20,698			21,632		(4.3)%
Marketing		12,126			8,115		49.4%			20,906			14,994		39.4%
Other direct property costs		16,260			15,310		6.2%			32,699			31,146		5.0%
Allocated overhead		11,648			11,688		(0.3)%			25,778			25,503		1.1%
Total cost of operations (a)		167,735			159,631		5.1%			336,922			322,476		4.5%
Net operating income (b)	$	434,320		$	430,954		0.8%		$	853,880		$	848,166		0.7%
Gross margin		72.1%			73.0%		(1.2)%			71.7%			72.5%		(1.1)%
Weighted average for the period:
Square foot occupancy		94.0%			93.8%		0.2%			93.2%			93.0%		0.2%
Realized annual rental income per (c):
Occupied square foot	$	17.55		$	17.25		1.7%		$	17.48		$	17.23		1.5%
Available square foot (“REVPAF”)	$	16.50		$	16.19		1.9%		$	16.30		$	16.02		1.7%
At June 30:
Square foot occupancy										94.1%			93.6%		0.5%
Annual contract rent per occupied
square foot (d)									$	18.01		$	17.81		1.1%

		(a)	Revenues and cost of operations do not include ancillary revenues and expenses generated at the facilities with respect to tenant reinsurance and retail sales.
		(b)	See attached reconciliation of self-storage NOI to net income.
		(c)	Realized annual rent per occupied square foot is computed by dividing annualized rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. 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 rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
		(d)	Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities (unaudited):

	For the Quarter Ended
	March 31			June 30			September 30			December 31			Entire Year
	(Amounts in thousands, except for per square foot amounts)
Total revenues:
2019	$	588,747		$	602,055
2018	$	580,057		$	590,585		$	607,598		$	594,302		$	2,372,542
Total cost of operations:
2019	$	169,187		$	167,735
2018	$	162,845		$	159,631		$	161,324		$	130,477		$	614,277
Property taxes:
2019	$	65,353		$	66,076
2018	$	62,226		$	62,940		$	62,750		$	36,550		$	224,466
Repairs and maintenance, including
snow removal expenses:
2019	$	13,414		$	11,735
2018	$	12,181		$	12,139		$	11,903		$	12,475		$	48,698
Marketing:
2019	$	8,780		$	12,126
2018	$	6,879		$	8,115		$	8,246		$	9,205		$	32,445
REVPAF:
2019	$	16.10		$	16.50
2018	$	15.86		$	16.19		$	16.62		$	16.25		$	16.23
Weighted average realized annual
rent per occupied square foot:
2019	$	17.41		$	17.55
2018	$	17.21		$	17.25		$	17.72		$	17.57		$	17.44
Weighted average occupancy levels
for the period:
2019		92.5%			94.0%
2018		92.1%			93.8%			93.8%			92.5%			93.1%

Property Operations – Non Same Store Facilities

In addition to the 2,165 same-store facilities, we have 291 facilities that were not stabilized with respect to occupancies, revenues or cost of operations since January 1, 2017 or that we did not own as of January 1, 2017, including 81 facilities that were acquired from third parties, 76 newly developed facilities, 62 facilities that have been expanded or are targeted for expansion, and 72 facilities that are unstabilized due to the impact of casualties and other factors (collectively, the “Non Same Store Facilities”). Operating data, metrics, and further commentary with respect to these facilities, including detail by vintage, is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Self-Storage Operations” in our June 30, 2019 Form 10-Q.

Investing and Capital Activities

During the three months ended June 30, 2019, we acquired 10 self-storage facilities (four in Florida, two in Virginia and one each in Arizona, Colorado, Michigan and Texas) with 0.7 million net rentable square feet for $116.7 million. During the six months ended June 30, 2019, we acquired 22 self-storage facilities (eleven in Virginia, five in Florida, and one each in Arizona, Colorado, Georgia, Kentucky, Michigan and Texas) with 1.4 million net rentable square feet for $198.0 million. Subsequent to June 30, 2019, we acquired or were under contract to acquire ten self-storage facilities (two each in Georgia and Texas and one each in Florida, Indiana, Minnesota, North Carolina, Tennessee and Virginia) with 0.8 million net rentable square feet for $86.5 million.

During the three months ended June 30, 2019, we opened two newly developed facilities and various expansion projects (1.1 million net rentable square feet – 0.3 million in North Carolina, 0.2 million each in Georgia, Tennessee and Texas and 0.1 million each in Colorado and Michigan) costing $89.7 million. During the six months ended June 30, 2019, we opened six newly developed facilities and various expansion projects (2.7 million net rentable square feet – 1.5 million in Texas, 0.3 million in North Carolina, 0.2 million each in Colorado, Georgia and Tennessee and 0.1 million each in California, Florida and Michigan) costing $223.2 million. At June 30, 2019, we had various facilities in development (1.1 million net rentable square feet) estimated to cost $189 million and various expansion projects (2.7 million net rentable square feet) estimated to cost $332 million. Our aggregate 3.8 million net rentable square foot pipeline of development and expansion facilities includes 1.2 million in Florida, 0.7 million in Minnesota, 0.6 million in California, 0.4 million in Washington, 0.2 million each in Colorado, Missouri, Texas and Virginia and 0.1 million in New York. The remaining $329 million of development costs for these projects is expected to be incurred primarily in the next 18 months.

On May 23, 2019, we called our 6.00% Series Z Preferred Shares for redemption. The shares were redeemed at liquidation value on June 27, 2019 for $287.5 million.

On April 12, 2019, we completed a public offering of $500 million in aggregate principal amount of senior notes bearing interest at an annual rate of 3.385% maturing on May 1, 2029.

On April 19, 2019, we amended our $500 million revolving line of credit. This amendment (i) extends the maturity date from March 31, 2020 to April 19, 2024, (ii) decreases the current effective borrowing spread over LIBOR from 0.850% to 0.70%, and (iii) decreases the current effective facility fee from 0.080% to 0.070%. All other terms remain substantially the same.

Distributions Declared

On July 24, 2019, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on September 27, 2019 to shareholders of record as of September 12, 2019.

Second Quarter Conference Call

A conference call is scheduled for July 31, 2019 at 9:00 a.m. (PDT) to discuss the second quarter earnings results. The domestic dial-in number is [phone], and the international dial-in number is [phone] (conference ID number for either domestic or international is 7560077). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” A replay of the conference call may be accessed through August 14, 2019 by calling [phone] (domestic), [phone] (international) or by using the link at www.publicstorage.com under “About Us, Investor Relations, News and Events, Event Calendar.” All forms of replay utilize conference ID number 7560077.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns and operates self-storage facilities. At June 30, 2019, we had: (i) interests in 2,456 self-storage facilities located in 38 states with approximately 166 million net rentable square feet in the United States, (ii) an approximate 35% common equity interest in Shurgard Self Storage SA (Euronext Brussels:SHUR) which owned 231 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the “Shurgard” brand and (iii) an approximate 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at June 30, 2019. Our headquarters are located in Glendale, California.

Additional information about Public Storage is available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “expects,” “believes,” “anticipates,” “should,” “estimates” and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Factors and risks that may impact future results and performance include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2019 and in our other filings with the SEC and the following: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage acquired and developed properties; risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws, and local and global economic uncertainty that could adversely affect our earnings and cash flows; risks related to our participation in joint ventures; the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental, taxes, our tenant reinsurance business and labor, and risks related to the impact of new laws and regulations; risks of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; risks due to a potential November 2020 statewide ballot initiative (or other equivalent actions) that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California; changes in federal or state tax laws related to the taxation of REITs and other corporations; security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; difficulties in raising capital at a reasonable cost; delays in the development process; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of this press release, except where expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, as predictions of future events nor guarantees of future performance.

PUBLIC STORAGE SELECTED INCOME STATEMENT DATA (Amounts in thousands, except per share data) (Unaudited)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019				2018
Revenues:
Self-storage facilities		$	669,339		$	645,206		$	1,319,747	$		1,276,743
Ancillary operations			41,611			40,322			80,241			78,709
			710,950			685,528			1,399,988			1,355,452
Expenses:
Self-storage cost of operations			196,083			179,876			389,739			362,063
Ancillary cost of operations			11,653			11,101			22,198			21,741
Depreciation and amortization			126,859			119,777			248,800			237,756
General and administrative			15,264			31,329			34,767			62,849
Interest expense			12,254			8,388			20,397			16,495
			362,113			350,471			715,901			700,904
Other increase (decrease) to net income:
Interest and other income			8,582			6,328			15,547			11,872
Equity in earnings of unconsolidated real estate entities			18,914			41,963			36,586			72,758
Gain on sale of real estate			341			-			341			424
Foreign currency exchange (loss) gain			(5,218)			21,944			2,573			10,126
Net income			371,456			405,292			739,134			749,728
Allocation to noncontrolling interests			(1,400)			(1,490)			(2,557)			(2,929)
Net income allocable to Public Storage shareholders			370,056			403,802			736,577			746,799
Allocation of net income to:
Preferred shareholders – distributions			(53,525)			(54,077)			(108,537)			(108,158)
Preferred shareholders – redemptions			(8,861)			-			(17,394)			-
Restricted share units			(1,259)			(1,425)			(2,492)			(2,522)
Net income allocable to common shareholders		$	306,411		$	348,300		$	608,154	$		636,119
Per common share:
Net income per common share – Basic		$	1.76		$	2.00		$	3.49	$		3.66
Net income per common share – Diluted		$	1.76		$	2.00		$	3.49	$		3.65
Weighted average common shares – Basic			174,253			173,932			174,215			173,912
Weighted average common shares – Diluted			174,542			174,224			174,459			174,186

PUBLIC STORAGE SELECTED BALANCE SHEET DATA (Amounts in thousands, except share and per share data)
		June 30, 2019			December 31, 2018
ASSETS		(Unaudited)
Cash and equivalents		$	360,331		$	361,218
Operating real estate facilities:
Land and buildings, at cost			15,781,745			15,296,844
Accumulated depreciation			(6,375,132)			(6,140,072)
			9,406,613			9,156,772
Construction in process			191,874			285,339
Investments in unconsolidated real estate entities			778,523			783,988
Goodwill and other intangible assets, net			210,178			209,856
Other assets			165,772			131,097
Total assets		$	11,113,291		$	10,928,270
LIABILITIES AND EQUITY
Senior unsecured notes		$	1,879,850		$	1,384,880
Mortgage notes			28,260			27,403
Accrued and other liabilities			410,671			371,259
Total liabilities			2,318,781			1,783,542
Equity:
Public Storage shareholders’ equity:
Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares
authorized, 149,500 shares issued (in series) and outstanding,
(161,000 at December 31, 2018) at liquidation preference			3,737,500			4,025,000
Common Shares, $0.10 par value, 650,000,000 shares authorized,
174,294,523 shares issued and outstanding, (174,130,881 shares
at December 31, 2018)			17,429			17,413
Paid-in capital			5,729,945			5,718,485
Accumulated deficit			(648,391)			(577,360)
Accumulated other comprehensive loss			(67,549)			(64,060)
Total Public Storage shareholders’ equity			8,768,934			9,119,478
Noncontrolling interests			25,576			25,250
Total equity			8,794,510			9,144,728
Total liabilities and equity		$	11,113,291		$	10,928,270

PUBLIC STORAGE SELECTED FINANCIAL DATA
Computation of Funds from Operations and Funds Available for Distribution (Unaudited – amounts in thousands except per share data)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Computation of FFO per Share:
Net income allocable to common shareholders		$	306,411		$	348,300		$	608,154		$	636,119
Eliminate items excluded from FFO:
Depreciation and amortization			126,859			119,777			248,800			237,756
Depreciation from unconsolidated real estate investments			17,247			19,308			34,761			38,623
Depreciation allocated to noncontrolling interests
and restricted share unitholders			(1,088)			(1,014)			(2,286)			(1,932)
Gains on sale of real estate, including our equity share
from investments			(992)			(23,873)			(992)			(35,764)
FFO allocable to common shares (a)		$	448,437		$	462,498		$	888,437		$	874,802
Diluted weighted average common shares			174,542			174,224			174,459			174,186
FFO per share (a)		$	2.57		$	2.65		$	5.09		$	5.02
Reconciliation of Earnings per Share to FFO per Share:
Earnings per share—Diluted		$	1.76		$	2.00		$	3.49		$	3.65
Eliminate per share amounts excluded from FFO:
Depreciation and amortization allocable to
common shareholders			0.82			0.79			1.61			1.58
Gains on sale of real estate, including our equity share
from investments			(0.01)			(0.14)			(0.01)			(0.21)
FFO per share (a)		$	2.57		$	2.65		$	5.09		$	5.02
Computation of Funds Available for Distribution ("FAD"):
FFO allocable to common shares		$	448,437		$	462,498		$	888,437		$	874,802
Eliminate effect of items included in FFO but not FAD:
Share-based compensation expense in excess
of cash paid			5,456			17,080			2,363			22,989
Foreign currency exchange loss (gain)			5,218			(21,944)			(2,573)			(10,126)
Application of EITF D-42			8,861			-			17,394			-
Less: Capital expenditures to maintain real estate facilities			(42,354)			(28,883)			(72,559)			(53,227)
FAD (a)		$	425,618		$	428,751		$	833,062		$	834,438
Distributions paid to common shareholders and restricted
share units		$	349,593		$	348,984		$	699,071		$	697,995
Distribution payout ratio			82.1%			81.4%			83.9%			83.6%
Distributions per common share		$	2.00		$	2.00		$	4.00		$	4.00

(a)

FFO and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and, along with the non-GAAP measure FAD, are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents GAAP net income before depreciation and amortization, real estate gains or losses and impairment charges, which are excluded because they are based upon historical costs and assume that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FAD represents FFO adjusted to exclude certain non-cash charges and to deduct capital expenditures. We utilize FAD in evaluating our ongoing cash flow available for investment, debt repayment and common distributions. We believe investors and analysts utilize FAD in a similar manner. FFO and FFO per share are not a substitute for net income or earnings per share. FFO and FAD are not substitutes for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because they exclude investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

PUBLIC STORAGE SELECTED FINANCIAL DATA
Reconciliation of Self-Storage Net Operating Income to Net Income (Unaudited – amounts in thousands)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Self-storage revenues for:
Same Store facilities		$	602,055		$	590,585		$	1,190,802		$	1,170,642
Acquired facilities			13,999			7,575			25,207			14,502
Newly developed and expanded facilities			36,888			30,357			71,342			58,669
Other non-same store facilities			16,397			16,689			32,396			32,930
Self-storage revenues			669,339			645,206			1,319,747			1,276,743
Self-storage cost of operations for:
Same Store facilities			167,735			159,631			336,922			322,476
Acquired facilities			5,358			2,624			9,969			5,153
Newly developed and expanded facilities			17,712			11,972			32,301			23,004
Other non-same store facilities			5,278			5,649			10,547			11,430
Self-storage cost of operations			196,083			179,876			389,739			362,063
Self-storage NOI for:
Same Store facilities			434,320			430,954			853,880			848,166
Acquired facilities			8,641			4,951			15,238			9,349
Newly developed and expanded facilities			19,176			18,385			39,041			35,665
Other non-same store facilities			11,119			11,040			21,849			21,500
Self-storage NOI (a)			473,256			465,330			930,008			914,680
Ancillary revenues			41,611			40,322			80,241			78,709
Ancillary cost of operations			(11,653)			(11,101)			(22,198)			(21,741)
Depreciation and amortization			(126,859)			(119,777)			(248,800)			(237,756)
General and administrative expense			(15,264)			(31,329)			(34,767)			(62,849)
Interest and other income			8,582			6,328			15,547			11,872
Interest expense			(12,254)			(8,388)			(20,397)			(16,495)
Equity in earnings of unconsolidated real estate entities			18,914			41,963			36,586			72,758
Gain on sale of real estate			341			-			341			424
Foreign currency exchange (loss) gain			(5,218)			21,944			2,573			10,126
Net income on our income statement		$	371,456		$	405,292		$	739,134		$	749,728

		(a)	Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related GAAP financial measures, in evaluating our operating results. This table reconciles from NOI for our self-storage facilities to the net income presented on our income statement.

 

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