SHU Shurgard Storage Ctr

Shurgard Storage Centers, Inc. (NYSE:SHU), a leading self-storage real estate investment trust in the United States and Europe, today released results for the quarter ended March 31, 2005. The Company announced that net income for the first quarter 2005 was $5.3 million, compared to a loss of $0.3 million reported in the first quarter of 2004. Basic and diluted net income per share attributable to common shareholders was $0.05 in first quarter 2005 compared to a loss of $0.07 in first quarter 2004. The improvement in net income was driven by the continuing growth in U.S. and European Net Operating Income (NOI) and gains on the sale of certain domestic properties. Total Same Store revenue was up 7.5% and NOI after indirect and leasehold expenses was up 5.5% across all 540 Same Stores, compared to the same quarter in 2004. Two properties sold during the quarter generated gains in excess of $6.4 million on sales proceeds of approximately $13.0 million. These store-level improvements and gains were offset, in part, by increased real estate development expenses ($2.7 million) and unrealized foreign exchange losses ($1.9 million). Net income was also affected by increased interest expense ($4.3 million), as short-term domestic interest rates rose and short-term floating rate debt in Europe was replaced by a seven-year bond last October. FFO attributable to common shareholders for the first quarter of 2005 was $15.5 million, down 8% from $16.9 million in the first quarter of 2004. FFO per share was $0.33 for the first quarter of 2005, compared to $0.36 for the same period in 2004. The computation of FFO excludes the gains on property sales described above but includes the unrealized foreign exchange loss ($0.04 per share higher than 2004). The Company also announced that it had 12 new stores under construction in the U.S. and Europe as of the end of the quarter and had recently acquired or agreed to acquire nine existing stores in the U.S. (one during the first quarter for approximately $3.0 million and eight scheduled to close in May 2005 for a total cost of approximately $38.0 million). Domestic Operating Results During the first quarter of 2005, the Domestic Same Store segment generated growth in revenue of 5.8% and NOI before leasehold and indirect expenses of 4.8% over the first quarter of 2004. Growth in NOI after leasehold and indirect expenses in the quarter was 3.3% over the same quarter in 2004. David K. Grant, president and chief operating officer stated, "U.S. same store NOI growth was in line with our expectations. We continue to see solid performance in most of our U.S. markets while, as anticipated, we are experiencing high growth in our indirect operating expenses reflecting the effect of our increase in accounting and related field positions." European Operating Results At constant exchange rates, the Europe Same Store segment in the first quarter of 2005 generated increases in revenue of 13% and NOI before leasehold and indirect expenses of 15.5% over the first quarter of 2004. NOI after leasehold and indirect expenses in the quarter grew 17.1% compared to the same quarter in 2004. Strong revenue growth was due mainly to an increase in average occupancy in the Same Store portfolio from 66% to 73%. While results were generally encouraging, continued sluggish occupancy gains in some areas have led management to moderate its new store development pace from approximately 20 to 15 openings for 2005. Portfolio As of March 31, 2005, Shurgard operated an international network of 634 operating properties containing approximately 40 million net rentable square feet. The total includes 475 owned, partially owned or leased storage centers in operation in the United States, 24 stores in the United States that we manage for third parties and 135 owned or partially owned stores in Europe. Of the 610 owned, partially owned or leased stores in the United States and Europe, 540 are classified as Same Store and 70 are classified as New Store. Together, the Domestic and Europe New Store groups now represent 15% of Shurgard's investment in storage centers, but these are not yet producing positive NOI after leasehold and indirect expenses, reflecting the early stage of rent-up of those properties. During the first quarter of 2005, the Company opened no new stores in the U.S. or Europe but had 12 projects under construction (three in the U.S. and nine in Europe) as of the end of the quarter. In addition, there were 18 domestic stores undergoing redevelopment for an estimated cost of $15.7 million. Executive Announcements Shurgard announced that Steven De Tollenaere, Chief Financial Officer of Shurgard Europe, will assume the duties of Managing Director of Europe, from Bruno Roqueplo who will be leaving the Company to pursue other opportunities. Commenting on the change Mr. Grant stated, "In his eight years with our European Company, Steven has developed a strong knowledge of the business and has established solid working relationships with our employees and our outside business partners. We wish to acknowledge Bruno's contribution to Shurgard Europe and wish him well in his future endeavors." In other executive moves, the Company announced the hiring of Ray Loeffler as the new Regional Vice President for the Southeastern United States. Mr. Loeffler has spent many years in the retail industry, most recently as Senior Vice President of Store Operations for Eckerd Drug Stores and prior to that, a long career with the Macy's department store group. Sydney Johnson-Gorrell has recently joined the company as its new Vice President of Human Resources. Previously, Ms. Johnson-Gorrell served for five years as the Senior Vice President of Human Resources and Administration for Wizards of the Coast, a subsidiary of Hasbro. Prior to that she spent ten years at Oberto Sausage Company where she was responsible for developing the Human Resources function. Status of Management's Report on Internal Control over Financial Reporting On March 29, 2005, the Company reported that management had not completed its assessment of internal control over financial reporting as of December 31, 2004. Management is now nearing completion of its 2004 assessment. The Company expects to file an amendment to its Form 10-K for 2004 once management completes its assessment and the Company's independent registered public accounting firm completes its attestation of management's 2004 assessment of internal control over financial reporting. Guidance for 2005 Previously, management had provided FFO guidance for 2005 of $2.25 to $2.40 per share and earnings guidance of $0.39 to $0.54 per share. We are revising that FFO guidance to $2.16 to $2.31 per share to include the $4.2 million ($0.09 per share) unrealized derivative and foreign exchange losses related to intercompany debt experienced in the first quarter. Earnings guidance remains unchanged. Quarterly Management Conference Call A conference call is scheduled for Wednesday, May 11, 2005, at 10:00 a.m. PDT to discuss the 2005 first quarter results. The public is invited to listen to the call live via the Internet by clicking the appropriate links on the Company's website at http://investorrelations.shurgard.com. The call also is available live on a listen-only basis by dialing 800-257-7087 (U.S. & Canadian callers) and 303-262-2137 (international callers). A taped replay of the conference call is available via the Internet address listed above or via telephone until May 18, 2005, at 800-405-2236 (U.S. & Canadian callers) and 303-590-3000 (international callers) access code 11030155#. A copy of this release and table attachments will also be available on the Company's website at http://investorrelations.shurgard.com. The Company uses FFO in addition to net earnings to report its operating results. The Company uses the definition of FFO adopted by the National Association of Real Estate Investment Trusts. Accordingly, FFO is defined as net earnings (computed in accordance with GAAP), excluding gains (losses) on dispositions of interests in depreciated operating properties and real estate depreciation and amortization expenses. FFO includes the Company's share of FFO of unconsolidated real estate ventures and discontinued operations and excludes minority interests in FFO. The Company believes FFO is a meaningful disclosure as a supplement to net earnings because net earnings assumes that the values of real estate assets diminish predictably over time as reflected through depreciation and amortization expenses. The Company believes that the values of real estate assets fluctuate due to market conditions. The Company's calculation of FFO may not be comparable to similarly titled measures reported by other companies because not all companies calculate FFO in the same manner. FFO is not a liquidity measure and should not be considered as an alternative to cash flows or indicative of cash available for distribution. It also should not be considered an alternative to net earnings, as determined in accordance with U.S. GAAP, as an indication of the Company's financial performance. A reconciliation of GAAP net income to FFO is included in the tables attached to this release. Statements in this release concerning the beliefs, expectations, intentions, future events, future performance, business prospects and business strategy in the United States and Europe, including statements regarding the earnings guidance, projected development activity, including our projected revenues, expenses, FFO projections, and net income projections for 2005 and beyond, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act and are based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the forward-looking statements. The risks and uncertainties that may cause these forward-looking statements to prove to be incorrect include the risks that implementation of the business plan, including marketing and sales initiatives, will not be successful and that the Company's earnings, expenses or revenues may be affected by other factors, such as: the risk that changes in economic conditions in the markets in which we operate; the risk that competition from new self storage facilities or other storage alternatives may cause rent to decline and may cause occupancy rates to drop, or may cause delays in lease up of newly developed properties; the risk that new developments could be delayed or reduced; the risk that the Company may experience increases in the cost of labor, taxes, marketing and other operating and construction expenses; the risk that tax law changes may change the taxability of future income; the risk that increases in interest rates may increase the cost of refinancing long term debt; and the risk that the Company's alternatives for funding its business plan may be impaired by the economic uncertainty due to the impact of war or terrorism; and the risk that the Company's interest in Shurgard Europe may be adversely impacted if that entity is unable to complete formation and funding of its contemplated development joint ventures. We may also be affected by deadlines imposed by the Sarbanes-Oxley Act of 2002 and other pending legislation. Changes in accounting principles, including impending changes in accounting for stock options, may affect the Company's reported results of operations and financial position. The information presented in this release reflects Shurgard's expectations as of the date of this release. Except as required by law, Shurgard undertakes no obligation to update or revise the information provided herein. For a discussion of additional risks and other factors that could affect these forward-looking statements and Shurgard's financial performance, see Shurgard's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the SEC on March 29, 2005. -0- *T INDEX of TABLES TO FOLLOW: Table 1. Consolidated Statements of Net Income for the three months ended March 31, 2005 and 2004 Table 2. Consolidated Balance Sheet as of March 31, 2005 and December 31, 2004 Table 3. FFO Reconciliation for the three months ended March 31, 2005 and 2004 Table 4. Split of FFO between European Joint Ventures and the rest of Shurgard Storage Centers, Inc. for the quarter ended March 31, 2005 Table 5. Earnings Per Share and FFO Per Share for the three months ended March 31, 2005 and 2004 Table 6. Segment reporting information results for the three months ended March 31, 2005 Table 7. Segment reporting information results for the three months ended March 31, 2004 Table 8. Domestic Same Store Results for the three months ended March 31, 2005 and 2004 Table 9. Summary of Operating Self Storage Properties as of March 31, 2005 Table 10. Europe Same Store Results for the three months ended March 31, 2005 and 2004 Table 11. Quarterly comparison for Europe Same Store of first quarter 2005 versus first quarter 2004 Table 12. Domestic Same Store Vintage Analysis for the three months ended March 31, 2005 and 2004 Table 13. European Development Performance Vintage Analysis for the three months ended March 31, 2005 and 2004 Table 14. Foreign exchange translation for the three months ended March 31, 2005 and 2004 Table 15. Store Asset Values and Operating Information for the three months ended March 31, 2005 Table 1: SHURGARD STORAGE CENTERS, INC. QUARTER-TO-DATE OPERATING RESULTS (unaudited) Condensed Consolidated Statements of Net Income for the three months ended March 31, 2005 and 2004 (Amounts in thousands except share data) For the three months ended March 31, ------------------- 2005 2004 -------- -------- Revenue Storage center operations $112,478 $ 97,988 Other 1,386 1,320 -------- -------- Total revenue 113,864 99,308 -------- -------- Expenses Operating 49,378 41,231 Real estate taxes 9,815 9,081 Real estate development expenses 3,253 561 Depreciation and amortization 23,373 20,163 General, administrative and other 8,029 9,220 -------- -------- Total expenses 93,848 80,256 -------- -------- Income from storage center operations 20,016 19,052 -------- -------- Other Income (Expense) Interest expense (24,125) (19,809) Loss on derivatives (359) (777) Foreign exchange loss (3,848) (1,950) Interest income and other, net 960 515 -------- -------- Other expense, net (27,372) (22,021) -------- -------- Loss before equity in earnings of other real estate investments, net, minority interest and income taxes (7,356) (2,969) Minority interest 6,110 4,532 Equity in earnings of other real estate investments 21 2 Income tax expense (10) (23) -------- -------- (Loss) income from continuing operations (1,235) 1,542 -------- -------- Discontinued operations Income from discontinued operations 68 492 Gain on sale of discontinued operations 6,423 - -------- -------- Total income from discontinued operations 6,491 492 -------- -------- Cumulative effect of change in accounting principle - (2,339) -------- -------- Net Income (loss) 5,256 (305) Net Income (loss) Allocation Preferred stock dividends and other (3,042) (3,058) -------- -------- Net income (loss) available to common shareholders $ 2,214 $ (3,363) ======== ======== Net Income (loss) per Common Share - Basic and Diluted: Loss from continuing operations available to common shareholders $ (0.09) $ (0.03) Total discontinued operations 0.14 0.01 Cumulative effect of change in accounting principle - (0.05) -------- -------- Net income (loss) per share $ 0.05 $ (0.07) ======== ======== Distributions per common share $ 0.55 $ 0.54 ======== ======== Table 2: SHURGARD STORAGE CENTERS, INC. BALANCE SHEET (unaudited) Condensed Consolidated Balance Sheet as of March 31, 2005 and December 31, 2004 (Amounts in thousands except share data) March 31, December 31, 2005 2004 ----------- ----------- ASSETS: Storage centers: Operating storage centers $ 3,102,262 $ 3,143,488 Less accumulated depreciation (495,438) (479,531) ----------- ----------- Operating storage centers, net 2,606,824 2,663,957 Construction in progress 72,784 58,431 Properties held for sale 5,718 8,328 ----------- ----------- Total storage centers 2,685,326 2,730,716 ----------- ----------- Cash and cash equivalents 52,148 50,277 Restricted cash 5,575 7,181 Goodwill 24,206 24,206 Other assets 119,800 120,504 ----------- ----------- Total assets $ 2,887,055 $ 2,932,884 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY: Accounts payable and accrued expenses $ 52,227 $ 60,938 Other liabilities 98,897 112,014 Lines of credit 418,100 397,300 Notes payable 1,278,293 1,287,202 ----------- ----------- Total liabilities 1,847,517 1,857,454 ----------- ----------- Minority interest 160,367 169,232 Commitments and contingencies (Notes 15) Shareholders' equity: Series C Cumulative Redeemable Preferred Stock; $0.001 par value; 2,000,000 shares authorized; 2,000,000 shares issued and outstanding; liquidation preference of $50,000 48,115 48,115 Series D Cumulative Redeemable Preferred Stock; $0.001 par value; 3,450,000 shares authorized; 3,450,000 shares issued and outstanding; liquidation preference of $86,250 83,068 83,068 Class A Common Stock, $0.001 par value; 120,000,000 authorized; 46,658,253 and 46,624,900 shares issued and outstanding, respectively 47 47 Additional paid-in capital 1,128,533 1,127,138 Accumulated deficit (378,292) (354,985) Accumulated other comprehensive (loss) income (2,300) 2,815 ----------- ----------- Total shareholders' equity 879,171 906,198 ----------- ----------- Total liabilities and shareholders' equity $ 2,887,055 $ 2,932,884 =========== =========== Table 3: SHURGARD STORAGE CENTERS, INC. FFO (unaudited) FFO Reconciliation for the three months ended March 31, 2005 and 2004 (in thousands except share data) For the three months ended March 31, ----------------- (in thousands) 2005 2004 ------- ------- Net income (loss) $ 5,256 $ (305) Depreciation and amortization (1) 19,723 17,879 Gain on sale of operating properties (6,423) - Cumulative effect of change in accounting principle - 2,339 ------- ------- FFO 18,556 19,913 Preferred distribution and other (3,042) (3,058) ------- ------- FFO attributable to common shareholders $15,514 $16,855 ======= ======= FFO per share $ 0.33 $ 0.36 ======= ======= Distributions per common share $ 0.55 $ 0.54 ======= ======= (1) Excludes depreciation related to non-real estate assets and minority interests in depreciation and amortization and includes depreciation and amortization of discontinued operations. Table 4: SHURGARD STORAGE CENTERS, INC. Split of FFO between European joint ventures and the rest of Shurgard Storage Centers, Inc. For the quarter ended March 31, 2005 (in thousands except share data) Shurgard Shurgard Remainder Europe Europe of Consolidated 20% (Excluding Shurgard Shurgard owned joint Storage Storage joint ventures) Centers, Centers, ventures(2) (2) Inc. Inc. --------- ----------- --------- ------------ Net income (loss) $(1,079) $(9,698) $16,033 $ 5,256 Depreciation and amortization (1) 237 3,696 15,790 19,723 Gain on sales of operating properties - - (6,423) (6,423) ------- ------- ------- ------- FFO $ (842) $(6,002) $25,400 $18,556 ======= ======= ======= ======= (1) Excludes depreciation related to non-real estate assets and minority interests in depreciation and amortization and includes depreciation and amortization of discontinued operations. (2) Balances are presented net of minority interests. Table 5: SHURGARD STORAGE CENTERS, INC. EARNINGS PER SHARE AND FFO PER SHARE (unaudited) Earnings Per Share and FFO Per Share for the three months ended March 31, 2005 and 2004 Basic and Diluted (in thousands except share data) Earnings Per share ---------- ----------------- For the three months ended March 31, 2005 Number of shares 46,514 Loss from continuing operations $ (1,235) Less: preferred distributions and other (3,042) --------- Loss from continuing operations available to common shareholders adjusted (4,277) $ (0.09) Discontinued operations 6,491 0.14 Cumulative effect of change in accounting principle - - --------- ---------- Net Income $ 2,214 $ 0.05 ========= ========== For the three months ended March 31, 2004 Number of shares 45,654 Income from continuing operations $ 1,542 Less: preferred distributions and other (3,058) --------- Loss from continuing operations available to common shareholders adjusted (1,516) $ (0.03) Discontinued operations 492 0.01 Cumulative effect of change in accounting principle (2,339) (0.05) --------- ---------- Net Loss $ (3,363) $ (0.07) ========= ========== (in thousands except share data) FFO Per share ---------- ----------------- For the three months ended March 31, 2005 Number of shares Basic share 46,514 Effect of dilutive stock options 673 Number of shares Diluted share 47,187 FFO $ 18,556 Less: preferred distributions and other (3,042) --------- FFO available to common shareholders adjusted $ 15,514 $ 0.33 ========= ========== For the three months ended March 31, 2004 Number of shares Basic share 45,654 Effect of dilutive stock options 701 Number of shares Diluted share 46,355 FFO $ 19,913 Less: preferred distributions and other (3,058) --------- FFO available to common shareholders adjusted $ 16,855 $ 0.36 ========= ========== Table 6: SHURGARD STORAGE CENTERS, INC. SEGMENT REPORTING INFORMATION RESULTS (unaudited) Segment reporting information results for the three months ended March 31, 2005 Three months ended March 31, 2005 (dollars in thousands except average rent) Domestic Europe Total ----------------- ----------------- ----------------- % of % of % of Same Store (1) Amount total Amount total Amount total ---------------- ----------------- ----------------- ----------------- Number of Storage Centers 444 93% 96 71% 540 89% Revenues $ 78,239 95% $ 25,298 83% $ 103,537 91% NOI after indirect and leasehold expense $ 45,102 96% $ 9,611 122% $ 54,713 100% Avg. annual rent per sq. ft. (3) $ 11.81 $ 23.69 Avg. sq. ft. occupancy 84% 73% Total Storage Center Costs (4) $1,769,855 91% $ 817,787 74% $2,587,642 85% New Store (2) ---------------- Number of Storage Centers 31 7% 39 29% 70 11% Revenues $ 4,543 5% $ 5,140 17% $ 9,683 9% NOI after indirect and leasehold expense $ 1,679 4% (1,720) -22% $ (41) 0% Avg. sq. ft. occupancy 67% 38% Total Storage Center Costs (4) $ 174,559 9% $ 294,765 26% $ 469,324 15% Combined New and Same Stores ---------------- Number of Storage Centers 475 100% 135 100% 610 100% Revenues $ 82,782 100% $ 30,438 100% $ 113,220 100% NOI after indirect and leasehold expense $ 46,781 100% $ 7,891 100% $ 54,672 100% Total Storage Center Costs (4) $1,944,414 100% 1,112,552 100% $3,056,966 100% (1) Our definition of Same Store includes existing storage centers acquired prior to January 1 of the previous year as well as developed properties that have been operating for a full two years as of January 1 of the current year. Our definition of Same Store results in the addition of storage centers each year as new acquisitions and developments meet the criteria for inclusion, so we then include these storage centers in the previous year's comparable data. Other storage companies may define Same Store differently, which will affect the comparability of the data. (2) Our definition of New Store, as shown in the table above, includes existing domestic facilities that had not been acquired or leased as of January 1 of the previous year as well as developed properties that have not been operating a full two years as of January 1 of the current year. (3) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. (4) Total costs capitalized to storage centers. Table 7: SHURGARD STORAGE CENTERS, INC. SEGMENT REPORTING INFORMATION RESULTS (unaudited) Segment reporting information results for the three months ended March 31, 2004 Three months ended March 31, 2004 (dollars in thousands except average rent) Domestic Europe Total -------------- -------------- -------------- % of % of % of Same Store (1) Amount total Amount total Amount total ---------------------------------------- -------------- -------------- Number of Storage Centers 444 96% 96 79% 540 92% Revenues $73,974 99% $22,379 94% $96,353 97% NOI after indirect and leasehold expense $43,677 101% $ 8,206 149% $51,883 106% Avg. annual rent per sq. ft.(3) $ 11.36 $ 23.24 Avg. sq. ft. occupancy 82% 66% New Store (2) -------------------------- Number of Storage Centers 18 4% 26 21% 44 8% Revenues $ 1,073 1% $ 1,406 6% $ 2,479 3% NOI after indirect and leasehold expense $ (379) -1% (2,685) -49% $(3,064) -6% Avg. sq. ft. occupancy 38% 11% Combined New and Same Stores -------------------------- Number of Storage Centers 462 100% 122 100% 584 100% Revenues $75,047 100% $23,785 100% $98,832 100% NOI after indirect and leasehold expense $43,298 100% $ 5,521 100% $48,819 100% (1) Our definition of Same Store includes existing storage centers acquired prior to January 1 of the previous year as well as developed properties that have been operating for a full two years as of January 1 of the current year. Our definition of Same Store results in the addition of storage centers each year as new acquisitions and developments meet the criteria for inclusion, so we then include these storage centers in the previous year's comparable data. Other storage companies may define Same Store differently, which will affect the comparability of the data. (2) Our definition of New Store, as shown in the table above, includes existing domestic facilities that had not been acquired or leased as of January 1 of the previous year as well as developed properties that have not been operating a full two years as of January 1 of the current year. (3) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. Table 8: SHURGARD STORAGE CENTERS, INC. DOMESTIC QUARTER TO DATE SAME STORE RESULTS (unaudited) Domestic Same Store Results for the three months ended March 31, 2005 and 2004 Same Store Results (1) For the three months ended March 31, (dollars in thousands) 2005 2004 % Change ----------- ----------- --------- Storage center operations revenue $ 78,239 $ 73,974 5.8% Operating expense: Personnel expenses 9,026 8,232 9.6% Real estate taxes 7,524 7,268 3.5% Repairs and maintenance 2,284 2,462 -7.2% Marketing expense 1,931 1,748 10.5% Utilities and phone expenses 2,900 2,884 0.6% Cost of goods sold 834 747 11.6% Store admin and other expenses 3,309 2,515 31.6% ----------- ----------- Direct operating and real estate tax expense 27,808 25,856 7.5% ----------- ----------- NOI 50,431 48,118 4.8% Leasehold expense 1,129 1,025 10.1% ----------- ----------- NOI after leasehold expense 49,302 47,093 4.7% Indirect operating expense (2) 4,200 3,416 23.0% ----------- ----------- NOI after indirect operating and leasehold expense $ 45,102 $ 43,677 3.3% =========== =========== Avg. annual rent per sq.ft. (3) $ 11.81 $ 11.36 4.0% Avg. sq.ft. occupancy 84% 82% Total net rentable sq.ft. 29,246,000 29,246,000 Number of properties as of December 31 444 444 (1) Table includes the total operating results of each storage center regardless of our percentage ownership interest in that storage center. (2) Indirect operating expense includes certain shared property costs such as district and corporate management, purchasing, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, legal services, human resources and accounting. Does not include containerized storage operations, internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to storage centers based on number of months in operation during the period. (3) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. Table 9: SHURGARD STORAGE CENTERS, INC. SUMMARY OF OPERATING SELF STORAGE PROPERTIES (unaudited) Summary of Operating Self Storage Properties as of March 31, 2005 Domestic European ----------------------- ------------------------ Number of Net Rentable Number of Net Rentable Properties Square Feet Properties Square Feet ---------- ------------ ----------- ------------ 100% owned or leased 372 23,938,000 1 38,000 Partially owned or leased, consolidated 100 7,004,000 134 7,224,000 Properties under leasing arrangements 3 211,000 - - Fee managed 24 1,454,000 - - ---------- ------------ ----------- ------------ 499 32,607,000 135 7,262,000 ========== ============ =========== ============ Total ------------------------ Number of Net Rentable Properties Square Feet ----------- ------------ 100% owned or leased 373 23,976,000 Partially owned or leased, consolidated 234 14,228,000 Properties under leasing arrangements 3 211,000 Fee managed 24 1,454,000 ----------- ------------ 634 39,869,000 =========== ============ Table 10: SHURGARD STORAGE CENTERS, INC. EUROPE QUARTER TO DATE SAME STORE RESULTS (unaudited) Europe Same Store Results for three months ended March 31, 2005 and 2004 (1) Three months ended March 31, --------------------------------- (in thousands except average rent) 2005 2004 % Change ---------- ---------- --------- Storage center operations revenue $ 25,298 $ 22,379 13.0% Operating expense: Personnel expenses 3,497 3,309 5.7% Real estate taxes 1,194 1,191 0.3% Repairs and maintenance 931 917 1.5% Marketing expense 2,349 1,956 20.1% Utilities and phone expenses 886 772 14.8% Cost of goods sold 899 771 16.6% Store admin and other expenses 2,028 1,764 15.0% ---------- ---------- Direct operating and real estate tax expense 11,784 10,680 10.3% ---------- ---------- NOI 13,514 11,699 15.5% Leasehold expense 521 498 4.6% ---------- ---------- NOI after leasehold expense 12,993 11,201 16.0% Indirect operating expense (2) 3,382 2,995 12.9% ---------- ---------- NOI after indirect operating and leasehold expense $ 9,611 $ 8,206 17.1% ========== ========== Avg. annual rent per sq. ft. (3) $ 23.69 $ 23.24 1.9% Avg. sq. ft. occupancy 73% 66% 10.6% Total net rentable sq. ft. 5,288,000 5,288,000 Number of properties 96 96 (1) Amounts for both years have been translated from local currencies at a constant exchange rate using the average exchange rate for the three months ended March 31, 2005 for the 2005 to 2004 comparison. (2) Indirect operating expense includes certain shared property costs such as district and regional management, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, human resources and accounting. It does not include internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to storage centers based on number of months in operation during the period. (3) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. Table 11: SHURGARD STORAGE CENTERS, INC. EUROPEAN 2004 QUARTERLY COMPARISON (unaudited) Quarterly comparison for European same store of first quarter 2005 versus first quarter 2004 Percent change compared to prior quarter --------------------------------- Q1 NOI Q1 2005 (after Number of Average Q1 leasehold Q1 Q1 Properties Occupancy Revenue expenses) Occupancy Rate ------------------------------------------------------ Belgium 17 72.1% 3.1% -1.1% 1.1% 1.7% Netherlands 22 63.9% 18.8% 5.5% 12.7% 5.6% France 23 79.2% 14.5% 22.5% 11.9% 1.3% Sweden 20 75.2% 12.9% 20.2% 11.3% 2.1% Denmark 4 79.2% 37.6% 56.8% 36.7% 0.0% United Kingdom 10 72.8% 8.5% 23.8% 18.9% -6.3% ---------- --------- ------- --------- --------- ----- Europe Totals 96 72.9% 13.0% 16.0% 10.6% 1.9% ========== ========= ======= ========= ========= ===== Table 12: SHURGARD STORAGE CENTERS, INC. DOMESTIC YEAR TO DATE SAME STORE VINTAGE TABLE (unaudited) Domestic Same Store Vintage Analysis for the three months ended March 31, 2005 and 2004 Total Net (In millions) Rentable Total sq. ft. Average Occupancy Storage when Three months ended Number of Center all phases -------------------- Properties Cost (1) are complete 3/31/2005 3/31/2004 ----------- ------------- ------------ -------------------- Same Store since 2005 34 $ 178.0 2,322,000 80% 74% Same Store since 2004 59 217.2 4,382,000 78% 75% Same Store since 2003 or prior 351 1,374.7 22,542,000 85% 85% ----------- ------------ ------------ -------------------- Same Store total 444 $ 1,769.9 29,246,000 84% 82% =========== ============ ============ ==================== (1) Total capitalized costs to storage centers since the store was acquired or developed. (2) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. (In thousands) NOI Average Annual Rent (In thousands) (after leasehold (per sq. ft) (2) Revenue expenses) -------------------- -------------------- -------------------- Three months ended Three months ended Three months ended -------------------- -------------------- -------------------- 3/31/2005 3/31/2004 3/31/2005 3/31/2004 3/31/2005 3/31/2004 -------------------- -------------------- -------------------- Same Store since 2005 $12.49 $11.67 $6,177 $5,380 $3,364 $2,644 Same Store since 2004 8.43 7.91 7,826 6,970 4,853 3,933 Same Store since 2003 or prior 12.35 11.92 64,236 61,624 41,085 40,516 -------------------- -------------------- -------------------- Same Store total $11.81 $11.36 $78,239 $73,974 $49,302 $47,093 ==================== ==================== ==================== (1) Total capitalized costs to storage centers since the store was acquired or developed. (2) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. Table 13: SHURGARD STORAGE CENTERS, INC. EUROPEAN DEVELOPMENT (unaudited) European Development Performance Vintage Analysis for the three months ended March 31, 2005 and 2004 Average Occupancy (in millions) ------------- Storage Center Total Net For the three Cost Rentable months Number ----------------- sq. ft. ended March of Devel- when all 31, Prop- opment Total phases are ------------- New store: erties Cost (1) Cost (2) complete 2005 2004 --------------------------- -------- -------- ---------- ------- ----- Opened in 2005 Germany - $ - $ - - - - Denmark - - - - - - United Kingdom - - - - - - ------ ------- ------- ---------- ------- ----- Total opened in 2005 - $ - $ - - - - ====== ======= ======= ========== ======= ===== Opened in 2004 Germany 4 $ 26.8 $ 26.8 202,000 21.1% - France 4 23.9 23.9 217,000 12.0% - Denmark 2 14.9 14.9 101,000 34.3% - United Kingdom 3 32.0 32.0 123,000 28.4% 0.2% ------ ------- ------- ---------- ------- ----- Total opened in 2004 13 $ 97.6 $ 97.6 643,000 21.5% - ====== ======= ======= ========== ======= ===== Opened in 2003 Belgium 1 $ 3.6 $ 4.9 45,000 62.7% 31.3% Netherlands 7 40.0 42.2 351,000 43.9% 14.9% Germany 5 36.2 36.2 268,000 41.4% 12.4% France 7 44.6 47.6 372,000 42.0% 13.1% Sweden 2 11.9 14.6 94,000 54.5% 23.1% Denmark 1 8.0 10.5 49,000 87.8% 31.3% United Kingdom 3 33.3 41.2 152,000 48.6% 16.3% ------ ------- ------- ---------- ------- ----- Total opened in 2003 26 $ 177.6 $ 197.2 1,331,000 46.4% 15.8% ====== ======= ======= ========== ======= ===== ------ -------- -------- ---------- ------- ----- New Store Total 39 $ 275.2 $ 294.8 1,974,000 38.3% 10.7% ====== ======= ======= ========== ======= ===== Same store: --------------------- Opened in 2002 Belgium 2 $ 7.5 $ 10.3 101,000 48.7% 42.1% Netherlands 7 41.6 56.5 368,000 52.2% 41.1% France 7 44.4 61.7 378,000 66.1% 50.4% Sweden 3 19.0 26.2 151,000 73.4% 55.3% Denmark 2 14.9 20.8 102,000 78.6% 47.4% United Kingdom 3 34.8 47.9 166,000 70.4% 47.1% ------ ------- ------- ---------- ------- ----- Total opened in 2002 24 $ 162.2 $ 223.4 1,266,000 63.1% 46.9% ====== ======= ======= ========== ======= ===== Opened in 2001 and before Belgium 15 $ 72.5 $ 101.1 894,000 74.7% 74.6% Netherlands 15 82.8 115.2 821,000 69.1% 63.6% France 16 94.0 129.9 855,000 85.0% 79.7% Sweden 17 97.3 135.2 974,000 75.5% 69.5% Denmark 2 13.6 18.9 107,000 79.8% 68.0% United Kingdom 7 68.1 94.1 371,000 73.8% 67.5% ------ ------- ------- ---------- ------- ----- Total opened before 2002 72 $ 428.3 $ 594.4 4,022,000 76.0% 71.4% ====== ======= ======= ========== ======= ===== ------ -------- -------- ---------- ------- ----- Same Store Total 96 $ 590.5 $ 817.8 5,288,000 72.9% 65.5% ====== ======= ======= ========== ======= ===== (1) The total development cost of these projects is reported in U.S. dollars translated at the March 31, 2005 exchange rate of $1.29 to the euro. The operating results (see note (2) below) are reported at the average exchange rate for the three months ended March 31, 2005 which was $1.31 to the euro. As these exchange rates are different we believe it does not allow for an accurate measure of property investment yield. We believe the application of a constant exchange rate to both the property cost and operating results would provide a more meaningful measure of investment yield. (2) The total cost of the storage centers includes additional costs of approximately $247 million we paid to acquire additional interests in Shurgard Europe in 2003 and 2004. The amounts have been translated at the March 31, 2005 exchange rate. (3) The amounts have been translated from local currencies at a constant exchange rate using the average exchange rate for the first quarter of 2005. (4) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. On the year of opening the average annual rent is lower as the store had not been opened a full year. (5) Expenses in some instances may include certain pre-opening costs. Average Annual (In thousands) Rent NOI (3) (per sq. ft) (In thousands) (after leasehold (3)(4) Revenue (3) expense) ----------------- ---------------- ------------------- For the three For the three For the three months months months ended March 31, ended March 31, ended March 31, ----------------- ---------------- ------------------- New store: 2005 2004 2005 2004 2005 (5) 2004 --------------- ------- ------- ------- ------- -------- -------- Opened in 2005 Germany $ - $ - $ - $ - $ (16) $ - Denmark - - - - (47) - United Kingdom - - - - (54) - ------- ------- ------- ------- -------- -------- Total opened in 2005 $ - $ - $ - $ - $ (117) $ - ======= ======= ======= ======= ======== ======== Opened in 2004 Germany $ 19.49 $ - $ 221 $ - $ (302) $ - France 22.04 - 181 2 (324) (93) Denmark 21.84 - 230 - (32) (27) United Kingdom 53.32 31.09 498 4 111 (25) ------- ------- ------- ------- -------- -------- Total opened in 2004 $ 29.10 $ 31.09 $ 1,130 $ 6 $ (547) $ (145) ======= ======= ======= ======= ======== ======== Opened in 2003 Belgium $ 16.70 $ 15.99 $ 128 $ 63 $ 48 $ (9) Netherlands 22.71 21.70 922 311 20 (378) Germany 16.17 16.21 475 148 (56) (379) France 23.30 23.23 1,038 341 85 (450) Sweden 19.47 17.45 297 115 67 (108) Denmark 24.67 23.21 291 103 145 2 United Kingdom 42.32 43.32 859 319 336 (125) ------- ------- ------- ------- -------- -------- Total opened in 2003 $ 23.62 $ 23.03 $ 4,010 $ 1,400 $ 645 $ (1,447) ======= ======= ======= ======= ======== ======== -------- -------- ---------------- -------- --------- New Store Total $ 24.65 $ 23.06 $ 5,140 $ 1,406 $ (19) $ (1,592) ======= ======= ======= ======= ======== ======== Same store: --------------- Opened in 2002 Belgium $ 14.19 $ 13.42 $ 189 $ 154 $ 25 $ (11) Netherlands 22.66 21.17 1,150 854 433 268 France 21.27 21.01 1,536 1,155 534 171 Sweden 22.81 21.58 699 514 376 209 Denmark 22.99 23.91 506 318 243 100 United Kingdom 39.38 46.00 1,263 1,018 702 425 ------- ------- ------- ------- -------- -------- Total opened in 2002 $ 24.21 $ 24.12 $ 5,343 $ 4,013 $ 2,313 $ 1,162 ======= ======= ======= ======= ======== ======== Opened in 2001 and before Belgium $ 17.55 $ 17.27 $ 3,240 $ 3,172 $ 1,932 $ 1,990 Netherlands 23.09 21.92 3,507 3,068 1,681 1,735 France 26.60 25.99 5,409 4,910 2,813 2,562 Sweden 21.82 21.48 4,551 4,136 2,397 2,098 Denmark 23.12 22.52 550 450 242 210 United Kingdom 35.85 37.30 2,698 2,630 1,615 1,444 ------- ------- ------- ------- -------- -------- Total opened before 2002 $ 23.55 $ 23.06 $19,955 $18,366 $ 10,680 $ 10,039 ======= ======= ======= ======= ======== ======== -------- -------- ---------------- -------- --------- Same Store Total $ 23.69 $ 23.24 $25,298 $22,379 $ 12,993 $ 11,201 ======= ======= ======= ======= ======== ======== (1) The total development cost of these projects is reported in U.S. dollars translated at the March 31, 2005 exchange rate of $1.29 to the euro. The operating results (see note (2) below) are reported at the average exchange rate for the three months ended March 31, 2005 which was $1.31 to the euro. As these exchange rates are different we believe it does not allow for an accurate measure of property investment yield. We believe the application of a constant exchange rate to both the property cost and operating results would provide a more meaningful measure of investment yield. (2) The total cost of the storage centers includes additional costs of approximately $247 million we paid to acquire additional interests in Shurgard Europe in 2003 and 2004. The amounts have been translated at the March 31, 2005 exchange rate. (3) The amounts have been translated from local currencies at a constant exchange rate using the average exchange rate for the first quarter of 2005. (4) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period. On the year of opening the average annual rent is lower as the store had not been opened a full year. (5) Expenses in some instances may include certain pre-opening costs. Table 14: SHURGARD STORAGE CENTERS, INC. FOREIGN EXCHANGE TRANSLATION (unaudited) Foreign exchange translation for three months ended March 31, 2005 and 2004 With the growth in the Company's foreign operations, foreign currency translation has a greater impact on the quarterly reporting of our financial results. Foreign currency translation could cause volatility in the reported financial results of the Company and otherwise limit the comparability of operating results and financial position from one period over another. Specifically, generally accepted accounting principles ("GAAP") prescribe specific foreign currency translation standards. For example, assets and liabilities are translated at the exchange rate in effect at the end of the applicable period. Revenue, expenses, and other components of the income statement and statement of cash flows are shown at the average exchange rate during the applicable period. For the quarter ended March 31, 2005, the average exchange rate between the Euro and the U.S. Dollar was $1.31 per Euro. During the quarter ended March 31, 2004, the average exchange rate was $1.25 per Euro. Revenues and total expenses for Shurgard Europe increased $1.1 million and $1.2 million, respectively, in the first quarter of 2005 over the first quarter of 2004. As of December 31, 2004 the exchange rate between the Euro and the U.S. Dollar was $1.36 per Euro compared to $1.29 per Euro as of March 31, 2005. Total assets and total liabilities decreased approximately $51 million and $40 million, respectively, from December 31, 2004 to March 31, 2005, as a result of exchange rate variances. Table 15: SHURGARD STORAGE CENTERS, INC. STORE ASSET VALUES AND OPERATING INFORMATION SCHEDULE (unaudited) Store asset values and operating information schedule for the three months ended March 31, 2005 (in thousands except for Weighted Net number of properties) average Rentable No. of ownership Square Occupancy Properties interest Feet (Q1 Avg) ---------- --------- --------- --------- Same Store ------------------------------ Domestic wholly owned or leased (1) 357 100% 23,051 84.1% Domestic consolidated joint ventures (2) 87 79% 6,195 81.2% European consolidated subsidiary (4) 96 87% 5,288 72.9% ---------- --------- --------- --------- Total Same Store 540 94% 34,534 81.9% ========== ========= ========= ========= New Store ------------------------------ Domestic wholly owned or leased developments(1) 11 100% 605 58.8% Domestic consolidated joint ventures developments(2) 9 68% 532 50.8% Domestic acquisitions (3) 8 90% 559 85.0% Domestic Properties under leasing arrangements (6) 3 0% 211 67.9% European consolidated subsidiary developments(4) 6 87% 287 46.4% European 20% development ventures developments(5) 32 17% 1,649 33.0% European acquisition (3) 1 100% 38 78.0% ---------- --------- --------- --------- Total New Store 70 52% 3,881 50.3% ========== ========= ========= ========= TOTALS 610 89% 38,415 78.7% ========== ========= ========= ========= (1) Includes owned and leased properties in which we have a 100% interest. (2) Includes properties in which we own an interest less than 100% but that are consolidated in our financial statements. The store information and results reflected the full 100% amounts. (3) Includes all stores acquired in 2005 and 2004. (4) Includes properties developed under Shurgard Europe in which we hold an 87.23% interest. (5) Includes properties developed under First and Second Shurgard in which we hold a 17.4% interest. (6) Three storage centers are operated through a leasing arrangement with a California developer for which the storage centers assets are consolidated in our financial statements but not the store operations. (7) Gross Book Value represents the cost of developing properties at the time they were developed, not the value at which partners interests in the properties may have been acquired for at a later date. The actual completed cost of these projects are reported in U.S. dollars translated at the March 31, 2005 exchange rate of $1.29 to the Euro. Operating results are reported at the average exchange rate for the three months ended March 31, 2005 which was $1.31 to the Euro. As these exchange rates are different we believe it does not allow for an accurate measure of property investment yield. However, we believe the application of a constant exchange rate to both the property cost and operating results may provide a more meaningful measure of investment yield. (8) Applicable debt represents debt secured by asset pool. (9) Represents Net Operating Income after Direct Expenses. The indirect expenses not included in NOI for Domestic Same Store, European Same Store, Domestic New Store and European New Store are the following (in thousands except indirect expense per revenue dollar): Gross Book Applicable Q1 Q1 Leasehold (in thousands except Value (7) debt (8) Revenue NOI (9) Expense for number of ----------------------------------------------- properties) Same Store ----------------------- Domestic wholly owned or leased (1) $1,407,261 $ 49,973 $ 63,889 $40,680 $ 1,097 Domestic consolidated joint ventures (2) 362,594 162,143 14,350 9,751 32 European consolidated subsidiary (4) 817,787 405,153 25,298 13,514 521 ---------- -------- -------- ------- ------- Total Same Store $2,587,642 $617,269 $103,537 $63,945 $ 1,650 ========== ======== ======== ======= ======= New Store ----------------------- Domestic wholly owned or leased developments(1) $ 59,525 $ - $ 1,231 $ 308 $ 35 Domestic consolidated joint ventures developments(2) 36,802 1,205 922 313 - Domestic acquisitions (3) 55,751 34,070 1,728 1,011 - Domestic Properties under leasing arrangements (6) 22,481 - 662 376 - European consolidated subsidiary developments (4) 58,454 25,058 1,157 401 - European 20% development ventures developments (5) 220,869 150,437 3,574 (606) 80 European acquisition (3) 15,442 - 409 266 - ---------- -------- -------- ------- ------- Total New Store $ 469,324 $210,770 $ 9,683 $ 2,069 $ 115 ========== ======== ======== ======= ======= TOTALS $3,056,966 $828,039 $113,220 $66,014 $ 1,765 ========== ======== ======== ======= ======= (1) Includes owned and leased properties in which we have a 100% interest. (2) Includes properties in which we own an interest less than 100% but that are consolidated in our financial statements. The store information and results reflected the full 100% amounts. (3) Includes all stores acquired in 2005 and 2004. (4) Includes properties developed under Shurgard Europe in which we hold an 87.23% interest. (5) Includes properties developed under First and Second Shurgard in which we hold a 17.4% interest. (6) Three storage centers are operated through a leasing arrangement with a California developer for which the storage centers assets are consolidated in our financial statements but not the store operations. (7) Gross Book Value represents the cost of developing properties at the time they were developed, not the value at which partners interests in the properties may have been acquired for at a later date. The actual completed cost of these projects are reported in U.S. dollars translated at the March 31, 2005 exchange rate of $1.29 to the Euro. Operating results are reported at the average exchange rate for the three months ended March 31, 2005 which was $1.31 to the Euro. As these exchange rates are different we believe it does not allow for an accurate measure of property investment yield. However, we believe the application of a constant exchange rate to both the property cost and operating results may provide a more meaningful measure of investment yield. (8) Applicable debt represents debt secured by asset pool. (9) Represents Net Operating Income after Direct Expenses. The indirect expenses not included in NOI for Domestic Same Store, European Same Store, Domestic New Store and European New Store are the following (in thousands except indirect expense per revenue dollar): Q1 indirect Indirect expense expense Q1 revenue per revenue dollar ------------------ ------------------- -------------------- Domestic Europe Domestic Europe Domestic Europe -------- -------- --------- --------- ---------- --------- Same Store $ 4,200 $ 3,382 $ 78,239 $ 25,298 $ 0.05 $ 0.13 ------- ------- -------- -------- --------- -------- New Store $ 294 $ 1,701 $ 4,543 $ 5,140 $ 0.06 $ 0.33 ------- ------- -------- -------- --------- -------- *T