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Life Storage, Inc. Reports Fourth Quarter and Full Year 2018 Results

Share:

Life
Storage, Inc
. (NYSE:LSI) a leading national owner and operator of
self storage properties, reported operating results for the quarter and
year ended December 31, 2018.

Highlights for the 4th
Quarter Included
:

  • Achieved net income attributable to common shareholders of $92.3
    million, or $1.98 per fully diluted common share.
  • Achieved adjusted funds from operations ("FFO")(1) per
    fully diluted common share of $1.38 as compared to $1.34 in the fourth
    quarter of 2017.
  • Increased same store revenue by 3.0% and same store net operating
    income ("NOI")(2) by 4.1% as compared to the
    fourth quarter of 2017.
  • Grew management and acquisition fees by 24.3% over the same period in
    2017.
  • Sold 12 mature properties to an unconsolidated joint venture in which
    the Company maintains a 20% ownership interest. Life Storage continues
    to manage the properties.
  • Acquired six high-quality properties for a total cost of $58.3 million.

Highlights for the Full Year Included:

  • Achieved net income attributable to common shareholders of $206.6
    million, or $4.43 per fully diluted common share.
  • Achieved adjusted FFO per fully diluted common share of $5.51 as
    compared to $5.31 in 2017.
  • Grew same store revenue by 3.4% and same store NOI by 4.1%
    year-over-year.
  • Sold 13 properties for net cash proceeds of $91.3 million, resulting
    in an aggregate gain of approximately $56.4 million.
  • Acquired eight high-quality properties for approximately $77.7 million.
  • Achieved a record year for its 3rd party management
    platform; adding a net 69 facilities in 2018.
  • Launched Rent Now, a fully-digital rental platform allowing customers
    who prefer to self-serve and "skip the counter" by completing the
    rental transaction online.
  • Continued investment in Warehouse Anywhere, Life Storage's intelligent
    warehousing solution, providing third-party logistics (3PL) to
    corporate customers.

David Rogers, the Company's Chief Executive Officer stated, "We had a
great year on a number of fronts. Our stores delivered strong top line
and NOI growth, we added a record 69 properties to our third-party
management platform, the Rent Now roll-out will be completed by early
next quarter, our Warehouse Anywhere B2B platform is really gaining
traction, and we're making great progress with our portfolio
optimization efforts."

FINANCIAL RESULTS

The Company achieved net income attributable to common shareholders in
the fourth quarter of 2018 of $92.3 million or $1.98 per fully diluted
common share. This compares to net income attributable to common
shareholders of $21.1 million in the fourth quarter of 2017, or $0.45
per fully diluted common share. The significant increase in net income
was the result of a $55.5 million gain on the sale of 12 storage
facilities during the fourth quarter of 2018. For the year-ended
December 31, 2018, the Company achieved $206.6 million net income
attributable to common shareholders or $4.43 per fully diluted common
share as compared to $96.4 million or $2.07 per fully diluted common
share for the year ended December 31, 2017. The significant increase in
net income was largely driven by the aforementioned gain on sale of
properties as well as a 4.0% increase in total revenues.

Funds from operations for the quarter were $1.36 per fully diluted
common share compared to $1.09 for the same period last year. Absent a
$0.7 million cost related to an officer's retirement, adjusted FFO per
fully diluted common share was $1.38 for the quarter ended December 31,
2018. Adjusted FFO per fully diluted common share for the quarter ended
December 31, 2017 was $1.34. For the year ended 2018, FFO per fully
diluted common share was $5.49 compared to $4.93 for the same period
last year. Adjusted FFO per fully diluted common share for the year
ended 2018 was $5.51 as compared to $5.31 for the prior year.

OPERATIONS:

Total revenues increased 3.9% over last year's fourth quarter while
operating costs increased 1.2%, resulting in an NOI increase of 5.3%.

Revenues for the 521 stabilized stores wholly owned by the Company since
December 31, 2016 increased 3.0% from those of the fourth quarter of
2017, the result of a 3.8% increase in rental rates, partially offset by
a 100 basis point decrease in average occupancy.

Same store operating expenses increased 0.8% for the fourth quarter of
2018 compared to the prior year period. Increased real estate taxes were
partially offset by lower payroll and benefits, utilities and repair
costs. Accordingly, same store NOI this period increased 4.1% over the
fourth quarter of 2017.

General and administrative expenses increased by approximately $1.1
million over the same period in 2017, primarily due to increases in
income tax and personnel costs.

During the fourth quarter of 2018, the Company experienced same store
revenue growth in 27 of its 33 major markets in the same store pool.
Overall, the markets with the strongest revenue impact include Las
Vegas, New York-Newark-New Jersey, New England, Buffalo and Los Angeles.

PORTFOLIO TRANSACTIONS

In late 2018 the Company sold 12 of its mature assets to a joint venture
for approximately $91.0 million, which includes $9.1 million contributed
to the entity in exchange for a 20% equity stake. The Company reinvested
a significant portion of these proceeds in newer properties, some of
which are relatively early on the lease-up curve.

In 2019, the Company is projecting sales of up to $225 million of mature
assets, with the expectation that the proceeds will likewise be
reinvested in properties with superior growth prospects. Joseph Saffire,
the Company's Chief Investment Officer and incoming Chief Executive
Officer, commented, "We're taking advantage of favorable market
conditions to upgrade our property base, focusing on larger stores in
growth markets and garnering higher revenues per square foot and per
store. While we'll absorb some minor FFO dilution in 2019 as a result of
this asset rotation, these transactions are adding significant value,
and better position our portfolio for future growth."

During the quarter, the Company added six properties to its owned
portfolio for a total cost of approximately $58.3 million. The
facilities are located in the markets in which the Company already has a
presence: the greater New York metro area (2); Atlanta, GA (1);
Sacramento, CA (1); Orlando, FL (1); and St. Louis, MO (1). The Atlanta
and Orlando properties were previously managed by the Company.

At December 31, 2018, the Company was in contract to acquire a self
storage facility in Tampa, FL for its owned portfolio for approximately
$9.3 million. Subsequent to quarter end, the Company acquired the
remaining 60% ownership interest in one of its joint ventures for $46.4
million for a property located in Queens, NY. Also subsequent to quarter
end, the Company entered into contracts to acquire 16 additional stores
for its wholly owned portfolio for a total consideration of
approximately $177.7 million. The facilities are located in
mid-Atlantic, Southeastern and mid-West markets where the Company
already has a presence. All pending acquisitions are subject to further
due diligence and closing conditions; therefore, no assurance can be
given that they will be purchased according to the terms described.

THIRD PARTY MANAGEMENT:

The Company continues to aggressively grow its third-party management
platform. During the quarter, the Company added 47 stores to the
platform, bringing the total stores managed through its joint venture
and third-party management agreements to 213 as of December 31, 2018. As
of December 31, 2018, almost 50% of the Company's managed portfolio
includes properties whereby Life Storage holds no ownership interest, a
100% average increase in each of the last two years.

Subsequent to quarter end, the Company commenced management of four self
storage facilities in Ontario, Canada. The properties are located in the
extended Greater Toronto Area, including the Hamilton and St.
Catharines-Niagara Canadian Metropolitan Areas. With more than seven
million people in this region, it is one of the largest markets in North
America.

CAPITAL TRANSACTIONS:

At December 31, 2018, the Company had approximately $13.6 million of
cash on hand, and $408.2 million available on its line of credit.

Illustrated below are key financial ratios at December 31, 2018:

  • Debt to Enterprise Value (at $92.99/share) 28.4%
  • Debt to Book Cost of Storage Facilities 39.3%
  • Debt to Recurring Annualized EBITDA 5.3x
  • Debt Service Coverage 4.6x

COMMON STOCK DIVIDEND:

Subsequent to quarter-end, the Company's Board of Directors approved a
quarterly dividend of $1.00 per share, or $4.00 annualized. The dividend
was paid on January 28, 2019 to Shareholders of record on January 15,
2019.

YEAR 2019 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in
formulating guidance for 2019:

 

Same Store
Projected Increases Over 2018

FY 2019

Revenue 1.50 – 2.50%
Operating Costs (excluding property taxes) 2.00 – 3.00%
Property Taxes

5.50 – 6.50%

Total Operating Expenses 3.00 – 4.00%
Net Operating Income 1.00 – 2.00%

The Company's 2019 same store pool consists of the 538 stabilized stores
owned since December 31, 2017. The stores purchased through 2018 at
certificate of occupancy or that were less than 80% occupied at market
rates are not included, regardless of their current occupancies. The
Company believes that occupancy levels achieved during the lease-up
period, using discounted rates, are not truly indicative of a new
store's performance, and therefore do not result in a meaningful
year-over-year comparison in future years. The Company includes such
stores in its same store pool in the first year after the stores achieve
80% sustained occupancy using market rates and incentives. Accordingly,
14 certificate of occupancy and lease-up facilities constructed or
purchased in 2015 and 2016 that have achieved stabilized occupancy and
rates by January 1, 2018 will be added to the 2019 same store pool.

The Company plans to complete $40 – $55 million of expansions in 2019.
It also has budgeted $20 - $25 million to provide for recurring
capitalized expenditures including roofing, paving, and office
renovations.

The Company has included $225 million of acquisition activity in its
projections for 2019 and $225 million of dispositions as it continues
its portfolio optimization efforts. Using proceeds generated from the
sale of mature properties that have achieved stabilization to acquire
newer, higher growth-potential properties, some of which are expected to
be in lease-up, Life Storage expects to incur between $0.10 - $0.12
dilution of FFO per share in 2019. This asset rotation should provide
significant net asset value and FFO growth potential in subsequent years.

In 2019, the Company anticipates entering into additional joint
ventures, or adding to its existing joint ventures, contributing up to
$50 million.

Annual general and administrative expenses, including costs incurred to
manage third-party properties, are expected to be approximately $48 –
$50 million.

As a result of the above assumptions, management expects adjusted funds
from operations for the first quarter of 2019 to be between $1.27 and
$1.31 per share and approximately $5.53 to $5.63 per share for the full
year 2019.

Reconciliation of Guidance  

1Q 2019
Range or Value

 

FY 2019
Range or Value

Earnings per share attributable to
common shareholders -
diluted



$


0.70 - $ 0.74


$


3.27 - $ 3.37

Plus: real estate depreciation and
amortization



0.57 - 0.57



2.26 - 2.26

FFO per share

$

1.27 - $ 1.31

$

5.53 - $ 5.63

FORWARD LOOKING STATEMENTS:

When used within this news release, the words "intends," "believes,"
"expects," "anticipates," and similar expressions are intended to
identify "forward looking statements" within the meaning of that term in
Section 27A of the Securities Act of 1933, and in Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of the Company to
be materially different from those expressed or implied by such forward
looking statements. Such factors include, but are not limited to, the
effect of competition from new self storage facilities, which could
cause rents and occupancy rates to decline; the Company's ability to
evaluate, finance and integrate acquired businesses into the Company's
existing business and operations; the Company's ability to enter new
markets where it has little or no operational experience; the Company's
existing indebtedness may mature in an unfavorable credit environment,
preventing refinancing or forcing refinancing of the indebtedness on
terms that are not as favorable as the existing terms; interest rates
may fluctuate, impacting costs associated with the Company's outstanding
floating rate debt; the Company's ability to comply with debt covenants;
the future ratings on the Company's debt instruments; the regional
concentration of the Company's business may subject it to economic
downturns in the states of Florida and Texas; the Company's ability to
effectively compete in the industries in which it does business; the
Company's reliance on its call center; the Company's cash flow may be
insufficient to meet required payments of principal, interest and
dividends; and tax law changes which may change the taxability of future
income.

CONFERENCE CALL:

Life Storage will hold its Fourth Quarter Earnings Release Conference
Call at 9:00 a.m. Eastern Time on Tuesday, February 26, 2019. To help
avoid connection delays, participants are encouraged to pre-register
using this
link
. Anyone unable to pre-register may access the conference call
at 877.737.7051 (domestic) or 201.689.8878 (international). Management
will accept questions from registered financial analysts after prepared
remarks; all others are encouraged to listen to the call via webcast by
accessing the investor relations tab at lifestorage.com/.

The webcast will be archived for 90 days; a telephone replay will also
be available for 72 hours by calling 877.481.4010 and entering
conference ID 42397.

ABOUT LIFE STORAGE, INC:

Life
Storage, Inc.
is a self-administered and self-managed equity REIT
that is in the business of acquiring and managing self storage
facilities. Located in Buffalo, New York, the Company operates more than
750 storage facilities in 28 states and Ontario, Canada. The Company
serves both residential and commercial storage customers with storage
units rented by month. Life Storage consistently provides responsive
service to its 400,000-plus customers, making it a leader in the
industry. For more information visit http://invest.lifestorage.com/.

Life Storage, Inc.    
Balance Sheet Data
(unaudited)
 
December 31, December 31,
(dollars in thousands)   2018   2017
Assets
Investment in storage facilities:
Land $ 794,729 $ 786,628
Building, equipment and construction in progress   3,604,210     3,534,782  
4,398,939 4,321,410
Less: accumulated depreciation   (704,681 )   (624,314 )
Investment in storage facilities, net 3,694,258 3,697,096
Cash and cash equivalents 13,560 9,167
Accounts receivable 7,805 7,331
Receivable from joint ventures 1,006 1,397
Investment in joint ventures 145,911 133,458
Prepaid expenses 7,251 6,757
Intangible asset - in-place customer leases 970 -
Trade name 16,500 16,500
Fair value of interest rate swap agreements - 205
Other assets   4,951     4,863  
Total Assets $ 3,892,212   $ 3,876,774  
 
Liabilities
Line of credit $ 91,000 $ 105,000
Term notes, net 1,610,820 1,609,089
Accounts payable and accrued liabilities 87,446 92,941
Deferred revenue 9,191 9,374
Mortgages payable   12,302     12,674  
Total Liabilities 1,810,759 1,829,078
 
Noncontrolling redeemable Operating Partnership Units at redemption
value
23,716 19,373
 
Equity
Common stock 466 466
Additional paid-in capital 2,372,157 2,363,171
Accumulated deficit (308,011 ) (327,727 )
Accumulated other comprehensive loss   (6,875 )   (7,587 )
Total Shareholders' Equity   2,057,737     2,028,323  
Total Liabilities and Shareholders' Equity $ 3,892,212   $ 3,876,774  

Life Storage, Inc.        
Consolidated Statements of Operations
(unaudited)
October 1, 2018 October 1, 2017 January 1, 2018 January 1, 2017
to to to to
(dollars in thousands, except share data) December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017
 
Revenues
Rental income $ 126,140 $ 122,020 $ 502,474 $ 485,303
Other operating income 9,156 8,670 37,805 34,580
Management and acquisition fee income   2,969     2,388     10,571     9,867  
Total operating revenues 138,265 133,078 550,850 529,750
 
Expenses
Property operations and maintenance 30,547 30,616 121,098 122,794
Real estate taxes 14,844 14,232 61,356 57,663
General and administrative 12,810 11,722 48,322 50,031
Operating leases of storage facilities 141 141 565 424
Depreciation and amortization 25,513 25,551 102,343 102,655
Amortization of in-place customer leases   178     39     187     24,830  
Total operating expenses 84,033 82,301 333,871 358,397
 
Gain (loss) on sale of storage facilities 55,473 (3,503 ) 56,398 (3,503 )
Gain on sale of real estate   -     -     718     -  
Income from operations 109,705 47,274 274,095 167,850
 
Other income (expense)
Interest expense (A) (18,026 ) (27,146 ) (70,672 ) (74,362 )
Interest income 5 2 13 7
Equity in income of joint ventures   1,056     1,055     4,122     3,314  
 
Net income 92,740 21,185 207,558 96,809
Noncontrolling interests in the Operating Partnership   (433 )   (101 )   (968 )   (444 )
Net income attributable to common shareholders $ 92,307   $ 21,084   $ 206,590   $ 96,365  
 

Earnings per common share attributable to common shareholders -
basic

$ 1.98   $ 0.45   $ 4.44   $ 2.08  
 

Earnings per common share attributable to common shareholders -
diluted

$ 1.98   $ 0.45   $ 4.43   $ 2.07  
 
Common shares used in basic
earnings per share calculation 46,543,292 46,404,920 46,500,763 46,372,540
 
Common shares used in diluted
earnings per share calculation 46,645,615 46,541,927 46,596,652 46,489,702
 
Dividends declared per common share $ 1.00   $ 1.00   $ 4.00   $ 3.95  
 
 
(A) Interest expense for the period ending December 31 consists
of the following
Interest expense $ 17,443 $ 16,039 $ 68,514 $ 61,695
Interest rate swap termination and unamortized debt issuance costs
associated with debt refinancing - 10,555 - 10,555
Amortization of debt issuance costs   583     552     2,158     2,112  
Total interest expense $ 18,026   $ 27,146   $ 70,672   $ 74,362  

Life Storage, Inc.
Computation of Funds From Operations (FFO) (1)
(unaudited)
  October 1, 2018   October 1, 2017   January 1, 2018   January 1, 2017
to to to to
(dollars in thousands, except share data)   December 31, 2018   December 31, 2017 December 31, 2018   December 31, 2017
 
Net income attributable to common shareholders $ 92,307 $ 21,084 $ 206,590 $ 96,365
Noncontrolling interests in the Operating Partnership 433 101 968 444
Depreciation of real estate and amortization of intangible
assets exclusive of debt issuance costs 25,225 25,079 100,528 125,580
Depreciation and amortization from unconsolidated joint ventures 1,433 1,313 5,107 4,296
(Gain) loss on sale of storage facilities (55,473 ) 3,503 (56,398 ) 3,503
Funds from operations allocable to noncontrolling
interest in Operating Partnership   (298 )   (243 )   (1,197 )   (1,045 )
Funds from operations available to common shareholders   63,627     50,837     255,598     229,143  
FFO per share - diluted $ 1.36 $ 1.09 $ 5.49 $ 4.93
 
Adjustments to FFO
Gain on sale of land $ - $ - $ (718 ) $ -
Costs related to officer's retirement 664 941 885 941
Board changes and other proxy related expenses - - 1,128 -
Interest rate swap termination and unamortized debt issuance costs
associated with debt refinancing - 10,555 - 10,555
Uninsured damages and lawsuit settlement - - - 7,790
Acquisition fee income - - - (1,358 )
Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership   (3 )   (55 )   (6 )   (82 )
Adjusted funds from operations available to common shareholders   64,288     62,278     256,887     246,989  
Adjusted FFO per share - diluted $ 1.38 $ 1.34 $ 5.51 $ 5.31
 
Common shares - diluted 46,645,615 46,541,927 46,596,652 46,489,702

Life Storage, Inc.        
Computation of Net Operating Income (2)
(unaudited)
October 1, 2018 October 1, 2017 January 1, 2018 January 1, 2017
to to to to
(dollars in thousands)   December 31, 2018   December 31, 2017 December 31, 2018   December 31, 2017
 
Net Income $ 92,740 $ 21,185 $ 207,558 $ 96,809
General and administrative 12,810 11,722 48,322 50,031
Payments for rent 141 141 565 424
Depreciation and amortization 25,691 25,590 102,530 127,485
Interest expense 18,026 27,146 70,672 74,362
Interest income (5 ) (2 ) (13 ) (7 )
Gain on sale of storage facility (55,473 ) 3,503 (56,398 ) 3,503
Gain on sale of real estate - - (718 ) -
Equity in income of joint ventures   (1,056 )   (1,055 )   (4,122 )   (3,314 )
Net operating income $ 92,874   $ 88,230   $ 368,396   $ 349,293  
 
Same store $ 83,841 $ 80,515 $ 333,745 $ 320,469
Other stores and management fee inc income   9,033     7,715     34,651     28,824  
Total net operating income $ 92,874   $ 88,230   $ 368,396   $ 349,293  

Life Storage, Inc.
Quarterly Same Store Data (3) 521 mature
stores owned since 12/31/16
   
(unaudited)
  October 1, 2018   October 1, 2017
to to Percentage
(dollars in thousands)   December 31, 2018   December 31, 2017 Change   Change
 
Revenues:
Rental income $ 117,558 $ 113,972 $ 3,586 3.1%
Revenues related to tenant insurance 4,571 4,521 50 1.1%
Other operating income   1,586   1,570   16   1.0%
Total operating revenues 123,715 120,063 3,652 3.0%
 
Expenses:
Payroll and benefits 9,946 10,467 (521 ) -5.0%
Real estate taxes 13,632 12,935 697 5.4%
Utilities 3,530 3,564 (34 ) -1.0%
Repairs and maintenance 4,751 4,850 (99 ) -2.0%
Office and other operating expense 4,049 3,918 131 3.3%
Insurance 1,459 1,394 65 4.7%
Advertising 310 354 (44 ) -12.4%
Internet marketing   2,197   2,066   131   6.3%
Total operating expenses   39,874   39,548   326   0.8%
 
Net operating income (2) $ 83,841 $ 80,515 $ 3,326   4.1%
 
 
QTD Same store move ins 42,768 44,856 (2,088 )
 
QTD Same store move outs 47,934 48,919 (985 )

Other Comparable Quarterly Same Store Data        
(unaudited)
October 1, 2018 October 1, 2017
to to Percentage
December 31, 2018 December 31, 2017 Change   Change
Stores owned since 12/31/15 (417 stores)
Revenues $ 94,423 $ 91,956 $ 2,467 2.7%
Expenses   29,635   29,940   (305 ) -1.0%
Net operating income $ 64,788 $ 62,016 $ 2,772   4.5%
 
 
Stores owned since 12/31/14 (399 stores)
Revenues $ 90,220 $ 87,873 $ 2,347 2.7%
Expenses   28,220   28,272   (52 ) -0.2%
Net operating income $ 62,000 $ 59,601 $ 2,399   4.0%

Life Storage, Inc.
Year to Date Same Store Data (3) 521
mature stores owned since 12/31/16
(unaudited)
  January 1, 2018   January 1, 2017    
to to Percentage
(dollars in thousands)   December 31, 2018   December 31, 2017 Change   Change
 
Revenues:
Rental income $ 469,258 $ 453,380 $ 15,878 3.5 %
Revenues related to tenant insurance 18,327 17,835 492 2.8 %
Other operating income   6,910   7,247   (337 ) -4.7 %
Total operating revenues 494,495 478,462 16,033 3.4 %
 
Expenses:
Payroll and benefits 40,120 40,184 (64 ) -0.2 %
Real estate taxes 55,476 52,464 3,012 5.7 %
Utilities 15,320 14,958 362 2.4 %
Repairs and maintenance 17,586 17,839 (253 ) -1.4 %
Office and other operating expense 16,087 15,701 386 2.5 %
Insurance 5,792 5,519 273 4.9 %
Advertising 1,261 1,332 (71 ) -5.3 %
Internet marketing   9,108   9,996   (888 ) -8.9 %
Total operating expenses   160,750   157,993   2,757   1.7 %
 
Net operating income (2) $ 333,745 $ 320,469 $ 13,276   4.1 %
 
 
YTD Same store move ins 196,042 205,644 (9,602 )
 
YTD Same store move outs 198,526 199,615 (1,089 )
Life Storage, Inc.                      
Other Data - unaudited Same Store (3) All Stores (4)

2018

2017

2018

2017

 
Weighted average quarterly occupancy 90.4% 91.4% 89.9% 90.7%
 
Occupancy at December 31 90.0% 90.9% 89.4% 90.1%
 
Rent per occupied square foot $14.09 $13.58 $14.05 $13.55

Life Storage, Inc.
Other Data - unaudited (continued)
     

Investment in Storage Facilities: (unaudited)

The following summarizes activity in storage facilities during the
twelve months ended December 31, 2018:
 
Beginning balance $ 4,321,410
Property acquisitions 76,582
Improvements and equipment additions:
Expansions 27,825
Roofing, paving, and equipment:
Stabilized stores 26,585
Recently acquired stores 72
Change in construction in progress (Total CIP $27.2 million) 12,809
Dispositions and Impairments   (66,344 )
Storage facilities at cost at period end $ 4,398,939  
 
 

Comparison of Selected G&A Costs (unaudited)

Quarter Ended Year Ended
December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017
 
Management and administrative salaries and benefits $ 7,118 $ 6,187 $ 27,090 $ 25,193
Training 383 340 1,031 1,073
Call center 786 703 3,014 2,842
Life Storage Solutions costs 209 68 739 636
Income taxes 1,163 (662 ) 3,093 967
Legal, accounting and professional 406 1,281 3,343 4,546
Costs related to officers retirement 664 941 885 941
Loss related to legal settlement, net of tax - 987 - 6,027
Name change - - - 805
Other administrative expenses (5)   2,081     1,877     9,127   7,001
$ 12,810   $ 11,722   $ 48,322 $ 50,031
 

Net rentable square feet

December 31, 2018
Wholly owned properties 39,496,938
Joint venture properties 8,405,037
Third party managed properties   7,387,786  
55,289,761
 
December 31, 2018 December 31, 2017
 
Common shares outstanding 46,617,441 46,552,222
Operating Partnership Units outstanding 248,966 217,481
(1) We believe that Funds from Operations ("FFO") provides relevant
and meaningful information about our operating performance that is
necessary, along with net earnings and cash flows, for an
understanding of our operating results. FFO adds back historical
cost depreciation, which assumes the value of real estate assets
diminishes predictably in the future. In fact, real estate asset
values increase or decrease with market conditions. Consequently, we
believe FFO is a useful supplemental measure in evaluating our
operating performance by disregarding (or adding back) historical
cost depreciation.
 
Funds from operations is defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") as net income available to
common shareholders computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains or losses on sales
of properties, plus impairment of real estate assets, plus
depreciation and amortization and after adjustments to record
unconsolidated partnerships and joint ventures on the same basis. We
believe that to further understand our performance, FFO should be
compared with our reported net income and cash flows in accordance
with GAAP, as presented in our consolidated financial statements.
 
Our computation of FFO may not be comparable to FFO reported by
other REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with
GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance, as an alternative to net cash flows from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, or as an indicator of our ability to make cash
distributions.
 
(2) Net operating income or "NOI" is a non-GAAP (generally accepted
accounting principles) financial measure that we define as total
continuing revenues less continuing property operating expenses. NOI
also can be calculated by adding back to net income: interest
expense, impairment and casualty losses, depreciation and
amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from
discontinued operations, interest income, gain on sale of real
estate, and equity in income of joint ventures. We believe that NOI
is a meaningful measure to investors in evaluating our operating
performance, because we utilize NOI in making decisions with respect
to capital allocations, in determining current property values, and
comparing period-to-period and market-to-market property operating
results. Additionally, NOI is widely used in the real estate
industry and the self storage industry to measure the performance
and value of real estate assets without regard to various items
included in net income that do not relate to or are not indicative
of operating performance, such as depreciation and amortization,
which can vary depending on accounting methods and book value of
assets. NOI should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in
accordance with GAAP, such as total revenues, operating income and
net income.
 
(3) Includes the stores owned and/or managed by the Company for the
entire periods presented that are consolidated in our financial
statements. Does not include unconsolidated joint ventures or other
stores managed by the Company.
 
(4) Does not include unconsolidated joint venture stores or other
stores managed by the Company.
 
(5) Other administrative expenses include office rent, travel
expense, investor relations and miscellaneous other expenses.

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