Public Storage | 2013 | FY | 3


4.Investments in Unconsolidated Real Estate Entities

The following table sets forth our investments in, and equity earnings of, the Unconsolidated Real Estate Entities (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Unconsolidated                         Real Estate Entities at December 31,

 

Equity in Earnings of Unconsolidated Real Estate Entities                                              for the Year Ended December 31,

 

 

2013

 

2012

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSB

$

424,538 

 

$

316,078 

 

$

23,199 

 

$

10,638 

 

$

27,781 

 

Shurgard Europe

 

424,095 

 

 

411,107 

 

 

32,694 

 

 

33,223 

 

 

29,152 

 

Other Investments

 

7,549 

 

 

8,138 

 

 

1,686 

 

 

1,725 

 

 

1,771 

 

Total

$

856,182 

 

$

735,323 

 

$

57,579 

 

$

45,586 

 

$

58,704 

During 2013, 2012 and 2011, we received cash distributions from our investments in the Unconsolidated Real Estate Entities totaling $45.9 million, $44.7 million and $53.5 million, respectively. 

Investment in PSB

PSB is a REIT traded on the New York Stock Exchange.  We have an approximate 42% common equity interest in PSB as of December  31, 2013,  comprised of our ownership of 7,158,354 shares of PSB’s common stock and 7,305,355 limited partnership units in an operating partnership controlled by PSB  (41% as of December 31, 2012, comprised of our ownership of 5,801,606 shares of PSB’s common stock and 7,305,355 limited partnership units at December 31, 2012).  The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.  Based upon the closing price at December 31, 2013 ($76.42 per share of PSB common stock), the shares and units we owned had a market value of approximately $1.1 billion. 

During 2013, we purchased 406,748 shares of PSB common stock in open-market transactions at an average cost of $73.15 per share.  Subsequently, on November 7, 2013, PSB completed a public offering of 1,495,000 shares of its common stock for $79.25 per share.  Concurrent with the public offering, we purchased an additional 950,000 shares of PSB common stock from PSB at the same price per share as the public offering for a total cost of $75.3 million.  In connection with PSB’s common share issuance, we recognized a gain on sale of real estate totaling $4.1 million as if we had sold a proportionate share of our investment in PSB. 

The following table sets forth selected financial information of PSB.  The amounts represent all of PSB’s balances and not our pro-rata share.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the year ended December 31,

 

 

 

 

 

 

 

 

 

Total revenue

$

359,885 

 

$

347,197 

 

$

298,141 

 

Costs of operations

 

(114,831)

 

 

(114,108)

 

 

(99,917)

 

Depreciation and amortization

 

(108,917)

 

 

(109,398)

 

 

(84,391)

 

General and administrative

 

(5,312)

 

 

(8,919)

 

 

(9,036)

 

Other items

 

(14,681)

 

 

(19,400)

 

 

(2,157)

 

Net income

 

116,144 

 

 

95,372 

 

 

102,640 

 

Net income allocated to preferred unitholders, preferred shareholders and restricted stock unitholders (a)

 

(59,341)

 

 

(69,597)

 

 

(34,935)

 

Net income allocated to common shareholders and common

 

 

 

 

 

 

 

 

 

unitholders

$

56,803 

 

$

25,775 

 

$

67,705 

 

 

 

 

 

 

 

 

 

 

 

(a)      Includes EITF D-42 allocations to preferred equity holders of $17.3 million during 2012 related to PSB’s redemption of preferred securities and an allocation from preferred equity holders of $7.4 million during 2011, related to PSB’s redemption of preferred securities.

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

As of December 31,

 

 

 

 

 

 

 

 

 

Total assets (primarily real estate)

$

2,238,559 

 

$

2,151,817 

 

 

 

 

Debt

 

250,000 

 

 

468,102 

 

 

 

 

Other liabilities

 

73,919 

 

 

69,454 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Preferred stock

 

995,000 

 

 

885,000 

 

 

 

 

Common equity and units

 

919,640 

 

 

729,261 

 

 

 

Investment in Shurgard Europe

For all periods presented, we had a  49% equity investment in Shurgard Europe.    On March 2, 2011, Shurgard Europe acquired the 80% interests it did not own in two joint ventures.  These joint ventures owned 72 self-storage facilities located in Europe and operated by Shurgard Europe under the “Shurgard” name.  We and our joint venture partner provided the funding for this acquisition (see Note 5).    

Changes in foreign currency exchange rates increased our investment in Shurgard Europe by approximately $45 thousand in 2013 and $21.6 million in 2012, and decreased our investment by approximately $7.0 million in 2011

Shurgard Europe pays interest to us on the loan we have provided to them (see Note 5).  In addition, Shurgard Europe pays us a license fee for the use of the “Shurgard” trademark.  We classify 49% of the interest income and trademark license fees received from Shurgard Europe as equity in earnings of unconsolidated real estate entities and the remaining 51% as interest and other income, as set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the year ended December 31,

 

 

 

 

 

 

 

 

 

 

Our 49% equity share of:

 

 

 

 

 

 

 

 

 

 

Shurgard Europe’s net income (net of $2,834 allocated to noncontrolling interests in 2011)

 

$

12,944 

 

$

14,040 

 

$

3,473 

 

Interest income and trademark license fee 

 

 

19,750 

 

 

19,183 

 

 

25,679 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity in earnings of Shurgard Europe

 

$

32,694 

 

$

33,223 

 

$

29,152 

The following table sets forth selected consolidated financial information of Shurgard Europe based upon all of Shurgard Europe’s balances for all periods (including the consolidated operations of 72 self-storage facilities formerly owned by the two joint ventures), rather than our pro rata share.  Such amounts are based upon our historical acquired book basis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31,

 

(Amounts in thousands)

 

Self-storage and ancillary revenues

 

$

246,615 

 

$

243,687 

 

$

259,618 

 

Self-storage and ancillary cost of operations

 

 

(98,222)

 

 

(96,341)

 

 

(107,056)

 

Depreciation and amortization

 

 

(60,029)

 

 

(60,404)

 

 

(61,244)

 

General and administrative

 

 

(13,651)

 

 

(13,327)

 

 

(12,458)

 

Interest expense on third party debt 

 

 

(5,082)

 

 

(7,689)

 

 

(16,299)

 

Trademark license fee payable to Public Storage

 

 

(2,468)

 

 

(2,439)

 

 

(2,481)

 

Interest expense on debt due to Public Storage

 

 

(37,838)

 

 

(36,710)

 

 

(49,925)

 

Lease termination charge, gain on sale of real estate and other

 

 

(2,909)

 

 

1,876 

 

 

(234)

 

 

 

 

 

 

 

 

 

 

 

 

Net income ($2,834 of net income was allocated to noncontrolling interests in 2011)

 

$

26,416 

 

$

28,653 

 

$

9,921 

 

Average exchange rates Euro to the U.S. Dollar

 

 

1.328 

 

 

1.285 

 

 

1.392 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

As of December 31,

 

 

 

 

 

 

 

 

 

 

Total assets (primarily self-storage facilities)

 

$

1,468,155 

 

$

1,468,111 

 

 

 

 

Total debt to third parties

 

 

154,119 

 

 

216,594 

 

 

 

 

Total debt to Public Storage

 

 

428,139 

 

 

410,995 

 

 

 

 

Other liabilities

 

 

107,550 

 

 

103,425 

 

 

 

 

Equity

 

 

778,347 

 

 

737,097 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange rate of Euro to U.S. Dollar

 

 

1.377 

 

 

1.322 

 

 

 

 

Other Investments

At December  31, 2013, the “Other Investments” include an average common equity ownership of approximately 26% in various limited partnerships that collectively own 14 self-storage facilities.

During 2012 and 2011, we began to consolidate limited partnerships that we gained control of, and recorded gains of $1.3 million and $3.1 million, respectively, representing the differences between the aggregate fair values of our existing investments and their book values.  The fair values of our existing investments in 2012 and 2011 was allocated to real estate facilities ($10.4 million and $19.4 million, respectively), intangible assets ($0.9 million and $4.0 million, respectively), noncontrolling interests ($8.2 million and $17.7 million, respectively), and cash ($0.4 million in 2011).

The following table sets forth certain condensed combined financial information (representing 100% of these entities’ balances, rather than our pro-rata share) with respect to the Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

For the year ended December 31,

 

 

 

 

 

 

 

 

 

Total revenue

$

14,105 

 

$

13,688 

 

$

13,271 

 

Cost of operations and other expenses

 

(4,686)

 

 

(4,398)

 

 

(5,117)

 

Depreciation and amortization

 

(2,012)

 

 

(2,140)

 

 

(2,252)

 

Net income

$

7,407 

 

$

7,150 

 

$

5,902 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

2012

 

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

As of December 31,

 

 

 

 

 

Total assets (primarily self-storage facilities)

$

26,531 

 

$

27,710 

 

 

 

 

Total accrued and other liabilities

 

1,412 

 

 

1,291 

 

 

 

 

Total Partners’ equity

 

25,119 

 

 

26,419 

 

 

 

 


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