-- Average same-store physical occupancy reached 83.6%, a sequential gain
of 2.2 percentage points over the second quarter of 2007, and a 1.3
percentage point increase over the third quarter of 2006
-- Same-store physical occupancy reached 83.7% on July 31, 2007, and
ended the quarter at 83.4%
-- At September 30, 2007, the Company had 5.3% or approximately 9,200
more occupied self-storage units in the comparable store portfolio as
compared to January 1, 2007
-- Accounts receivable greater than 30 days past due at September 30,
2007 represented approximately 2.4% of our projected rents, better than
what we believe to be industry standard
-- The Company acquired 14 Class A self-storage facilities for
approximately $121 million and closed on a $50.0 million term-loan facility
used to fund a portion of the acquisition
President and Chief Executive Officer Dean Jernigan commented, "In a
quarter during which published reports have national self-storage average
occupancies declining 1.7 percentage points and rent per occupied square
foot declining 1.4 percentage points over the third quarter of last year,
we are pleased with our ability to gain both physical occupancy and
realized rent per occupied square foot in our same-store pool as compared
to the third quarter of 2006. We continued to be aggressive to gain
physical occupancy. During the quarter, we made significant investments
through the use of aggressive discounting, increased our marketing
expenditures, and improved the physical appearance of our facilities
through both capital investment and increased spending on repair and
maintenance. In the near term, those investments produced strong,
same-store occupancy gains and we expect to continue this strategy into
2008. In the long term, our higher occupancies should result in improved
top-line and bottom-line growth."
The Company reported a net loss of $4.1 million or $0.07 per share,
compared to a net loss, as restated of $2.0 million or $0.03 per share for
the quarter ended September 30, 2006. Funds from Operations for the third
quarter of 2007 were $12.4 million. Funds from Operations excluding the
non-cash lease abandonment charge of $1.3 million or $0.02 per share were
$13.7 million or $0.22 per share. The restated FFO for the third quarter of
2006 was $14.1 million or $0.23 per share.
Chief Financial Officer Christopher Marr said, "Our occupancy gains across
the portfolio allowed us to exceed our guidance by 60 basis points. We
waived the traditional administrative fee during the quarter as an
additional promotion on our lower occupied unit types, resulting in a
sequential decline in our FFO per share of approximately one-cent. The
sharp spike in LIBOR during the quarter impacted the borrowing cost on our
floating rate debt of approximately $324 million and was not anticipated in
our guidance. Our operating expense increase is reflective of higher
repair, maintenance, and landscaping costs as we invested in improving the
physical appearance of our portfolio, and higher personnel costs as we
enhanced our store-level staffing and incentives, while continuing to
operate on Sunday to better position us to capture more than our share of
rental activity."
Total revenues increased $2.3 million and total operating expenses
increased $2.9 million in the third quarter of 2007, compared to the same
period in 2006. Increases in total revenues and property operating expenses
are attributable to: (i) the acquisition of 17 self-storage facilities for
approximately $140.4 million since September 30, 2006; (ii) a full-period
impact in the 2007 period of the 16 self-storage facilities purchased
during the third quarter of 2006 for approximately $59.9 million, and (iii)
increases in same-store revenues and expenses. General and administrative
expenses declined by $2.1 million in the third quarter of 2007 as compared
to the same period in 2006.
The Company vacated its office space in Middleburg Heights, Ohio during the
quarter and subleased the space to a third party. The Company incurred a
non-cash charge of approximately $800 thousand representing the present
value of future net cash flows related to our office leases and the
sublease. Additionally, the Company incurred a non-cash charge of
approximately $500 thousand to write-off the net carrying value of
furniture, fixtures and improvements related to the space. This
transaction was part of our stated goal of eliminating related party
transactions.
Interest expense increased approximately $1.7 million in the third quarter
of 2007 compared to the third quarter of 2006 primarily as a result of the
additional debt used to fund the acquisition of 17 facilities purchased
since September 30, 2006 and the full-period impact of the borrowings used
to acquire the 16 facilities during the third quarter of 2006.
On September 14, 2007, the Company acquired 14 self-storage facilities for
approximately $121 million. Containing approximately 1.1 million square
feet, the facilities are located in California, Florida, Georgia, Ohio and
Massachusetts. The Company funded the acquisition through a new $50.0
million secured term loan and borrowings under its $250 million unsecured
revolving credit facility. The facilities were owned by Rising Tide
Development LLC, an entity controlled by Robert Amsdell and Barry Amsdell,
both former Trustees of the Company. In connection with the closing of the
acquisition, the Company terminated all related party agreements with
Rising Tide entered into at the time of the Company's initial public
offering, pursuant to which the Company managed and provided services to
these properties and had an option to acquire the properties.
The Company's 411 owned facilities, containing 26.2 million rentable square
feet, had a physical occupancy at September 30, 2007 of 81.5% and an
average physical occupancy for the quarter ended September 30, 2007 of
82.0%.
Same-Store Results:
The Company's same-store pool at September 30, 2007 represents 331
facilities containing approximately 20.2 million rentable square feet and
includes approximately 76.8% of the aggregate rentable square feet of the
Company's 411 owned facilities. These same-store facilities represent
approximately 84.2% of property net operating income for the quarter-ended
September 30, 2007.
Sequentially, the same-store physical occupancy grew 0.50 percentage points
to 83.4% at September 30, 2007 compared to 82.9% at June 30, 2007. The
same-store average physical occupancy for the third quarter of 2007 was
83.6% compared to 82.3% for the same quarter of last year. In-place annual
rent per square foot declined 0.6% to $12.28 in the third quarter of 2007
over the same quarter of last year. Same-store net rental income for the
third quarter of 2007 grew 2.2% over the same period in 2006.
Fourth Quarter 2007 Financial Outlook
The Company estimates that its fully-diluted FFO per share for the three
months ending December 31, 2007, will be between $0.19 and $0.21, and that
its fully diluted net loss per share for the period will be between $0.08
and $0.06. The Company's estimate is based on the following key
assumptions:
-- General and administrative expenses of approximately $5.5 million
-- Same-store average occupancy of approximately 82.0%
-- Same-store revenue growth of 2.5%-3.5% over the fourth quarter of 2006
-- Same-store expense growth of 6.5%-7.5% over the fourth quarter of 2006
-- Same-store net operating income growth of 1.0%-2.0% over the fourth
quarter of 2006
-- Dilution during the fourth quarter of 2007 from the acquisition of the
14 Rising Tide properties of approximately $0.01 per share
-- A 15 basis point increase, effective October 1, 2007, in our borrowing
spread on our floating rate debt. This is a result of an increase during
the third quarter in the Company's leverage ratio as a result of additional
borrowings used to fund the recent acquisitions
2008 Earnings Guidance and Dividend Declaration
In December 2007, the Company will provide 2008 earnings guidance and the
Board of Trustees will declare the Company's dividend for the quarter
ending December 31, 2007. The Company anticipates a record date for the
dividend of January 8, 2008 and a payment date of January 25, 2008.
Conference Call
Management will host a conference call at 11:00 a.m. EDT on Friday November
2, 2007, to discuss financial results for the three months ended September
30, 2007.
A live webcast of the conference call will be available online from the
investor relations page of the Company's corporate website at
www.u-store-it.com. The dial-in numbers are 877-407-8035 for domestic
callers and
201-689-8035 for international callers. The reservation number for both is
259783. After the live webcast, the call will remain available on
U-Store-It's website for thirty days. In addition, a telephonic replay of
the call will be available until December 2, 2007. The replay dial-in
number is
877-660-6853 for domestic callers and
201-612-7415 for international callers. The account number for both is
286. The replay reservation number is 259783.
Supplemental operating and financial data as of September 30, 2007 is
available on our corporate website under the heading "Investor Relations
and Corporate Information."
About U-Store-It Trust
U-Store-It Trust is a self-administered and self-managed real estate
investment trust. The Company's self-storage facilities are designed to
offer affordable, easily-accessible and secure storage space for
residential and commercial customers. According to the Self-Storage
Almanac, U-Store-It Trust is one of the top five owners and operators of
self-storage facilities in the United States.
Non-GAAP Performance Measurements
FFO is a widely used performance measure for real estate companies and is
provided here as a supplemental measure of operating performance. The
Company calculates FFO in accordance with the best practices described in
the April 2002 National Policy Bulletin of the National Association of Real
Estate Investment Trusts (the "White Paper"). The White Paper defines FFO
as net income (computed in accordance with GAAP), excluding gains (or
losses) from sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a key performance indicator in evaluating the
operations of the Company's facilities. Given the nature of its business as
a real estate owner and operator, the Company considers FFO a key measure
of its operating performance that is not specifically defined by accounting
principles generally accepted in the United States. The Company believes
that FFO is useful to management and investors as a starting point in
measuring its operational performance because it excludes various items
included in net income that do not relate to or are not indicative of its
operating performance such as gains (or losses) from sales of property and
depreciation, which can make periodic and peer analyses of operating
performance more difficult. FFO should not be considered as an alternative
to net income (determined in accordance with GAAP) as an indicator of the
Company's financial performance, is not an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, and is not indicative of funds available to fund
the Company's cash needs, including its ability to make distributions.
We define net operating income, which we refer to as "NOI," as total
continuing revenues less continuing property operating expenses. NOI also
can be calculated by adding back to net income: interest expense, loan
procurement amortization expense, early extinguishment of debt, minority
interest, loss on sale of storage facilities, depreciation and general and
administrative, and deducting from net income: income from discontinued
operations, gains on sale of self-storage facilities, and interest income.
NOI is not a measure of performance calculated in accordance with GAAP.
Management uses NOI as a measure of operating performance at each of our
facilities, and for all of our facilities in the aggregate. NOI should not
be considered as a substitute for operating income, net income, cash flows
provided by operating, investing and financing activities, or other income
statement or cash flow statement data prepared in accordance with GAAP.
Forward-Looking Statements
Certain statements in this release that are not historical fact may
constitute forward-looking statements within the meaning of the Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements are based on assumptions and expectations that
may not be realized and are inherently subject to risks, uncertainties and
other factors, many of which cannot be predicted with accuracy and some of
which might not even be anticipated. Although we believe the expectations
reflected in these forward-looking statements are based on reasonable
assumptions, future events and actual results, performance, transactions or
achievements, financial and otherwise, may differ materially from the
results, performance, transactions or achievements expressed or implied by
the forward-looking statements. Risk, uncertainties and other factors that
might cause such differences, some of which could be material, include but
are not limited to: national and local economic, business, real estate and
other market conditions; the competitive environment in which the Company
operates; the execution of the Company's business plan; financing risks,
including the risk of over-leverage and the corresponding risk of default
on our mortgage and other debt; increases in interest rates and operating
costs; the Company's ability to maintain its status as a REIT for federal
income tax purposes; acquisition and development risks; changes in real
estate and zoning laws or regulations; risks related to natural disasters;
potential environmental and other liabilities; material weaknesses in our
internal financial reporting; and other factors affecting the real estate
industry generally or the self-storage industry in particular. The Company
refers you to the documents filed by the Company from time to time with the
Securities and Exchange Commission, specifically the section titled
"Business - Risk Factors" in the Company's Annual Report on Form 10-K,
which discuss these and other risks and factors that could cause the
Company's actual results to differ materially from any forward-looking
statements.
U-STORE-IT TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
September 30, December 31,
2007 2006
------------ ------------
ASSETS
Storage facilities $ 1,909,429 $ 1,771,864
Accumulated depreciation (251,952) (205,049)
------------ ------------
1,657,477 1,566,815
Cash and cash equivalents 5,903 19,716
Restricted cash 19,449 14,126
Loan procurement costs - net of amortization 6,390 7,575
Other assets 9,389 6,475
Due from related parties - 632
------------ ------------
Total assets $ 1,698,608 $ 1,615,339
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving credit facility $ 191,500 $ 90,500
Unsecured term loan 200,000 200,000
Secured term loan 47,444 -
Mortgage loans and notes payable 580,294 588,930
Accounts payable and accrued expenses 26,946 22,590
Due to related parties 110 336
Distributions payable 18,236 18,197
Deferred revenue 10,229 9,740
Security deposits 594 655
------------ ------------
Total liabilities 1,075,353 930,948
Minority interests 50,484 56,898
Commitments and contingencies
Shareholders' Equity
Common shares $.01 par value, 200,000,000
shares authorized, 57,574,851 and
57,335,490 shares issued and outstanding
at September 30, 2007 and December 31,
2006, respectively 575 573
Additional paid in capital 796,148 794,632
Accumulated deficit (223,952) (167,712)
------------ ------------
Total shareholders' equity 572,771 627,493
------------ ------------
Total liabilities and shareholders' equity $ 1,698,608 $ 1,615,339
============ ============
U-STORE-IT TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2007 2006 2007 2006
(as (as
restated restated
and and
reclassified) reclassified)
--------- --------- --------- ---------
REVENUES
Rental income $ 53,969 $ 52,021 $ 156,479 $ 145,906
Other property related income 4,236 3,823 12,930 10,501
Other - related party 101 126 340 340
--------- --------- --------- ---------
Total revenues 58,306 55,970 169,749 156,747
OPERATING EXPENSES
Property operating expenses 25,110 21,854 70,469 61,375
Property operating expenses -
related party 8 15 59 47
Depreciation 17,068 16,312 50,476 46,532
Asset write-off - 305 - 305
Lease abondonment 1,316 - 1,316 -
General and administrative 5,173 7,289 16,742 16,810
General and administrative -
related party 118 75 337 525
--------- --------- --------- ---------
Total operating expenses 48,793 45,850 139,399 125,594
OPERATING INCOME 9,513 10,120 30,350 31,153
OTHER INCOME (EXPENSE)
Interest:
Interest expense on loans (13,666) (11,917) (39,398) (32,714)
Loan procurement amortization
expense (445) (527) (1,335) (1,500)
Write-off of loan procurement
cost due to early
extinguishment of debt - - - (1,273)
Interest income 104 95 308 1,138
Other - (14) (6) (74)
--------- --------- --------- ---------
Total other expense (14,007) (12,363) (40,431) (34,423)
LOSS BEFORE MINORITY INTERESTS (4,494) (2,243) (10,081) (3,270)
MINORITY INTERESTS 364 187 827 271
--------- --------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS (4,130) (2,056) (9,254) (2,999)
DISCONTINUED OPERATIONS
Income from operations - 103 102 265
Net gain on disposition of
discontinued operations - - 2,122 -
Minority interest attributable
to discontinued operations - (9) (183) (20)
--------- --------- --------- ---------
Income from discontinued
operations - 94 2,041 245
--------- --------- --------- ---------
NET LOSS $ (4,130) $ (1,962) $ (7,213) $ (2,754)
========= ========= ========= =========
Basic and diluted earnings
(loss) per share from
continuing operations $ (0.07) $ (0.04) $ (0.16) $ (0.05)
Basic and diluted earnings per
share from discontinued
operations $ (0.00) $ 0.01 $ 0.03 $ 0.00
--------- --------- --------- ---------
Basic and diluted earnings
(loss) per share $ (0.07) $ (0.03) $ (0.13) $ (0.05)
========= ========= ========= =========
Weighted-average basic shares
outstanding 57,537 57,351 57,466 57,308
Weighted-average diluted shares
outstanding 57,537 57,351 57,466 57,308
========= ========= ========= =========
Distributions declared per
common share and unit $ 0.29 $ 0.29 $ 0.87 $ 0.87
========= ========= ========= =========
Same-Store Facility Results (331 facilities)
(unaudited and in thousands, except per square foot data)
Three months ended
September 30,
------------------
Percent
2007 2006 Change
-------- -------- --------
REVENUES
Net rental income $ 44,323 $ 43,387 2.2%
Other property related income 3,293 3,169 3.9%
-------- -------- --------
Total revenues $ 47,616 $ 46,556 2.3%
OPERATING EXPENSES
Property taxes $ 5,517 $ 5,524 (1) -0.1%
Personnel expense 5,028 4,361 (1) 16.5%
Advertising 1,318 1,345 -2.0%
Repair and maintenance 957 575 66.4%
Utilities 1,813 1,780 1.9%
Property insurance 592 836 -29.2%
Other expenses 3,312 2,749 20.5%
-------- -------- --------
Total operating expenses $ 18,537 $ 17,125 8.2%
Net operating income (2) $ 29,079 $ 29,431 -1.2%
Gross margin 61.1% 63.2%
Period Average Occupancy (3) 83.6% 82.3%
Period End Occupancy (4) 83.4% 81.3%
Total Rentable
square feet 20,151 20,151
Realized annual rent
per occupied square foot (5) $ 10.52 $ 10.47
In place annual rent per
square foot (6) $ 12.28 $ 12.35
Reconciliation of Same-Store Net Operating
Income to Operating Income
Same-store net operating income (2) $ 29,079 $ 29,431
Non same-store net operating income (2) 2,793 3,883
Depreciation (17,068) (16,312)
General and administrative expense (5,291) (7,364)
Adjustments - 482 (1)
-------- --------
Operating Income $ 9,513 $ 10,120
(1) Adjusted for comparison purposes to reflect $377 thousand of
additional property taxes and $105 thousand of additional workers
compensation costs. These amounts, related to the third quarter of
2006, were expenses in the fourth quarter of 2006, as management
reevaluated its method of estimating these expenses.
(2) Net operating income (NOI) is a non-GAAP (generally accepted
accounting principles) financial measure that excludes the impact of
depreciation and general & administrative expense.
(3) Square feet occupancy represents the weighted average occupancy for
the period.
(4) Represents occupancy at September 30 of the respective year.
(5) Realized annual rent per occupied square foot is computed by dividing
rental income by the weighted average occupied square feet for the
period.
(6) In place annual rent per square foot represents annualized
contractual rents per available square foot for the period.
Non-GAAP Financial Measures – Computation of Funds From Operations (FFO)
(unaudited and in thousands, except per share data)
Three months ended
September 30,
--------------------------
2007 2006
(as
restated)
------------ ------------
Net loss $ (4,130) $ (1,962)
Add (deduct):
Real estate depreciation 16,868 16,243
Minority interests from continuing operations (364) (187)
Minority interest from discontinued
operations - 9
------------ ------------
FFO $ 12,374 $ 14,103
============ ============
Add (deduct):
Non-recurring lease abandonment charge 1,316 -
FFO, excluding non-recurring charge $ 13,690 $ 14,103
============ ============
Income (loss) per share - fully diluted $ (0.07) $ (0.03)
FFO per share and unit - fully diluted $ 0.20 $ 0.23
FFO per share, excluding non-recurring charge $ 0.22 $ 0.23
Weighted-average diluted shares outstanding 57,537 57,351
Weighted-average diluted shares and units
outstanding 62,651 62,550
Dividend per common share and unit $ 0.29 $ 0.29
Payout ratio of FFO (Dividend per share divided
by FFO per share, excluding non-recurring
charge) 133% 129%
Contact Information: Contact: U-Store-It Trust Christopher P. Marr Chief Financial Officer (610) 293-5700