Public Storage Canadian Properties (TSX:PUB) today announced operating results
for the fourth quarter ended December 31, 2008 and distributions to be paid on
March 31, 2009.
David Singelyn, President of Canadian Mini-Warehouses Company ("CMP"), the
general partner of Public Storage Canadian Properties (the "Partnership") stated
that "although the Partnership achieved "Same Store" net operating income growth
of 1.9% during the year, the Partnership is not immune from the current economic
downturn and reported a 2.9% decline in net operating income for the fourth
quarter of 2008."
Operating Results
Net income of the Partnership was $1,552,000 or $0.17 per partnership unit
("Unit") (based on 9,040,181 Units) for the three months ended December 31, 2008
compared to $2,209,000 or $0.25 per Unit (based on 8,804,350 Units) for the same
period in 2007. The decreases in net income and net income per unit were due
primarily to a slowdown in rental activity, the dilutive impact in connection
with the lease-up of newly developed self-storage facilities whereby operating
costs exceed rental income, additional amortization expense of the new
facilities placed in service, and higher administrative expenses and income tax
expense in connection with the new SIFT legislation.
Net income of the Partnership was $7,267,000 or $0.80 per Unit (based on
9,040,181 Units) for the year ended December 31, 2008 compared to $8,484,000 or
$1.11 per Unit (based on 7,628,427) for the same period in 2007. The decreases
in net income and net income per unit were due, in part, to the recognition of
an income tax benefit of $1,198,000 in the prior year arising from amendments to
the Income Tax Act (Canada), an increase in the number of outstanding Units as a
result of the completion of rights offering by the Partnership in October 2007,
and the dilutive impact in connection with the lease-up of newly developed
self-storage facilities whereby operating costs exceed rental income.
Property Operations
The Partnership owns, and derives substantially all of its income from, 25
self-storage facilities, of which fifteen are located in Ontario, five are
located in British Columbia, four are located in Quebec and one is located in
Alberta. In addition, the Partnership owns parcels of land in Oakville, Ontario,
Orleans, Ontario, Richmond Hill, Ontario, Dorval, Quebec and LaSalle, Quebec for
development into new self-storage facilities.
In order to evaluate the performance of the Partnership's portfolio, management
analyzes the operating performance of a stabilized group of self-storage
facilities (herein referred to as "Same Store" facilities). Management considers
the operating performance of the "Same Store" facilities to be a more useful
measure of the overall operating performance of the Partnership's portfolio to
analyze trends and provide meaningful comparisons. "Same Store" facilities are
facilities that have been owned and operated at a mature, stabilized occupancy
level since January 1, of the earliest period presented. Management considers a
facility to be stabilized after it has been opened for at least three years. As
at December 31, 2008, the "Same Store" facilities consist of fifteen facilities
that have been owned and operated by the Partnership since its inception and
contain approximately 1,172,000 net rentable square feet and 10,667 storage
units.
The following table summarizes the pre-amortization operating results of the
Partnership's "Same Store" facilities.
Three months ended December 31, Year ended December 31,
------------------------------- --------------------------------
2008 2007 Change 2008 2007 Change
----------- ------------------ ------------ -------------------
Rental
income $4,133,000 $4,224,000 (2.2%) $17,039,000 $16,773,000 1.6%
Less:
cost of
operations 1,161,000 1,167,000 (0.5%) 4,887,000 4,844,000 0.9%
Less:
management
fees 248,000 253,000 (2.0%) 1,022,000 1,006,000 1.6%
----------- ----------- ------------ ------------
Net
operating
income(1) $2,724,000 $2,804,000 (2.9%) $11,130,000 $10,923,000 1.9%
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Gross
margin(2) 65.9% 66.4% 65.3% 65.1%
Weighted
average
for
period:
Occupancy 84.9% 87.5% 87.0% 87.8%
Realized
annual
rent per
square
foot(3) $16.63 $16.56 0.4% $16.74 $16.31 2.6%
-----------------------
(1) Net operating income ("NOI") is equal to rental income less cost of
operations and management fees paid to an affiliate before
amortization. This non-GAAP financial measure does not have any
standardized meanings prescribed by GAAP and is therefore unlikely
to be comparable to similar measures presented by other issuers.
(2) Gross margin is computed by dividing property net operating income
by rental income.
(3) Realized rent per square foot represents the actual revenue earned
per occupied square foot. Management believes this is a more relevant
measure than posted or scheduled rates as posted rates can be
discounted through promotions.
Effective January 1, 2009, the Partnership will reclassify two facilities that
were acquired and/or opened in 2005 to "Same Store" facilities. The new pool of
"Same Store" facilities will include 17 self-storage facilities and contain
approximately 1,303,000 net rentable square feet or approximately 63.3% of the
total portfolio. The Partnership will begin reporting the results of the new
pool of "Same Store" facilities beginning with the first quarter ending March
31, 2009.
Update on Tax Matters
Some time ago, the Income Tax Act (Canada) was amended to eliminate tax
advantages presently enjoyed by certain investors in publicly-traded specified
investment flow-through trusts or partnerships, including the Partnership,
effective no later than the Partnership's taxation year ending in 2011.
Management and its legal and accounting advisors have been engaged in an ongoing
effort to identify and implement a means to permit the Partnership to qualify
for the real estate investment trust exemption from such tax changes. This
effort has included discussions with the Canada Revenue Agency. However, the
Partnership currently has no assurance that it will qualify for such exemption.
Funds from Operations ("FFO") and Earnings before Interest, Taxes, Depreciation
and Amortization ("EBITDA")
FFO and EBITDA are supplementary performance measures for real estate companies
used by investors and analysts. These non-generally accepted accounting
principles ("GAAP") financial measures do not have any standardized meanings
prescribed by GAAP and are therefore unlikely to be comparable to similar
measures presented by other issuers. Many investors and analysts consider FFO
and EBITDA to be measures of the performance of real estate companies. FFO is
equal to net income computed in accordance with GAAP before depreciation,
amortization and gains or losses on sale of real estate assets. EBITDA is equal
to earnings before interest income, interest expense, taxes, depreciation and
amortization. FFO and EBITDA do not take into consideration scheduled principal
payments on debt, capital improvements, distributions or other obligations of
the Partnership. Accordingly, FFO and EBITDA are not substitutes for the
Partnership's cash flow or net income as a measure of the Partnership's
liquidity or operating performance or ability to pay distributions.
The following table calculates FFO and EBITDA for the three months and years
ended December 31, 2008 and 2007:
Three months ended December 31, Years ended December 31,
------------------------------- --------------------------------
2008 2007 Change 2008 2007 Change
----------- ----------- ------- ------------ ----------- -------
Calculation
of FFO:
-----------
Net income $1,552,000 $2,209,000 $7,267,000 $8,484,000
Amort-
ization
of real
estate 1,220,000 1,071,000 4,447,000 3,963,000
Amort-
ization
of intan-
gibles - 49,000 116,000 1,080,000
Less:
future
income
taxes 68,000 (138,000) (96,000) (1,198,000)
----------- ----------- ------------ ------------
FFO $2,840,000 $3,191,000 (11.0%) $11,734,000 $12,329,000 (4.8%)
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Weighted
average
number
of units 9,040,181 8,804,350 9,040,181 7,628,427
FFO per
Unit $0.31 $0.36 (13.9%) $1.30 $1.62 (19.8%)
Calculation
of EBITDA:
-----------
Net income $1,552,000 $2,209,000 $7,267,000 $8,484,000
Amort-
ization
of real
estate 1,220,000 1,071,000 4,447,000 3,963,000
Amort-
ization of
intan-
gibles - 49,000 116,000 1,080,000
Interest
and
commit-
ment
fees 148,000 185,000 583,000 841,000
Less:
future
income
taxes 68,000 (138,000) (96,000) (1,198,000)
Less:
interest
and other
income 79,000 (30,000) (13,000) (87,000)
----------- ----------- ------------ ------------
EBITDA $3,067,000 $3,346,000 (8.3%) $12,304,000 $13,083,000 (6.0%)
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Weighted
average
number of
units 9,040,181 8,804,350 9,040,181 7,628,427
EBITDA per
Unit $0.34 $0.38 (10.5%) $1.36 $1.72 (20.9%)
Distributions
The board of directors of the general partner today declared a distribution of
$0.225 per Unit payable on March 31, 2009 to unitholders of record at the close
of business on March 13, 2009. In light of current economic and capital market
conditions, the board of directors of the general partner determined that it
would be prudent to reduce quarterly distributions in order to retire existing
debt, conserve cash and provide the Partnership with additional financial
flexibility.
Partnership Information
Public Storage Canadian Properties is a publicly held limited partnership that
invests in self-storage facilities. More information about the Partnership is
available on the Internet. The Partnership's web site is
www.publicstoragecanada.com.
PUBLIC STORAGE CANADIAN PROPERTIES
SELECTED FINANCIAL DATA
Three Months
Ended December 31, Years Ended December 31,
------------------------------ -------------------------
2008 2007 2008 2007
----------------- ------------ ------------ ------------
Revenue
Rental income $6,042,000 $5,804,000 $24,267,000 $22,764,000
Interest and other
income (loss) (79,000) 30,000 13,000 87,000
----------------- ------------ ------------ ------------
5,963,000 5,834,000 24,280,000 22,851,000
----------------- ------------ ------------ ------------
Costs and expenses
Cost of operations 2,397,000 2,039,000 9,758,000 7,815,000
Management fees
paid to an
affiliate 362,000 347,000 1,456,000 1,366,000
Amortization of real
estate facilities 1,220,000 1,071,000 4,447,000 3,963,000
Amortization of
intangible assets - 49,000 116,000 1,080,000
Interest and
commitment fees 148,000 185,000 583,000 841,000
Administrative 216,000 72,000 749,000 500,000
----------------- ------------ ------------ ------------
4,343,000 3,763,000 17,109,000 15,565,000
----------------- ------------ ------------ ------------
Income before
income taxes 1,620,000 2,071,000 7,171,000 7,286,000
Future income taxes (68,000) 138,000 96,000 1,198,000
----------------- ------------ ------------ ------------
Net income $1,552,000 $2,209,000 $7,267,000 $8,484,000
----------------- ------------ ------------ ------------
----------------- ------------ ------------ ------------
Net income per Unit $0.17 $0.25 $0.80 $1.11
Declared
distributions
per Unit $0.45 $0.45 $1.80 $1.80
Weighted average
number
of Units
outstanding 9,040,181 8,804,350 9,040,181 7,628,427
As at As at
December 31, 2008 December 31, 2007
-----------------------------------
Balance sheet data:
Cash and cash equivalents $2,390,000 $269,000
Debt 24,371,000 5,073,000
Total assets 119,504,000 106,729,000
Partners' equity 90,046,000 99,051,000
Units outstanding
at end of period 9,040,181 9,040,181
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