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. |
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|
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 | |||||||