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CubeSmart - Annual Report: 2008 (Form 10-K)

Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-K

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended December 31, 2008

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from                     to                    

 

Commission file number 001-32324

 

U-STORE-IT TRUST

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

 

20-1024732

(State or Other Jurisdiction of

 

(IRS Employer

Incorporation or Organization)

 

Identification No.)

 

 

 

460 East Swedesford Road

 

 

Suite 3000

 

 

Wayne, Pennsylvania

 

19087

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (610) 293-5700

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common Shares, $0.01 par value per share

 

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES o     NO x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o     NO x

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  YES x     NO o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large Accelerated Filer x

 

Accelerated Filer o

 

Non-Accelerated Filer o

 

Smaller Reporting Company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO x

 

As of June 30, 2008, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of common shares held by non-affiliates of the registrant was $687,071,574.

 

As of February 27, 2009, the number of common shares of the registrant outstanding was 58,192,706.

 

Documents incorporated by reference: Portions of the Proxy Statement for the 2009 Annual Meeting of Shareholders of the Registrant to be filed subsequently with the SEC are incorporated by reference into Part III of this report.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

 

 

PART I

 

 

3

 

 

 

 

Item 1.

 

Business

3

 

 

 

 

Item 1A.

 

Risk Factors

9

 

 

 

 

Item 1B.

 

Unresolved Staff Comments

20

 

 

 

 

Item 2.

 

Properties

21

 

 

 

 

Item 3.

 

Legal Proceedings

29

 

 

 

 

Item 4.

 

Submission of Matters to a Vote of Security Holders

29

 

 

 

 

PART II

 

 

30

 

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

30

 

 

 

 

Item 6.

 

Selected Financial Data

32

 

 

 

 

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

 

 

 

 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

51

 

 

 

 

Item 8.

 

Financial Statements and Supplementary Data

51

 

 

 

 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

51

 

 

 

 

Item 9A.

 

Controls and Procedures

51

 

 

 

 

Item 9B.

 

Other Information

52

 

 

 

 

PART III

 

 

52

 

 

 

 

Item 10.

 

Trustees, Executive Officers and Corporate Governance

52

 

 

 

 

Item 11.

 

Executive Compensation

52

 

 

 

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

52

 

 

 

 

Item 13.

 

Certain Relationships and Related Transactions, and Trustee Independence

53

 

 

 

 

Item 14.

 

Principal Accountant Fees and Services

53

 

 

 

 

PART IV

 

 

53

 

 

 

 

Item 15.

 

Exhibits and Financial Statement Schedules

53

 

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PART I

 

Forward-Looking Statements

 

This Annual Report on Form 10-K, together with other statements and information publicly disseminated by U-Store-It Trust (“we,” “us,” “our” or “the Company”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. Risks, 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 we operate;

 

·         the execution of our business plan;

 

·         financing risks including the risk of overleverage and the corresponding risk of default on our mortgage and other debt and potential inability to refinance existing indebtedness;

 

·         increases in interest rates and operating costs;

 

·         counterparty non-performance related to the use of derivative financial instruments;

 

·         our ability to maintain our status as a real estate investment trust (“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;

 

·         other factors affecting the real estate industry generally or the self-storage industry in particular; and

 

·         other risks identified in Item 1A of this Annual Report on Form 10-K and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate.

 

We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise except as may be required in securities laws.

 

ITEM 1.  BUSINESS

 

Overview

 

We are a self-administered and self-managed real estate company focused primarily on the ownership, operation, acquisition and development of self-storage facilities in the United States.

 

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As of December 31, 2008, we owned 387 self-storage facilities located in 26 states and in the District of Columbia; and aggregating approximately 25.0 million rentable square feet.  As of December 31, 2008, our 387 facilities were approximately 78.9% leased to approximately 170,000 tenants and no single tenant accounted for more than 1% of our annual rental revenue.

 

Our self-storage facilities are designed to offer affordable, easily-accessible and secure storage space for our residential and commercial customers. Our customers rent storage units for their exclusive use, typically on a month-to-month basis. Additionally, some of our facilities offer outside storage areas for vehicles and boats. Our facilities are specifically designed to accommodate both residential and commercial customers, with features such as security systems and wide aisles and load-bearing capabilities for large truck access. All of our facilities have an on-site manager during business hours, and 265, or approximately 68%, of our facilities have a manager who resides in an apartment at the facility. Our customers can access their storage units during business hours, and some of our facilities provide customers with 24-hour access through computer controlled access systems. Our goal is to provide customers with the highest standard of facilities and service in the industry. To that end, approximately 65% of our facilities include climate controlled units, compared to the national average of 50% reported by the 2008 Self-Storage Almanac.

 

We were formed in July 2004 to succeed the self-storage operations owned directly and indirectly by Robert J. Amsdell, Barry L. Amsdell, Todd C. Amsdell, and their affiliated entities and related family trusts (which entities and family trusts are referred to herein as the “Amsdell Entities”). We are organized as a REIT under Maryland law, and we believe that we qualify for taxation as a REIT for federal income tax purposes beginning with our short taxable year ended December 31, 2004. From our inception until October 2004, we did not have any operations. We commenced operations as a publicly-traded REIT in October 2004 after completing the mergers of certain Amsdell Entities with and into us, our initial public offering (“IPO”), and the consummation of various other formation transactions that occurred concurrently with, or shortly after, completion of our IPO.

 

We conduct all of our business through our operating partnership, U-Store-It, L.P., and its subsidiaries.  We also act as the general partner of our Operating Partnership and as of December 31, 2008, we held approximately 91.9% of the aggregate partnership interests in our operating partnership. Since its formation in 1996, our operating partnership has been engaged in virtually all aspects of the self-storage business, including the development, acquisition, ownership and operation of self-storage facilities.

 

Acquisition and Disposition Activity

 

As of December 31, 2008 and 2007, we owned 387 and 409 facilities, respectively, that contained an aggregate of 25.0 million and 26.1 million rentable square feet with occupancy rates of 78.9% and 78.2%, respectively.  As of December 31, 2008 we had facilities in the District of Columbia and the following 26 states: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia and Wisconsin.  A complete listing of, and certain information about, our facilities is included in Item 2 of this Annual Report on Form 10-K.  The following is a summary of acquisition and disposition activity that occurred during the years ended December 31, 2008 and 2007:

 

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Facility/Portfolio

 

Location

 

Transaction Date

 

Number of Facilities

 

Purchase / Sale Price
(in thousands)

 

 

 

 

 

 

 

 

 

 

 

2008 Acquisitions

 

 

 

 

 

 

 

 

 

Uptown Asset

 

Washington, DC

 

January 2008

 

1

 

$

13,300

 

 

 

 

 

 

 

 

 

 

 

2008 Dispositions

 

 

 

 

 

 

 

 

 

Waterway Asset

 

Miami, FL

 

December 2008

 

1

 

$

4,635

 

Skipper Road Assets

 

Multiple locations in FL

 

November 2008

 

2

 

5,020

 

Stuart/Vero Beach Assets

 

Multiple locations in FL

 

October 2008

 

2

 

4,550

 

Hudson Assets

 

Hudson, OH

 

October 2008

 

2

 

2,640

 

Deland Asset

 

Deland, FL

 

September 2008

 

1

 

2,780

 

Biloxi/Gulf Breeze Assets

 

Multiple locations in MS/FL

 

September 2008

 

2

 

10,760

 

Mobile Assets

 

Mobile, AL

 

September 2008

 

2

 

6,140

 

Churchill Assets

 

Multiple locations in MS

 

August 2008

 

4

 

8,333

 

Baton Rouge/Prairieville Assets

 

Multiple Locations in LA

 

June 2008

 

2

 

5,400

 

Linden Asset

 

Linden, NJ

 

June 2008

 

1

 

2,825

 

Endicott Asset

 

Union, NY

 

May 2008

 

1

 

2,250

 

Lakeland Asset

 

Lakeland, FL

 

April 2008

 

1

 

2,050

 

77th Street Asset

 

Miami, FL

 

March 2008

 

1

 

2,175

 

Leesburg Asset

 

Leesburg, FL

 

March 2008

 

1

 

2,400

 

 

 

 

 

 

 

23

 

$

61,958

 

 

 

 

 

 

 

 

 

 

 

2007 Acquisitions

 

 

 

 

 

 

 

 

 

Sanford Asset

 

San Antonio, TX

 

January 2007

 

1

 

$

6,300

 

Grand Central Portfolio

 

Multiple locations in GA

 

January 2007

 

2

 

13,200

 

Rising Tide Portfolio

 

Multiple locations in FL/GA/MA/OH/CA

 

September 2007

 

14

 

121,000

 

 

 

 

 

 

 

17

 

$

140,500

 

 

 

 

 

 

 

 

 

 

 

2007 Dispositions

 

 

 

 

 

 

 

 

 

Hilton Head Assets

 

Multiple locations in SC

 

May 2007

 

3

 

$

12,750

 

Arizona Assets

 

Multiple locations in AZ

 

December 2007

 

2

 

6,440

 

 

 

 

 

 

 

5

 

$

19,190

 

 

The following table summarizes the change in number of self-storage facilities from January 1, 2007 through December 31, 2008:

 

 

 

2008

 

2007

 

Balance - Beginning of year

 

409

 

399

 

Facilities acquired

 

1

 

17

 

Facilities consolidated

 

 

(2

)

Facilities sold

 

(23

)

(5

)

Balance - End of year

 

387

 

409

 

 

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Financing Activities

 

The following summarizes certain financing activities during the years ended December 31, 2008, 2007 and 2006:

 

·         Revolving Credit Facility.  In November 2006, we and our operating partnership entered into a three-year $450.0 million unsecured credit facility with Wachovia Capital Markets, LLC (“Wachovia”) and Keybanc Capital Markets, replacing our existing $250.0 million unsecured revolving facility. The facility consists of a $200 million term loan and a $250 million revolving credit facility.  The facility has a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $675,000, and are not in default under the facility.  The Company currently intends to exercise this extension option prior to the November 20, 2009 termination date.  Borrowings under the credit facility bear interest, at our option, at either an alternative base rate or a Eurodollar rate, in each case, plus an applicable margin based on our leverage ratio or our credit rating.  The alternative base interest rate is a fluctuating rate equal to the higher of the prime rate or the sum of the federal funds effective rate plus 50 basis points.  The applicable margin for the alternative base rate will vary from 0.00% to 0.50% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or six months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.00% to 1.50% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating.  At December 31, 2008, borrowings under the unsecured credit facility had a weighted average interest rate of 1.92%.

 

·         Secured Term Loan.  On September 14, 2007, we and our Operating Partnership entered into a credit agreement that allowed for total secured term loan borrowings of $50.0 million and subsequently amended the agreement on April 3, 2008 to allow for total secured term loan borrowings of $57.4 million.  The term loans have a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $86,000, and are not in default under the facility.  The Company currently intends to exercise these extension options prior to the November 20, 2009 termination date.  Each term loan bears interest at either an alternative base rate or a Eurodollar rate, at our option, in each case plus an applicable margin. The applicable margin for the alternative base rate will vary from 0.10% to 0.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or nine months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.10% to 1.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating.  As of December 31, 2008, there were two term loans outstanding totaling $57.4 million that had a weighted average interest rate of 2.05%.  The outstanding term loans are secured by a pledge by our Operating Partnership of all equity interests in YSI RT LLC, the wholly-owned subsidiary of the Operating Partnership that acquired eight self-storage facilities in September 2007 and one self-storage facility in May 2008. The nine YSI RT LLC assets had a net book value of approximately $70.0 million at December 31, 2008.

 

Business Strategy

 

Our business strategy consists of several elements:

 

·         Maximize cash flow from our facilities — Our operating strategy focuses on achieving the highest sustainable rent levels at each of our facilities while at the same time meeting and sustaining occupancy targets. We utilize our operating systems and experienced personnel to manage the balance between rental rates, discounts, and physical occupancy with an objective of maximizing our rental revenue.

 

·         Acquire facilities within our targeted markets — Although we do not expect to actively acquire facilities in 2009, we will continue to selectively acquire facilities in markets that we believe have high barriers to entry, strong demographic fundamentals and existing supply at or below the demand in the market. We believe the self-storage industry will continue to provide us with opportunities for growth through acquisitions due to the highly fragmented composition of the industry.  While we will continue to review selected acquisition opportunities across the United States, the primary

 

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focus of acquisitions, if any, will be in areas that we consider to be growth markets, such as Arizona, California, Florida and the Northeastern United States.

 

·         Utilize our expertise in selective new developments — We seek to use our development expertise to pursue new developments in areas where we have facilities and perceive there to be unmet demand. We expect to pursue our development primarily in conjunction with joint venture partners.

 

Investment and Market Selection Process

 

We maintain a disciplined and focused process in the acquisition and development of self-storage facilities. Our investment committee, which consists of certain of our executive officers and is led by Dean Jernigan, our Chief Executive Officer, oversees our investment process. Our investment process involves six stages — identification, initial due diligence, economic assessment, investment committee approval (and when required, Board approval), final due diligence, and documentation. Through our investment committee, we intend to focus on the following criteria:

 

·         Targeted markets — Our targeted markets include areas where we currently maintain management that can be extended to additional facilities, or where we believe that we can acquire a significant number of facilities efficiently and within a short period of time. We evaluate both the broader market and the immediate area, typically five miles around the facility, for their ability to support above-average demographic growth. We will seek to grow our presence primarily in areas that we consider to be growth markets, such as Arizona, California, Florida and the Northeastern United States and to enter new markets should suitable opportunities arise.

 

·         Quality of facility — We focus on self-storage facilities that have good visibility and are located near retail centers, which typically provide high traffic corridors and are generally located near residential communities and commercial customers.

 

·         Growth potential — We target acquisitions that offer growth potential through increased operating efficiency and, in some cases, through additional leasing efforts, renovations or expansions. In addition to acquiring single facilities, we seek to invest in portfolio acquisitions, searching for situations where there is significant potential for increased operating efficiency and an ability to spread our fixed costs across a large base of facilities.

 

Operating Segment

 

We have one reportable operating segment: we own, operate, develop, and acquire self-storage facilities.

 

Concentration

 

Our self-storage facilities are located in major metropolitan areas as well as rural areas and have numerous tenants per facility.  No single tenant represents 1% or more of our revenues. The facilities in Florida, California, Texas and Illinois provided approximately 19%, 15%, 9% and 7% of total revenues, respectively, for the year ended December 31, 2008.  Florida, California, Texas and Illinois provided total revenues of approximately 19%, 15%, 8% and 7%, respectively, for the year ended December 31, 2007.

 

Seasonality

 

We typically experience seasonal fluctuations in the occupancy levels of our facilities, which are generally slightly higher during the summer months due to increased moving activity.

 

Financing Strategy

 

Although our organizational documents contain no limitation on the amount of debt we may incur, we maintain a capital structure that we believe is reasonable and prudent and that will enable us to have ample cash flow to cover debt service and make distributions to our shareholders. As of December 31, 2008, our debt to total capitalization ratio, determined by dividing the carrying value of our total indebtedness by the sum of (a) the market value of our outstanding common shares and operating partnership units and (b) the carrying value of our total indebtedness, was approximately 77.8%. Our ratio of debt to the depreciated cost of our real estate assets as of December 31, 2008 was 62.7% compared to 62.4% as of December 31, 2007.  We expect to finance additional investments in self-storage facilities through the most attractive available source

 

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of capital at the time of the transaction, in a manner consistent with maintaining a strong financial position and future financial flexibility. These capital sources may include borrowings under our revolving credit facility, selling common or preferred shares or debt securities through public offerings or private placements, incurring additional secured indebtedness, issuing units in our operating partnership in exchange for contributed property, issuing preferred units in our operating partnership to institutional partners and forming joint ventures. We also may consider selling less productive self-storage facilities from time to time in order to reallocate proceeds from these sales into more productive facilities.

 

Competition

 

The continued development of new self-storage facilities has intensified the competition among self-storage operators in many market areas in which we operate. Self-storage facilities compete based on a number of factors, including location, rental rates, security, suitability of the facility’s design to prospective customers’ needs and the manner in which the facility is operated and marketed. In particular, the number of competing self-storage facilities in a particular market could have a material effect on our occupancy levels, rental rates and on the overall operating performance of our facilities. We believe that the primary competition for potential customers of any of our self-storage facilities comes from other self-storage facilities within a three-mile radius of that facility. We believe we have positioned our facilities within their respective markets as high-quality operators that emphasize customer convenience, security and professionalism.

 

Our key competitors include local and regional operators as well as the other public self-storage REITS, including Public Storage, Sovran Self Storage and Extra Space Storage Inc. These companies, some of which operate significantly more facilities than we do and have greater resources than we have, and other entities may generally be able to accept more risk than we determine is prudent, including risks with respect to the geographic proximity of facility investments and the payment of higher facility acquisition prices. This competition may generally reduce the number of suitable acquisition opportunities available to us, increase the price required to be able to consummate the acquisition of particular facilities and reduce the demand for self-storage space in certain areas where our facilities are located. Nevertheless, we believe that our experience in operating, acquiring, developing and obtaining financing for self-storage facilities should enable us to compete effectively.

 

Government Regulation

 

We are subject to federal, state and local environmental regulations that apply generally to the ownership of real property and the operation of self-storage facilities.

 

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of hazardous substances released on or in its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of hazardous substances, or the failure to properly remediate such substances, when released, may adversely affect the property owner’s ability to sell the real estate or to borrow using real estate as collateral, and may cause the property owner to incur substantial remediation costs. In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in a claim by a private party for personal injury or a claim by an adjacent property owner or user for property damage. We may also become liable for the costs of removal or remediation of hazardous substances stored at the facilities by a customer even though storage of hazardous substances would be without our knowledge or approval and in violation of the customer’s storage lease agreement with us.

 

Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional facilities. Whenever the environmental assessment for one of our facilities indicates that a facility is impacted by soil or groundwater contamination from prior owners/operators or other sources, we will work with our environmental consultants and where appropriate, state governmental agencies, to ensure that the facility is either cleaned up, that no cleanup is necessary because the low level of contamination poses no significant risk to public health or the environment, or that the responsibility for cleanup rests with a third party.

 

We are not aware of any environmental cleanup liability that we believe will have a material adverse effect on us. We cannot assure you, however, that these environmental assessments and investigations have revealed or will reveal all potential environmental liabilities, that no prior owner created any material environmental condition not known to us or the independent consultant or that future events or changes in environmental laws will not result in the imposition of environmental liability on us.

 

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We have not received notice from any governmental authority of any material noncompliance, claim or liability in connection with any of our facilities, nor have we been notified of a claim for personal injury or property damage by a private party in connection with any of our facilities relating to environmental conditions.

 

We are not aware of any environmental condition with respect to any of our facilities that could reasonably be expected to have a material adverse effect on our financial condition or results of operations, and we do not expect that the cost of compliance with environmental regulations will have a material adverse effect on our financial condition or results of operations. We cannot assure you, however, that this will continue to be the case.

 

Insurance

 

We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the facilities in our portfolio. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for losses such as loss from riots, war or acts of God, and, in some cases, flooding and environmental hazards, because such coverage is not available or is not available at commercially reasonable rates. Some of our policies, such as those covering losses due to terrorist activities, hurricanes, floods and earthquakes, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses.  We also carry liability insurance to insure against personal injuries that might be sustained on our properties and director and officer liability insurance.

 

Offices

 

Our principal executive office is located at 460 E. Swedesford Road, Suite 3000, Wayne, PA 19087. Our telephone number is (610) 293-5700. We believe that our current facilities are adequate for our present and future operations.

 

Employees

 

As of December 31, 2008, we employed 931 employees, of whom 112 were corporate executive and administrative personnel and 819 were property level personnel. We believe that our relations with our employees are good. None of our employees are unionized.

 

Available Information

 

We file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports with the Securities and Exchange Commission (the “SEC”). You may obtain copies of these documents by visiting the SEC’s Public Reference Room at 450 Fifth Street, N.E., Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the SEC’s website at www.sec.gov. Our internet website address is www.ustoreit.com.  You also can obtain on our website, free of charge, a copy of our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or amendments with, or furnish them to, the SEC. Our internet website and the information contained therein or connected thereto are not intended to be incorporated by reference into this Annual Report on Form 10-K.

 

Also available on our website, free of charge, are copies of our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, and the charters for each of the committees of our Board of Trustees — the Audit Committee, the Corporate Governance and Nominating Committee, and the Compensation Committee. Copies of each of these documents are also available in print free of charge, upon request by any shareholder. You can obtain copies of these documents by contacting Investor Relations by mail at 460 E. Swedesford Road, Suite 3000, Wayne, PA 19087.

 

ITEM 1A.  RISK FACTORS

 

Overview

 

Investors should carefully consider, among other factors, the risks set forth below. These risks are not the only ones that we may face. Additional risks not presently known to us or that we currently consider immaterial may also impair our business operations and hinder our ability to make expected distributions to our shareholders.

 

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We face risks related to current debt maturities, including refinancing and counterparty risk.

 

Approximately 55% (or approximately $523.9 million) of the aggregate principal amount of our total debt, including mortgage debt and revolving debt, is payable on or before December 31, 2009, subject to a one year extension until November 20, 2010 at the Company’s option of approximately $429.4 million of principal on our revolving and term credit facilities with Wells Fargo (formerly Wachovia) provided we pay an extension fee of 15 basis points, or $761,000, and are not in default under the facility.  The Company currently intends to exercise this extension option prior to the November 20, 2009 termination date.  Certain of our mortgages will have significant outstanding balances on their maturity dates, commonly known as “balloon payments.”  We do not have the cash resources currently to repay those amounts, and we will have to raise funds for such repayment either through the issuance of capital stock, additional borrowings (which may include extension of maturity dates), joint ventures or asset sales.  There can be no assurance that we will be able to refinance the debt on favorable terms or at all. To the extent we cannot refinance debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates, either of which would have an adverse impact on our financial performance and ability to pay dividends to investors.

 

In addition, we are exposed to the potential risk of counterparty default or non-payment with respect to interest rate hedges, swap agreements, floors, caps and other interest rate hedging contracts that we may enter into from time to time, in which event we could suffer a material loss on the value of those agreements.  Although these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.  While we do not currently believe that our counterparties on our in-place swap agreements are likely to default or not perform their obligations under those agreements, there is no assurance that this will be the case.

 

Financing our future growth plan or refinancing existing debt maturities could be impacted by negative capital market conditions.

 

Recently, domestic financial markets have experienced extreme volatility and uncertainty. Overall liquidity has tightened in the domestic financial markets, including the investment grade debt and equity capital markets for which we historically sought financing. Consequently, there is greater uncertainty regarding our ability to access the credit markets in order to attract financing on reasonable terms nor can there be any assurance we can issue common or preferred equity securities at a reasonable price. Our ability to finance new acquisitions and refinance future debt maturities could be adversely impacted by our inability to secure permanent financing on reasonable terms, if at all.

 

The terms and covenants relating to our indebtedness could adversely impact our economic performance.

 

Like other real estate companies that incur debt, we are subject to risks associated with debt financing, such as the insufficiency of cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness.  If our debt cannot be paid, refinanced or extended at maturity, we may not be able to make distributions to shareholders at expected levels or at all and may not be able to acquire new properties.  Failure to make distributions to our shareholders could result in our failure to qualify as a REIT for federal income tax purposes.  Furthermore, an increase in our interest expense could adversely affect our cash flow and ability to make distributions to shareholders.  If we do not meet our debt service obligations, any facilities securing such indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions and, depending on the number of facilities foreclosed on, could threaten our continued viability.

 

Our unsecured credit facility and unsecured term loan each contain (and any new or amended facility will likely contain) customary restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain.  Our ability to borrow under our credit facility is (and any new or amended facility will be) subject to compliance with such financial and other covenants.  In the event that we fail to satisfy these covenants, we would be in default under the credit facility and term loan and may be required to repay such debt with capital from other sources.  Under such circumstances, other sources of debt or equity capital may not be available to us, or may be available only on unattractive terms.  Moreover, the presence of such covenants in our credit agreements could cause us to operate our business with a view toward compliance with such covenants, which might not produce optimal returns for shareholders.

 

Increases in interest rates on variable rate indebtedness would increase our interest expense, which could adversely affect our cash flow and ability to make distributions to shareholders.  Rising interest rates could also restrict our ability to

 

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refinance existing debt when it matures.  In addition, an increase in interest rates could decrease the amounts that third parties are willing to pay for our assets, thereby limiting our ability to alter our portfolio promptly in relation to economic or other conditions.  We have entered into and may, from time to time, enter into agreements such as interest rate hedges, swap agreements, floors, caps and other interest rate hedging contracts with respect to a portion of our variable rate debt.  Although these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that we cannot enforce the agreements.  While we do not currently believe that our counterparties on our swap agreements are likely to default or not perform their obligations under those agreements, there is no assurance that this will be the case.

 

Our organizational documents contain no limitation on the amount of debt we may incur.  As a result, we may become highly leveraged in the future.

 

Our organizational documents contain no limitations on the amount of indebtedness that we or our operating partnership may incur. We could alter the balance between our total outstanding indebtedness and the value of our assets at any time. If we become more highly leveraged, then the resulting increase in debt service could adversely affect our ability to make payments on our outstanding indebtedness and to pay our anticipated distributions and/or the distributions required to maintain our REIT status, and could harm our financial condition.

 

We depend on external sources of capital that are outside of our control; the unavailability of capital from external sources could adversely affect our ability to acquire or develop facilities, satisfy our debt obligations and/or make distributions to shareholders.

 

To continue to qualify as a REIT, we are required to distribute to our shareholders each year at least 90% of our REIT taxable income, excluding net capital gains or pay applicable income taxes. In order to eliminate federal income tax, we will be required to distribute annually 100% of our net taxable income, including capital gains. Because of these distribution requirements, we likely will not be able to fund all future capital needs, including capital for acquisitions and facility development, with income from operations. We therefore will have to rely on third-party sources of capital, which may or may not be available on favorable terms, if at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings and our ability to continue to qualify as a REIT for federal income tax purposes. If we are unable to obtain third-party sources of capital, we may not be able to acquire or develop facilities when strategic opportunities exist, satisfy our debt obligations or make distributions to shareholders that would permit us to qualify as a REIT or avoid paying tax on our REIT taxable income.

 

Additional issuances of equity securities may be dilutive to shareholders.

 

The interests of our shareholders could be diluted if we issue additional equity securities to finance future developments or acquisitions or to repay indebtedness.  Our Board of Trustees may authorize the issuance of additional equity securities without shareholder approval.  Our ability to execute our business strategy depends upon our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including the issuance of common and preferred equity.

 

Because real estate is illiquid, we may not be able to sell properties when appropriate.

 

Real estate property investments generally cannot be sold quickly. Also, the tax laws applicable to REITs require that we hold our facilities for investment, rather than sale in the ordinary course of business, which may cause us to forgo or defer sales of facilities that otherwise would be in our best interest. Therefore, we may not be able to dispose of facilities promptly, or on favorable terms, in response to economic or other market conditions, which may adversely affect our financial position.

 

Rising operating expenses could reduce our cash flow and funds available for future distributions.

 

Our facilities and any other facilities we acquire or develop in the future are and will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. Our facilities are subject to increases in operating expenses such as real estate and other taxes, utilities, insurance, administrative expenses and costs for repairs and maintenance. If operating expenses increase without a corresponding increase in revenues, our profitability could diminish and limit our ability to make distributions to our shareholders.

 

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Our insurance coverage may not comply fully with certain loan requirements.

 

We maintain comprehensive insurance on each of our self-storage facilities in amounts sufficient to permit replacement of the property, subject to applicable deductibles. Certain of our properties serve as collateral for our mortgage-backed debt, some of which was assumed in connection with our acquisition of facilities, that requires us to maintain insurance at levels and on terms that are not commercially reasonable in the current insurance environment. We may be unable to obtain required insurance coverage if the cost and/or availability make it impractical or impossible to comply with debt covenants. If we cannot comply with a lender’s requirements in any respect, the lender could declare a default that could affect our ability to obtain future financing and could have a material adverse effect on our results of operations and cash flows and our ability to obtain future financing. In addition, we may be required to self-insure against certain losses or the Company’s insurance costs may increase.

 

Potential losses may not be covered by insurance, which could result in the loss of our investment in a facility and the future cash flows from the facility.

 

We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the facilities in our portfolio. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for losses such as loss from riots, war or acts of God, and, in some cases, flooding and environmental hazards, because such coverage is not available or is not available at commercially reasonable rates. Some of our policies, such as those covering losses due to terrorism, hurricanes, floods and earthquakes, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses. If we experience a loss at a facility that is uninsured or that exceeds policy limits, we could lose the capital invested in that facility as well as the anticipated future cash flows from that facility. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it impractical or undesirable to use insurance proceeds to replace a facility after it has been damaged or destroyed. In addition, if the damaged facilities are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these facilities were irreparably damaged.

 

We cannot assure you of our ability to pay dividends in the future.

 

Historically, we have paid quarterly distributions to our shareholders, and we intend to pay quarterly dividends and to make distributions to our shareholders in amounts such that all or substantially all of our taxable income in each year, subject to certain adjustments, is distributed.  This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Internal Revenue Code.  We have not established a minimum dividends payment level and all future distributions will be made at the discretion of our Board of Trustees. Our ability to pay dividends will depend upon, among other factors:

 

·                  the operational and financial performance of our facilities;

 

·                  capital expenditures with respect to existing and newly acquired facilities;

 

·                  general and administrative costs associated with our operation as a publicly-held REIT;

 

·                  maintenance of our REIT status;

 

·                  the amount of, and the interest rates on, our debt;

 

·                  the absence of significant expenditures relating to environmental and other regulatory matters; and

 

·                  other risk factors described in this Annual Report on From 10-K.

 

Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a material adverse effect on our cash flow and our ability to make distributions to shareholders.

 

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Our performance and the value of our self-storage facilities are subject to risks associated with our properties and with the real estate industry.

 

Our rental revenues and operating costs and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our facilities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected.  Events or conditions beyond our control that may adversely affect our operations or the value of our facilities include:

 

·                  downturns in the national, regional and local economic climate;

 

·                  local or regional oversupply, increased competition or reduction in demand for self-storage space;

 

·                  vacancies or changes in market rents for self-storage space;

 

·                  inability to collect rent from customers;

 

·                  increased operating costs, including maintenance, insurance premiums and real estate taxes;

 

·                  changes in interest rates and availability of financing;

 

·                  hurricanes, earthquakes and other natural disasters, civil disturbances, terrorist acts or acts of war that may result in uninsured or underinsured losses;

 

·                  significant expenditures associated with acquisitions and development projects, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property;

 

·                  costs of complying with changes in laws and governmental regulations, including those governing usage, zoning, the environment and taxes; and

 

·                  the relative illiquidity of real estate investments.

 

In addition, prolonged periods of economic slowdown or recession, rising interest rates or declining demand for self-storage, or the public perception that any of these events may occur, could result in a general decline in rental revenues, which could impair our ability to satisfy our debt service obligations and to make distributions to our shareholders.

 

Rental revenues are significantly influenced by demand for self-storage space generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.

 

Because our portfolio of facilities consists primarily of self-storage facilities, we are subject to risks inherent in investments in a single industry. A decrease in the demand for self-storage space would have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio. Demand for self-storage space has been and could be adversely affected by ongoing weakness in the national, regional and local economies, changes in supply of, or demand for, similar or competing self-storage facilities in an area and the excess amount of self-storage space in a particular market. To the extent that any of these conditions occur, they are likely to affect market rents for self-storage space, which could cause a decrease in our rental revenue. Any such decrease could impair our ability to satisfy debt service obligations and make distributions to our shareholders.

 

Adverse macroeconomic and business conditions may significantly and negatively affect our revenues, profitability and results of operations.

 

The United States is currently in a deep recession that has resulted in higher unemployment, shrinking demand for products, large-scale business failures and tight credit markets.  Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, as well as to increased bad debts due to recessionary pressures.  A continuation of ongoing adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs, and other matters

 

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could reduce consumer spending or cause consumers to shift their spending to other products and services.  A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability.

 

It is difficult to determine the breadth and duration of the economic and financial market problems and the many ways in which they may affect our customers and our business in general. Nonetheless, continuation or further worsening of these difficult financial and macroeconomic conditions could have a significant adverse effect on our sales, profitability and results of operations.

 

Our financial performance is dependent upon the economic and other conditions of the markets in which our facilities are located.

 

We are susceptible to adverse developments in the markets in which we operate, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors. Our facilities in California, Florida, Texas, Ohio, Tennessee, Illinois and Arizona accounted for approximately 16%, 15%, 11%, 8%, 7%, 7% and 5%, respectively, of our total rentable square feet as of December 31, 2008. As a result of this geographic concentration of our facilities, we are particularly susceptible to adverse market conditions in these areas. Any adverse economic or real estate developments in these markets, or in any of the other markets in which we operate, or any decrease in demand for self-storage space resulting from the local business climate could adversely affect our rental revenues, which could impair our ability to satisfy our debt service obligations and pay distributions to our shareholders.

 

Terrorist attacks and other acts of violence or war may adversely impact our performance and may affect the markets on which our securities are traded.

 

Terrorist attacks against our facilities, the United States or our interests, may negatively impact our operations and the value of our securities.  Attacks or armed conflicts could negatively impact the demand for self-storage facilities and increase the cost of insurance coverage for our facilities, which could reduce our profitability and cash flow.  Furthermore, any terrorist attacks or armed conflicts could result in increased volatility in or damage to the United States and worldwide financial markets and economy.

 

We face risks and significant competition associated with actions taken by our competitors.

 

Actions by our competitors may decrease or prevent increases of the occupancy and rental rates of our properties.  We compete with numerous developers, owners and operators of self-storage, including other REITs, some of which own or may in the future own properties similar to ours in the same submarkets in which our properties are located and some of which may have greater capital resources.  In addition, due to the relatively low cost of each individual self-storage facility, other developers, owners and operators have the capability to build additional facilities that may compete with our facilities.

 

If our competitors build new facilities that compete with our facilities or offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire.  As a result, our financial condition, cash flow, cash available for distribution, market price of our stock and ability to satisfy our debt service obligations could be materially adversely affected.  In addition, increased competition for customers may require us to make capital improvements to facilities that we would not have otherwise made. Any unbudgeted capital improvements we undertake may reduce cash available for distributions to our shareholders.

 

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We also face significant competition for acquisitions and development opportunities.  Some of our competitors have greater financial resources than we do and a greater ability to borrow funds to acquire facilities.  These competitors may also be willing and/or able to accept more risk than we can prudently manage, including risks with respect to the geographic proximity of investments and the payment of higher facility acquisition prices.  This competition for investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs and may reduce demand for self-storage space in certain areas where our facilities are located and, as a result, adversely affect our operating results.We face risks associated with facility acquisitions.

 

We have in the past acquired, and intend at some time in the future to acquire, individual and portfolios of self-storage facilities that would increase our size and potentially alter our capital structure.  Although we believe that the acquisitions that we expect to undertake in the future will enhance our future financial performance, the success of such transactions is subject to a number of factors, including the risks that:

 

·                  we may not be able to obtain financing for acquisitions on favorable terms;

 

·                  acquisitions may fail to perform as expected;

 

·                  the actual costs of repositioning or redeveloping acquired facilities may be higher than our estimates;

 

·                  acquisitions may be located in new markets where we may have limited knowledge and understanding of the local economy, an absence of business relationships in the area or an unfamiliarity with local governmental and permitting procedures;

 

·                  there is only limited recourse, or no recourse, to the former owners of newly acquired facilities for unknown or undisclosed liabilities such as the clean-up of undisclosed environmental contamination; claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the facilities; ordinary course of business expenses; and claims by local governments, adjoining property owners, property owner associations, and easement holders for fees, assessments, taxes on other property-related changes.

 

·                  As a result, if a liability were asserted against us based upon ownership of an acquired facility, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow.

 

We will incur costs and will face integration challenges when we acquire additional facilities.

 

As we acquire or develop additional self-storage facilities, we will be subject to risks associated with integrating and managing new facilities, including customer retention and mortgage default risks. In the case of a large portfolio purchase, we could experience strains in our existing management information capacity.  In addition, acquisitions or developments may cause disruptions in our operations and divert management’s attention away from day-to-day operations. Furthermore, our profitability may suffer because we will be required to expense acquisition-related costs and amortize in future periods costs for acquired goodwill and other intangible assets. Our failure to successfully integrate any future facilities into our portfolio could have an adverse effect on our operating costs and our ability to make distributions to our shareholders.

 

The acquisition of new facilities that lack operating history with us will give rise to difficulties in predicting revenue potential.

 

We intend to continue to acquire additional facilities.  These acquisitions could fail to perform in accordance with expectations.  If we fail to accurately estimate occupancy levels, operating costs or costs of improvements to bring an acquired facility up to the standards established for our intended market position, the performance of the facility may be below expectations.  Acquired facilities may have characteristics or deficiencies affecting their valuation or revenue potential that we have not yet discovered.  We cannot assure you that the performance of facilities acquired by us will increase or be maintained under our management.

 

Property ownership through joint ventures may limit our ability to act exclusively in our interest.

 

We may co-invest with third parties through joint ventures. In any such joint venture, we may not be in a position to exercise sole decision-making authority regarding the facilities owned through joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that

 

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joint venture partners might become bankrupt or fail to fund their share of required capital contributions. Joint venture partners may have business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Such investments also have the potential risk of impasse on strategic decisions, such as a sale, in cases where neither we nor the joint venture partner would have full control over the joint venture. In other circumstances, joint venture partners may have the ability without our agreement to make certain major decisions, including decisions about sales, capital expenditures and/or financing. Any disputes that may arise between us and our joint venture partners could result in litigation or arbitration that could increase our expenses and distract our officers and/or Trustees from focusing their time and effort on our business. In addition, we might in certain circumstances be liable for the actions of our joint venture partners, and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.

 

We face system security risks as we depend upon automated processes and the Internet.

 

We are increasingly dependent upon automated information technology processes.  While we attempt to mitigate this risk through offsite backup procedures and contracted data centers that include, in some cases, redundant operations, we could still be severely impacted by a catastrophic occurrence, such as a natural disaster or a terrorist attack. In addition, an increasing portion of our business operations are conducted over the Internet, increasing the risk of viruses that could cause system failures and disruptions of operations despite our deployment of anti-virus measures. Experienced computer programmers may be able to penetrate our network security and misappropriate our confidential information, create system disruptions or cause shutdowns.

 

Potential liability for environmental contamination could result in substantial costs.

 

We are subject to federal, state and local environmental regulations that apply generally to the ownership of real property and the operation of self-storage facilities. If we fail to comply with those laws, we could be subject to significant fines or other governmental sanctions.

 

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at a facility and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean up costs incurred by such parties in connection with contamination. Such liability may be imposed whether or not the owner or operator knew of, or was responsible for, the presence of these hazardous or toxic substances. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such facility or to borrow using such facility as collateral. In addition, in connection with the ownership, operation and management of real properties, we are potentially liable for property damage or injuries to persons and property.

 

Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional facilities. We obtain or examine environmental assessments from qualified and reputable environmental consulting firms (and intend to conduct such assessments prior to the acquisition or development of additional facilities). The environmental assessments received to date have not revealed, nor do we have actual knowledge of, any environmental liability that we believe will have a material adverse effect on us. However, we cannot assure you that any environmental assessments performed have identified or will identify all material environmental conditions, that any prior owner of any facility did not create a material environmental condition not actually known to us or that a material environmental condition does not otherwise exist with respect to any of our facilities.

 

Americans with Disabilities Act and applicable state accessibility act compliance may require unanticipated expenditures.

 

Under the Americans with Disabilities Act of 1990 and applicable state accessibility act (collectively, the “ADA”), all places of public accommodation are required to meet federal requirements related to physical access and use by disabled persons. A number of other federal, state and local laws may also impose access and other similar requirements at our facilities. A failure to comply with the ADA or similar state or local requirements could result in the governmental imposition of fines or the award of damages to private litigants affected by the noncompliance. Although we believe that our facilities comply in all material respects with these requirements (or would be eligible for applicable exemptions from material requirements because of adaptive assistance provided), a determination that one or more of our facilities is not in compliance with the ADA or similar state or local requirements would result in the incurrence of additional costs associated with bringing the facilities into compliance. If we are required to make substantial modifications to comply with the ADA or

 

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similar state or local requirements, we may be required to incur significant unanticipated expenditures, which could have an adverse effect on our operating costs and our ability to make distributions to our shareholders.

 

We may become subject to litigation or threatened litigation which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business.

 

We may become subject to disputes with commercial parties with whom we maintain relationships or other parties with whom we do business. Any such dispute could result in litigation between us and the other parties. Whether or not any dispute actually proceeds to litigation, we may be required to devote significant management time and attention to its successful resolution (through litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business. Any such resolution could involve the payment of damages or expenses by us, which may be significant. In addition, any such resolution could involve our agreement with terms that restrict the operation of our business.

 

One type of commercial dispute could involve our use of our brand name and other intellectual property (for example, logos, signage and other marks), for which we generally have common law rights but no federal trademark registration. There are other commercial parties, at both a local and national level, that may assert that our use of our brand names and other intellectual property conflict with their rights to use brand names and other intellectual property that they consider to be similar to ours. Any such commercial dispute and related resolution would involve all of the risks described above, including, in particular, our agreement to restrict the use of our brand name or other intellectual property.

 

We also could be sued for personal injuries and/or property damage occurring on our properties.  We maintain liability insurance with limits that we believe adequate to provide for the defense and/or payment of any damages arising from such lawsuits.  There can be no assurance that such coverage will cover all costs and expenses from such suits.

 

If we fail to qualify as a REIT, our distributions to shareholders would not be deductible for federal income tax purposes, and therefore we would be required to pay corporate income tax at applicable rates on our taxable income, which would substantially reduce our earnings and may substantially reduce the value of our common shares and adversely affect our ability to raise additional capital.

 

We operate our business to qualify to be taxed as a REIT for federal income tax purposes. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. As a REIT, we generally will not be subject to federal income tax on the income that we distribute currently to our shareholders. Many of the REIT requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our shareholders with respect to each year at least 90% of our REIT taxable income (excluding net capital gains). The fact that we hold substantially all of our assets through the operating partnership and its subsidiaries further complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as a REIT. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.

 

If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set forth in the Internal Revenue Code, we would be subject to federal income tax at regular corporate rates on all of our income. As a taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or pass through long term capital gains to individual shareholders at favorable rates. We also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT for four years following the year we first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. If we failed to qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or distribution to our shareholders. This likely would have a

 

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significant adverse effect on our earnings and likely would adversely affect the value of our securities. In addition, we would no longer be required to pay any distributions to shareholders.

 

As a REIT, we are subject to certain distribution requirements, including the requirement to distribute 90% of our REIT taxable income that may result in our having to make distributions at disadvantageous time or to borrow funds at unfavorable rates.  Compliance with this requirement may hinder our ability to operate solely on the basis of maximizing profits.

 

We will pay some taxes even if we qualify as a REIT.

 

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions.

 

In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. We have elected to treat U-Store-It Mini Warehouse Co. as a taxable REIT subsidiary, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.

 

We are dependent upon our key personnel whose continued service is not guaranteed.

 

Our top executives, Dean Jernigan, Christopher Marr and Timothy Martin, have extensive self-storage, real estate and public company experience.  Although we have employment agreements with these members of our senior management team, we cannot provide any assurance that any of them will remain in our employment.  The loss of services of one or more members of our senior management team, particularly Dean Jernigan, our Chief Executive Officer, could adversely affect our operations and our future growth.

 

We are dependent upon our on-site personnel to maximize customer satisfaction; any difficulties we encounter in hiring, training and retaining skilled field personnel may adversely affect our rental revenues.

 

As of December 31, 2008, we had 819 field personnel involved in the management and operation of our facilities. The customer service, marketing skills and knowledge of local market demand and competitive dynamics of our facility managers are contributing factors to our ability to maximize our rental income and to achieve the highest sustainable rent levels at each of our facilities. We compete with various other companies in attracting and retaining qualified and skilled personnel. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel.  If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

 

18



Table of Contents

 

Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our shares or otherwise benefit our shareholders.

 

Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then-prevailing market price of those shares, including:

 

·         “business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes stringent fair price and super-majority shareholder voting requirements on these combinations; and

 

·         “control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing Trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares” from a party other than the issuer) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two thirds of all the votes entitled to be cast on the matter, excluding all interested shares, and are subject to redemption in certain circumstances.

 

We have opted out of these provisions of Maryland law. However, our Board of Trustees may opt to make these provisions applicable to us at any time without shareholder approval.

 

Our Trustees also have the discretion, granted in our bylaws and Maryland law, without shareholder approval to, among other things (1) create a staggered Board of Trustees, and (2) amend our bylaws or repeal individual bylaws in a manner that provides the Board of Trustees with greater authority.  Any such action could inhibit or impede a third party from making a proposal to acquire us at a price that could be beneficial to our shareholders.

 

Robert J. Amsdell, our former Chairman and Chief Executive Officer; Barry L. Amsdell, a former Trustee; Todd C. Amsdell, our former Chief Operating Officer and former President of our development subsidiary; and the Amsdell Entities (collectively, “The Amsdell Family”) collectively own an approximate 23.3% beneficial interest in our company on a fully diluted basis and therefore have the ability to exercise significant influence on any matter presented to our shareholders.

 

The Amsdell Family collectively owns approximately 21.3% of our outstanding common shares, and an approximate 23.3% beneficial interest in our company on a fully diluted basis. Consequently, the Amsdell Family may be able to significantly influence the outcome of matters submitted for shareholder action, including the election of our Board of Trustees and approval of significant corporate transactions, including business combinations, consolidations and mergers. As a result, Robert J. Amsdell, Barry L. Amsdell and Todd C. Amsdell have substantial influence on us and could exercise their influence in a manner that conflicts with the interests of our other shareholders.

 

Our shareholders have limited control to prevent us from making any changes to our investment and financing policies.

 

Our Board of Trustees has adopted policies with respect to certain activities. These policies may be amended or revised from time to time at the discretion of our Board of Trustees without a vote of our shareholders. This means that our shareholders have limited control over changes in our policies. Such changes in our policies intended to improve, expand or diversify our business may not have the anticipated effects and consequently may adversely affect our business and prospects, results of operations and share price.

 

Our rights and the rights of our shareholders to take action against our Trustees and officers are limited.

 

Maryland law provides that a trustee or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our declaration of trust and bylaws require us to indemnify our Trustees and officers for actions taken by them in those capacities to the extent permitted by Maryland law. Accordingly,

 

19



Table of Contents

 

in the event that actions taken in good faith by any Trustee or officer impede our performance, our and our shareholders’ ability to recover damages from that Trustee or officer will be limited.

 

Our declaration of trust permits our Board of Trustees to issue preferred shares with terms that may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our shares or otherwise benefit our shareholders.

 

Our declaration of trust permits our Board of Trustees to issue up to 40,000,000 preferred shares, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, or terms or conditions of redemption as determined by our Board. In addition, our Board may reclassify any unissued common shares into one or more classes or series of preferred shares. Thus, our Board could authorize, without shareholder approval, the issuance of preferred shares with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price of our shares. We currently do not expect that the Board would require shareholder approval prior to such a preferred issuance. In addition, any preferred shares that we issue would rank senior to our common shares with respect to the payment of distributions, in which case we could not pay any distributions on our common shares until full distributions have been paid with respect to such preferred shares.

 

Many factors could have an adverse effect on the market value of our securities.

 

A number of factors might adversely affect the price of our securities, many of which are beyond our control.  These factors include:

 

·                  increases in market interest rates, relative to the dividend yield on our shares.  If market interest rates go up, prospective purchasers of our securities may require a higher yield.  Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution.  Thus, higher market interest rates could cause the market price of our common shares to go down;

 

·                  anticipated benefit of an investment in our securities as compared to investment in securities of companies in other industries (including benefits associated with tax treatment of dividends and distributions);

 

·                  perception by market professionals of REITs generally and REITs comparable to us in particular;

 

·                  level of institutional investor interest in our securities;

 

·                  relatively low trading volumes in securities of REITs;

 

·                  our results of operations and financial condition;

 

·                  investor confidence in the stock market generally; and

 

·                  additions and departures of key personnel.

 

The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash distributions.  Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share.  If our future earnings or cash distributions are less than expected, it is likely that the market price of our common shares will diminish.

 

ITEM 1B.  UNRESOLVED STAFF COMMENTS

 

None.

 

20



Table of Contents

 

ITEM 2.  PROPERTIES

 

Overview

 

As of December 31, 2008, we owned 387 self-storage facilities located in 26 states and the District of Columbia; and aggregating approximately 25.0 million rentable square feet. The following table sets forth certain summary information regarding our facilities by state as of December 31, 2008.

 

State

 

Number of
Facilities

 

Number of
Units

 

Total
Rentable
Square Feet

 

% of Total
Rentable
Square Feet

 

% of
Occupied
Square Feet

 

 

 

 

 

 

 

 

 

 

 

 

 

California

 

60

 

35,661

 

4,081,312

 

16.3

%

71.1

%

Florida

 

53

 

37,125

 

3,932,291

 

15.8

%

77.0

%

Texas

 

43

 

20,971

 

2,638,976

 

10.6

%

82.5

%

Ohio

 

34

 

15,789

 

1,938,114

 

7.8

%

79.6

%

Illinois

 

27

 

13,915

 

1,610,552

 

6.5

%

84.1

%

Tennessee

 

24

 

12,889

 

1,684,576

 

6.8

%

81.3

%

Arizona

 

24

 

12,042

 

1,246,942

 

5.0

%

80.2

%

Colorado

 

20

 

10,332

 

1,198,133

 

4.8

%

85.0

%

Connecticut

 

17

 

7,147

 

847,231

 

3.4

%

78.4

%

New Jersey

 

14

 

10,141

 

968,751

 

3.9

%

75.1

%

New Mexico

 

11

 

4,355

 

480,949

 

1.9

%

85.7

%

Georgia

 

9

 

6,178

 

759,535

 

3.0

%

77.3

%

Indiana

 

9

 

5,202

 

593,976

 

2.4

%

80.0

%

North Carolina

 

8

 

4,777

 

558,346

 

2.2

%

82.6

%

Maryland

 

5

 

4,196

 

517,982

 

2.1

%

81.9

%

New York

 

5

 

2,871

 

312,833

 

1.3

%

80.4

%

Utah

 

4

 

2,319

 

241,624

 

1.0

%

85.7

%

Michigan

 

4

 

1,885

 

270,869

 

1.1

%

79.7

%

Louisiana

 

3

 

1,472

 

201,167

 

0.8

%

92.2

%

Massachusetts

 

3

 

1,776

 

172,385

 

0.7

%

78.4

%

Pennsylvania

 

2

 

1,602

 

176,583

 

0.7

%

80.7

%

Virginia

 

2

 

1,181

 

130,927

 

0.5

%

68.1

%

Nevada

 

2

 

905

 

97,206

 

0.4

%

86.2

%

Alabama

 

1

 

799

 

129,035

 

0.4

%

73.9

%

Washington DC

 

1

 

754

 

62,695

 

0.2

%

86.6

%

Mississippi

 

1

 

513

 

61,251

 

0.2

%

79.6

%

Wisconsin

 

1

 

485

 

58,515

 

0.2

%

82.8

%

Total/Weighted Average

 

387

 

217,282

 

24,972,756

 

100.0

%

78.9

%

 

Our Facilities

 

The following table sets forth certain additional information with respect to each of our facilities as of December 31, 2008. Our ownership of each facility consists of a fee interest in the facility held by U-Store-It, L.P., our operating partnership, or one of its subsidiaries, except for our Morris Township, NJ facility, where we have a ground lease. In addition, small parcels of land at five of our other facilities are subject to ground leases.

 

21



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Mobile, AL †

 

1997

 

1974/90

 

129,035

 

73.9

%

799

 

Y

 

2.6

%

Chandler, AZ

 

2005

 

1985

 

47,520

 

90.4

%

461

 

Y

 

6.9

%

Glendale, AZ

 

1998

 

1987

 

56,830

 

85.8

%

546

 

Y

 

0.0

%

Green Valley, AZ

 

2005

 

1985

 

25,050

 

70.7

%

258

 

N

 

8.0

%

Mesa I, AZ

 

2006

 

1985

 

52,375

 

79.9

%

515

 

N

 

0.0

%

Mesa II, AZ

 

2006

 

1981

 

45,345

 

79.4

%

411

 

Y

 

8.4

%

Mesa III, AZ

 

2006

 

1986

 

58,264

 

75.2

%

507

 

Y

 

4.1

%

Phoenix I, AZ

 

2006

 

1987

 

100,812

 

73.2

%

797

 

Y

 

8.8

%

Phoenix II, AZ

 

2006

 

1974

 

45,270

 

76.4

%

433

 

Y

 

4.7

%

Scottsdale, AZ

 

1998

 

1995

 

81,125

 

75.5

%

679

 

Y

 

9.5

%

Tempe, AZ

 

2005

 

1975

 

53,840

 

80.1

%

404

 

Y

 

12.4

%

Tucson I, AZ

 

1998

 

1974

 

59,350

 

85.2

%

490

 

Y

 

0.0

%

Tucson II, AZ

 

1998

 

1988

 

43,950

 

78.3

%

515

 

Y

 

100.0

%

Tucson III, AZ

 

2005

 

1979

 

49,772

 

79.6

%

491

 

N

 

0.0

%

Tucson IV, AZ

 

2005

 

1982

 

48,008

 

87.6

%

515

 

Y

 

3.6

%

Tucson V, AZ

 

2005

 

1982

 

45,234

 

74.0

%

419

 

Y

 

3.0

%

Tucson VI, AZ

 

2005

 

1982

 

40,766

 

80.5

%

427

 

Y

 

3.4

%

Tucson VII, AZ

 

2005

 

1982

 

52,688

 

89.9

%

618

 

Y

 

2.0

%

Tucson VIII, AZ

 

2005

 

1979

 

46,650

 

77.9

%

472

 

Y

 

0.0

%

Tucson IX, AZ

 

2005

 

1984

 

67,656

 

79.2

%

623

 

Y

 

2.0

%

Tucson X, AZ

 

2005

 

1981

 

46,350

 

79.7

%

458

 

N

 

0.0

%

Tucson XI, AZ

 

2005

 

1974

 

42,800

 

86.8

%

436

 

Y

 

0.0

%

Tucson XII, AZ

 

2005

 

1974

 

42,325

 

79.3

%

452

 

Y

 

4.8

%

Tucson XIII, AZ

 

2005

 

1974

 

45,792

 

81.6

%

542

 

Y

 

0.0

%

Tucson XIV, AZ

 

2005

 

1976

 

49,170

 

82.4

%

573

 

Y

 

8.8

%

Apple Valley I, CA

 

1997

 

1984

 

73,340

 

44.7

%

579

 

N

 

0.0

%

Apple Valley II, CA

 

1997

 

1988

 

62,115

 

71.3

%

485

 

Y

 

7.0

%

Benicia, CA

 

2005

 

1988/93/05

 

74,770

 

82.7

%

753

 

Y

 

0.0

%

Bloomington I, CA

 

1997

 

1987

 

28,425

 

86.1

%

218

 

N

 

0.0

%

Bloomington II, CA †

 

1997

 

1987

 

25,860

 

82.2

%

20

 

N

 

0.0

%

Cathedral City, CA †

 

2006

 

1982/92

 

129,048

 

49.1

%

999

 

Y

 

1.9

%

Citrus Heights, CA

 

2005

 

1987

 

75,620

 

59.0

%

677

 

Y

 

0.0

%

Diamond Bar, CA

 

2005

 

1988

 

103,034

 

83.6

%

918

 

Y

 

0.0

%

Escondido, CA

 

2007

 

2002

 

143,170

 

89.5

%

1239

 

Y

 

6.7

%

Fallbrook, CA

 

1997

 

1985/88

 

46,170

 

82.2

%

455

 

Y

 

0.0

%

Hemet, CA

 

1997

 

1989

 

66,040

 

71.4

%

437

 

Y

 

0.0

%

Highland I, CA

 

1997

 

1987

 

76,765

 

54.5

%

841

 

Y

 

0.0

%

Highland II, CA

 

2006

 

1982

 

62,257

 

60.5

%

519

 

Y

 

0.0

%

Lancaster, CA

 

2001

 

1987

 

60,825

 

61.5

%

393

 

Y

 

0.0

%

Long Beach, CA

 

2006

 

1974

 

125,213

 

73.1

%

1409

 

Y

 

0.0

%

Murrieta, CA

 

2005

 

1996

 

49,840

 

81.4

%

433

 

Y

 

2.9

%

North Highlands, CA

 

2005

 

1980

 

57,244

 

79.9

%

477

 

N

 

0.0

%

Orangevale, CA

 

2005

 

1980

 

50,542

 

68.9

%

549

 

Y

 

0.0

%

Palm Springs I, CA

 

2006

 

1989

 

72,775

 

67.3

%

567

 

Y

 

0.0

%

Palm Springs II, CA †

 

2006

 

1982/89

 

122,370

 

50.1

%

628

 

Y

 

8.7

%

Pleasanton, CA

 

2005

 

2003

 

82,015

 

81.0

%

704

 

Y

 

0.0

%

Rancho Cordova, CA

 

2005

 

1979

 

53,928

 

73.4

%

480

 

Y

 

0.0

%

Redlands, CA

 

1997

 

1985

 

62,805

 

79.2

%

543

 

N

 

0.0

%

Rialto I, CA

 

1997

 

1987

 

57,371

 

83.4

%

507

 

Y

 

0.0

%

Rialto II, CA

 

2006

 

1980

 

99,783

 

81.2

%

752

 

Y

 

0.0

%

Riverside I, CA

 

1997

 

1989

 

28,360

 

86.1

%

229

 

N

 

0.0

%

Riverside II, CA †

 

1997

 

1989

 

20,420

 

49.3

%

18

 

N

 

0.0

%

Riverside III, CA

 

1998

 

1989

 

46,809

 

76.9

%

436

 

Y

 

0.0

%

Riverside IV, CA

 

2006

 

1977

 

67,320

 

77.4

%

681

 

Y

 

0.0

%

Riverside V, CA

 

2006

 

1985

 

85,496

 

52.7

%

831

 

Y

 

3.9

%

Riverside VI, CA

 

2007

 

2004

 

74,900

 

65.7

%

436

 

Y

 

12.7

%

Roseville, CA

 

2005

 

1979

 

60,094

 

70.5

%

573

 

N

 

0.0

%

Sacramento I, CA

 

2005

 

1979

 

50,839

 

79.2

%

541

 

Y

 

0.0

%

Sacramento II, CA

 

2005

 

1986

 

61,890

 

72.3

%

583

 

Y

 

0.0

%

San Bernardino I, CA

 

1997

 

1987

 

83,278

 

70.5

%

584

 

Y

 

2.0

%

San Bernardino II, CA

 

1997

 

1987

 

31,070

 

70.0

%

255

 

N

 

0.0

%

San Bernardino III, CA

 

1997

 

1989

 

57,215

 

65.8

%

584

 

Y

 

0.0

%

San Bernardino IV, CA

 

1997

 

1991

 

41,546

 

78.4

%

375

 

Y

 

0.0

%

San Bernardino V, CA

 

1997

 

1985/92

 

35,671

 

76.7

%

405

 

N

 

0.0

%

San Bernardino VI, CA

 

2005

 

2002/04

 

83,507

 

83.2

%

769

 

N

 

11.8

%

San Bernardino VII, CA

 

2006

 

1974

 

56,795

 

66.4

%

496

 

Y

 

4.2

%

San Bernardino VIII, CA

 

2006

 

1975

 

118,456

 

42.6

%

1083

 

N

 

0.0

%

San Bernardino IX, CA

 

2006

 

1978

 

78,839

 

73.3

%

653

 

Y

 

1.3

%

San Bernardino X, CA

 

2006

 

1977

 

111,904

 

55.5

%

1001

 

Y

 

0.0

%

San Marcos, CA

 

2005

 

1979

 

37,430

 

91.3

%

246

 

Y

 

0.0

%

Santa Ana, CA

 

2006

 

1984

 

64,931

 

72.8

%

736

 

N

 

2.5

%

South Sacramento, CA

 

2005

 

1979

 

51,890

 

62.9

%

431

 

Y

 

0.0

%

South Palmetto, CA

 

1998

 

1982

 

80,555

 

73.4

%

793

 

Y

 

0.0

%

 

22



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Spring Valley, CA

 

2006

 

1980

 

55,080

 

82.8

%

709

 

Y

 

0.0

%

Sun City, CA

 

1998

 

1989

 

38,435

 

87.9

%

357

 

N

 

0.0

%

Temecula I, CA

 

1998

 

1985/2003

 

81,700

 

74.3

%

696

 

Y

 

46.4

%

Temecula II, CA

 

2006

 

2003

 

84,380

 

70.9

%

659

 

Y

 

51.2

%

Thousand Palms, CA

 

2006

 

1988/01

 

72,970

 

48.3

%

788

 

Y

 

63.5

%

Vista I, CA

 

2001

 

1988

 

74,355

 

91.5

%

611

 

Y

 

0.0

%

Vista II, CA

 

2005

 

2001/02/03

 

147,721

 

78.1

%

1273

 

Y

 

2.3

%

Walnut, CA

 

2005

 

1987

 

50,708

 

74.7

%

538

 

Y

 

9.2

%

West Sacramento, CA

 

2005

 

1984

 

39,715

 

82.1

%

486

 

Y

 

0.0

%

Westminster, CA

 

2005

 

1983/98

 

68,148

 

92.2

%

562

 

Y

 

0.0

%

Yucaipa, CA

 

1997

 

1989

 

77,560

 

75.5

%

661

 

Y

 

0.0

%

Aurora I, CO

 

2005

 

1981

 

75,667

 

79.9

%

620

 

Y

 

0.0

%

Aurora II, CO

 

2005

 

1984

 

57,609

 

83.5

%

474

 

Y

 

5.0

%

Aurora III, CO

 

2005

 

1977

 

28,730

 

91.6

%

311

 

Y

 

0.0

%

Aurora IV, CO

 

2006

 

1998/99

 

49,700

 

78.5

%

352

 

N

 

0.0

%

Avon, CO

 

2005

 

1989

 

28,227

 

82.3

%

387

 

Y

 

22.7

%

Boulder I, CO

 

2006

 

1972/75/77

 

46,996

 

84.2

%

524

 

Y

 

0.0

%

Boulder II, CO

 

2006

 

1983/84

 

101,120

 

84.5

%

1092

 

Y

 

0.0

%

Boulder III, CO

 

2006

 

1974/78

 

80,244

 

78.4

%

782

 

Y

 

0.0

%

Boulder IV, CO

 

2006

 

1983/98

 

95,148

 

85.9

%

713

 

Y

 

7.1

%

Colorado Springs I, CO

 

2005

 

1986

 

47,975

 

78.1

%

465

 

Y

 

0.0

%

Colorado Springs II, CO

 

2006

 

2001

 

62,400

 

91.3

%

433

 

Y

 

0.0

%

Denver I, CO

 

2005

 

1987

 

58,050

 

85.4

%

428

 

Y

 

4.4

%

Denver II, CO

 

2006

 

1997

 

59,200

 

88.1

%

451

 

Y

 

0.0

%

Denver III, CO

 

2006

 

1999

 

63,700

 

80.5

%

444

 

Y

 

0.0

%

Englewood, CO

 

2005

 

1981

 

51,000

 

92.5

%

366

 

Y

 

0.0

%

Federal Heights, CO

 

2005

 

1980

 

54,770

 

90.3

%

554

 

Y

 

0.0

%

Golden, CO

 

2005

 

1985

 

85,830

 

91.2

%

625

 

Y

 

1.2

%

Littleton I, CO

 

2005

 

1987

 

53,490

 

84.2

%

451

 

Y

 

37.4

%

Littleton II, CO

 

2005

 

1982

 

46,175

 

89.8

%

362

 

Y

 

0.0

%

Northglenn, CO

 

2005

 

1980

 

52,102

 

83.0

%

498

 

Y

 

0.0

%

Bloomfield, CT

 

1997

 

1987/93/94

 

48,700

 

78.2

%

443

 

Y

 

6.6

%

Branford, CT

 

1995

 

1986

 

50,679

 

84.6

%

431

 

N

 

2.2

%

Bristol, CT

 

2005

 

1989/99

 

47,825

 

85.0

%

452

 

N

 

22.6

%

East Windsor, CT

 

2005

 

1986/89

 

45,900

 

80.7

%

305

 

N

 

0.0

%

Enfield, CT

 

2001

 

1989

 

52,875

 

83.5

%

375

 

N

 

0.0

%

Gales Ferry, CT

 

1995

 

1987/89

 

54,230

 

72.8

%

597

 

N

 

6.8

%

Manchester I, CT (6)

 

2002

 

1999/00/01

 

47,125

 

69.6

%

466

 

N

 

37.6

%

Manchester II, CT

 

2005

 

1984

 

52,725

 

74.8

%

410

 

N

 

0.0

%

Milford, CT

 

1994

 

1975

 

44,885

 

79.3

%

376

 

Y

 

4.0

%

Monroe, CT

 

2005

 

1996/03

 

58,500

 

81.4

%

403

 

N

 

0.0

%

Mystic, CT

 

1994

 

1975/86

 

50,850

 

73.1

%

547

 

Y

 

2.4

%

Newington I, CT

 

2005

 

1978/97

 

42,520

 

83.8

%

252

 

N

 

0.0

%

Newington II, CT

 

2005

 

1979/81

 

35,810

 

83.4

%

201

 

N

 

0.0

%

Old Saybrook I, CT

 

2005

 

1982/88/00

 

87,500

 

79.0

%

713

 

N

 

6.3

%

Old Saybrook II, CT

 

2005

 

1988/02

 

26,425

 

71.9

%

254

 

N

 

54.6

%

South Windsor, CT

 

1994

 

1976

 

71,725

 

72.4

%

555

 

Y

 

1.1

%

Stamford, CT

 

2005

 

1997

 

28,957

 

81.1

%

367

 

N

 

32.8

%

Washington, DC

 

2008

 

2002

 

62,695

 

86.6

%

754

 

Y

 

96.5

%

Boca Raton, FL

 

2001

 

1998

 

37,958

 

92.1

%

605

 

Y

 

68.2

%

Boynton Beach I, FL

 

2001

 

1999

 

61,987

 

79.0

%

772

 

Y

 

54.2

%

Boynton Beach II, FL

 

2005

 

2001

 

61,751

 

72.4

%

589

 

Y

 

82.3

%

Bradenton I, FL

 

2004

 

1979

 

68,466

 

56.8

%

643

 

N

 

2.8

%

Bradenton II, FL

 

2004

 

1996

 

87,810

 

75.7

%

861

 

Y

 

40.1

%

Cape Coral, FL

 

2000*

 

2000

 

76,592

 

74.1

%

864

 

Y

 

83.5

%

Dania, FL

 

1994

 

1988

 

58,270

 

84.0

%

498

 

Y

 

26.9

%

Dania Beach, FL (6)

 

2004

 

1984

 

182,693

 

78.5

%

1987

 

N

 

20.5

%

Davie, FL

 

2001*

 

2001

 

81,035

 

79.8

%

849

 

Y

 

55.7

%

Deerfield Beach, FL

 

1998*

 

1998

 

57,350

 

81.0

%

518

 

Y

 

38.9

%

Delray Beach, FL

 

2001

 

1999

 

67,821

 

83.2

%

822

 

Y

 

39.3

%

Fernandina Beach, FL

 

1996

 

1986

 

112,165

 

68.7

%

854

 

N

 

35.5

%

Ft. Lauderdale, FL

 

1999

 

1999

 

70,593

 

88.5

%

699

 

Y

 

46.5

%

Ft. Myers, FL

 

1998

 

1998

 

67,546

 

71.8

%

601

 

Y

 

67.0

%

Jacksonville I, FL

 

2005

 

2005

 

80,336

 

67.9

%

735

 

N

 

100.0

%

Jacksonville II, FL

 

2007

 

2004

 

65,020

 

86.5

%

677

 

N

 

100.0

%

Jacksonville III, FL

 

2007

 

2003

 

65,595

 

83.8

%

699

 

N

 

100.0

%

Jacksonville IV, FL

 

2007

 

2006

 

78,374

 

53.9

%

720

 

N

 

74.9

%

Jacksonville V, FL

 

2007

 

2004

 

81,995

 

78.2

%

713

 

N

 

82.3

%

Kendall, FL

 

2007

 

2003

 

75,395

 

80.0

%

703

 

N

 

71.0

%

Lake Worth, FL †

 

1998

 

1998/02

 

161,828

 

84.0

%

1398

 

Y

 

37.3

%

Lakeland I, FL

 

1994

 

1988

 

49,007

 

85.6

%

491

 

Y

 

79.0

%

Lutz I, FL

 

2004

 

2000

 

66,595

 

70.6

%

618

 

Y

 

37.2

%

 

23



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Lutz II, FL

 

2004

 

1999

 

69,232

 

74.3

%

533

 

Y

 

20.6

%

Margate I, FL †

 

1994

 

1979/81

 

54,405

 

84.6

%

339

 

N

 

9.8

%

Margate II, FL †

 

1996

 

1985

 

65,186

 

85.7

%

433

 

Y

 

28.8

%

Merrit Island, FL

 

2000

 

2000

 

50,447

 

85.7

%

465

 

Y

 

56.7

%

Miami I, FL

 

1995

 

1995

 

46,925

 

88.8

%

565

 

Y

 

52.2

%

Miami II, FL

 

1994

 

1989

 

67,060

 

78.6

%

567

 

Y

 

8.0

%

Miami III, FL

 

1995

 

1976

 

78,465

 

83.9

%

342

 

N

 

4.0

%

Miami IV, FL

 

2005

 

1988/03

 

150,510

 

68.2

%

1519

 

Y

 

86.8

%

Naples I, FL

 

1996

 

1996

 

48,150

 

73.3

%

339

 

Y

 

26.6

%

Naples II, FL

 

1997

 

1985

 

65,850

 

78.3

%

667

 

Y

 

44.6

%

Naples III, FL

 

1997

 

1981/83

 

80,699

 

70.2

%

830

 

N

 

23.9

%

Naples IV, FL

 

1998

 

1990

 

40,725

 

70.5

%

449

 

Y

 

43.6

%

Ocoee, FL

 

2005

 

1997

 

76,280

 

83.2

%

630

 

N

 

15.5

%

Orange City, FL

 

2004

 

2001

 

59,586

 

82.4

%

652

 

Y

 

39.1

%

Orlando I, FL (6)

 

1997

 

1987

 

52,170

 

76.5

%

505

 

N

 

4.9

%

Orlando II, FL

 

2005

 

2002/04

 

63,114

 

83.8

%

589

 

Y

 

74.2

%

Orlando III, FL

 

2006

 

1988/90/96

 

104,165

 

77.3

%

787

 

Y

 

6.9

%

Oviedo, FL

 

2006

 

1988/1991

 

49,051

 

83.1

%

430

 

Y

 

3.3

%

Pembroke Pines, FL

 

1997

 

1997

 

67,337

 

85.4

%

706

 

N

 

63.2

%

Royal Palm Beach I, FL †

 

1994

 

1988

 

98,961

 

58.8

%

676

 

N

 

54.5

%

Royal Palm Beach II, FL

 

2007

 

2004

 

81,440

 

78.8

%

774

 

Y

 

82.3

%

Sanford, FL

 

2006

 

1988/2006

 

61,960

 

84.4

%

439

 

Y

 

28.8

%

Sarasota, FL

 

1998

 

1998

 

71,102

 

67.2

%

537

 

Y

 

42.5

%

St. Augustine, FL

 

1996

 

1985

 

59,725

 

79.4

%

703

 

N

 

29.9

%

Stuart, FL

 

1997

 

1995

 

86,883

 

70.9

%

983

 

N

 

51.4

%

SW Ranches, FL

 

2007

 

2004

 

64,955

 

82.4

%

647

 

Y

 

85.3

%

Tampa I, FL

 

2001

 

1985

 

55,997

 

81.9

%

478

 

N

 

17.1

%

Tampa II, FL

 

2007

 

2001/2002

 

83,763

 

76.5

%

798

 

Y

 

28.5

%

West Palm Beach I, FL

 

2001

 

1997

 

68,063

 

74.1

%

993

 

Y

 

47.2

%

West Palm Beach II, FL

 

2004

 

1996

 

93,903

 

75.7

%

834

 

Y

 

74.4

%

Alpharetta, GA

 

2001

 

1996

 

90,485

 

73.9

%

664

 

N

 

75.1

%

Austell, GA

 

2006

 

2000

 

83,525

 

72.5

%

652

 

Y

 

66.0

%

Decatur, GA

 

1998

 

1986

 

148,480

 

79.5

%

1332

 

Y

 

0.6

%

Norcross, GA

 

2001

 

1997

 

85,390

 

66.7

%

599

 

N

 

55.3

%

Peachtree City, GA

 

2001

 

1997

 

49,845

 

76.9

%

446

 

Y

 

75.6

%

Smyrna, GA

 

2001

 

2000

 

56,820

 

90.9

%

504

 

Y

 

100.0

%

Snellville, GA

 

2007

 

1996/1997

 

80,000

 

88.4

%

765

 

Y

 

27.1

%

Suwanee I, GA

 

2007

 

2000/2003

 

85,600

 

77.8

%

625

 

N

 

28.6

%

Suwanee II, GA

 

2007

 

2005

 

79,390

 

72.2

%

591

 

Y

 

61.1

%

Addison, IL

 

2004

 

1979

 

31,325

 

90.2

%

372

 

Y

 

0.0

%

Aurora, IL

 

2004

 

1996

 

74,085

 

74.9

%

553

 

Y

 

6.9

%

Bartlett, IL

 

2004

 

1987

 

51,425

 

90.4

%

412

 

Y

 

33.1

%

Bellwood, IL

 

2001

 

1999

 

86,525

 

88.9

%

744

 

N

 

52.2

%

Des Plaines, IL (6)

 

2004

 

1978

 

74,400

 

90.4

%

643

 

Y

 

0.0

%

Elk Grove Village, IL

 

2004

 

1987

 

64,304

 

89.9

%

637

 

Y

 

5.6

%

Glenview, IL

 

2004

 

1998

 

100,115

 

87.6

%

742

 

Y

 

100.0

%

Gurnee, IL

 

2004

 

1987

 

80,275

 

80.8

%

726

 

N

 

34.1

%

Hanover, IL

 

2004

 

1987

 

41,174

 

82.4

%

411

 

Y

 

0.4

%

Harvey, IL

 

2004

 

1987

 

60,140

 

92.6

%

577

 

Y

 

3.0

%

Joliet, IL

 

2004

 

1993

 

74,350

 

57.8

%

483

 

Y

 

98.9

%

Kildeer, IL

 

2004

 

1988

 

46,475

 

91.5

%

431

 

N

 

0.0

%

Lombard, IL

 

2004

 

1981

 

58,088

 

87.6

%

553

 

Y

 

9.8

%

Mount Prospect, IL

 

2004

 

1979

 

64,900

 

93.2

%

594

 

Y

 

12.7

%

Mundelein, IL

 

2004

 

1990

 

44,700

 

84.8

%

491

 

N

 

8.9

%

North Chicago, IL

 

2004

 

1985

 

53,300

 

91.0

%

431

 

N

 

0.0

%

Plainfield I, IL

 

2004

 

1998

 

53,900

 

84.6

%

401

 

N

 

3.3

%

Plainfield II, IL

 

2005

 

2000

 

52,100

 

66.6

%

349

 

N

 

22.7

%

Schaumburg, IL

 

2004

 

1988

 

31,235

 

81.4

%

323

 

N

 

5.6

%

Streamwood, IL

 

2004

 

1982

 

64,305

 

83.3

%

572

 

N

 

4.4

%

Warrensville, IL

 

2005

 

1977/89

 

48,796

 

85.6

%

376

 

Y

 

0.0

%

Waukegan, IL

 

2004

 

1977

 

79,750

 

83.9

%

691

 

Y

 

8.4

%

West Chicago, IL

 

2004

 

1979

 

48,425

 

81.4

%

426

 

Y

 

0.0

%

Westmont, IL

 

2004

 

1979

 

53,700

 

90.6

%

392

 

N

 

0.0

%

Wheeling I, IL

 

2004

 

1974

 

54,210

 

88.7

%

501

 

Y

 

0.0

%

Wheeling II, IL

 

2004

 

1979

 

67,825

 

77.3

%

615

 

N

 

7.3

%

Woodridge, IL

 

2004

 

1987

 

50,725

 

80.5

%

469

 

N

 

7.6

%

Indianapolis I, IN

 

2004

 

1987

 

43,600

 

88.8

%

327

 

Y

 

0.0

%

Indianapolis II, IN

 

2004

 

1997

 

44,900

 

81.1

%

456

 

Y

 

15.6

%

Indianapolis III, IN

 

2004

 

1999

 

60,850

 

79.9

%

498

 

Y

 

32.8

%

Indianapolis IV, IN

 

2004

 

1976

 

62,909

 

83.2

%

540

 

Y

 

0.0

%

Indianapolis V, IN

 

2004

 

1999

 

74,825

 

84.5

%

584

 

Y

 

33.6

%

Indianapolis VI, IN

 

2004

 

1976

 

73,353

 

82.3

%

728

 

Y

 

0.0

%

 

24



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Indianapolis VII, IN

 

2004

 

1992

 

91,807

 

78.6

%

815

 

Y

 

6.4

%

Indianapolis VIII, IN

 

2004

 

1975

 

80,000

 

75.9

%

706

 

Y

 

0.0

%

Indianapolis IX, IN

 

2004

 

1976

 

61,732

 

69.1

%

548

 

Y

 

0.0

%

Baton Rouge I, LA

 

1997

 

1980

 

41,300

 

93.9

%

370

 

Y

 

9.9

%

Baton Rouge II, LA

 

1997

 

1980/1995

 

80,327

 

93.2

%

579

 

Y

 

40.4

%

Slidell, LA

 

2001

 

1998

 

79,540

 

90.4

%

523

 

Y

 

46.6

%

Boston, MA

 

2002

 

2001

 

60,270

 

76.8

%

627

 

Y

 

100.0

%

Leominster, MA

 

1998

 

1987/88/00

 

53,823

 

75.2

%

500

 

Y

 

38.5

%

Medford, MA

 

2007

 

2001

 

58,292

 

83.1

%

649

 

N

 

95.9

%

Baltimore, MD

 

2001

 

1999/00

 

93,625

 

77.0

%

840

 

Y

 

45.4

%

California, MD

 

2004

 

1998

 

77,840

 

76.0

%

736

 

Y

 

39.0

%

Gaithersburg, MD

 

2005

 

1998

 

86,970

 

81.4

%

791

 

Y

 

42.0

%

Laurel, MD †

 

2001

 

1978/99/00

 

162,297

 

91.1

%

1021

 

N

 

41.0

%

Temple Hills, MD

 

2001

 

2000

 

97,250

 

76.7

%

808

 

Y

 

68.8

%

Grand Rapids, MI

 

1996

 

1976

 

87,381

 

70.7

%

525

 

Y

 

0.0

%

Portage, MI (6)

 

1996

 

1980

 

50,280

 

89.3

%

386

 

N

 

0.0

%

Romulus, MI

 

1997

 

1997

 

42,050

 

85.9

%

339

 

Y

 

7.4

%

Wyoming, MI

 

1996

 

1987

 

91,158

 

80.2

%

635

 

N

 

0.0

%

Gulfport, MS

 

1997

 

1977/93

 

61,251

 

79.6

%

513

 

Y

 

33.5

%

Belmont, NC

 

2001

 

1996/97/98

 

80,948

 

80.4

%

588

 

N

 

23.6

%

Burlington I, NC

 

2001

 

1990/91/93/94/98

 

109,446

 

70.1

%

959

 

N

 

4.7

%

Burlington II, NC

 

2001

 

1991

 

42,880

 

87.8

%

395

 

Y

 

11.9

%

Cary, NC

 

2001

 

1993/94/97

 

111,772

 

85.6

%

795

 

N

 

7.3

%

Charlotte, NC

 

1999

 

1999

 

69,000

 

89.2

%

736

 

Y

 

52.8

%

Fayetteville I, NC

 

1997

 

1981

 

41,400

 

91.4

%

343

 

N

 

0.0

%

Fayetteville II, NC

 

1997

 

1993/95

 

54,225

 

85.5

%

546

 

Y

 

11.9

%

Raleigh, NC

 

1998

 

1994/95

 

48,675

 

83.0

%

415

 

Y

 

8.2

%

Brick, NJ

 

1994

 

1981

 

52,740

 

73.1

%

439

 

N

 

0.0

%

Clifton, NJ

 

2005

 

2001

 

105,550

 

80.8

%

1020

 

Y

 

85.5

%

Cranford, NJ

 

1994

 

1987

 

91,250

 

80.9

%

847

 

Y

 

7.9

%

East Hanover, NJ

 

1994

 

1983

 

107,679

 

66.9

%

984

 

N

 

1.6

%

Elizabeth, NJ

 

2005

 

1925/97

 

38,945

 

58.8

%

675

 

N

 

0.0

%

Fairview, NJ

 

1997

 

1989

 

27,925

 

86.2

%

448

 

N

 

100.0

%

Hamilton, NJ

 

2006

 

1990

 

70,550

 

60.7

%

612

 

Y

 

0.0

%

Hoboken, NJ

 

2005

 

1945/97

 

34,180

 

90.5

%

742

 

N

 

100.0

%

Jersey City, NJ

 

1994

 

1985

 

91,311

 

86.4

%

1087

 

Y

 

0.0

%

Linden, NJ

 

1994

 

1983

 

100,125

 

71.0

%

1117

 

N

 

2.8

%

Morris Township, NJ (5)

 

1997

 

1972

 

71,776

 

78.9

%

566

 

Y

 

1.3

%

Parsippany, NJ

 

1997

 

1981

 

66,325

 

77.2

%

583

 

Y

 

6.9

%

Randolph, NJ

 

2002

 

1998/99

 

52,565

 

73.7

%

555

 

Y

 

82.5

%

Sewell, NJ

 

2001

 

1984/98

 

57,830

 

71.1

%

466

 

N

 

5.3

%

Albuquerque I, NM

 

2005

 

1985

 

65,927

 

89.2

%

615

 

Y

 

3.2

%

Albuquerque II, NM

 

2005

 

1985

 

58,798

 

86.4

%

536

 

Y

 

4.1

%

Albuquerque III, NM

 

2005

 

1978

 

41,016

 

91.9

%

451

 

N

 

4.3

%

Albuquerque IV, NM

 

2005

 

1986

 

57,611

 

87.8

%

524

 

Y

 

4.7

%

Albuquerque V, NM

 

2006

 

1994

 

52,217

 

85.5

%

420

 

Y

 

10.2

%

Carlsbad, NM

 

2005

 

1975

 

39,999

 

97.3

%

343

 

Y

 

0.0

%

Deming, NM

 

2005

 

1973/83

 

33,005

 

85.2

%

242

 

Y

 

0.0

%

Las Cruces, NM

 

2005

 

1984

 

43,850

 

75.8

%

381

 

Y

 

3.1

%

Las Cruces, NM

 

2008

 

2007

 

21,890

 

31.7

%

156

 

N

 

11.4

%

Lovington, NM

 

2005

 

1975

 

15,751

 

96.8

%

264

 

Y

 

0.0

%

Silver City, NM

 

2005

 

1972

 

26,875

 

93.7

%

253

 

Y

 

0.0

%

Truth or Consequences, NM

 

2005

 

1977/99/00

 

24,010

 

91.8

%

170

 

Y

 

0.0

%

Las Vegas I, NV †

 

2006

 

1986

 

48,306

 

91.4

%

383

 

Y

 

5.4

%

Las Vegas II, NV

 

2006

 

1997

 

48,900

 

81.1

%

522

 

N

 

76.5

%

Jamaica, NY

 

2001

 

2000

 

88,815

 

67.9

%

916

 

Y

 

34.1

%

New Rochelle, NY

 

2005

 

1998

 

48,431

 

86.9

%

398

 

N

 

15.0

%

North Babylon, NY

 

1998

 

1988/99

 

78,338

 

89.1

%

649

 

N

 

9.2

%

Riverhead, NY

 

2005

 

1985/86/99

 

38,640

 

91.8

%

329

 

N

 

0.0

%

Southold, NY

 

2005

 

1989

 

58,609

 

75.0

%

579

 

N

 

3.1

%

Boardman, OH

 

1980

 

1980/89

 

65,495

 

74.4

%

509

 

Y

 

24.0

%

Brecksville, OH

 

1998

 

1970/89

 

58,452

 

85.8

%

440

 

Y

 

25.2

%

Canton I, OH

 

2005

 

1979/87

 

39,750

 

63.2

%

409

 

N

 

0.0

%

Canton II, OH

 

2005

 

1997

 

26,200

 

85.7

%

191

 

Y

 

0.0

%

Centerville I, OH

 

2004

 

1976

 

86,390

 

69.5

%

640

 

Y

 

0.0

%

Centerville II, OH

 

2004

 

1976

 

43,350

 

75.3

%

305

 

N

 

0.0

%

Cleveland I, OH

 

2005

 

1997/99

 

45,950

 

93.5

%

336

 

Y

 

4.9

%

Cleveland II, OH

 

2005

 

2000

 

58,425

 

69.9

%

569

 

Y

 

0.0

%

Columbus, OH

 

2006

 

1999

 

72,075

 

65.5

%

607

 

Y

 

26.1

%

Dayton I, OH

 

2004

 

1978

 

43,100

 

79.9

%

340

 

N

 

0.0

%

Dayton II, OH

 

2005

 

1989/00

 

48,149

 

85.7

%

387

 

Y

 

1.7

%

Euclid I, OH

 

1988*

 

1988

 

46,910

 

78.8

%

422

 

Y

 

22.2

%

 

25



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Euclid II, OH

 

1988*

 

1988

 

47,275

 

81.4

%

377

 

Y

 

0.0

%

Grove City, OH

 

2006

 

1997

 

89,290

 

82.3

%

776

 

Y

 

16.9

%

Hilliard, OH

 

2006

 

1995

 

89,715

 

69.7

%

780

 

Y

 

24.5

%

Lakewood, OH

 

1989*

 

1989

 

39,337

 

85.1

%

458

 

Y

 

24.6

%

Louisville, OH

 

2005

 

1988/90

 

53,960

 

79.3

%

381

 

N

 

0.0

%

Marblehead, OH

 

2005

 

1988/98

 

52,300

 

80.8

%

383

 

Y

 

0.0

%

Mason, OH

 

1998

 

1981

 

33,900

 

72.9

%

282

 

Y

 

0.0

%

Mentor, OH

 

2005

 

1983/99

 

51,225

 

89.0

%

362

 

N

 

16.1

%

Miamisburg, OH

 

2004

 

1975

 

59,930

 

78.9

%

429

 

Y

 

0.0

%

Middleburg Heights, OH

 

1980*

 

1980

 

93,125

 

87.7

%

669

 

N

 

3.8

%

North Canton I, OH

 

1979*

 

1979

 

45,400

 

82.4

%

319

 

N

 

0.0

%

North Canton II, OH

 

1983*

 

1983

 

44,180

 

76.4

%

344

 

Y

 

15.8

%

North Olmsted I, OH

 

1979*

 

1979

 

48,665

 

86.7

%

441

 

N

 

7.0

%

North Olmsted II, OH

 

1988*

 

1988

 

47,850

 

86.1

%

397

 

Y

 

14.2

%

North Randall, OH

 

1998*

 

1998/02

 

80,099

 

85.0

%

800

 

N

 

90.8

%

Perry, OH

 

2005

 

1992/97

 

63,700

 

86.8

%

418

 

Y

 

0.0

%

Reynoldsburg, OH

 

2006

 

1979

 

66,895

 

72.9

%

663

 

Y

 

0.0

%

Strongsville, OH

 

2007

 

1978

 

43,927

 

82.2

%

397

 

N

 

100.0

%

Warrensville Heights, OH

 

1980*

 

1980/82/98

 

90,331

 

76.3

%

720

 

Y

 

0.0

%

Westlake, OH

 

2005

 

2001

 

62,750

 

82.2

%

450

 

Y

 

6.1

%

Willoughby, OH

 

2005

 

1997

 

34,064

 

85.6

%

268

 

Y

 

10.1

%

Youngstown, OH

 

1977*

 

1977

 

65,950

 

83.1

%

520

 

Y

 

1.2

%

Levittown, PA

 

2001

 

2000

 

76,230

 

74.9

%

657

 

Y

 

36.3

%

Philadelphia, PA

 

2001

 

1999

 

100,353

 

85.1

%

945

 

N

 

46.0

%

Alcoa, TN

 

2005

 

1986

 

42,325

 

76.3

%

358

 

N

 

0.0

%

Antioch, TN

 

2005

 

1985/98

 

76,020

 

82.3

%

603

 

Y

 

8.4

%

Cordova I, TN

 

2005

 

1987

 

54,225

 

81.3

%

388

 

Y

 

0.0

%

Cordova II, TN

 

2006

 

1995

 

67,550

 

89.1

%

716

 

N

 

7.2

%

Knoxville I, TN

 

1997

 

1984

 

29,377

 

71.9

%

294

 

Y

 

6.8

%

Knoxville II, TN

 

1997

 

1985

 

38,000

 

83.6

%

337

 

Y

 

6.9

%

Knoxville III, TN

 

1998

 

1991

 

45,736

 

86.3

%

451

 

Y

 

6.9

%

Knoxville IV, TN

 

1998

 

1983

 

58,852

 

76.1

%

440

 

N

 

1.1

%

Knoxville V, TN

 

1998

 

1977

 

42,790

 

82.4

%

372

 

N

 

0.0

%

Knoxville VI, TN

 

2005

 

1975

 

63,440

 

84.0

%

587

 

Y

 

0.0

%

Knoxville VII, TN

 

2005

 

1983

 

55,094

 

80.5

%

449

 

Y

 

0.0

%

Knoxville VIII, TN

 

2005

 

1978

 

95,868

 

81.4

%

770

 

Y

 

0.0

%

Memphis I, TN

 

2001

 

1999

 

91,000

 

82.8

%

696

 

N

 

50.8

%

Memphis II, TN

 

2001

 

2000

 

71,910

 

76.9

%

559

 

N

 

46.3

%

Memphis III, TN

 

2005

 

1983

 

41,017

 

89.3

%

355

 

N

 

6.9

%

Memphis IV, TN

 

2005

 

1986

 

38,714

 

82.8

%

325

 

Y

 

7.8

%

Memphis V, TN

 

2005

 

1981

 

60,120

 

87.6

%

495

 

Y

 

0.0

%

Memphis VI, TN

 

2006

 

1985/93

 

110,171

 

77.1

%

877

 

Y

 

3.2

%

Memphis VII, TN

 

2006

 

1980/85

 

115,303

 

73.9

%

575

 

N

 

0.0

%

Memphis VIII, TN †

 

2006

 

1990

 

96,060

 

72.3

%

559

 

Y

 

0.0

%

Nashville I, TN

 

2005

 

1984

 

103,830

 

82.6

%

694

 

Y

 

0.0

%

Nashville II, TN

 

2005

 

1986/00

 

83,274

 

87.2

%

632

 

Y

 

6.5

%

Nashville III, TN

 

2006

 

1985

 

101,475

 

85.0

%

634

 

Y

 

5.2

%

Nashville IV, TN

 

2006

 

1986/00

 

102,425

 

85.0

%

723

 

N

 

7.0

%

Austin I, TX

 

2005

 

2001

 

59,595

 

76.3

%

542

 

Y

 

58.9

%

Austin II, TX

 

2006

 

2000/03

 

65,401

 

93.6

%

594

 

Y

 

38.8

%

Austin III, TX

 

2006

 

2004

 

71,010

 

81.3

%

581

 

Y

 

84.9

%

Baytown, TX

 

2005

 

1981

 

38,950

 

89.8

%

363

 

Y

 

0.0

%

Bryan, TX

 

2005

 

1994

 

60,450

 

76.6

%

495

 

Y

 

0.0

%

College Station, TX

 

2005

 

1993

 

26,550

 

79.9

%

346

 

N

 

0.0

%

Dallas, TX

 

2005

 

2000

 

58,907

 

90.2

%

552

 

Y

 

26.7

%

Denton, TX

 

2006

 

1996

 

60,836

 

84.2

%

463

 

Y

 

3.9

%

El Paso I, TX

 

2005

 

1980

 

59,702

 

84.0

%

509

 

N

 

0.9

%

El Paso II, TX

 

2005

 

1980

 

48,704

 

87.8

%

413

 

Y

 

0.0

%

El Paso III, TX

 

2005

 

1980

 

71,276

 

86.7

%

595

 

Y

 

2.0

%

El Paso IV, TX

 

2005

 

1983

 

58,958

 

73.5

%

525

 

Y

 

3.6

%

El Paso V, TX

 

2005

 

1982

 

62,300

 

78.5

%

404

 

Y

 

0.0

%

El Paso VI, TX

 

2005

 

1985

 

36,620

 

80.0

%

257

 

N

 

0.0

%

El Paso VII, TX †

 

2005

 

1982

 

34,545

 

81.3

%

17

 

N

 

0.0

%

Fort Worth I, TX

 

2005

 

2000

 

49,778

 

79.9

%

405

 

Y

 

27.0

%

Fort Worth II, TX

 

2006

 

2003

 

72,925

 

87.1

%

659

 

N

 

49.0

%

Frisco I, TX

 

2005

 

1996

 

50,854

 

77.0

%

436

 

Y

 

17.5

%

Frisco II, TX

 

2005

 

1998/02

 

71,239

 

82.1

%

513

 

Y

 

22.5

%

Frisco III, TX

 

2006

 

2004

 

75,225

 

72.7

%

609

 

Y

 

85.7

%

Garland I, TX

 

2006

 

1991

 

70,120

 

90.2

%

681

 

Y

 

4.4

%

Garland II, TX

 

2006

 

2004

 

68,475

 

80.5

%

476

 

Y

 

39.7

%

Greenville I, TX

 

2005

 

2001/04

 

59,385

 

84.0

%

452

 

Y

 

28.8

%

Greenville II, TX

 

2005

 

2001

 

44,900

 

82.0

%

318

 

N

 

36.3

%

 

26



Table of Contents

 

Facility Location

 

Year Acquired/
Developed (1)

 

Year
Built

 

Rentable
Square Feet

 

Occupancy (2)

 

Units

 

Manager
Apartment (3)

 

% Climate
Controlled (4)

 

Houston I, TX

 

2005

 

1981

 

101,350

 

94.0

%

635

 

Y

 

0.0

%

Houston II, TX

 

2005

 

1977

 

71,300

 

97.6

%

391

 

Y

 

0.0

%

Houston III, TX

 

2005

 

1984

 

61,145

 

92.1

%

464

 

Y

 

4.3

%

Houston IV, TX

 

2005

 

1987

 

43,775

 

92.5

%

380

 

Y

 

6.2

%

Houston V, TX †

 

2006

 

1980/1997

 

127,145

 

80.4

%

1008

 

Y

 

54.7

%

Keller, TX

 

2006

 

2000

 

61,885

 

91.4

%

488

 

Y

 

21.1

%

La Porte, TX

 

2005

 

1984

 

45,100

 

93.2

%

432

 

Y

 

18.6

%

Lewisville, TX

 

2006

 

1996

 

58,190

 

66.2

%

426

 

Y

 

19.3

%

Mansfield, TX

 

2006

 

2003

 

63,075

 

82.1

%

495

 

Y

 

38.4

%

McKinney I, TX

 

2005

 

1996

 

47,020

 

87.7

%

369

 

Y

 

9.2

%

McKinney II, TX

 

2006

 

1996

 

70,050

 

86.7

%

540

 

Y

 

46.3

%

North Richland Hills, TX

 

2005

 

2002

 

57,175

 

85.8

%

440

 

N

 

47.6

%

Roanoke, TX

 

2005

 

1996/01

 

59,300

 

83.6

%

449

 

Y

 

30.0

%

San Antonio I, TX

 

2005

 

2005

 

73,930

 

65.5

%

575

 

Y

 

78.6

%

San Antonio II, TX

 

2006

 

2005

 

73,180

 

78.0

%

670

 

N

 

82.3

%

San Antonio III, TX

 

2007

 

2006

 

72,375

 

63.4

%

568

 

N

 

87.1

%

Sherman I, TX

 

2005

 

1998

 

55,050

 

73.6

%

507

 

N

 

20.8

%

Sherman II, TX

 

2005

 

1996

 

48,425

 

74.0

%

392

 

Y

 

30.9

%

Spring, TX

 

2006

 

1980/86

 

72,801

 

81.3

%

537

 

Y

 

14.2

%

Murray I, UT

 

2005

 

1976

 

60,280

 

87.6

%

678

 

Y

 

0.0

%

Murray II, UT †

 

2005

 

1978

 

71,222

 

87.0

%

377

 

N

 

2.6

%

Salt Lake City I, UT

 

2005

 

1976

 

56,446

 

78.1

%

754

 

Y

 

0.0

%

Salt Lake City II, UT

 

2005

 

1978

 

53,676

 

89.6

%

510

 

Y

 

0.0

%

Fredericksburg I, VA

 

2005

 

2001/04

 

69,475

 

75.2

%

607

 

N

 

21.4

%

Fredericksburg II, VA

 

2005

 

1998/01

 

61,452

 

59.9

%

574

 

N

 

100.0

%

Milwaukee, WI

 

2004

 

1988

 

58,515

 

82.8

%

485

 

Y

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total/Weighted Average (387 Facilities)

 

 

24,972,756

 

78.9

%

217,282

 

 

 

 

 

 


* Denotes facilities developed by us.

 

† Denotes facilities that contain a significant amount of commercial rentable square footage.  All of this commercial space, which was developed in conjunction with the self-storage units, is located within or adjacent to our self-storage facilities and is managed by our self-storage facility managers.  As of December 31, 2008, there was an aggregate of approximately 449,000 rentable square feet of commercial space at these facilities.

 

(1) Represents the year acquired for those facilities acquired from a third party or the year developed for those facilities developed by us.

 

(2) Represents occupied square feet divided by total rentable square feet at December 31, 2008.

 

(3) Indicates whether a facility has an on-site apartment where a manager resides.

 

(4) Represents the percentage of rentable square feet in climate-controlled units.

 

(5) We do not own the land at this facility.  We leased the land pursuant to a ground lease that expires in 2013, but have eight five-year renewal options.

 

(6) We have ground leases for certain small parcels of land adjacent to these facilities that expire between 2009 and 2015.

 

27



Table of Contents

 

Our growth has been achieved by internal growth and by adding facilities to our portfolio each year through acquisitions and development. The tables set forth below show the average occupancy, annual rent per occupied square foot, average occupied square feet and total revenues for our facilities owned as of December 31, 2008 for each of the last three years, grouped by the year end during which we first owned or operated the facility.

 

Our Facilities by Year Acquired - Average Occupied Square Feet (2)

 

Year Acquired (1)

 

# of Facilities

 

Rentable Square
Feet

 

2006

 

2007

 

2008

 

2005 and earlier

 

309

 

18,988,250

 

80.2

%

82.6

%

83.1

%

2006

 

60

 

4,581,350

 

75.6

%

75.2

%

76.4

%

2007

 

17

 

1,318,571

 

 

 

71.3

%

76.1

%

2008

 

1

 

84,585

 

 

 

 

 

87.6

%

All Facilities Owned as of December 31, 2008

 

387

 

24,972,756

 

80.2

%

80.0

%

80.1

%

 

Our Facilities by Year Acquired - Annual Rent Per Occupied Square Foot (2)

 

Year Acquired (1)

 

# of Facilities

 

2006

 

2007

 

2008

 

2005 and earlier

 

309

 

$10.52

 

$10.42

 

$11.20

 

2006

 

60

 

10.21

 

10.25

 

11.01

 

2007

 

17

 

 

 

11.13

 

12.44

 

2008

 

1

 

 

 

 

 

21.65

 

All Facilities Owned as of December 31, 2008

 

387

 

$10.61

 

$10.98

 

$11.84

 

 


(1)  For facilities developed by us, “Year Acquired” represents the year in which such facilities were acquired by our operating partnership from an affiliated entity, which in some cases is later than the year developed.

 

(2)  Determined by dividing the aggregate rental revenue for each twelve-month period by the average of the month-end occupied square feet for the period. Rental revenue includes customer rental revenues, access, administrative and late fees and revenues from auctions, but does not include ancillary revenues generated at our facilities.

 

28



Table of Contents

 

Facilities by Year Acquired - Average Occupied Square Feet (2)

 

Year Acquired (1)

 

# of Facilities

 

2006

 

2007

 

2008

 

2005 and earlier

 

309

 

16,587,297

 

16,489,127

 

15,523,908

 

2006

 

60

 

3,465,677

 

3,452,109

 

3,501,679

 

2007

 

17

 

 

 

934,799

 

1,003,961

 

2008

 

1

 

 

 

 

 

58,844

 

All Facilities Owned as of December 31, 2008

 

387

 

20,052,974

 

20,876,035

 

20,088,392

 

 

Facilities by Year Acquired - Total Revenues (dollars in thousands) (3)

 

Year Acquired (1)

 

# of Facilities

 

2006

 

2007

 

2008

 

2005 and earlier

 

309

 

$

185,632

 

$

193,900

 

$

189,528

 

2006

 

60

 

26,659

 

37,813

 

39,307

 

2007

 

17

 

 

 

4,957

 

12,835

 

2008

 

1

 

 

 

 

 

1,340

 

All Facilities Owned as of December 31, 2008 (4)

 

387

 

$

212,291

 

$

236,670

 

$

243,010

 

 


(1)  For facilities developed by us, “Year Acquired” represents the year in which such facilities were acquired by our operating partnership from an affiliated entity, which in some cases is later than the year developed.

 

(2)  Represents the average of the aggregate month-end occupied square feet for the twelve-month period for each group of facilities.

 

(3)  Represents the result obtained by multiplying annual rent per occupied square foot by the average occupied square feet for the twelve-month period for each group of facilities.

 

(4)  Represents total revenues as presented in our historical financial statements.

 

Planned Renovations and Improvements

 

We have a capital improvement and property renovation program that includes office upgrades, adding climate control at selected units, construction of parking areas, safety and security enhancements, and general facility upgrades.  For 2009, we anticipate spending approximately $7 million to $9 million associated with these capital expenditures and expect to enhance the safety and improve the aesthetic appeal of our facilities.

 

ITEM 3.  LEGAL PROCEEDINGS

 

We are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our properties. We are involved in routine litigation arising in the ordinary course of business, none of which we believe to be material.

 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No matters were submitted to a vote of our shareholders during the fourth quarter of 2008.

 

29



Table of Contents

 

PART II

 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

As of December 31, 2008, there were approximately 56 registered record holders of our common shares. This figure does not include beneficial owners who hold shares in nominee name. The following table shows the high and low closing prices per share for our common shares, as reported by the New York Stock Exchange, and the cash dividends declared with respect to such shares:

 

 

 

 

 

 

 

Cash Dividends

 

 

 

High

 

Low

 

Declared

 

2007

 

 

 

 

 

 

 

First quarter

 

$

23.20

 

$

19.57

 

$

0.29

 

Second quarter

 

$

20.11

 

$

16.14

 

$

0.29

 

Third quarter

 

$

16.61

 

$

12.15

 

$

0.29

 

Fourth quarter

 

$

14.31

 

$

9.16

 

$

0.18

 

2008

 

 

 

 

 

 

 

First quarter

 

$

11.37

 

$

7.86

 

$

0.18

 

Second quarter

 

$

13.38

 

$

11.14

 

$

0.18

 

Third quarter

 

$

13.17

 

$

10.96

 

$

0.18

 

Fourth quarter

 

$

11.99

 

$

3.62

 

$

0.025

 

 

Since our initial quarter as a publicly-traded REIT, we have made regular quarterly distributions to our shareholders.  Distributions to shareholders are usually taxable as ordinary income, although a portion of the distribution may be designated as capital gain or may constitute a tax-free return of capital. Annually, we provide each of our shareholders a statement detailing distributions paid during the preceding year and their characterization as ordinary income, capital gain or return of capital. The characterization of our dividends for 2008 was 33.12% ordinary income, 34.11% capital gain distribution and 32.77% return of capital.

 

We intend to continue to declare quarterly distributions. However, we cannot provide any assurance as to the amount or timing of future distributions. Under our revolving credit facility, beginning in the fourth quarter of 2008 we are restricted from paying distributions on our common shares that would exceed an amount equal to the greater of (i) 95% of our funds from operations, and (ii) such amount as may be necessary to maintain our REIT status.

 

To the extent that we make distributions in excess of our earnings and profits, as computed for federal income tax purposes, these distributions will represent a return of capital, rather than a dividend, for federal income tax purposes. Distributions that are treated as a return of capital for federal income tax purposes generally will not be taxable as a dividend to a U.S. shareholder, but will reduce the shareholder’s basis in its shares (but not below zero) and therefore can result in the shareholder having a higher gain upon a subsequent sale of such shares. Return of capital distributions in excess of a shareholder’s basis generally will be treated as gain from the sale of such shares for federal income tax purposes.

 

Share Performance Graph

 

The SEC requires us to present a chart comparing the cumulative total shareholder return on our common shares with the cumulative total shareholder return of (i) a broad equity index and (ii) a published industry or peer group index. The following chart compares the cumulative total shareholder return for our common shares with the cumulative shareholder return of companies on (i) the S&P 500 Index, (ii) the Russell 2000 and (iii) the NAREIT All Equity REIT Index as provided by NAREIT for the period beginning with October 22, 2004 (the first closing share price following the initial public offering of our common shares) and ending December 31, 2008.

 

30



Table of Contents

 

 

 

 

Period Ending

 

Index

 

10/22/04

 

12/31/04

 

06/30/05

 

12/31/05

 

06/30/06

 

12/31/06

 

06/30/07

 

12/31/07

 

06/30/08

 

12/31/08

 

U-Store-It Trust

 

100.00

 

108.44

 

120.81

 

133.37

 

122.93

 

137.82

 

112.91

 

65.58

 

88.71

 

34.12

 

S&P 500

 

100.00

 

110.97

 

110.65

 

116.30

 

119.45

 

134.67

 

144.26

 

142.29

 

125.34

 

89.65

 

Russell 2000

 

100.00

 

115.08

 

113.64

 

120.32

 

130.20

 

142.42

 

151.60

 

140.19

 

127.05

 

92.82

 

NAREIT All Equity REIT Index

 

100.00

 

111.12

 

118.21

 

124.64

 

140.74

 

168.34

 

158.43

 

141.92

 

136.82

 

88.38

 

 

The following table provides information about repurchases of the Company’s common shares during the three-month period ended December 31, 2008:

 

 

 

Total Number of
Shares Purchased

 

Average Price Paid
Per Share

 

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

 

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
(1)

 

 

 

 

 

 

 

 

 

 

 

October

 

134

 

8.46

 

N/A

 

3,000,000

 

November

 

N/A

 

N/A

 

N/A

 

3,000,000

 

December

 

N/A

 

N/A

 

N/A

 

3,000,000

 

 

 

 

 

 

 

 

 

 

 

Total

 

134

 

 

 

N/A

 

3,000,000

 

 


(1)  On June 27, 2007, the Company announced that the Board of Trustees approved a share repurchase program for up to 3.0 million of the Company’s outstanding common shares.  Unless terminated earlier by resolution of the Board of Trustees, the program will expire when the number of authorized shares has been repurchased.  For the three-month period ended December 31, 2008, the Company made no repurchases under this program.

 

31



Table of Contents

 

ITEM 6.  SELECTED FINANCIAL DATA

 

The following table sets forth selected financial and operating data on a historical consolidated basis for the Company, and on a combined historical basis for Acquiport/Amsdell (the “Predecessor”). The selected historical financial information as of December 31, 2008 and 2007 and for each of the periods indicated in the five-year period ended December 31, 2008 were derived from the Company’s and the Predecessor’s financial statements. Historical information for the Company has not been presented prior to October 21, 2004, the date on which the Company consummated the mergers of Amsdell Partners, Inc. and High Tide LLC with and into the Company, because during the period prior to the mergers, the Company did not have material corporate activity.

 

The Predecessor’s combined historical financial information includes the following entities, which are the entities referred to collectively in this Form 10-K as Acquiport/Amsdell, for periods prior to October 21, 2004: the operating partnership (formerly known as Acquiport/Amsdell I Limited Partnership, which is sometimes referred to herein as “Acquiport I”) and its consolidated subsidiaries, Acquiport/Amsdell III, LLC (“Acquiport III”), Acquiport/Amsdell IV, LLC, Acquiport/Amsdell V, LLC, Acquiport/Amsdell VI, LLC, Acquiport/Amsdell VII, LLC, and USI II, LLC. The Predecessor also includes three additional facilities: Lakewood, OH; Lake Worth, FL; and Vero Beach I, FL which were contributed to our operating partnership in connection with the IPO. All intercompany balances and transactions are eliminated in consolidation and combination. At October 20, 2004, the Predecessor owned 155 self-storage facilities.

 

The following data should be read in conjunction with the audited financial statements and notes thereto of the Company and the Predecessor and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

 

32



Table of Contents

 

 

 

The Company

 

The Predecessor
(1) (5)

 

 

 

 

 

 

 

 

 

 

 

Period

 

Period

 

 

 

 

 

 

 

 

 

 

 

October 21,

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

through

 

through

 

 

 

Year Ended December 31,

 

December 31,

 

October 20,

 

 

 

2008

 

2007

 

2006

 

2005

 

2004

 

2004

 

 

 

(in thousands, except per share data)

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

219,917

 

$

203,036

 

$

186,088

 

$

127,571

 

$

20,061

 

$

65,722

 

Other property related income

 

16,483

 

16,081

 

14,101

 

9,391

 

1,347

 

3,211

 

Other - related party

 

 

365

 

457

 

405

 

71

 

 

Total revenues

 

236,400

 

219,482

 

200,646

 

137,367

 

21,479

 

68,933

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

99,182

 

92,771

 

81,551

 

51,603

 

9,096

 

26,170

 

Property operating expense - related party

 

 

59

 

69

 

43

 

 

 

Depreciation and amortization

 

77,580

 

68,424

 

62,401

 

38,049

 

5,539

 

16,528

 

Asset write-off

 

 

 

305

 

 

 

 

Lease abandonment

 

 

1,316

 

 

 

 

 

General and administrative

 

24,964

 

21,966

 

21,675

 

17,786

 

4,140

 

 

General and administrative - related party

 

 

337

 

613

 

736

 

114

 

 

Management fees — related party (2)

 

 

 

 

 

 

3,689

 

Total operating expenses

 

201,726

 

184,873

 

166,614

 

108,217

 

18,889

 

46,387

 

Operating income

 

34,674

 

34,609

 

34,032

 

29,150

 

2,590

 

22,546

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on loans

 

(52,014

)

(54,108

)

(45,628

)

(31,907

)

(4,428

)

(19,385

)

Loan procurement amortization expense

 

(1,929

)

(1,772

)

(1,972

)

(2,045

)

(286

)

(5,958

)

Early extinguishment of debt

 

 

 

(1,907

)

(93

)

(7,012

)

 

Costs incurred to acquire management company —  related party

 

 

 

 

 

(22,152

)

 

Interest income

 

153

 

401

 

1,336

 

2,404

 

37

 

69

 

Other

 

94

 

118

 

191

 

(47

)

(78

)

 

Total

 

(53,696

)

(55,361

)

(47,980

)

(31,688

)

(33,919

)

(25,274

)

Loss from continuing operations before minority interest

 

(19,022

)

(20,752

)

(13,948

)

(2,538

)

(31,329

)

(2,728

)

Minority interest

 

1,482

 

1,704

 

424

 

(312

)

883

 

 

Loss from continuing operations

 

(17,540

)

(19,048

)

(13,524

)

(2,850

)

(30,446

)

(2,728

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

2,404

 

3,988

 

4,624

 

4,040

 

522

 

 

Gain on sale of storage facilities

 

19,720

 

2,517

 

 

179

 

 

 

Minority interest attributable to discontinued operations

 

(1,792

)

(534

)

349

 

199

 

15

 

 

Income from discontinued operations

 

20,332

 

5,971

 

4,973

 

4,418

 

537

 

 

Net income (loss)

 

$

2,792

 

$

(13,077

)

$

(8,551

)

$

1,568

 

$

(29,909

)

$

(2,728

)

Basic and diluted earnings (loss) per share from continuing operations

 

$

(0.30

)

$

(0.33

)

$

(0.24

)

$

(0.07

)

$

(0.81

)

 

 

Basic and diluted earnings per share from discontinued operations

 

$

0.35

 

$

0.11

 

$

0.09

 

$

0.11

 

$

0.01

 

 

 

Basic and diluted earnings (loss) per share

 

$

0.05

 

$

(0.22

)

$

(0.15

)

$

0.04

 

$

(0.80

)

 

 

Weighted average basic common shares outstanding (3)

 

57,621

 

57,497

 

57,287

 

42,120

 

37,478

 

 

 

Weighted average diluted common shares outstanding (3)

 

57,621

 

57,497

 

57,287

 

42,120

 

37,478

 

 

 

Distribution declared per share (4)

 

$

0.565

 

$

1.05

 

$

1.16

 

$

1.13

 

$

0.20

 

 

 

 

33



Table of Contents

 

 

 

The Company

 

The Predecessor (1)
(5)

 

 

 

 

 

 

 

 

 

 

 

Period

 

Period

 

 

 

 

 

 

 

 

 

 

 

October 21,

 

January 1,

 

 

 

 

 

 

 

 

 

 

 

through

 

through

 

 

 

Year Ended December 31,

 

December 31,

 

October 20,

 

 

 

2008

 

2007

 

2006

 

2005

 

2004

 

2004

 

 

 

(in thousands, except per share data)

 

Balance Sheet Data (as of end of period):

 

 

 

 

 

 

 

 

 

 

 

 

 

Storage facilities, net

 

$

1,559,958

 

$

1,647,118

 

$

1,566,815

 

$

1,246,295

 

$

729,155

 

 

 

Total assets

 

1,597,659

 

1,687,831

 

1,615,339

 

1,476,321

 

774,272

 

 

 

Revolving credit facility

 

172,000

 

219,000

 

90,500

 

 

 

 

 

Unsecured term loan

 

200,000

 

200,000

 

200,000

 

 

 

 

 

Secured term loan

 

57,419

 

47,444

 

 

 

 

 

 

Mortgage loans and notes payable

 

548,085

 

561,057

 

588,930

 

669,282

 

380,496

 

 

 

Total liabilities

 

1,028,705

 

1,083,230

 

930,948

 

714,157

 

406,243

 

 

 

Minority interest

 

46,026

 

48,982

 

56,898

 

63,695

 

10,804

 

 

 

Shareholders’/owners’ equity

 

522,928

 

555,619

 

627,493

 

698,469

 

357,225

 

 

 

Total liabilities and shareholders’/owners’ equity

 

1,597,659

 

1,687,831

 

1,615,339

 

1,476,321

 

774,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of facilities (end of period)

 

387

 

409

 

399

 

339

 

201

 

155

 

Total rentable square feet (end of period)

 

24,973

 

26,119

 

25,436

 

20,828

 

12,978

 

9,683

 

Occupancy percentage (end of period)

 

78.9

%

79.5

%

78.2

%

81.2

%

82.2

%

85.2

%

Cash dividends declared per share (4)

 

$

0.565

 

$

1.05

 

$

1.16

 

$

1.13

 

$

0.20

 

 

 

 


(1)

 

Represents historical financial data of our operating partnership, including three additional facilities acquired by our operating partnership from certain of the Amsdell Entities in connection with the IPO.

 

 

 

(2)

 

Prior to the IPO, management fees to related parties were paid to U-Store-It Mini Warehouse Co., the prior manager of our self-storage facilities that was acquired at the time of our IPO.

 

 

 

(3)

 

Excludes 5,198,855 operating partnership units issued at our IPO and in connection with the acquisition of facilities subsequent to our IPO. Operating partnership units have been excluded from the earnings per share calculations as there would be no effect on the earnings per share since, upon conversion, the minority interests’ share of income would also be added back to net income.

 

 

 

(4)

 

The Company announced a pro rata dividend of $0.2009 per common share on November 24, 2004, full quarterly dividends of $0.28 per common share on March 2, 2005, May 31, 2005 and August 24, 2005; dividends of $0.29 per common share on December 1, 2005, February 22, 2006, April 24, 2006, August 23, 2006, November 3, 2006, February 21, 2007, May 8, 2007, and August 14, 2007; dividends of $0.18 per common share on December 13, 2007, February 27, 2008, May 7, 2008, and August 6, 2008; and a dividend of $0.025 per common share on December 11, 2008.

 

 

 

(5)

 

For the period from October 21, 2004 through December 31, 2004, amount includes a one-time management contract termination charge of approximately $22.2 million related to the termination of our management contracts as a result of the purchase of U-Store-It Mini Warehouse Co. and approximately $7.0 million of expenses related to the early extinguishment of debt at the time of our IPO. Additionally, for the period from October 21, 2004 through December 31, 2004, general and administrative expense includes a one-time compensation charge of approximately $2.4 million for deferred shares granted to certain members of our senior management team in connection with our IPO.

 

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. The Company makes certain statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled “Forward-Looking Statements.” Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see the section in this report entitled “Risk Factors.”

 

Overview

 

On October 27, 2004, the Company completed its IPO, pursuant to which it sold an aggregate of 28,750,000 common shares (including 3,750,000 shares pursuant to the exercise of the underwriters’ over-allotment option) at an offering price of $16.00 per share. The IPO resulted in gross proceeds to the Company of $460.0 million. On October 7, 2005, the Company completed a follow-on public offering, pursuant to which it sold an aggregate of 19,665,000 common shares (including 2,565,000 shares pursuant to the exercise of the underwriters’ over-allotment option) at an offering price of $20.35 per share, for gross proceeds of approximately $400.2 million.

 

The Company is an integrated self-storage real estate company, which means that it has in-house capabilities in the operation, design, development, leasing, and acquisition of self-storage facilities. The Company has elected to be taxed as a REIT for federal tax purposes. At December 31, 2008 and 2007, the Company owned 387 and 409 self-storage facilities, respectively, totaling approximately 25.0 million and 26.1 million rentable square feet, respectively.

 

The Company derives revenues principally from rents received from its customers who rent units at its self-storage facilities under month-to-month leases. Therefore, our operating results depend materially on our ability to retain our existing customers and lease our available self-storage units to new customers while maintaining and, where possible, increasing our pricing levels. In addition, our operating results depend on the ability of our customers to make required rental payments to us. We believe that our decentralized approach to the management and operation of our facilities, which places an emphasis on local, market level oversight and control, allows us to respond quickly and effectively to changes in local market conditions, where appropriate increasing rents while maintaining occupancy levels, or increasing occupancy levels while maintaining pricing levels.

 

The Company typically experiences seasonal fluctuations in the occupancy levels of our facilities, which are generally slightly higher during the summer months due to increased moving activity.

 

Currently, the United States is in a deep recession that has resulted in higher unemployment, shrinking demand for products, large-scale business failures and tight credit markets.  Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending, as well as to increased bad debts due to recessionary pressures.  A continuation of ongoing adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, interest rates, tax rates, fuel and energy costs, and other matters could reduce consumer spending or cause consumers to shift their spending to other products and services.  A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability.

 

In the future, the Company intends to focus on increasing our internal growth and selectively pursuing targeted acquisitions and developments of self-storage facilities. We intend to incur additional debt in connection with any such future acquisitions or developments.

 

The Company has one reportable operating segment: we own, operate, develop, and acquire self-storage facilities.

 

The Company’s self-storage facilities are located in major metropolitan and rural areas and have numerous tenants per facility. No single tenant represents 1% or more of our revenues. The facilities in Florida, California, Texas and Illinois provided approximately 19%, 15%, 9% and 7%, respectively, of total revenues for the year ended December 31, 2008.

 

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Summary of Critical Accounting Policies and Estimates

 

Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements included in this report. Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this report. A summary of significant accounting policies is also provided in the notes to our consolidated financial statements (See Note 2 to the consolidated financial statements). These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Due to this uncertainty, actual results could differ materially from estimates calculated and utilized by management.

 

Basis of Presentation

 

The accompanying consolidated financial statements include all of the accounts of the Company, the operating partnership and the wholly-owned subsidiaries of the operating partnership. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this Annual Report on Form 10-K.

 

Self-Storage Facilities

 

The Company records self-storage facilities at cost less accumulated depreciation. Depreciation on the buildings and equipment is recorded on a straight-line basis over their estimated useful lives, which range from five to 40 years. Expenditures for significant renovations or improvements that extend the useful life of assets are capitalized. Repairs and maintenance costs are expensed as incurred.

 

When facilities are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. When a portfolio of facilities is acquired, the purchase price is allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates, which take into account the relative size, age and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available. Allocations to the individual assets and liabilities are based upon comparable market sales information for land, buildings and improvements and estimates of depreciated replacement cost of equipment.

 

In allocating the purchase price, the Company determines whether the acquisition includes intangible assets or liabilities. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no portion of the purchase price has been allocated to above- or below-market lease intangibles.  To date, no intangible asset has been recorded for the value of tenant relationships, because the Company does not have any concentrations of significant tenants and the average tenant turnover is fairly frequent. The Company recorded a $6.8 million intangible asset to recognize the value of in-place leases related to its acquisition of 14 self-storage facilities during the third quarter of 2007.  Subsequently, during the quarter ended March 31, 2008, the Company acquired a finite-lived intangible asset valued at approximately $1.0 million as part of its acquisition of one self-storage facility.  This asset represents the value of in-place leases at the time of acquisition.

 

Long-lived assets classified as “held for use” are reviewed for impairment when events and circumstances indicate that there may be an impairment. The carrying values of these long-lived assets are compared to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the asset exceeds the fair value based on its undiscounted future net operating cash flows attributable to the asset and circumstances indicate that the carrying value of the real estate asset may not be recoverable. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset.  Future events, or facts and circumstances that currently exist, that we have not yet identified, could cause us to conclude in the future that our long-lived assets are impaired.  Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.  The Company recorded impairment charges totaling $0.4 million for the year ended December 31, 2007, related to fire and flood damage and impairment charges totaling $0.5 million for the year ended December 31, 2008, related to fire and hurricane damage.

 

The Company considers long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits to a plan to sell a facility (or group of facilities), (b) the facility is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such facilities, (c) an active program to locate a buyer and other actions required to complete the plan to sell the facility have been initiated, (d) the sale of the facility is

 

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probable and transfer of the asset is expected to be completed within one year, (e) the facility is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

 

Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent the transaction from closing. In most transactions, these contingencies are not satisfied until the actual closing of the transaction; and, accordingly, the facility is not identified as held for sale until the closing actually occurs. However, each potential transaction is evaluated based on its separate facts and circumstances.

 

Revenue Recognition

 

Management has determined that all our leases with tenants are operating leases. Rental income is recognized in accordance with the terms of the lease agreements or contracts, which generally are month-to-month. Revenues from long-term operating leases are recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in deferred revenue, and contractually due but unpaid rents are included in other assets.

 

Share Based Payments

 

We apply the fair value method of accounting for contingently issued shares and share options issued under our equity incentive plans. Accordingly, share compensation expense was recorded ratably over the vesting period relating to such contingently issued shares and options. The Company has elected to recognize compensation expense on a straight-line method over the requisite service period.

 

Minority Interests

 

Minority Interests include income allocated to holders of operating partnership units and income allocated to our partner’s interests in consolidated joint ventures. Income is allocated to the minority interests based on their ownership percentage of the operating partnership. This ownership percentage, as well as the total net assets of the operating partnership, changes when additional common shares or operating partnership units are issued. Such changes result in an allocation between shareholders’ equity and Minority Interests in the Consolidated Balance Sheets. Due to the number of such capital transactions that occur each period, we have presented a single net effect of all such allocations for the period as the “Adjustment for Minority Interest in Operating Partnership” in our Consolidated Statements of Shareholders’ Equity and Owners’ Equity (Deficit) (rather than separately allocating the minority interest for each individual capital transaction).

 

Income Taxes

 

The Company elected to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code beginning with the period from October 21, 2004 (commencement of operations) through December 31, 2004.  In management’s opinion, the requirements to maintain these elections are being met.  Accordingly, no provision for federal income taxes has been reflected in the consolidated financial statements other than for operations conducted through our taxable REIT subsidiaries.

 

Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial reporting purposes due to differences in cost basis, the estimated useful lives used to compute depreciation, and the allocation of net income and loss for financial versus tax reporting purposes.

 

The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits.  The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income and (b) 95% of the Company’s net capital gain exceeds cash distributions and certain taxes paid by the Company.

 

Recent Accounting Pronouncements

 

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“EITF 03-6-1”).  EITF 03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or

 

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dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method.  EITF 03-6-1 applies to our fiscal years beginning on January 1, 2009 and requires that all prior-period earnings per share data be adjusted retrospectively.  Early adoption is prohibited.  The Company does not expect the adoption of EITF 03-6-1 will have a material impact on our consolidated financial statements.

 

In May 2008, the FASB issued FSP No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (“APB 14-1”) that affects the accounting treatment for convertible debt instruments that may be settled wholly or partially in cash.  APB 14-1 requires that instruments within its scope be separated into their liability and equity components at initial recognition by recording the liability component at the fair value of a similar liability that does not have an associated equity component and attributing the remaining proceeds from issuance to the equity component. The excess of the principal amount of the liability component over its initial fair value will be amortized to interest expense using the interest method.  APB 14-1 applies to our fiscal years beginning on January 1, 2009 and requires retrospective application to all periods presented with early adoption prohibited.  The Company does not expect the adoption of APB 14-1 will have a material impact on our consolidated financial statements.

 

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60 (“SFAS 163”). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on our consolidated financial statements.

 

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). Under SFAS 162, the GAAP hierarchy will now reside in the accounting literature established by the FASB. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” We believe that the adoption of this standard on its effective date will not have a material effect on our consolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an Amendment of FASB Statement No. 133 (“SFAS 161”).  SFAS 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows.  SFAS 161 is effective on January 1, 2009.  We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141(R)”).  SFAS 141(R) establishes principles and requirements for recognizing identifiable assets acquired, liabilities assumed, noncontrolling interest in the acquiree, goodwill acquired in the combination or the gain from a bargain purchase, and disclosure requirements.  Under this revised statement, all costs incurred to effect an acquisition will be recognized separately from the acquisition.  Also, restructuring costs that are expected but the acquirer is not obligated to incur will be recognized separately from the acquisition.  SFAS 141(R) is effective for all transactions entered into on or after January 1, 2009.  The impact of the adoption of this standard will be dependent on levels of costs incurred to effect future acquisitions.  These costs will now be expensed as incurred.

 

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”).  SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent are clearly identified.  In addition, it requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the income statement.  SFAS 160 is effective on January 1, 2009.  The Company is currently assessing the impacts on its consolidated financial statements.

 

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In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date.  This statement became effective on January 1, 2008.  The Company did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether or not we will elect this option for any eligible financial instruments we acquire in the future.

 

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. The adoption of this standard on January 1, 2008 did not have a material effect on our consolidated financial statements.

 

Results of Operations

 

The following discussion of our results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto. Historical results set forth in the consolidated statements of operations reflect only the existing facilities and should not be taken as indicative of future operations.

 

Comparison of Operating Results for the Years Ended December 31, 2008 and 2007

 

Acquisition and Development Activities

 

The comparability of the Company’s results of operations is significantly affected by acquisition activities in 2008 and 2007 as listed below. At December 31, 2008 and 2007, the Company owned 387 and 409 self-storage facilities and related assets, respectively.

 

·                  In 2008, one self-storage facility was acquired for approximately $13.3 million (the “2008 Acquisition”).

 

·                  In 2008, 23 self-storage facilities were sold for approximately $62.0 million (the “2008 Dispositions”).

 

·                  In 2007, 17 self-storage facilities were acquired for approximately $140.5 million (the “2007 Acquisitions”).

 

·                  In 2007, five self-storage facilities were sold for approximately $19.2 million (the “2007 Dispositions”).

 

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A comparison of net income (loss) for the years ended December 31, 2008 and 2007 is as follows:

 

 

 

For the year ended December 31,

 

 

 

2008

 

2007

 

 

 

(in thousands)

 

REVENUES

 

 

 

Rental income

 

$

219,917

 

$

203,036

 

Other property related income

 

16,483

 

16,081

 

Other - related party

 

 

365

 

Total revenues

 

236,400

 

219,482

 

OPERATING EXPENSES

 

 

 

 

 

Property operating expenses

 

99,182

 

92,771

 

Property operating expenses - related party

 

 

59

 

Depreciation and amortization

 

77,580

 

68,424

 

Lease abandonment

 

 

1,316

 

General and administrative

 

24,964

 

21,966

 

General and administrative - related party

 

 

337

 

Total operating expenses

 

201,726

 

184,873

 

OPERATING INCOME

 

34,674

 

34,609

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Interest:

 

 

 

 

 

Interest expense on loans

 

(52,014

)

(54,108

)

Loan procurement amortization expense

 

(1,929

)

(1,772

)

Interest income

 

153

 

401

 

Other

 

94

 

118

 

Total other expense

 

(53,696

)

(55,361

)

LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS

 

(19,022

)

(20,752

)

MINORITY INTERESTS

 

1,482

 

1,704

 

NET LOSS FROM CONTINUING OPERATIONS

 

(17,540

)

(19,048

)

DISCONTINUED OPERATIONS

 

 

 

 

 

Income from operations

 

2,404

 

3,988

 

Gain on disposition of discontinued operations

 

19,720

 

2,517

 

Minority interest attributable to discontinued operations

 

(1,792

)

(534

)

Income from discontinued operations

 

20,332

 

5,971

 

NET INCOME (LOSS)

 

$

2,792

 

$

(13,077

)

 

Total Revenues

 

Rental income increased from $203.0 million in 2007 to $219.9 million in 2008, an increase of $16.9 million, or 8%. This increase is primarily attributable to (i) additional rental income from the 2008 Acquisition of $1.2 million, (ii) a full year contribution from the 2007 Acquisitions resulting in additional rental income of $7.5 million, and (iii) an increase in rental income from our pool of same-store facilities of approximately $8.3 million resulting from rate increases and an increase in realized rent per occupied square foot of 3.9% during the 2008 period as compared to the 2007 period.

 

Other property related income increased from $16.1 million in 2007 to $16.5 million in 2008, an increase of $0.4 million, or 2%.  This increase is primarily attributable to increased administrative fees across the portfolio of storage facilities during 2008 as compared to 2007.

 

Other — related party decreased from $0.4 million in 2007 to $0 in 2008 due to a decrease in third party management fee income pursuant to the termination of the Rising Tide property management agreement in September 2007.

 

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Total Operating Expenses

 

Property operating expenses, including property operating expenses — related party, increased from $92.8 million in 2007 to $99.2 million in 2008, an increase of $6.4 million, or 7%. This increase is primarily attributable to (i) additional operating expenses from the 2008 Acquisition of $0.5 million, (ii) a full year contribution from the 2007 Acquisitions resulting in additional operating expenses of $3.3 million, and (iii) an increase in operating expenses from our pool of same-store facilities of approximately $1.6 million.  The increase in our same-store facilities’ operating expenses in 2008 as compared to 2007 primarily relates to increased marketing and utility expenses of $0.6 million and $0.6 million, respectively.

 

Depreciation and amortization increased from $68.4 million in 2007 to $77.6 million in 2008, an increase of $9.2 million, or 13%. The increase is attributable to additional depreciation expense of $1.8 million related to the 2008 Acquisition and a full year of depreciation expense related to the 2007 Acquisitions in the 2008 period as compared to the 2007 period, an increase from our pool of same-store facilities of approximately $1.4 million, and additional intangible amortization expense of $5.5 million related to the 2008 Acquisition and 2007 Acquisitions in the 2008 period as compared to the 2007 period.

 

In August 2007, the Company abandoned certain office space in Cleveland, OH that was previously used for its corporate offices.  The related leases have expiration dates ranging from December 31, 2008 through December 31, 2014. Upon vacating the space, the Company entered into a sub-lease agreement with a sub-tenant to lease the majority of the space for the duration of the term.  As a result of this exit activity, the Company recognized a “Lease abandonment charge” of $1.3 million during 2007.

 

General and administrative expenses, including General and administrative expenses — related party increased from $22.3 million in 2007 to $25.0 million in 2008, an increase of $2.7 million, or 12%.  The increase is primarily attributable to (i) approximately $1.1 million of due diligence costs that were written off during the 2008 period (ii) $0.9 million of increased amortization of equity compensation during the 2008 period as compared to the 2007 period and (iii) $2.1 million of severance related costs incurred during the 2008 period, offset by $1.2 million of non-recurring legal costs incurred during the 2007 period.  Excluding the 2008 charges for due diligence and severance costs, reduced by the non-recurring charge for legal costs in 2007, general and administrative expenses increased by approximately $0.7 million, or approximately 3%.

 

Total Other Income (Expenses)

 

Interest expense decreased from $54.1 million in the 2007 period to $52.0 million in the 2008 period, a decrease of $2.1 million, or 4%. Although the Company incurred additional debt to finance certain 2007 and 2008 acquisitions, lower interest rates on unsecured debt and loan repayments during the 2008 period as compared to the 2007 period resulted in an overall decrease in interest expense during 2008 as compared to 2007.

 

Loan procurement amortization expense increased from $1.8 million in the 2007 period to $1.9 million in the 2008 period, an increase of $0.1 million, or 6%.  The increase is attributable to additional costs incurred in relation to the secured term loan entered into in April 2008 and the related amortization of those costs in the 2008 period as compared to no similar amortization in the 2007 period.

 

Interest income decreased to $0.2 million in the 2008 period from $0.4 million in the 2007 period. This decrease is primarily attributable to lower interest rates earned on daily operating cash during the 2008 period as compared to the 2007 period.

 

Discontinued Operations

 

Gains on disposition of discontinued operations increased from $2.5 million in the 2007 period to $19.7 million in the 2008 period, an increase of $17.2 million, as a result of the sale of five assets during the 2007 period as compared to 23 assets sold during the 2008 period.

 

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Comparison of Operating Results for the Years Ended December 31, 2007 and 2006

 

Acquisition and Development Activities

 

The comparability of the Company’s results of operations is significantly affected by acquisition activities in 2007 and 2006 as listed below. At December 31, 2007 and 2006, the Company owned 409 and 399 self-storage facilities and related assets, respectively.

 

·                  In 2007, 17 self-storage facilities were acquired for approximately $140.5 million (the “2007 Acquisitions”).

 

·                  In 2007, five self-storage facilities were sold for approximately $19.2 million (the “2007 Dispositions”).

 

·                  In 2006, 60 self-storage facilities were acquired for approximately $362.4 million (the “2006 Acquisitions”).

 

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A comparison of net loss for the years ended December 31, 2007 and 2006 is as follows:

 

 

 

For the year ended December 31,

 

 

 

2007

 

2006

 

 

 

(in thousands)

 

REVENUES

 

 

 

 

 

Rental income

 

$

203,036

 

$

186,088

 

Other property related income

 

16,081

 

14,101

 

Other - related party

 

365

 

457

 

Total revenues

 

219,482

 

200,646

 

OPERATING EXPENSES

 

 

 

 

 

Property operating expenses

 

92,771

 

81,551

 

Property operating expenses - related party

 

59

 

69

 

Depreciation and amortization

 

68,424

 

62,401

 

Asset write-off

 

 

305

 

Lease abandonment

 

1,316

 

 

General and administrative

 

21,966

 

21,675

 

General and administrative - related party

 

337

 

613

 

Total operating expenses

 

184,873

 

166,614

 

OPERATING INCOME

 

34,609

 

34,032

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

Interest:

 

 

 

 

 

Interest expense on loans

 

(54,108

)

(45,628

)

Loan procurement amortization expense

 

(1,772

)

(1,972

)

Write-off of loan procurement cost due to early extinguishment of debt

 

 

(1,907

)

Interest income

 

401

 

1,336

 

Other

 

118

 

191

 

Total other expense

 

(55,361

)

(47,980

)

LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS

 

(20,752

)

(13,948

)

MINORITY INTERESTS

 

1,704

 

424

 

NET LOSS FROM CONTINUING OPERATIONS

 

(19,048

)

(13,524

)

DISCONTINUED OPERATIONS

 

 

 

 

 

Income from operations

 

3,988

 

4,624

 

Gain on disposition of discontinued operations

 

2,517

 

 

Minority interest attributable to discontinued operations

 

(534

)

349

 

Income from discontinued operations

 

5,971

 

4,973

 

NET LOSS

 

$

(13,077

)

$

(8,551

)

 

Total Revenues

 

Rental income increased from $186.1 million in 2006 to $203.0 million in 2007, an increase of $16.9 million, or 9%. This increase is primarily attributable to (i) additional rental income from the 2007 Acquisitions, (ii) a full year contribution from the 2006 Acquisitions, and (iii) an increase in rental income from our pool of same-store facilities of approximately $3.0 million resulting from a 50 basis point increase in average occupancy and 130 basis point increase in realized annual rent per occupied square foot in 2007 as compared to 2006.

 

Other property related income increased from $14.1 million in 2006 to $16.1 million in 2007, an increase of $2.0 million, or 14%. This increase is primarily attributable to the other property income from the 2007 Acquisitions and a full year contribution from the 2006 Acquisitions.

 

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Other — related party decreased from $0.5 million in 2006 to $0.4 million, a decrease of $0.1 million, or 20%, due to a decrease in third party management fee income pursuant to the termination of the Rising Tide property management agreement in September 2007.

 

Total Operating Expenses

 

Property operating expenses, including property operating expenses — related party, increased from $81.6 million in 2006 to $92.8 million in 2007, an increase of $11.2 million, or 14%. This increase is primarily attributable to (i) additional operating expenses from the 2007 Acquisitions, (ii) a full year of operating expenses from the 2006 Acquisitions, and (iii) an increase in repair and maintenance expenses of $1.2 million from our pool of same-store facilities.

 

Depreciation and amortization increased from $62.4 million in 2006 to $68.4 million in 2007, an increase of $6.0 million, or 10%. The increase is primarily attributable to additional depreciation expense related to the 2007 Acquisitions and a full year of depreciation expense related to the 2006 Acquisitions.

 

Asset write-off of $0.3 million represents the disposal of the Company’s former point of sale system, which was replaced with CentershiftTM in the third quarter of 2006.

 

In August 2007, the Company abandoned certain office space in Cleveland, OH that was previously used for its corporate offices.  The related leases have expiration dates ranging from December 31, 2008 through December 31, 2014. Upon vacating the space, the Company entered into a sub-lease agreement with a sub-tenant to lease the majority of the space for the duration of the term.  As a result of this exit activity, the Company recognized a “Lease abandonment charge” of $1.3 million during 2007.

 

General and administrative expenses, including General and administrative expenses — related party, remained unchanged at $22.3 million.  The 2006 period includes approximately $2.7 million of severance costs related to a Company restructuring of certain management positions; the 2007 period includes approximately $1.2 million of non-recurring legal and professional costs associated with the litigation and related settlement with the Amsdell Family.

 

Total Other Income (Expenses)

 

Interest expense increased from $45.6 million in 2006 to $54.1 million in 2007, an increase of $8.5 million, or 19%. The increase is attributable to a higher amount of outstanding debt in 2007 primarily resulting from the financing of the 2007 Acquisitions, which was primarily funded through the revolving credit facility and secured term loan.  An additional source of the increase is a full year of interest expense related to debt assumed in conjunction with the 2006 Acquisitions.

 

Loan procurement amortization expense decreased from $2.0 million in 2006 to $1.8 million in 2007, a decrease of $0.2 million, or 10%.  The decrease is attributable to the repayment of five mortgages during 2007.

 

In conjunction with the two revolving credit facility financings during 2006, the Company incurred charges of $1.9 million relating to the write-off of unamortized loan procurement costs.

 

Interest income decreased to $0.4 million in 2007 from $1.3 million in 2006. This decrease is primarily attributable to the Company’s investment of excess proceeds from the 2005 follow-on public offering in interest bearing accounts and in short-term marketable securities until the excess proceeds were used to fund acquisitions or pay down existing debt during the first quarter of 2006.

 

Discontinued Operations

 

Gains on disposition of discontinued operations increased from $0 in the 2006 period to $2.5 million in the 2007 period, an increase of $2.5 million, as a result of the sale of five assets during the 2007 period as compared to no similar activity in the 2006 period.

 

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Table of Contents

 

Same-Store Facility Results

 

The Company considers its same-store portfolio to consist of only those facilities owned at the beginning and at the end of the applicable periods presented. The following same-store presentation is considered to be useful to investors in evaluating our performance because it provides information relating to changes in facility-level operating performance without taking into account the effects of acquisitions, developments or dispositions. The following table sets forth operating data for our same-store portfolio for the periods presented.

 

Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007

 

The following table provides information pertaining to our Same-Store portfolio for 2008 and 2007:

 

 

 

Same Store Property Portfolio

 

Properties
Acquired

 

Other/
Eliminations

 

Total Portfolio

 

 

 

 

 

 

 

Increase/

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase/

 

 

 

 

 

2008

 

2007

 

(Decrease)

 

Change

 

2008

 

2007

 

2008

 

2007

 

2008

 

2007

 

(Decrease)

 

Change

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

205,605

 

$

197,262

 

$

8,343

 

4

%

$

14,312

 

$

5,774

 

$

 

$

 

$

219,917

 

$

203,036

 

$

16,881

 

8

%

Other property related income

 

15,362

 

15,186

 

176

 

1

%

1,121

 

895

 

 

 

16,483

 

16,081

 

402

 

2

%

Other - related party

 

 

 

 

 

 

365

 

 

 

 

365

 

(365

)

-100

%

Total revenues

 

220,967

 

212,448

 

8,519

 

4

%

15,433

 

7,034

 

 

 

236,400

 

219,482

 

16,918

 

8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

84,323

 

82,681

 

1,642

 

2

%

7,352

 

2,892

 

7,507

 

7,198

 

99,182

 

92,771

 

6,411

 

7

%

Property operating expenses - related party

 

 

 

 

 

 

 

 

59

 

 

59

 

(59

)

-100

%

Subtotal

 

84,323

 

82,681

 

1,642

 

2

%

7,352

 

2,892

 

7,507

 

7,257

 

99,182

 

92,830

 

6,352

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET OPERATING INCOME:

 

136,644

 

129,767

 

6,877

 

5

%

8,081

 

4,142

 

(7,507

)

(7,257

)

137,218

 

126,652

 

10,566

 

8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,580

 

68,424

 

9,156

 

13

%

Lease abondonment charge

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,316

 

(1,316

)

 

General and administrative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,964

 

21,966

 

2,998

 

14

%

General and administrative - related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

337

 

(337

)

-100

%

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102,544

 

92,043

 

10,501

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,674

 

34,609

 

65

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,014

)

(54,108

)

2,094

 

-4

%

Loan procurement amortization expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,929

)

(1,772

)

(157

)

9

%

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

153

 

401

 

(248

)

-62

%

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

118

 

(24

)

-20

%

Total other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(53,696

)

(55,361

)

1,665

 

-3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,022

)

(20,752

)

1,730

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MINORITY INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,482

 

1,704

 

(222

)

-13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,540

)

(19,048

)

1,508

 

-8

%

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,404

 

3,988

 

(1,584

)

-40

%

Net gain on disposition of discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,720

 

2,517

 

17,203

 

683

%

Minority interest attributable to discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,792

)

(534

)

(1,258

)

236

%

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,332

 

5,971

 

14,361

 

241

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,792

 

$

(13,077

)

$

15,869

 

-121

%

 

Same-store revenues increased from $197.3 million in the 2007 period to $205.6 million in the 2008 period, an increase of $8.3 million, or 4%.   This increase is primarily attributable to an increase in realized rent per occupied square foot of 3.9% during the 2008 period as compared to the 2007 period.  Same-store property operating expenses increased from $82.7 million in 2007 to $84.3 million in 2008, an increase of $1.6 million, or 2%.  The increase in our same-store facilities’ operating expenses in the 2008 period as compared to the 2007 period primarily relates to increased marketing expenses and utility expenses of $0.6 million and $0.6 million, respectively.

 

Non-GAAP Financial Measures

 

NOI

 

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 (loss): interest expense on loans, loan procurement amortization expense, minority interest, other, depreciation and amortization, lease abandonment charge,

 

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general and administrative, and general and administrative - related party; and deducting from net income: income from discontinued operations, gains on sale of self-storage facilities, other, and interest income. NOI is not a measure of performance calculated in accordance with GAAP.

 

We use 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.

 

We believe NOI is useful to investors in evaluating our operating performance because:

 

·         It is one of the primary measures used by our management and our facility managers to evaluate the economic productivity of our facilities, including our ability to lease our facilities, increase pricing and occupancy and control our property operating expenses;

 

·         It 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 upon accounting methods and the book value of assets; and

 

·         We believe it helps our investors to meaningfully compare the results of our operating performance from period to period by removing the impact of our capital structure (primarily interest expense on our outstanding indebtedness) and depreciation of our basis in our assets from our operating results.

 

There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income. 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.

 

Cash Flows

 

Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007

 

A comparison of cash flow provided by operating, investing and financing activities for the years ended December 31, 2008 and 2007 is as follows:

 

 

 

Year Ended December 31,

 

 

 

Net cash flow provided by (used in):

 

2008

 

2007

 

Change

 

 

 

(in thousands)

 

 

 

Operating activities

 

$

67,012

 

$

62,874

 

$

4,138

 

Investing activities

 

$

27,177

 

$

(153,576

)

$

180,753

 

Financing activities

 

$

(94,962

)

$

75,503

 

$

(170,465

)

 

Cash provided by operations increased from $62.9 million in 2007 to $67.0 million in 2008, an increase of $4.1 million, or 7%. The increase is primarily attributable to (i) 2008 net income of $2.8 million as compared to net losses of $13.1 million in 2007, (ii) additional depreciation and amortization expense of $7.9 million in the 2008 period as compared to the 2007 period related to the 2008 Acquisition and a full year the 2007 Acquisitions, and (iii) an increase of $4.2 million in the change in other assets during the 2008 period as compared to the 2007 period as a result of the timing of certain payments, offset by (a) increased gains on dispositions of $17.4 million in the 2008 period as compared to the 2007 period due to 23 dispositions during the 2008 period as compared to five dispositions during the 2007 period and (b) a decrease of $6.7 million in the change in accounts payable and accrued expenses during the 2008 period as compared to the 2007 period as a result of the timing of certain payments.

 

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Cash used in or provided by investing activities changed from a use of $153.6 million in 2007 to proceeds of $27.2 million in 2008, a change of $180.8 million. The change in cash related to investing activities is primarily attributable to (i) higher acquisition activity in the 2007 period (17 facilities for an aggregate purchase price of $140.5 million) relative to the 2008 period (one facility for an aggregate purchase price of $13.3 million), (ii) higher capital improvement activity in the 2007 period ($29.3 million in the 2007 period compared to $16.0 million in the 2008 period), (iii) proceeds from dispositions during 2008 of $56.9 million compared to proceeds from dispositions during 2007 of $17.9 million, (iv) insurance settlements of $1.5 million in 2008 compared to $0 in 2007, and (v) a decrease in the change in restricted cash of $1.3 million in the 2008 period as compared to the 2007 period.

 

Cash used in or provided by financing activities changed from proceeds of $75.5 million in 2007 to a use of $95.0 million in 2008, a change of $170.5 million. The change is primarily attributable to net borrowings of $148.4 million during the 2007 period as compared to net principal payments of $50.0 million in the 2008 period and a decrease in the dividends paid during 2008 to $0.72 per share from $1.16 per share in 2007, which reduced distributions paid to shareholders and minority partners by $27.5 million during the 2008 period as compared to the 2007 period.

 

Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2006

 

A comparison of cash flow operating, investing and financing activities for the years ended December 31, 2007 and 2006 is as follows:

 

 

 

Year Ended December 31,

 

 

 

Net cash flow provided by (used in):

 

2008

 

2007

 

Change

 

 

 

(in thousands)

 

 

 

Operating activities

 

$

62,874

 

$

64,567

 

$

(1,693

)

Investing activities

 

$

(153,576

)

$

(248,047

)

$

94,471

 

Financing activities

 

$

75,503

 

$

104,297

 

$

(28,794

)

 

Cash provided by operations decreased from $64.6 million in 2006 to $62.9 million in 2007, a decrease of $1.7 million, or 3%. The decrease is primarily attributable to the increase in certain prepaid assets, which is a result of the timing of certain expenditures.

 

Cash used in investing activities decreased from $248.0 million in 2006 to $153.6 million in 2007, a decrease of $94.4 million, or 38%. The decrease in cash used in investing activities is primarily attributable to $349.8 million used to fund the 2006 Acquisitions offset by the $140.5 million used to fund the 2007 Acquisitions.  Additionally, the net proceeds from sales of marketable securities in 2006 resulted in $95.1 million while the property dispositions in 2007 provided $18.0 million.

 

Cash provided by financing activities decreased from $104.3 million in 2006 to $75.5 million in 2007, a decrease of $28.8 million, or 28%. This decrease is primarily attributable to the net debt assumed during 2006 of $176.4 million as compared to the net debt assumed during 2007 of $150.6 million.  This fluctuation is a result of the 2006 Acquisition activity.

 

Liquidity and Capital Resources

 

As of December 31, 2008, we had approximately $3.7 million in available cash and cash equivalents. In addition, we had approximately $78.0 million of available borrowings under our revolving credit facility.

 

In November 2006, we and our Operating Partnership entered into a three-year, $450.0 million unsecured credit facility with Wachovia Capital Markets, LLC and Keybanc Capital Markets, replacing our existing $250.0 million unsecured revolving credit facility. The facility consists of a $200 million unsecured term loan and a $250 million revolving credit facility.  The facility has a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $675,000, and are not in default under the facility.  The Company currently intends to exercise this extension option prior to the November 20, 2009 termination date.  Borrowings under the credit facility bear interest, at our option, at either an alternative base rate or a Eurodollar rate, in each case, plus an applicable margin based on our leverage ratio or our credit rating.  The alternative base interest rate is a fluctuating rate equal

 

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to the higher of the prime rate or the sum of the federal funds effective rate plus 50 basis points.  The applicable margin for the alternative base rate will vary from 0.00% to 0.50% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or nine months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.00% to 1.50% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating.

 

On September 14, 2007, the Company and its Operating Partnership entered into a credit agreement that allowed for total secured term loan borrowings of $50.0 million and subsequently amended the agreement on April 3, 2008 to allow for total secured term loan borrowings of $57.4 million. The term loans have a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $86,000, and are not in default under the facility.  The Company currently intends to exercise these extension options prior to the November 20, 2009 termination date.  Each term loan bears interest at either an alternative base rate or a Eurodollar rate, at our option, in each case plus an applicable margin.  The applicable margin for the alternative base rate will vary from 0.10% to 0.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or nine months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.10% to 1.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating.  As of December 31, 2008, there were two secured term loans outstanding totaling $57.4 million.  The outstanding term loans are secured by a pledge by our Operating Partnership of all equity interests in YSI RT LLC, the wholly-owned subsidiary of our Operating Partnership that acquired eight self-storage facilities in September 2007 and one self-storage facility in May 2008.  At December 31, 2008, the outstanding term loans had an interest rate of 2.05%.  Financial covenants for the secured term loans are identical to the financial covenants for the unsecured credit facility described above.

 

Our ability to borrow and to exercise our option to extend the termination date under this credit facility and secured term loan will be subject to our ongoing compliance with the following financial covenants, among others:

 

·         Maximum total indebtedness to total asset value of 65%;

 

·         Minimum interest coverage ratio of 2.0:1.0;

 

·         Minimum fixed charge coverage ratio of 1.6:1.0; and

 

·         Minimum tangible net worth of $673.2 million plus 75% of net proceeds from future equity issuances.

 

We are currently in compliance with all of our covenants and anticipate being in compliance with all of our covenants through the duration of the term of the credit facility and secured term loan, including the extension period through November 20, 2010.

 

During 2007 and 2008, the Company entered into interest rate swap agreements designated as cash flow hedges that are designed to reduce the impact of interest rate changes on its variable rate debt. At December 31, 2008, the Company had interest rate swap agreements for notional principal amounts aggregating $300 million. The swap agreements effectively fix the 30-day LIBOR interest rate on $50 million of borrowings at 4.7725% per annum, $25 million of borrowings at 4.716% per annum and on $25 million of borrowings at 2.3400% per annum, in each case until November 20, 2009.  Additionally, the Company entered into interest rate cap agreements on $40 million of LIBOR based borrowings at 5.50% per annum that matured in June 2008.  In April 2008, the Company entered into an interest rate swap agreement for notional principal amounts aggregating $200 million, that effectively fix the 30-day LIBOR interest rate on $200 million of LIBOR based borrowings at 2.7625% per annum until November 20, 2009.  The notional amount at December 31, 2008 provides an indication of the extent of the Company’s involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.  The Company is exposed to the potential risk of counterparty default or non-payment with respect to its interest rate swap agreements, in which event the Company could suffer a material loss on the value of those agreements; however, the Company does not currently believe that its counterparties on its swap agreements are likely to default or not perform their obligations under those agreements.

 

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Our cash flow from operations has historically been one of our primary sources of liquidity to fund debt service, distributions and capital expenditures. We derive substantially all of our revenue from customers who lease space from us at our facilities. Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our customers.  We believe that the facilities in which we invest — self-storage facilities — are less sensitive than other real estate product types to current near-term economic downturns. However, prolonged economic downturns will adversely affect cash flow from operations.

 

In order to qualify as a REIT for federal income tax purposes, we are required to distribute at least 90% of our REIT taxable income, excluding capital gains, to our shareholders on an annual basis or pay federal income tax.  The nature of our business, coupled with the requirement that we distribute a substantial portion of our income on an annual basis, will cause us to have substantial liquidity needs over both the short term and the long term.

 

Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our facilities, refinancing of certain mortgage indebtedness, interest expense and scheduled principal payments on debt, expected distributions to limited partners and shareholders and recurring capital expenditures. These expenses, as well as the amount of recurring capital expenditures that we incur, will vary from year to year, in some cases significantly.  We expect such recurring capital expenditures in 2009 to be approximately $7 million to $9 million.  In addition, our currently scheduled principal payments on debt are approximately $524 million in 2009 and $113 million in 2010.

 

Although recent credit-market disruptions have significantly affected our near term ability to obtain additional capital, we expect to meet our 2009 liquidity needs of $7 million to $9 million of recurring capital expenditures and $524 million of schedule principal payments, which includes approximately $95.0 million of required principal payments related to mortgage loans and notes payable, by (i) exercising our option to extend the termination date of the credit facility and secured term loans from November 20, 2009 to November 20, 2010, resulting in deferring $429 million of principal payments to 2010 from 2009, (ii) borrowing $78 million under our credit facility, and (iii) generating cash from operations in excess of the remaining liquidity needs.

 

We are also focused on addressing our 2010 liquidity needs.  We anticipate meeting our 2010 liquidity needs through a combination of the following activities: cash generated from operations, proceeds from additional mortgage debt, the issuance of public equity or debt instruments, the pursuit of joint ventures, and future sales of existing properties.  Additionally, we are discussing the potential to extend and/or rework the terms of the current agreements with our unsecured lenders.

 

Our most restrictive debt covenants limit the amount of additional leverage we can add; however, we believe the sources of capital described above are adequate to execute our current business plan and remain in compliance with our debt covenants.

 

Our liquidity needs beyond 2010 consist primarily of funds necessary to fund: (i) repayment of indebtedness at maturity; (ii) non-recurring capital expenditures; (iii) redevelopment of operating facilities; (iv) acquisitions of additional facilities; and (v) development of new facilities. In addition, certain of our mortgages will have significant outstanding balances on their maturity dates, commonly known as “balloon payments.”  We do not expect that we will have sufficient funds on hand to cover these long-term cash requirements. We will have to satisfy our needs through either additional borrowings, including borrowings under a new or revised revolving credit facility, sales of common or preferred shares and/or cash generated through facility dispositions and joint venture transactions.

 

Notwithstanding the discussion above, we believe that, as a publicly traded REIT, we will have access to multiple sources of capital to fund long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, we cannot provide any assurance that this will be the case. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. In addition, the current dislocation in the United States debt markets has significantly reduced the availability and increased the cost of long-term debt capital, including conventional mortgage financing and commercial mortgage-backed securities financing.  There can be no assurance that such capital will be readily available in the foreseeable future.  Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

 

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Other Material Changes in Financial Position

 

 

 

December 31,

 

Increase

 

 

 

2008

 

2007

 

(decrease)

 

 

 

(in thousands)

 

Selected Assets

 

 

 

 

 

 

 

Storage facilities — net

 

$

1,559,958

 

$

1,647,118

 

$

(87,160

)

 

 

 

 

 

 

 

 

Selected Liabilities

 

 

 

 

 

 

 

Revolving credit facility

 

$

172,000

 

$

219,000

 

$

(47,000

)

Secured term loan

 

$

57,419

 

$

47,444

 

$

9,975

 

Distributions payable

 

$

1,572

 

$

11,300

 

$

(9,728

)

 

Storage facilities decreased $87.2 million during 2008 primarily as a result of $72.7 million of depreciation recognized during 2008, $40.3 million related to the 2008 Dispositions, and $2.4 million related to the held for sale property, offset by $13 million related to fixed asset additions and $14.2 million related to the 2008 Acquisition.

 

Our revolving credit facility decreased $47.0 million as a result of multiple paydowns related to proceeds from the 2008 Dispositions, and the secured term loan increased $10.0 million as a result of the 2008 Acquisition.  Distributions payable decreased as a reduction in the quarterly dividends declared from $0.18 per share in the fourth quarter of 2007 to $0.025 per share in the fourth quarter of 2008.

 

Contractual Obligations

 

The following table summarizes our known contractual obligations as of December 31, 2008 (in thousands):

 

 

 

Payments Due by Period

 

 

 

Total

 

2009

 

2010

 

2011

 

2012

 

2013

 

2014 and
thereafter

 

Mortgage loans and notes payable (a)

 

$

547,391

 

$

94,511

 

$

112,730

 

$

88,565

 

$

161,381

 

$

21,759

 

$

68,445

 

Revolving credit facility, unsecured term loan and secured term loans (b)

 

429,419

 

429,419

 

 

 

 

 

 

Interest payments (c)

 

91,356

 

29,037

 

23,867

 

15,871

 

11,100

 

4,890

 

6,591

 

Ground leases and third party office lease

 

856

 

159

 

149

 

149

 

149

 

149

 

101

 

Related party office leases

 

2,854

 

453

 

453

 

475

 

475

 

499

 

499

 

Software contracts

 

350

 

350

 

 

 

 

 

 

Employment contracts

 

2,265

 

1,245

 

1,020

 

 

 

 

 

 

 

$

1,074,491

 

$

555,174

 

$

138,219

 

$

105,060

 

$

173,105

 

$

27,297

 

$

75,636

 

 


(a)  Amounts do not include unamortized discounts/premiums.

 

(b)  The Company has the option to extend the termination date from November 20, 2009 to November 20, 2010 provided we pay an extension fee of 15 basis points, or $761,000, and are not in default under the facility.

 

(c)  Interest on variable rate debt calculated using LIBOR of 2.00%.

 

We expect that the contractual obligations owed in 2009 will be satisfied by a combination of cash generated from operations, the exercise of option extensions on the revolving credit facility and secured term loans and from draws on the revolving credit facility.

 

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Off-Balance Sheet Arrangements

 

We do not currently have any off-balance sheet arrangements.

 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company’s future income, cash flows and fair values relevant to financial instruments depend upon prevailing interest rates.

 

Market Risk

 

Our investment policy relating to cash and cash equivalents is to preserve principal and liquidity while maximizing the return through investment of available funds.  We did not hold any auction rate securities at December 31, 2007 or December 31, 2008.

 

Effect of Changes in Interest Rates on our Outstanding Debt

 

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates.  The range of changes chosen reflects our view of changes which are reasonably possible over a one-year period.  Market values are the present value of projected future cash flows based on the market rates chosen.

 

Our financial instruments consist of both fixed and variable rate debt.  As of December 31, 2008, our consolidated debt consisted of $548.1 million in fixed rate loans payable and variable rate loans totaling $429.4 million, consisting of $172.0 million borrowings under our variable rate revolving credit facility, $200.0 million in a variable rate unsecured term loan and $57.4 million in variable rate secured loans.  All financial instruments were entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position.  Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio.  A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows.  A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.

 

If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $3.8 million a year.  If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $3.9 million a year.

 

If market rates of interest increase by 1%, the fair value of our outstanding fixed-rate mortgage debt would decrease by approximately $14.1 million.  If market rates of interest decrease by 1%, the fair value of our outstanding fixed-rate mortgage debt would increase by approximately $14.6 million.

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Financial statements required by this item appear with an Index to Financial Statements and Schedules, starting on page F-1 of this report.

 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A.  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the

 

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Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures are effective.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our most recent fiscal year, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s Report on Internal Control Over Financial Reporting

 

Management’s report on internal control over financial reporting is set forth on page F-2 of this Annual Report on Form 10-K, and is incorporated herein by reference.

 

ITEM 9B.  OTHER INFORMATION

 

Not applicable.

 

PART III

 

ITEM 10.  TRUSTEES AND EXECUTIVE OFFICERS

 

We have adopted a Code of Ethics, which is available on our website at www.ustoreit.com. We intend to disclose any amendment to, or a waiver from, a provision of our Code of Ethics on our website within four business days following the date of the amendment or waiver.

 

The remaining information required by this item regarding trustees, executive officers and corporate governance is hereby incorporated by reference to the material appearing in the Proxy Statement for the Annual Shareholders Meeting to be held in 2009 (the “Proxy Statement”) under the captions “Proposal 1: Election of Trustees,” “Executive Officers” and “Meetings and Committees of the Board of Trustees.” The information required by this item regarding compliance with Section 16(a) of the Exchange Act is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Other Matters — Section 16(a) Beneficial Ownership Reporting Compliance.”

 

ITEM 11.  EXECUTIVE COMPENSATION

 

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “Potential Payments Upon Termination or Change in Control,” and “Trustee Compensation.”

 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

The information regarding security ownership of certain beneficial owners and management required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”

 

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Table of Contents

 

The following table sets forth certain information regarding our equity compensation plans as of December 31, 2008.

 

Plan Category

 

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

 

Weighted-average
exercise price of
outstanding options,
warrants and rights

 

Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities
reflected in column(a)

 

 

 

(a)

 

(b)

 

(c)

 

Equity compensation plans approved by shareholders

 

3,311,099

(1)

$

13.84

(2)

2,754,544

 

Equity compensation plans not approved by shareholders

 

 

 

 

Total

 

3,311,099

 

$

13.84

 

2,754,544

 

 


(1)

Excludes 292,672 shares subject to outstanding restricted share unit awards, and 14,429 shares subject to deferred shares credited to the account of our Trustees in the U- Store-It Trust Deferred Trustees Plan.

 

 

(2)

This number reflects the weighted-average exercise price of outstanding options and has been calculated exclusive of outstanding restricted unit awards.

 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Policies and Procedures Regarding Review, Approval or Ratification of Transactions With Related Persons,” and “Transactions With Related Persons.”

 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Audit Committee Matters - Fees Paid to Our Independent Auditor” and “Audit Committee Pre-Approval Policies and Procedures.”

 

PART IV

 

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) Documents filed as part of this report:

 

1.  Financial Statements.

 

The response to this portion of Item 15 is submitted as a separate section of this report.

 

2.  Financial Statement Schedules.

 

The response to this portion of Item 15 is submitted as a separate section of this report.

 

3.  Exhibits.

 

The list of exhibits filed with this report is set forth in response to Item 15(b). The required exhibit index has been filed with the exhibits.

 

(b) Exhibits.  The following documents are filed as exhibits to this report:

 

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Table of Contents

 

3.1*

 

Articles of Amendment and Restatement of Declaration of Trust of U-Store-It Trust, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

3.2*

 

Second Amended and Restated Bylaws of U-Store-It Trust, incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed on November 10, 2008.

 

 

 

4.1*

 

Form of Common Share Certificate, incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Company’s Registration Statement on Form S-11, File No. 333-117848.

 

 

 

10.1*

 

Second Amended and Restated Agreement of Limited Partnership of U-Store-It, L.P. dated as of October 27, 2004, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.2*

 

First Amendment to Credit Agreement, dated as of April 13, 2008, by and among U-Store-It, L.P., as borrower, U-Store-It Trust, as parent, Wachovia Bank National Association, as administrative agent and the financial institutions a party thereto, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 9, 2008.

 

 

 

10.3*

 

Guarantor Acknowledgement, dated as of April 13, 2008, executed on behalf of U-Store-It Trust, U-Store-It Mini Warehouse Co., YSI Management LLC and YSI RT LLC, as guarantors, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 9, 2008.

 

 

 

10.4*

 

Amended and Restated Term Note with respect to the Credit Agreement, dated as of April 3, 2008, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on form 10-Q, filed on May 9, 2008.

 

 

 

10.5*

 

Credit Agreement, dated as of September 14, 2007, by and among U-Store-It, L.P., as borrower, U-Store-It Trust, as parent, Wachovia Capital Markets, LLC, as lead arranger and book manager, Wachovia Bank, National Association, as administrative agent and the financial institutions initially signatory thereto and their assignees, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 14, 2007.

 

 

 

10.6*

 

Form of Term Note with respect to the Credit Agreement, dated as of September 14, 2007, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on September 14, 2007.

 

 

 

10.7*

 

Form of Guaranty with respect to the Credit Agreement, dated as of September 14, 2007, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on September 14, 2007.

 

 

 

10.8*

 

Form of Pledge Agreement with respect to the Credit Agreement, dated as of September 14, 2007, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on September 14, 2007.

 

 

 

10.9*

 

First Amendment to Credit Agreement, dated as of June 12, 2007, by and among U-Store-It, L.P., as borrower, U-Store-It Trust, as parent, Wachovia Bank, National Association, as agent and each of the financial institutions party thereto, as lenders, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on August 9, 2007.

 

 

 

10.10*

 

Alternate Currency Note, dated as of June 12, 2007, executed on behalf of U-Store-It, L.P. incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on August 9, 2007.

 

 

 

10.11*

 

Guarantor Acknowledgment, dated as of June 12, 2007, executed on behalf of U-Store-It, Trust, U-Store-It Mini Warehouse Co., and YSI Management LLC, as guarantors, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed on August 9, 2007.

 

 

 

10.12*

 

Credit Agreement, dated as of November 21, 2006, by and among U-Store-It, L.P., as borrower, U-Store-It Trust, as parent, Wachovia Capital Markets, LLC and Keybanc Capital Markets, as joint lead arrangers, Wachovia Capital Markets, LLC, as book manager, Wachovia Bank, National Association, as administrative agent, Keybank National Association, as syndication agent, Bank of America, N.A., SunTrust Bank, and Wells Fargo Bank, National Association, each as documentation agent, and the financial institutions initial signatory thereto and their assignees, as lenders, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 28, 2006.

 

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Table of Contents

 

10.13*

 

Guaranty, dated as of November 21, 2006, executed on behalf of U-Store-It Trust, U-Store-It Mini Warehouse Co., and YSI Management LLC, as guarantors, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 28, 2006.

 

 

 

10.14*

 

Form of Term Note, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on November 28, 2006.

 

 

 

10.15*

 

Form of Revolving Note, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 28, 2006.

 

 

 

10.16*

 

Form of Swingline Note, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on November 28, 2006.

 

 

 

10.17*

 

Form of Security Interest regarding fixed rate mortgage loan between YSI XX LP and Transamerica Financial Life Insurance Company, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 4, 2005.

 

 

 

10.18*

 

Secured Promissory Note, dated November 1, 2005, between YSI XX LP and Transamerica Financial Life Insurance Company, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 4, 2005.

 

 

 

10.19*

 

Loan Agreement, dated August 4, 2005, by and between YASKY LLC and LaSalle Bank National Association, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 14, 2005.

 

 

 

10.20*

 

Loan Agreement, dated July 19, 2005, by and between YSI VI LLC and Lehman Brothers Bank, FSB, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 14, 2005.

 

 

 

10.21*

 

Loan Agreement, dated as of October 27, 2004, by and between YSI I LLC and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.22*

 

Loan Agreement, dated as of October 27, 2004, by and between YSI II LLC and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.23*

 

Loan Agreement, dated as of October 27, 2004, by and between YSI III LLC and Lehman Brothers Bank, FSB, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.24*

 

Standstill Agreement, by and among, U-Store-It Trust, Robert J. Amsdell, Barry L. Amsdell and Todd C. Amsdell, dated August 6, 2007, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.25*

 

Settlement Agreement and Mutual Release, by and among U-Store-It Trust, U-Store-It, L.P., YSI Management LLC, U-Store-It Mini Warehouse Co., U-Store-It Development, LLC, Dean Jernigan, Kathleen A. Weigand, Robert J. Amsdell, Barry L. Amsdell, Todd C. Amsdell, Kyle V. Amsdell, Rising Tide Development LLC, and Amsdell and Amsdell, dated August 6, 2007, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.26*

 

Purchase and Sale Agreement, by and between U-Store-It, L.P. and Rising Tide Development, LLC, dated August 6, 2007, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.27*

 

First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007, amending Lease dated March 29, 2005, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.28*

 

First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007, amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.29*

 

First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007, amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.6 to the

 

55



Table of Contents

 

 

 

Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.30*

 

First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007, amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.31*

 

First Amendment to Lease, by and between U-Store-It, L.P. and Amsdell and Amsdell, dated August 6, 2007, amending Lease dated December 5, 2005, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.32*

 

Lease, dated March 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 31, 2005.

 

 

 

10.33*

 

Lease, dated June 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed on August 12, 2005.

 

 

 

10.34*

 

Lease, dated June 29, 2005, by and between Amsdell and Amsdell and U-Store-It, L.P., incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed on August 12, 2005.

 

 

 

10.35*

 

Option Termination Agreement, by and between U-Store-It, L.P. and Rising Tide Development LLC, dated August 6, 2007, incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.36*

 

Property Management Termination Agreement, by and among U-Store-It Trust, YSI Management LLC, and Rising Tide Development LLC, dated August 6, 2007, incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.37*

 

Marketing and Ancillary Services Termination Agreement, by and among U-Store-It Trust, U-Store-It Mini Warehouse Co., and Rising Tide Development LLC, dated August 6, 2007, incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed on August 7, 2007.

 

 

 

10.38†

 

Amended and Restated Executive Employment Agreement, dated December 18, 2008, by and between U-Store-It Trust and Dean Jernigan, filed herewith.

 

 

 

10.39†

 

Amended and Restated Executive Employment Agreement, dated December 18, 2008, by and between U-Store-It Trust and Christopher P. Marr, filed herewith.

 

 

 

10.40†

 

Amended and Restated Executive Employment Agreement, dated December 18, 2008, by and between U-Store-It Trust and Timothy M. Martin, filed herewith.

 

 

 

10.41†

 

Amended and Restated Executive Employment Agreement, dated December 18, 2008, by and between U-Store-It Trust and Stephen R. Nichols, filed herewith.

 

 

 

10.42†

 

Amended and Restated Executive Employment Agreement, dated December 18, 2008, by and between U-Store-It Trust and Kathleen A. Weigand, filed herewith.

 

 

 

10.43*†

 

Indemnification Agreement, dated as of January 25, 2008, by and among U-Store-It Trust, U-Store-It, L.P. and Daniel B. Hurwitz, incorporated by reference to Exhibit 10.49 to the Company’s Annual Report on Form 10-K, filed on February 29, 2008.

 

 

 

10.44*†

 

Indemnification Agreement, dated as of March 22, 2007, by and among U-Store-It Trust, U-Store-It, L.P. and Marianne M. Keler, incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.45*†

 

Indemnification Agreement, dated as of December 11, 2006, by and among U-Store-It Trust, U-Store-It, L.P. and Timothy M. Martin, incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K, filed on March 16, 2007.

 

 

 

10.46*†

 

Indemnification Agreement, dated as of July 10, 2006, by and among U-Store-It Trust, U-Store-It, L.P. and Stephen R. Nichols, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on July 10, 2006.

 

 

 

10.47*†

 

Indemnification Agreement, dated June 5, 2006, by and among U-Store-It Trust, U-Store-It, L.P. and

 

56



Table of Contents

 

 

 

Christopher P. Marr, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on August 8, 2006.

 

 

 

10.48*†

 

Indemnification Agreement, dated as of April 24, 2006, by and among U-Store-It Trust, U-Store-It, L.P. and Dean Jernigan, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on April 24, 2006

 

 

 

10.49*†

 

Indemnification Agreement, dated as of February 24, 2006, by and among U-Store-It Trust, U-Store-It, L.P. and Kathleen A. Weigand, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on March 1, 2006.

 

 

 

10.50*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and Robert J. Amsdell, incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.51*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and Barry L. Amsdell, incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.52*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and Todd C. Amsdell, incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.53*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and John C. Dannemiller, incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.54*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and Thomas A. Commes, incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.55*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and David J. LaRue, incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.56*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and Harold S. Haller, incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.57*†

 

Indemnification Agreement, dated as of October 27, 2004, by and among U-Store-It Trust, U-Store-It, L.P. and William M. Diefenderfer III, incorporated by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K, filed on November 2, 2004.

 

 

 

10.58*†

 

Noncompetition Agreement, dated as of December 11, 2006, by and between U-Store-It Trust and Timothy M. Martin, incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K, filed on March 16, 2007. 

 

 

 

10.59*† 

 

Noncompetition Agreement, dated as of July 10, 2006, by and between U-Store-It Trust and Stephen R. Nichols, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on July 10, 2006.

 

 

 

10.60*†

 

Noncompetition Agreement, dated as of June 5, 2006, by and between U-Store-It Trust and Christopher P. Marr, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed on August 8, 2006.

 

 

 

10.61*†

 

Noncompetition Agreement, dated as of April 24, 2006, by and between U-Store-It Trust and Dean Jernigan, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on April 24, 2006.

 

 

 

10.62*†

 

Schedule of Compensation for Non-Employee Trustees of U-Store-It Trust, effective May 8, 2007, incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.63*†

 

Deferred Share Agreement, dated as of February 21, 2006, by and between U-Store-It Trust and Kathleen A. Weigand, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on

 

57



Table of Contents

 

 

 

Form 8-K, filed on March 1, 2006.

 

 

 

10.64*†

 

Nonqualified Share Option Agreement, dated as of July 10, 2006, by and between U-Store-It Trust and Stephen R. Nichols, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K/A, filed on July 13, 2006.

 

 

 

10.65*†

 

Nonqualified Share Option Agreement, dated as of June 5, 2006, by and between U-Store-It Trust and Christopher P. Marr, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on August 8, 2006.

 

 

 

10.66*†

 

Nonqualified Share Option Agreement, dated as of April 19, 2006, by and between U-Store-It Trust and Dean Jernigan, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on April 24, 2006.

 

 

 

10.67*†

 

Form of Restricted Share Agreement for Non-Employee Trustees under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by reference to Exhibit 10.83 to the Company’s Annual Report on Form 10-K, filed on February 29, 2008.

 

 

 

10.68*†

 

Form of Restricted Share Agreement for Non-Employee Trustees under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.69*†

 

Form of Nonqualified Share Option Agreement under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 25, 2008.

 

 

 

10.70*†

 

Form of Nonqualified Share Option Agreement under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.71*†

 

Form of Performance-Vested Restricted Share Agreement under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on January 25, 2008.

 

 

 

10.72*†

 

Form of Performance-Vested Restricted Share Agreement under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.73*†

 

Form of Restricted Share Agreement under the U-Store-It Trust 2007 Equity Incentive Plan, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on January 25, 2008.

 

 

 

10.74*†

 

Form of Restricted Share Agreement under the U-Store-It Trust 2004 Equity Incentive Plan, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.75*†

 

Restricted Share Agreement, dated as of December 11, 2006, by and between U-Store-It Trust and Timothy M. Martin, incorporated by reference to Exhibit 10.88 to the Company’s Annual Report on Form 10-K, filed on March 16, 2007.

 

 

 

10.76*†

 

Restricted Share Agreement, dated as of July 10, 2006, by and between U-Store-It Trust and Stephen R. Nichols, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 10, 2006.

 

 

 

10.77*†

 

Restricted Share Agreement, dated as of June 5, 2006, by and between U-Store-It Trust and Christopher P. Marr, incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed August 8, 2006.

 

 

 

10.78†

 

U-Store-It Trust Trustees Deferred Compensation Plan, amended and restated as of December 11, 2008, filed herewith.

 

 

 

10.79†

 

U-Store-It Trust Executive Deferred Compensation Plan, amended and restated as of December 11, 2008, filed herewith.

 

 

 

10.80*†

 

U-Store-It Trust Deferred Trustees Plan, incorporated by reference to Exhibit 10.1 to the Company’s

 

58



Table of Contents

 

 

 

Current Report on Form 8-K, filed on June 6, 2005.

 

 

 

10.81*†

 

2007 Equity Incentive Plan of U-Store-It Trust, effective as of May 8, 2007, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on May 10, 2007.

 

 

 

10.82*†

 

2004 Equity Incentive Plan of U-Store-It Trust, effective as of October 19, 2004, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8- K, filed on November 2, 2004.

 

 

 

10.83†

 

Indemnification Agreement, dated as of February 26, 2009, by and among U-Store-It Trust, U-Store-It, L.P. and Jeffrey Foster, filed herewith.

 

 

 

10.84†

 

Severance and General Release Agreement dated February 10, 2009 by and between U-Store-It Trust and Kathleen Weigand, filed herewith

 

 

 

10.85†

 

Severance and General Release Agreement dated December 31, 2008 by and between U-Store-It Trust and Steve Nichols, filed herewith

 

 

 

21.1

 

List of Subsidiaries

 

 

 

23.1

 

Consent of Independent Registered Public Accounting Firm.

 

 

 

31.1

 

Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 


*

Incorporated herein by reference as above indicated.

 

 

Denotes a management contract or compensatory plan, contract or arrangement.

 

59



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

U-STORE-IT TRUST

 

 

 

By:

/s/  Timothy M. Martin

 

 

Timothy M. Martin

 

 

Chief Financial Officer

 

Date: March 2, 2009

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ William M. Diefenderfer III

 

Chairman of the Board of Trustees

 

March 2, 2009

William M. Diefenderfer III

 

 

 

 

 

 

 

 

 

/s/ Dean Jernigan

 

Chief Executive Officer

 

March 2, 2009

Dean Jernigan

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Timothy M. Martin

 

Chief Financial Officer

 

March 2, 2009

Timothy M. Martin

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

/s/ C.E. Andrews

 

Trustee

 

March 2, 2009

C.E. Andrews

 

 

 

 

 

 

 

 

 

/s/ John C. Dannemiller

 

Trustee

 

March 2, 2009

John C. Dannemiller

 

 

 

 

 

 

 

 

 

/s/ Harold S. Haller

 

Trustee

 

March 2, 2009

Harold S. Haller

 

 

 

 

 

 

 

 

 

/s/ Daniel B. Hurwitz

 

Trustee

 

March 2, 2009

Daniel B. Hurwitz

 

 

 

 

 

 

 

 

 

/s/ Marianne M. Keler

 

Trustee

 

March 2, 2009

Marianne M. Keler

 

 

 

 

 

 

 

 

 

/s/ David J. LaRue

 

Trustee

 

March 2, 2009

David J. LaRue

 

 

 

 

 

60



Table of Contents

 

FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Page No.

Consolidated Financial Statements of U-Store-It Trust and Subsidiaries (The “Company”)

 

 

 

Management’s Report on Internal Control Over Financial Reporting

F-2

 

 

Report of Independent Registered Public Accounting Firm

F-3

 

 

Report of Independent Registered Public Accounting Firm

F-4

 

 

Consolidated Balance Sheets as of December 31, 2008 and 2007

F-5

 

 

Consolidated Statements of Operations for the years ended December 31, 2008, 2007, and 2006

F-6

 

 

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007, and 2006

F-7

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006

F-8

 

 

Notes to Consolidated Financial Statements

F-9

 

F-1



Table of Contents

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management is required to assess the effectiveness of the Company’s internal control over financial reporting as of the end of each fiscal year, and report on the basis of that assessment whether the Company’s internal control over financial reporting is effective.

 

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

 

·                  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and the disposition of the assets of the Company;

 

·                  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that the receipts and expenditures of the Company are being made only in accordance with the authorization of the Company’s management and its Board of Trustees; and

 

·                  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time.

 

Under the supervision, and with the participation, of the Company’s management, including the principal executive officer and principal financial officer, we conducted a review, evaluation and assessment of the effectiveness of our internal control over financial reporting as of December 31, 2008, based upon the Committee of Sponsoring Organizations of the Treadway Commission (COSO) criteria. In performing its assessment of the effectiveness of internal control over financial reporting, management has concluded that, as of December 31, 2008, our internal control over financial reporting was effective based on the COSO framework.

 

The effectiveness of our internal control over financial reporting as of December 31, 2008, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report that appears herein.

 

March 2, 2009

 

F-2



Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Trustees and Shareholders of
U-Store-It Trust
Wayne, Pennsylvania

 

We have audited the internal control over financial reporting of U-Store-It Trust and subsidiaries (the “Company”) as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet and the related consolidated statements of operations, shareholders’ equity, cash flows, and financial statement schedule as of and for the year ended December 31, 2008 of the Company and our report dated March 2, 2009 expressed an unqualified opinion on those financial statements and financial statement schedule.

 

/s/ DELOITTE & TOUCHE LLP

 

Philadelphia, Pennsylvania

March 2, 2009

 

F-3



Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Trustees and Shareholders of
U-Store-It Trust
Wayne, Pennsylvania

 

We have audited the accompanying consolidated balance sheets of U-Store-It Trust and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of U-Store-It Trust and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth herein.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

 

/s/ DELOITTE & TOUCHE LLP

 

Philadelphia, Pennsylvania

March 2, 2009

 

F-4



Table of Contents

 

U-STORE-IT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

December 31,
2008

 

December 31,
2007

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Storage facilities

 

$

1,888,123

 

$

1,916,396

 

Less: Accumulated depreciation

 

(328,165

)

(269,278

)

Storage facilities, net

 

1,559,958

 

1,647,118

 

Cash and cash equivalents

 

3,744

 

4,517

 

Restricted cash

 

16,217

 

15,818

 

Loan procurement costs - net of amortization

 

4,453

 

6,108

 

Assets held for sale

 

2,378

 

 

Other assets, net

 

10,909

 

14,270

 

Total assets

 

$

1,597,659

 

$

1,687,831

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

$

172,000

 

$

219,000

 

Unsecured term loan

 

200,000

 

200,000

 

Secured term loan

 

57,419

 

47,444

 

Mortgage loans and notes payable

 

548,085

 

561,057

 

Accounts payable, accrued expenses and other liabilities

 

39,410

 

33,623

 

Due to related parties

 

 

110

 

Distributions payable

 

1,572

 

11,300

 

Deferred revenue

 

9,725

 

10,148

 

Security deposits

 

472

 

548

 

Other liabilities held for sale

 

22

 

 

Total liabilities

 

1,028,705

 

1,083,230

 

 

 

 

 

 

 

Minority interests, including unitholders in the Operating Partnership

 

46,026

 

48,982

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Common shares $.01 par value, 200,000,000 shares authorized, 57,623,491 and 57,577,232 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively

 

576

 

576

 

Additional paid in capital

 

801,029

 

797,940

 

Accumulated other comprehensive loss

 

(7,553

)

(1,664

)

Accumulated deficit

 

(271,124

)

(241,233

)

Total shareholders’ equity

 

522,928

 

555,619

 

Total liabilities and shareholders’ equity

 

$

1,597,659

 

$

1,687,831

 

 

See accompanying notes to the consolidated financial statements.

 

F-5



Table of Contents

 

U-STORE-IT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

 

 

 

For the year ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

(Dollars and shares in thousands, except per share data)

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

Rental income

 

$

219,917

 

$

203,036

 

$

186,088

 

Other property related income

 

16,483

 

16,081

 

14,101

 

Other - related party

 

 

365

 

457

 

Total revenues

 

236,400

 

219,482

 

200,646

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Property operating expenses

 

99,182

 

92,771

 

81,551

 

Property operating expenses - related party

 

 

59

 

69

 

Depreciation and amortization

 

77,580

 

68,424

 

62,401

 

Asset write-off

 

 

 

305

 

Lease abandonment

 

 

1,316

 

 

General and administrative

 

24,964

 

21,966

 

21,675

 

General and administrative - related party

 

 

337

 

613

 

Total operating expenses

 

201,726

 

184,873

 

166,614

 

OPERATING INCOME

 

34,674

 

34,609

 

34,032

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest:

 

 

 

 

 

 

 

Interest expense on loans

 

(52,014

)

(54,108

)

(45,628

)

Loan procurement amortization expense

 

(1,929

)

(1,772

)

(1,972

)

Write-off of loan procurement cost due to early extinguishment of debt

 

 

 

(1,907

)

Interest income

 

153

 

401

 

1,336

 

Other

 

94

 

118

 

191

 

Total other expense

 

(53,696

)

(55,361

)

(47,980

)

LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS

 

(19,022

)

(20,752

)

(13,948

)

MINORITY INTERESTS

 

1,482

 

1,704

 

424

 

LOSS FROM CONTINUING OPERATIONS

 

(17,540

)

(19,048

)

(13,524

)

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

Income from operations

 

2,404

 

3,988

 

4,624

 

Gain on disposition of discontinued operations

 

19,720

 

2,517

 

 

Minority interest attributable to discontinued operations

 

(1,792

)

(534

)

349

 

Income from discontinued operations

 

20,332

 

5,971

 

4,973

 

NET INCOME (LOSS)

 

$

2,792

 

$

(13,077

)

$

(8,551

)

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.30

)

$

(0.33

)

$

(0.24

)

Basic and diluted earnings per share from discontinued operations

 

$

0.35

 

$

0.11

 

$

0.09

 

Basic and diluted earnings (loss) per share

 

$

0.05

 

$

(0.22

)

$

(0.15

)

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

 

57,621

 

57,497

 

57,287

 

Weighted-average diluted shares outstanding

 

57,621

 

57,497

 

57,287

 

 

 

 

 

 

 

 

 

Distributions declared per common share and unit

 

$

0.565

 

$

1.05

 

$

1.16

 

 

See accompanying notes to the consolidated financial statements.

 

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Table of Contents

 

U-STORE-IT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common Shares

 

Additional Paid
in

 

Other
Comprehensive

 

Accumulated

 

 

 

 

 

Number

 

Amount

 

Capital

 

Loss

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2005

 

57,010

 

$

570

 

$

790,372

 

$

 

$

(92,473

)

$

698,469

 

Issuance of restricted shares

 

139

 

1

 

 

 

 

 

 

 

1

 

Proceeds from option exercise

 

186

 

2

 

2,985

 

 

 

 

 

2,987

 

Amortization of restricted shares

 

 

 

 

 

649

 

 

 

 

 

649

 

Share compensation expense

 

 

 

 

 

444

 

 

 

 

 

444

 

Issuance of trustee deferred shares

 

 

 

 

 

176

 

 

 

 

 

176

 

Adjustment for minority interest in operating partnership

 

 

 

 

 

6

 

 

 

 

 

6

 

Net loss

 

 

 

 

 

 

 

 

 

(8,551

)

(8,551

)

Distributions

 

 

 

 

 

 

 

 

 

(66,688

)

(66,688

)

Balance at December 31, 2006

 

57,335

 

$

573

 

$

794,632

 

$

 

$

(167,712

)

$

627,493

 

Issuance of restricted shares

 

123

 

2

 

 

 

 

 

 

 

2

 

Conversion from units to shares

 

119

 

1

 

 

 

 

 

 

 

1

 

Amortization of restricted shares

 

 

 

 

 

972

 

 

 

 

 

972

 

Share compensation expense

 

 

 

 

 

867

 

 

 

 

 

867

 

Adjustment for minority interest in operating partnership

 

 

 

 

 

1,469

 

 

 

 

 

1,469

 

Net loss

 

 

 

 

 

 

 

 

 

(13,077

)

(13,077

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on interest rate swap

 

 

 

 

 

 

 

(1,545

)

 

 

(1,545

)

Unrealized loss on foreign currency translation

 

 

 

 

 

 

 

(119

)

 

 

(119

)

Distributions

 

 

 

 

 

 

 

 

 

(60,444

)

(60,444

)

Balance at December 31, 2007

 

57,577

 

$

576

 

$

797,940

 

$

(1,664

)

$

(241,233

)

$

555,619

 

Issuance of restricted shares

 

46

 

 

 

 

 

 

 

 

 

 

Conversion from units to shares

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of restricted shares

 

 

 

 

 

1,297

 

 

 

 

 

1,297

 

Share compensation expense

 

 

 

 

 

1,425

 

 

 

 

 

1,425

 

Adjustment for minority interest in operating partnership

 

 

 

 

 

367

 

 

 

 

 

367

 

Net income

 

 

 

 

 

 

 

 

 

2,792

 

2,792

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on interest rate swap

 

 

 

 

 

 

 

(4,608

)

 

 

(4,608

)

Unrealized loss on foreign currency translation

 

 

 

 

 

 

 

(1,281

)

 

 

(1,281

)

Distributions

 

 

 

 

 

 

 

 

 

(32,683

)

(32,683

)

Balance at December 31, 2008

 

57,623

 

$

576

 

$

801,029

 

$

(7,553

)

$

(271,124

)

$

522,928

 

 

See accompanying notes to the consolidated financial statements.

 

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Table of Contents

 

U-STORE-IT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the year ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

Net income (loss)

 

$

2,792

 

$

(13,077

)

$

(8,551

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

80,132

 

72,218

 

66,727

 

Asset write-off

 

 

 

305

 

Lease abandonment charge

 

 

1,316

 

 

Gain on disposition of discontinued operations

 

(19,720

)

(2,311

)

 

Equity compensation expense

 

2,722

 

1,840

 

1,272

 

Accretion of fair market value of debt

 

(446

)

(367

)

(692

)

Early extinguishment of debt

 

 

 

1,907

 

Minority interests

 

310

 

(995

)

(773

)

Changes in other operating accounts:

 

 

 

 

 

 

 

Other assets

 

1,425

 

(2,756

)

(350

)

Accounts payable and accrued expenses

 

(7

)

6,660

 

5,733

 

Other liabilities

 

(196

)

346

 

(1,011

)

Net cash provided by operating activities

 

$

67,012

 

$

62,874

 

$

64,567

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

Acquisitions, additions and improvements to storage facilities

 

(30,738

)

(48,014

)

(312,352

)

Acquisitions, additions and improvements to storage facilities - related party

 

 

(121,805

)

(37,414

)

Proceeds from sales of properties

 

56,867

 

17,935

 

42

 

Proceeds from sales of marketable securities

 

 

 

114,170

 

Investment in marketable securities

 

 

 

(19,000

)

Insurance settlements

 

1,447

 

 

1,712

 

Decrease (increase) in restricted cash

 

(399

)

(1,692

)

4,795

 

Net cash provided by (used in) investing activities

 

$

27,177

 

$

(153,576

)

$

(248,047

)

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

Proceeds from:

 

 

 

 

 

 

 

Revolving credit facility

 

57,300

 

156,500

 

331,000

 

Unsecured term loan

 

 

 

200,000

 

Secured term loan

 

9,975

 

47,444

 

 

Mortgage loans and notes payable

 

 

4,651

 

 

Short-term financing

 

 

 

80,000

 

Principal payments on:

 

 

 

 

 

 

 

Revolving credit facility

 

(104,300

)

(28,000

)

(240,500

)

Mortgage loans and notes payable

 

(12,526

)

(32,157

)

(114,111

)

Short term financing

 

 

 

(80,000

)

Capital lease obligations

 

 

 

(39

)

Distributions paid to shareholders

 

(41,621

)

(66,816

)

(66,623

)

Distributions paid to minority partners

 

(3,656

)

(5,975

)

(6,017

)

Loan procurement costs

 

(134

)

(144

)

(2,398

)

Proceeds from exercise of stock options

 

 

 

2,985

 

Net cash (used in) provided by financing activities

 

$

(94,962

)

$

75,503

 

$

104,297

 

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(773

)

(15,199

)

(79,183

)

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

4,517

 

19,716

 

98,899

 

Cash and cash equivalents at end of year

 

$

3,744

 

$

4,517

 

$

19,716

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

Cash paid for interest, net of interest capitalized

 

$

52,291

 

$

53,952

 

$

45,461

 

Supplemental disclosure of noncash activities:

 

 

 

 

 

 

 

Acquisitions of facilities:

 

 

 

 

 

 

 

Additions to storage facilities

 

1,023

 

 

 

Mortgage loans

 

 

 

(34,451

)

Other, net

 

 

 

(2,032

)

Dispositions of facilities:

 

 

 

 

 

 

 

Notes receivable

 

2,612

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

F-8



Table of Contents

 

U-STORE-IT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.  ORGANIZATION AND NATURE OF OPERATIONS

 

U-Store-It Trust, a Maryland real estate investment trust (collectively with its subsidiaries, “we” or the “Company”), is a self-administered and self-managed real estate investment trust, or REIT, active in acquiring, developing and operating self-storage properties for business and personal use under month-to-month leases.  As of December 31, 2008, the Company owned 387 self-storage facilities (collectively, the “Properties”) containing an aggregate of approximately 25.0 million rentable square feet.  The Properties are located in 26 states throughout the United States, and in the District of Columbia. All references to building square footage, occupancy percentage, and the number of buildings are unaudited.

 

The Company owns substantially all of its assets through U-Store-It, L.P., a Delaware limited partnership (the “Operating Partnership”).  The Company is the sole general partner of the Operating Partnership and, as of December 31, 2008, owned a 91.9% interest in the Operating Partnership.  The Company manages its assets through YSI Management, LLC (the “Management Company”), a wholly owned subsidiary of the Operating Partnership.  The Company owns 100% of U-Store-It Mini Warehouse Co. (the “TRS”) in addition to three other subsidiaries, which it has elected to treat as taxable REIT subsidiaries. In general, a taxable REIT subsidiary may perform non-customary services for tenants, hold assets that the Company cannot hold directly and generally may engage in any real estate or non-real estate related business.

 

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts of the Company, and its majority-owned and/or controlled subsidiaries.  The portion of these entities not owned by the Company is presented as minority interest as of and during the periods consolidated.  All significant intercompany accounts and transactions have been eliminated in consolidation.

 

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). When an entity is not deemed to be a VIE, the Company considers the provisions of EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and the limited partners do not have the ability to dissolve the entity or remove the Company without cause nor substantive participating rights.

 

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Storage Facilities

Storage facilities are carried at historical cost less accumulated depreciation and impairment losses.  The cost of storage facilities reflects their purchase price or development cost.  Costs incurred for the acquisition and renovation of a storage facility are capitalized to the Company’s investment in that property.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

 

Purchase Price Allocation

When facilities are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. When a portfolio of facilities is acquired, the purchase price is allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates, which take into account the relative size, age and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available. Allocations to the individual assets and liabilities are based

 

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Table of Contents

 

upon comparable market sales information for land, buildings and improvements and estimates of depreciated replacement cost of equipment.

 

In allocating the purchase price, the Company determines whether the acquisition includes intangible assets or liabilities. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date no portion of the purchase price has been allocated to above- or below-market lease intangibles.  To date, no intangible asset has been recorded for the value of tenant relationships, because the Company does not have any concentrations of significant tenants and the average tenant turnover is fairly frequent.

 

The Company recorded a $6.8 million intangible asset to recognize the value of in-place leases related to its acquisitions in 2007.  Subsequently, during the quarter ended March 31, 2008, the Company acquired a finite-lived intangible asset valued at approximately $1.0 million as part of its acquisition of one self-storage facility.  This asset represents the value of in-place leases at the time of acquisition.

 

Depreciation and Amortization

The costs of self-storage facilities and improvements are depreciated using the straight-line method based on useful lives ranging from five to 40 years.

 

Impairment of Long-Lived Assets

We evaluate long-lived assets for impairment when events and circumstances indicate that there may be impairment. The carrying value of these long-lived assets is compared to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the asset exceeds the fair value based on its undiscounted future net operating cash flows attributable to the asset and circumstances indicate that the carrying value of the real estate asset may not be recoverable. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset. Approximately $0.5 million and $0.4 million of impairment charges were recorded during 2008 and 2007, respectively.

 

Long-Lived Assets Held for Sale

We consider long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits to a plan to sell a facility (or group of facilities), (b) the facility is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such facilities, (c) an active program to locate a buyer and other actions required to complete the plan to sell the facility have been initiated, (d) the sale of the facility is probable and transfer of the asset is expected to be completed within one year, (e) the facility is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

 

Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent the transaction from closing. In most transactions, these conditions or criteria are not satisfied until the actual closing of the transaction; and, accordingly, the facility is not identified as held for sale until the closing actually occurs. However, each potential transaction is evaluated based on its separate facts and circumstances.  As of December 31, 2008, there was one property held for sale (see Note 10).

 

During 2008, the Company sold 23 storage facilities throughout the United States.  During 2007, the Company sold three storage facilities in South Carolina and two additional facilities in Arizona. No facilities were sold during 2006. These sales have been accounted for as discontinued operations and, accordingly, the accompanying financial statements and notes reflect the results of operations of the storage facilities sold as discontinued operations (see Note 10).

 

Cash and Cash Equivalents

Cash and cash equivalents are highly-liquid investments with original maturities of three months or less.  The Company maintains cash equivalents in financial institutions in excess of insured limits, but believes this risk is mitigated by only investing in or through major financial institutions.

 

Restricted Cash

Restricted cash consists of purchase deposits and cash deposits required for debt service requirements, capital replacement, and expense reserves in connection with the requirements of our loan agreements.

 

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Table of Contents

 

Loan Procurement Costs

Loan procurement costs related to borrowings consist of $10.6 million and $10.3 million at December 31, 2008 and 2007, respectively and are reported net of accumulated amortization of $6.2 million and $4.2 million as of December 31, 2008 and 2007, respectively. The costs are amortized over the life of the related debt using the effective interest rate method and reported as loan procurement amortization expense.

 

Marketable Securities

The Company accounts for its investments in debt and equity securities according to the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires securities classified as “available-for-sale” to be stated at fair value. Adjustments to fair value of available-for-sale securities are recorded as a component of other comprehensive income (loss).  A decline in the market value of equity securities below cost, that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value.  The impairment is charged to earnings and a new cost basis for the security is established.  We had no realized or unrealized gains or losses related to these securities during the years ended December 31, 2008, 2007 or 2006 and did not own any of these securities during 2007 and 2008. All income related to these investments was recorded as interest income.

 

Other Assets

Other assets consist primarily of accounts receivable, notes receivable, prepaid expenses and intangible assets. Accounts receivable were $2.8 million and $2.6 million as of December 31, 2008 and 2007, respectively. The Company has recorded an allowance of approximately $0.6 million and $0.5 million, respectively, related to accounts receivable as of December 31, 2008 and 2007.  The net carrying value of intangible assets as of December 31, 2008 and 2007 was $0.1 million and $4.6 million, respectively.

 

Environmental Costs

Our practice is to conduct or obtain environmental assessments in connection with the acquisition or development of additional facilities. Whenever the environmental assessment for one of our facilities indicates that a facility is impacted by soil or groundwater contamination from prior owners/operators or other sources, we will work with our environmental consultants and where appropriate, state governmental agencies, to ensure that the facility is either cleaned up, that no cleanup is necessary because the low level of contamination poses no significant risk to public health or the environment, or that the responsibility for cleanup rests with a third party.

 

Revenue Recognition

Management has determined that all of our leases are operating leases. Rental income is recognized in accordance with the terms of the leases, which generally are month-to-month. Revenues from long-term operating leases are recognized on a straight-line basis over the term of the respective lease. The excess of rents received over amounts contractually due pursuant to the underlying leases is included in deferred revenue in the accompanying consolidated balance sheets and contractually due but unpaid rents are included in other assets.

 

Costs Associated with Exit or Disposal Activities

In October 2006, the Company committed to a plan to relocate its accounting, finance and information technology functions to the Philadelphia, Pennsylvania area.  As part of the relocation of these functions, the Company provided severance arrangements for certain existing employees related to those functions.  At the time the severance arrangements were entered into, the Company estimated a total expense of $470,000, of which $45,000 was paid in 2006 and the remainder was paid in 2007.

 

In August 2007, the Company abandoned certain office space in Cleveland, Ohio that was previously used for its corporate offices.  The related leases have expiration dates ranging from December 31, 2008 through December 31, 2014. Upon vacating the space, the Company entered into a sub-lease agreement with a sub-tenant to lease the majority of the space for the duration of the term.

 

As a result of this exit activity, the Company recognized a “Lease abandonment charge” of $1.3 million during the three months ended September 30, 2007.  The charge was comprised of approximately $0.8 million of costs that represent the present value of the net cash flows associated with leases and the sub-lease agreement (“Contract Termination Costs”) and approximately $0.5 million of costs associated with the write-off of certain assets related to the abandoned space (“Other Associated Costs”).  The Contract Termination Costs of $0.8 million are presented as “Accounts payable and accrued rent” and the Other Associated Costs of $0.5 million were accounted for as a reduction of “Storage facilities.”  The Company amortizes the Contract Termination Costs against rental expense over the remaining life of the respective leases.

 

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Table of Contents

 

Advertising Costs

The Company incurs advertising costs primarily attributable to print advertisements in telephone books. The Company recognizes the costs when the related telephone book is first published. The Company incurred $3.8 million, $4.3 million and $4.4 million in advertising expenses for the years ended 2008, 2007 and 2006, respectively.

 

Equity Offering Costs

Underwriting discount and commissions, financial advisory fees and offering costs are reflected as a reduction to additional paid-in capital.

 

Other Property Related Income

Other property related income consists of late fees, administrative charges, sales of storage supplies and other ancillary revenues.

 

Capitalized Interest

The Company capitalizes interest incurred that is directly associated with construction activities until the asset is placed into service. Interest is capitalized to the related assets using a weighted-average rate of the Company’s outstanding debt. The Company capitalized $0.1 million during 2008, $0.1 million during 2007 and $0.1 million during 2006.

 

Derivative Financial Instruments

We carry all derivatives on the balance sheet at fair value. We determine the fair value of derivatives by observable prices that are based on inputs not quoted on active markets, but corroborated by market data. The accounting for changes in the fair value of a derivative instrument depends on whether the derivative has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. Our use of derivative instruments has been limited to cash flow hedges of certain interest rate risks. At December 31, 2008 the Company had interest rate swap agreements for notional principal amounts aggregating $300 million, and $75 million at December 31, 2007.

 

Income Taxes

The Company elected to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code beginning with the period from October 21, 2004 (commencement of operations) through December 31, 2004.  In management’s opinion, the requirements to maintain these elections are being met.  Accordingly, no provision for federal income taxes has been reflected in the consolidated financial statements other than for operations conducted through our taxable REIT subsidiaries.

 

Earnings and profits, which determine the taxability of distributions to shareholders, differ from net income reported for financial reporting purposes due to differences in cost basis, the estimated useful lives used to compute depreciation, and the allocation of net income and loss for financial versus tax reporting purposes.  The tax basis in the Company’s assets was $1.5 billion as of December 31, 2008 and $1.5 billion as of December 31, 2007.

 

The Company is subject to a 4% federal excise tax if sufficient taxable income is not distributed within prescribed time limits.  The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company’s ordinary income and (b) 95% of the Company’s net capital gain exceeds cash distributions and certain taxes paid by the Company.  No excise tax was incurred in 2008, 2007, or 2006.

 

Taxable REIT subsidiaries, such as the TRS, are subject to federal and state income taxes.  The TRS recorded a net deferred tax asset of $0.5 million and $0.5 million as of December 31, 2008 and 2007, respectively, related to expenses which are deductible for tax purposes in future periods.

 

Minority Interests

Minority interests include income allocated to holders of the Operating Partnership Units (the “OP Minority Interests”). Income is allocated to the OP Minority Interests based on their ownership percentage of the Operating Partnership. This ownership percentage, as well as the total net assets of the Operating Partnership, changes when additional shares of our common stock or Operating Partnership Units are issued. Such changes result in an allocation between shareholders’ equity and Minority Interests in the Consolidated Balance Sheets. Due to the number of such capital transactions that occur each period, we have presented a single net effect of all such allocations for the period as the “Adjustment for Minority Interest in Operating Partnership” in our Consolidated Statements of Shareholders’ Equity and Owners’ Equity (Deficit) (rather than separately allocating the minority interest for each individual capital transaction). The Company has not adjusted the carrying

 

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Table of Contents

 

value of its minority interests subject to redemption provisions for changes in fair value.  Disclosure of the fair value of such redemption provisions is provided in Note 7.

 

Earnings per Share

Basic earnings per share is calculated based on the weighted average number of common shares and restricted shares outstanding and/or vested during the period. Diluted earnings per share is calculated by further adjusting for the dilutive impact of share options, unvested restricted shares and contingently issuable shares outstanding during the period using the treasury stock method.  The total dilutive impact of these items totaled approximately 94,000, 22,000 and 121,000 in 2008, 2007 and 2006, respectively, and was included in the calculation of diluted earnings per share, unless the inclusion would be anti-dilutive.

 

Share Based Payments

We apply the fair value method of accounting for contingently issued shares and share options issued under our incentive award plan. Accordingly, share compensation expense was recorded ratably over the vesting period relating to such contingently issued shares and options. The Company has elected to recognize compensation expense on a straight-line method over the requisite service period.

 

Foreign Currency

The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for revenues, expenses, and capital expenditures.  The local currency is the functional currency for the Company’s foreign subsidiaries.  Translation adjustments for foreign subsidiaries are recorded as a component of accumulated other comprehensive loss in shareholders’ equity.  The Company recognizes transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency in earnings as incurred. The Pound, which represents the functional currency used by USIFB, LLP, our joint venture in England, was translated at an end-of-period exchange rate of approximately 1.4619 and 1.9843 U.S. Dollars per Pound at December 31, 2008 and December 31, 2007, respectively, and an average exchange rate of 1.8669 U.S. Dollars per Pound for the twelve months ended December 31, 2008.

 

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“EITF 03-6-1”).  EITF 03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method.  EITF 03-6-1 applies to our fiscal years beginning on January 1, 2009 and requires that all prior-period earnings per share data be adjusted retrospectively.  Early adoption is prohibited.  The Company does not expect the adoption of EITF 03-6-1 will have a material impact on our consolidated financial statements.

 

In May 2008, the FASB issued FSP No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (“APB 14-1”) that affects the accounting treatment for convertible debt instruments that may be settled wholly or partially in cash.  APB 14-1 requires that instruments within its scope be separated into their liability and equity components at initial recognition by recording the liability component at the fair value of a similar liability that does not have an associated equity component and attributing the remaining proceeds from issuance to the equity component. The excess of the principal amount of the liability component over its initial fair value will be amortized to interest expense using the interest method.  APB 14-1 applies to our fiscal years beginning on January 1, 2009 and requires retrospective application to all periods presented with early adoption prohibited.  The Company does not expect the adoption of APB 14-1 will have a material impact on our consolidated financial statements.

 

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60 (“SFAS 163”). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on our consolidated financial statements.

 

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Table of Contents

 

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). Under SFAS 162, the GAAP hierarchy will now reside in the accounting literature established by the FASB. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” We believe that the adoption of this standard on its effective date will not have a material effect on our consolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an Amendment of FASB Statement No. 133 (“SFAS 161”).  SFAS 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 and the impact of derivative instruments and related hedged items on an entity’s financial position, financial performance and cash flows.  SFAS 161 is effective on January 1, 2009.  We believe that the adoption of this standard on January 1, 2009 will not have a material effect on our consolidated financial statements.

 

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141(R)”).  SFAS 141(R) establishes principles and requirements for recognizing identifiable assets acquired, liabilities assumed, noncontrolling interest in the acquiree, goodwill acquired in the combination or the gain from a bargain purchase, and disclosure requirements.  Under this revised statement, all costs incurred to effect an acquisition will be recognized separately from the acquisition.  Also, restructuring costs that are expected but the acquirer is not obligated to incur will be recognized separately from the acquisition.  SFAS 141(R) is effective for all transactions entered into on or after January 1, 2009.  The impact of the adoption of this standard will be dependent on levels of costs incurred to effect future acquisitions.  These costs will now be expensed as incurred.

 

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”).  SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent be clearly identified.  In addition, it requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the income statement.  SFAS 160 is effective on January 1, 2009.  The Company is currently assessing the impacts on its consolidated financial statements.

 

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date.  This statement became effective on January 1, 2008.  The Company did not elect the fair value option for any of our existing financial instruments on the effective date and have not determined whether or not we will elect this option for any eligible financial instruments we acquire in the future.

 

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability. SFAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS 157 applies whenever other standards require assets or liabilities to be measured at fair value. This statement is effective in fiscal years beginning after November 15, 2007. The adoption of this standard on January 1, 2008 did not have a material effect on our consolidated financial statements.

 

Operating Segment

The Company has one reportable operating segment: it owns, operates, develops, and manages storage facilities.

 

Concentration of Credit Risk

The storage facilities are located in major metropolitan and rural areas and have numerous tenants per facility. No single tenant represents 1% or more of the Company’s revenues. The facilities in Florida, California, Texas and Illinois provided total revenues of approximately 19%, 15%, 8% and 7%, respectively, for the year ended December 31, 2007.  The facilities in Florida, California, Texas and Illinois provided total revenues of approximately 19%, 15%, 9% and 7%, respectively, for the year ended December 31, 2008.

 

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3.  STORAGE FACILITIES

 

The following summarizes the real estate assets of the Company as of December 31, 2008 and December 31, 2007:

 

 

 

December 31,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(in thousands)

 

Land

 

$

387,831

 

$

393,715

 

Buildings and improvements

 

1,300,711

 

1,324,168

 

Equipment

 

198,981

 

193,031

 

Construction in progress

 

600

 

5,482

 

Total

 

1,888,123

 

1,916,396

 

Less accumulated depreciation

 

(328,165

)

(269,278

)

Storage facilities — net

 

$

1,559,958

 

$

1,647,118

 

 

 

The carrying value of storage facilities has decreased from December 31, 2007 to December 31, 2008, primarily as a result of the 23 dispositions during 2008 and the one held for sale property at December 31, 2008.

 

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The Company completed the following acquisitions, dispositions and consolidations for the years ended December 31, 2007 and 2008:

 

Facility/Portfolio

 

Location

 

Transaction Date

 

Total Number of
Facilities

 

Purchase / Sale
Price (in
thousands)

 

 

 

 

 

 

 

 

 

 

 

2008 Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Uptown Asset

 

Washington, DC

 

January 2008

 

1

 

$

13,300

 

 

 

 

 

 

 

 

 

 

 

2008 Dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Waterway Asset

 

Miami, FL

 

December 2008

 

1

 

$

4,635

 

Skipper Road Assets

 

Multiple locations in FL

 

November 2008

 

2

 

5,020

 

Stuart/Vero Beach Assets

 

Multiple locations in FL

 

October 2008

 

2

 

4,550

 

Hudson Assets

 

Hudson, OH

 

October 2008

 

2

 

2,640

 

Deland Asset

 

Deland, FL

 

September 2008

 

1

 

2,780

 

Biloxi/Gulf Breeze Assets

 

Multiple locations in MS/FL

 

September 2008

 

2

 

10,760

 

Mobile Assets

 

Mobile, AL

 

September 2008

 

2

 

6,140

 

Churchill Assets

 

Multiple locations in MS

 

August 2008

 

4

 

8,333

 

Baton Rouge/Prairieville Assets

 

Multiple Locations in LA

 

June 2008

 

2

 

5,400

 

Linden Asset

 

Linden, NJ

 

June 2008

 

1

 

2,825

 

Endicott Asset

 

Union, NY

 

May 2008

 

1

 

2,250

 

Lakeland Asset

 

Lakeland, FL

 

April 2008

 

1

 

2,050

 

77th Street Asset

 

Miami, FL

 

March 2008

 

1

 

2,175

 

Leesburg Asset

 

Leesburg, FL

 

March 2008

 

1

 

2,400

 

 

 

 

 

 

 

23

 

$

61,958

 

2007 Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sanford Asset

 

San Antonio, TX

 

January 2007

 

1

 

$

6,300

 

Grand Central Portfolio

 

Multiple locations in GA

 

January 2007

 

2

 

13,200

 

Rising Tide Portfolio

 

Multiple locations in FL/GA/MA/OH/CA

 

September 2007

 

14

 

121,000

 

 

 

 

 

 

 

17

 

$

140,500

 

2007 Dispositions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hilton Head Assets

 

Multiple locations in SC

 

May 2007

 

3

 

$

12,750

 

Arizona Assets

 

Multiple locations in AZ

 

December 2007

 

2

 

6,440

 

 

 

 

 

 

 

5

 

$

19,190

 

 

The following table summarizes the change in number of self-storage facilities from January 1, 2007 through December 31, 2008:

 

 

 

2008

 

2007

 

Balance - Beginning of year

 

409

 

399

 

Facilities acquired

 

1

 

17

 

Facilities consolidated

 

 

(2

)

Facilities sold

 

(23

)

(5

)

Balance - End of year

 

387

 

409

 

 

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4.  INTANGIBLE ASSETS

 

During the year ended December 31, 2007, the Company acquired finite-lived intangible assets valued at approximately $6.8 million as part of its 2007 acquisitions.  These assets represent the value of in-place leases at the time of acquisition.  During the year, the intangible assets became fully amortized, with $4.6 million recognized as amortization expense during the year ended December 31, 2008.

 

During the quarter ended March 31, 2008, the Company acquired a finite-lived intangible asset valued at approximately $1.0 million as part of its acquisition of one self-storage facility.  This asset represents the value of in-place leases at the time of acquisition.  The Company recognized amortization expense related to this asset of $0.9 million ended December 31, 2008.  The estimated life of this asset at the time of acquisition was 12 months.  The amortization expense that will be recognized during 2009 is $0.1 million.

 

5.  REVOLVING CREDIT FACILITY AND UNSECURED TERM LOAN

 

As of December 31, 2008, the Company and its operating partnership had in place a three-year $450 million unsecured credit facility, which was entered into in November 2006, consisting of $200 million in an unsecured term loan and $250 million in unsecured revolving loans. The outstanding balance on the Company’s credit facility was $372 million and was comprised of $200 million of term loan borrowings and $172 million of unsecured revolving loans.  As of December 31, 2008, approximately $78 million was available under the Company’s credit facility.  The facility has a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $675,000, and are not in default under the facility.  The Company currently intends to exercise this extension option prior to the November 20, 2009 termination date.  Borrowings under the credit facility bear interest, at our option, at either an alternative base rate or a Eurodollar rate, in each case, plus an applicable margin based on our leverage ratio or our credit rating.  The alternative base interest rate is a fluctuating rate equal to the higher of the prime rate or the sum of the federal funds effective rate plus 50 basis points.  The applicable margin for the alternative base rate will vary from 0.00% to 0.50% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or six months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.00% to 1.50% depending on our leverage ratio prior to achieving an investment grate rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating. At December 31, 2008, borrowings under the unsecured credit facility had a weighted average interest rate of 1.92%.

 

On September 14, 2007, the Company and its Operating Partnership entered into a credit agreement that allowed for total secured term loan borrowings of $50.0 million and subsequently amended the agreement on April 3, 2008 to allow for total secured term loan borrowings of $57.4 million.  The term loans have a November 20, 2009 termination date, subject to a one year extension to November 20, 2010 at the Company’s option, provided we pay an extension fee of 15 basis points, or $86,000, and are not in default under the facility.  The Company currently intends to exercise these extension options prior to the November 20, 2009 termination date.  Each term loan bears interest at either an alternative base rate or a Eurodollar rate, at our option, in each case plus an applicable margin. The applicable margin for the alternative base rate will vary from 0.10% to 0.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.00% to 0.25% depending on our credit rating after achieving an investment grade rating.  The Eurodollar rate is a rate of interest that is fixed for interest periods of one, two, three or nine months based on the LIBOR rate determined two business days prior to the commencement of the applicable interest period.  The applicable margin for the Eurodollar rate will vary from 1.10% to 1.60% depending on our leverage ratio prior to achieving an investment grade rating, and will vary from 0.425% to 1.00% depending on our credit rating after achieving an investment grade rating.  As of December 31, 2008, there were two term loans outstanding totaling $57.4 million that had a weighted average interest rate of 2.05%.  The outstanding term loans are secured by a pledge by our Operating Partnership of all equity interests in YSI RT LLC, the wholly-owned subsidiary of the Operating Partnership that acquired eight self-storage facilities in September 2007 and one self-storage facility in May 2008. The nine YSI RT LLC assets had a net book value of approximately $70.0 million at December 31, 2008.

 

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6.  MORTGAGE LOANS AND NOTES PAYABLE

 

The Company’s mortgage loans and notes payable are summarized as follows:

 

 

 

Carrying Value as of:

 

 

 

 

 

 

 

December 31,

 

December 31,

 

Effective

 

Maturity

 

Mortgage Loan

 

2008

 

2007

 

Interest Rate

 

Date

 

 

 

(in thousands)

 

 

 

 

 

Acq IV

 

$

 

$

2,359

 

7.71

%

Dec-08

 

Acq VI

 

1,701

 

1,746

 

8.43

%

Aug-09

 

YSI III

 

85,020

 

86,712

 

5.09

%

Nov-09

 

YSI I

 

85,105

 

86,770

 

5.19

%

May-10

 

YSI IV

 

6,150

 

6,227

 

5.25

%

Jul-10

 

YSI XXVI

 

9,724

 

9,956

 

5.00

%

Aug-10

 

YSI XXV

 

8,093

 

8,201

 

5.00

%

Oct-10

 

Promissory Notes

 

75

 

92

 

5.97

%

Nov-10

 

YSI II

 

85,213

 

86,843

 

5.33

%

Jan-11

 

YSI XII

 

1,561

 

1,599

 

5.97

%

Sep-11

 

YSI XIII

 

1,342

 

1,374

 

5.97

%

Sep-11

 

YSI VI

 

78,543

 

79,645

 

5.13

%

Aug-12

 

YASKY

 

80,000

 

80,000

 

4.96

%

Sep-12

 

USIFB

 

3,509

 

4,651

 

4.59

%

Oct-12

 

YSI XIV

 

1,862

 

1,909

 

5.97

%

Jan-13

 

YSI VII

 

3,224

 

3,280

 

6.50

%

Jun-13

 

YSI VIII

 

1,842

 

1,874

 

6.50

%

Jun-13

 

YSI IX

 

2,026

 

2,062

 

6.50

%

Jun-13

 

YSI XVII

 

4,365

 

4,477

 

6.32

%

Jul-13

 

YSI XXVII

 

532

 

547

 

5.59

%

Nov-13

 

YSI XXX

 

7,804

 

8,024

 

5.59

%

Nov-13

 

YSI XI

 

2,548

 

2,605

 

5.87

%

Dec-13

 

YSI V

 

3,363

 

3,440

 

5.25

%

Jan-14

 

YSI XXVIII

 

1,638

 

1,676

 

5.59

%

Feb-14

 

YSI X

 

4,237

 

4,303

 

5.87

%

Jan-15

 

YSI XV

 

1,961

 

1,999

 

6.41

%

Jan-15

 

YSI XX

 

65,953

 

67,545

 

5.97

%

Nov-15

 

Unamortized fair value adjustment

 

694

 

1,141

 

 

 

 

 

Total mortgage loans and notes payable

 

$

548,085

 

$

561,057

 

 

 

 

 

 

As of December 31, 2008 and 2007, the Company’s mortgage loans payable were secured by certain of its self-storage facilities with net book values of approximately $689 million and $725 million, respectively.

 

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The following table represents the future principal payment requirements on the outstanding mortgage loans and notes payable at December 31, 2008:

 

2009

 

$

94,511

 

2010

 

112,730

 

2011

 

88,565

 

2012

 

161,381

 

2013

 

21,759

 

2014 and thereafter

 

68,445

 

Total mortgage payments

 

547,391

 

Plus: Unamortized fair value adjustment

 

694

 

Total mortgage indebtedness

 

$

548,085

 

 

The Company currently intends to fund its 2009 future principal payment requirements from cash provided by operating activities as well as additional borrowings under our credit facility ($78 million available as of December 31, 2008).

 

We believe that, as a publicly traded REIT, we will have access to multiple sources of capital to fund long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, we cannot provide any assurance that this will be the case. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. In addition, the current dislocation in the United States debt markets has significantly reduced the availability and increased the cost of long-term debt capital, including conventional mortgage financing and commercial mortgage-backed securities financing.  There can be no assurance that such capital will be readily available in the foreseeable future.

 

7.  MINORITY INTERESTS

 

Operating Partnership

 

Operating partnership minority interests relate to the interests in the operating partnership that are not owned by the Company, which, at December 31, 2008, 2007 and 2006, amounted to approximately 8.1%, 8.1% and 8.3%, respectively.  These minority interests were issued in the form of Operating Partnership units and were a component of the consideration the Company paid to acquire certain self-storage facilities. Limited partners who acquired Operating Partnership units have the right to require the Operating Partnership to redeem part or all of their Operating Partnership units for, at the Company’s option, an equivalent number of common shares of the Company or cash based upon the fair market value of an equivalent number of common shares of the Company. The market value of the Company’s common shares for this purpose will be equal to the average of the closing trading price of the Company’s common shares on the New York Stock Exchange for the 10 trading days before the date the Company received the redemption notice.  As of December 31, 2008, the calculated aggregate redemption value of outstanding Operating Partnership units based upon the Company’s stock price was approximately $20.8 million.

 

 

 

Number of limited
partnership units

 

 

 

 

 

As of December 31, 2007

 

5,079,928

 

Units issued

 

 

Units redeemed

 

 

As of December 31, 2008

 

5,079,928

 

 

In conjunction with the formation of the Company, certain former owners contributed facilities to the operating partnership and received units in the operating partnership concurrently with the closing of the Company’s initial public offering on October 22, 2004 (“IPO”). Limited partners who acquired operating partnership units in the Formation Transactions have the right, effective October 27, 2005, to require the operating partnership to redeem part or all of their operating partnership units for cash or, at the Company’s option, common shares, based upon the fair market value of an equivalent number of common shares for which the operating partnership units would have been redeemed if the Company had assumed and satisfied the operating partnership’s obligation by paying common shares. The market value of the Company’s common shares for this purpose will be equal to the average of the closing trading price of the Company’s common shares on the New York Stock Exchange for the 10 trading days before the day on which the Company received the redemption notice. Upon consummation of the IPO, the carrying value of the net assets of the operating partnership was allocated to minority interests. Pursuant to three contribution agreements and three option exercises in 2005, entities owned by the Company’s former Chief Executive Officer and one of its former Trustees received an aggregate of 1,524,358 operating partnership units for six facilities with a net historical basis of $7.3 million.

 

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Table of Contents

 

Consolidated Real Estate Venture

 

USIFB, LLP (“the Venture”) was formed to own, operate, acquire and develop self-storage facilities in England.  The Company has a 97% interest in the Venture, and through a wholly-owned subsidiary and together with its joint venture partner, operations began at one facility in London, England during 2008.  We have determined that the Venture is a variable interest entity as defined by FIN 46R, and that we are the primary beneficiary.  Accordingly, the assets, liabilities and results of operations of the Venture are consolidated in our consolidated financial statements.  At December 31, 2008, the Venture had total assets of $6.3 million and total liabilities of $3.6 million and a mortgage loan of $3.5 million secured by assets with a net book value of $5.3 million.  At December 31, 2008, the Venture’s creditors had no recourse to the general credit of the Company other than certain loan commitments.

 

8.  RELATED PARTY TRANSACTIONS

 

Robert J. Amsdell, former Chief Executive Officer and Chairman of the Board of Trustees, retired from the Board effective as of February 13, 2007.  Barry L. Amsdell submitted his letter of resignation from the Board on February 20, 2007.  Effective as of February 19, 2007, Todd C. Amsdell, President of U-Store-It Development LLC, a subsidiary of the Company, resigned.

 

Amsdell Settlement/Rising Tide Acquisition

On September 14, 2007, the Company settled all pending state and federal court litigation involving the Company and the interests of Robert J. Amsdell, Barry L. Amsdell, Todd C. Amsdell and Kyle Amsdell, son of Robert and brother of Todd Amsdell (collectively, the “Amsdells”), and Rising Tide Development LLC, a company owned and controlled by Robert J. Amsdell and Barry L. Amsdell (“Rising Tide”).  The Board of Trustees of the Company, along with the Corporate Governance and Nominating Committee, approved the terms of the settlement.

 

In addition, on September 14, 2007, the Operating Partnership purchased 14 self-storage facilities from Rising Tide (the “Rising Tide Properties”) for an aggregate purchase price of $121 million pursuant to a purchase and sale agreement.  In connection with the settlement agreement and acquisition of the 14 self storage facilities, the Company considered the provisions of EITF 04-01, Accounting for Pre-existing relationships between the Parties to a Business Combination, and determined that all consideration paid was allocable to the purchase of the storage facilities.

 

Pursuant to a Settlement Agreement and Mutual Release, dated August 6, 2007, (the “Settlement Agreement”) which was conditioned upon the acquisition of the 14 self-storage facilities from Rising Tide for $121 million, each of the parties to the agreement executed various agreements.  A summary of the various agreements follows:

 

·                  Standstill Agreement.  Robert J. Amsdell, Barry L. Amsdell and Todd C. Amsdell agreed they would not commence or participate in any proxy solicitation or initiate any shareholder proposal; take any action to convene a meeting of shareholders; or take any actions, including making any public or private proposal or announcement, that could result in an extraordinary corporate transaction relating to the Company.  The standstill agreement terminated on April 20, 2008.

 

·                  First Amendment to Lease.  The Operating Partnership and Amsdell and Amsdell, an entity owned by Robert and Barry Amsdell, entered into a First Amendment to Lease which modified certain terms of all of the lease agreements the Operating Partnership has with Amsdell and Amsdell for office space in Cleveland, Ohio.  The First Amendment provided the Operating Partnership the ability to assign or sublease the office space previously used for its corporate office and certain operations.  Separately, Amsdell and Amsdell consented to the Operating Partnership’s proposed sublease to an unrelated party of approximately 22,000 square feet of office space covered by the aforementioned leases.

 

·                  Termination of Option Agreement.  The Operating Partnership and Rising Tide entered into an Option Termination Agreement that terminated an Option Agreement dated October 27, 2004, by and between the Operating Partnership and Rising Tide.  The Option Agreement provided the Operating Partnership with an option to acquire Rising Tide’s right, title and interest to 18 properties, including:  the 14 Rising Tide Properties discussed above;

 

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Table of Contents

 

three properties that the Operating Partnership acquired in 2005 pursuant to exercise of its option; and one undeveloped property that Rising Tide has the option to acquire and that was not acquired as a part of the purchase and sale agreement.

 

·                  Termination of Property Management Agreement, and Marketing and Ancillary Services Agreement.  Certain of the Company’s subsidiaries and Rising Tide entered into a Property Management Termination Agreement and a Marketing and Ancillary Services Termination Agreement. Under the Property Management Agreement, the Company provided property management services for the Rising Tide Properties for a fee equal to the greater of 5.35% of the gross revenues of each property or $1,500 per property per month.  Under the Marketing and Ancillary Services Agreement, the Company provided limited marketing and other miscellaneous services for the Rising Tide properties.  Management fees earned by YSI Management LLC, from Rising Tide Development, were approximately $0, $0.4 million and $0.5 million for the years ended December 31, 2008, 2007 and 2006, respectively, and are included in other related party revenues. Accounts receivable from Rising Tide Development at December 31, 2008, 2007 and 2006 were approximately $0, $0.4 million and $0.5 million, respectively, and are included in due from related parties. No amounts were outstanding as of December 31, 2008.  These amounts represent expenses paid on behalf of Rising Tide Development by YSI Management LLC and proceeds from the sale of ancillary items that were reimbursed under standard business terms.  In connection with the termination of the Property Management Agreement, expenses relating to property management will be prorated.

 

·                  Amendment of Employment and Non-Compete Agreements.  As part of the Settlement Agreement, the Company entered into a Modification of Noncompetition Agreement and Termination of Employment Agreement (each a “Modification of Noncompetition Agreement and Termination of Employment Agreement”) with each of Robert J. Amsdell and Todd C. Amsdell, and a Modification of Noncompetition Agreement (“Modification of Noncompetition Agreement”) with Barry L. Amsdell, which terminates and modifies specific provisions of the noncompetition agreement the Company has with each of them, dated October 27, 2004 (the “Original Noncompetition Agreements”).  The Original Noncompetition Agreements restrict the ability of Robert J., Barry L. and Todd C. Amsdell to compete with the Company for one year and their ability to solicit employees of the Company for two years from the date of their termination of employment or resignation from service as a Trustee.  Pursuant to these modification agreements, Todd C. Amsdell will be able to compete with the Company, and Robert J. and Barry L. Amsdell will be able to (a) develop the one Rising Tide property that the Company did not acquire under the purchase and sale agreement and (b) compete with respect to any property identified as part of a Section 1031 “like-kind exchange” referenced in the purchase and sale agreement.  Further, each Original Noncompetition Agreement was modified to allow each of them to hire, for any purpose, any employee or independent contractor who was terminated, has resigned or otherwise left the employment or other service of the Company or any of its affiliates on or prior to June 1, 2007.

 

The Modification and Noncompetition Agreement and Termination of Employment Agreement with each of Robert J. Amsdell and Todd C. Amsdell also terminates the employment agreements the Company had with each of them, effective as of February 13, 2007 with respect to Robert J. Amsdell and February 19, 2007 with respect to Todd C. Amsdell.

 

Additional Acquisitions of Facilities

The Company, in accordance with a contract signed on April 3, 2006, acquired nine self-storage facilities from Jernigan Property Group on July 27, 2006 for consideration of approximately $45.3 million. Our Chief Executive Officer, Dean Jernigan, served as President of Jernigan Property Group. Mr. Jernigan has agreed that he will not expand his outside interest, ownership or activity in the self-storage business. Given Mr. Jernigan’s appointment as a Trustee and the Chief Executive Officer of the Company on April 24, 2006, this transaction was approved by a majority of the independent members of the Company’s Board of Trustees.

 

Construction Services

Historically, the Company engaged Amsdell Construction, a company owned by Robert J. Amsdell and Barry L. Amsdell, to maintain and improve its self-storage facilities.  The total payments incurred by the Company to Amsdell Construction for the year ended December 31, 2006 was approximately $42,000.  The Company did not engage Amsdell Construction during 2007 or 2008.

 

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Corporate Office Leases

Pursuant to lease agreements that the Operating Partnership entered into with Amsdell and Amsdell during 2007, we rented office space from Amsdell and Amsdell at The Parkview Building, a multi-tenant office building of approximately 40,000 square feet located at 6745 Engle Road, an office building of approximately 18,000 square feet located at 6751 Engle Road, and an office building of approximately 28,000 square feet located at 6779 Engle Road.  Each of these properties is part of Airport Executive Park, a 50-acre office and flex development located in Cleveland, Ohio, which is owned by Amsdell and Amsdell. Our independent Trustees approved the terms of, and entry into, each of the office lease agreements by the Operating Partnership.  The table below shows the office space subject to these lease agreements and certain key provisions, including the term of each lease agreement, the period for which the Operating Partnership may extend the term of each lease agreement, and the minimum and maximum rents payable per month during the term.

 

Office Space

 

Approximate
Square Footage

 

Term

 

Period of
Extension Option (1)

 

Fixed Minimum
Rent Per Month

 

Fixed
Maximum Rent
Per Month

 

The Parkview Building — 6745 Engle Road; and 6751 Engle Road

 

21,900

 

12/31/2014

 

Five-year

 

$

25,673

 

$

31,205

 

6745 Engle Road — Suite 100

 

2,212

 

12/31/2014

 

Five-year

 

$

3,051

 

$

3,709

 

6745 Engle Road — Suite 110

 

1,731

 

12/31/2014

 

Five-year

 

$

2,387

 

$

2,901

 

6751 Engle Road — Suites C and D

 

3,000

 

12/31/2014

 

Five-year

 

$

3,137

 

$

3,771

 

6779 Engle Road — Suites G and H

 

3,500

 

12/31/2008

 

Five-year

 

$

3,079

 

$

3,347

 

6745 Engle Road — Suite 120

 

1,600

 

4/30/2007

 

Three-year

 

$

1,800

 

$

1,900

 

6779 Engle Road — Suites I and J

 

3,500

 

(2

)

N/A

 

$

3,700

 

N/A

 

 


(1)          Our operating partnership may extend the lease agreement beyond the termination date by the period set forth in this column at prevailing market rates upon the same terms and conditions contained in each of the lease agreements.

 

(2)          In June 2007, the Operating Partnership terminated this lease agreement which had a month-to-month term.

 

In addition to monthly rent, the office lease agreements provide that our Operating Partnership reimburse Amsdell and Amsdell for certain maintenance and improvements to the leased office space.  The total amounts of lease payments incurred under the six office leases during the years ended December 31, 2008 and December 31, 2007 were approximately $0.4 million and $0.4 million, respectively.

 

Total future minimum rental payments under the related party lease agreements entered into as of December 31, 2008 are as follows:

 

 

 

Due to Related Party

 

Due from Subtenant

 

 

 

Amount

 

Amount

 

 

 

(in thousands)

 

 

 

 

 

 

 

2009

 

$

453

 

$

314

 

2010

 

453

 

314

 

2011

 

475

 

314

 

2012

 

475

 

314

 

2013

 

499

 

314

 

2014 and thereafter

 

499

 

315

 

 

 

$

2,854

 

$

1,885

 

 

Other

During the fourth quarter of 2006, the Company engaged a consultant to assist in establishing certain development protocols and processes. In connection with that assignment, the outside consultant utilized the services of the son-in-law of Dean Jernigan, President and Chief Executive Officer of the Company.  Our payments for Mr. Jernigan’s son-in-law’s services totaled $168 thousand in 2008 and $149 thousand in 2007.  Mr. Jernigan’s son-in-law was hired as a full-time employee of the Company on September 15, 2008.

 

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Registration Rights

Robert J. Amsdell, Barry L. Amsdell, Todd C. Amsdell and the “Amsdell Entities” that acquired common shares or Operating Partnership units in the formation transactions which took place at the time of the IPO received certain registration rights. An aggregate of approximately 9.7 million common shares acquired in the formation transactions were subject to a registration rights agreement (including approximately 1.1 million shares issuable upon redemption of approximately 1.1 million Operating Partnership units issued in the formation transactions).

 

In addition, Rising Tide Development received registration rights with respect to the Operating Partnership units it received in connection with the Company’s acquisition of three option facilities. An aggregate of approximately 0.4 million common shares (which shares are issuable upon redemption of approximately 0.4 million Operating Partnership units issued in connection with the Company’s option exercises) were subject to a registration rights agreement.

 

In March 2007, the Company filed a Registration Statement on Form S-3 to satisfy all of the abovementioned registration rights.

 

9.  FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The fair value of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximates their respective book values at December 31, 2008 and 2007. The Company has fixed interest rate loans with a carrying value of $548.1 million and $556.4 million at December 31, 2008 and 2007, respectively.  The estimated fair values of these fixed rate loans were $527.8 million and $533.2 million at December 31, 2008 and 2007, respectively. The Company has variable interest rate loans with a carrying value of $429.4 million and $471.1 million at December 31, 2008 and 2007, respectively.  The estimated fair values of the variable interest rate loans were $423.2 million and $471.1 million at December 31, 2008 and 2007, respectively.  These estimates are based on discounted cash flow analyses assuming market interest rates for comparable obligations at December 31, 2008 and 2007.

 

10.  DISCONTINUED OPERATIONS

 

For the years ended December 31, 2008, 2007 and 2006, discontinued operations relates to 23 properties that the Company sold during 2008, one property that was considered held-for-sale at December 31, 2008, and five properties that the Company sold during 2007 (see Note 3).  There were no property dispositions during 2006.  Each of the sales during 2008 and 2007 resulted in the recognition of a gain, which in the aggregate totaled $19.7 million and $2.5 million, respectively.

 

The following table summarizes the revenue and expense information for the properties classified as discontinued operations for the years ended December 31, 2008, 2007 and 2006 (in thousands):

 

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For the year ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

Rental income

 

$

6,058

 

$

10,445

 

$

11,668

 

Other property related income

 

476

 

805

 

801

 

Total revenues

 

6,534

 

11,250

 

12,469

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Property operating expenses

 

2,850

 

4,866

 

4,996

 

Depreciation and amortization

 

1,280

 

2,209

 

2,328

 

Total operating expenses

 

4,130

 

7,075

 

7,324

 

OPERATING INCOME

 

2,404

 

4,175

 

5,145

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Interest:

 

 

 

 

 

 

 

Interest expense on loans

 

 

(189

)

(497

)

Loan procurement amortization expense

 

 

(3

)

(26

)

Interest income

 

 

5

 

5

 

Other

 

 

 

(3

)

Total other expense

 

 

(187

)

(521

)

Income from discontinued operations

 

2,404

 

3,988

 

4,624

 

Net gain on disposition of discontinued operations

 

19,720

 

2,517

 

 

Minority interest attributable to discontinued operations

 

(1,792

)

(534

)

349

 

Income from discontinued operations

 

$

20,332

 

$

5,971

 

$

4,973

 

 

As of December 31, 2008, the property held-for-sale includes $2.4 million of storage facilities, net and the approximate gain on disposition of the property held-for-sale is $0.5 million and will be finalized as the sale is consummated.

 

11.  COMMITMENTS AND CONTINGENCIES

 

The Company currently owns one self-storage facility subject to a ground lease and five self-storage facilities having small parcels of land that are subject to ground leases. The Company recorded rent expense of approximately $0.2 million for each of the years ended December 31, 2008, 2007 and 2006, respectively.

 

Total future minimum rental payments under non-cancelable ground leases and related party office leases in effect as of December 31, 2008 are as follows:

 

 

 

Third Party
Amount

 

Related Party
Amount

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

2009

 

$

159

 

$

453

 

2010

 

149

 

453

 

2011

 

149

 

475

 

2012

 

149

 

475

 

2013

 

149

 

499

 

2014 and thereafter

 

101

 

499

 

 

 

$

856

 

$

2,854

 

 

The Company has been named as a defendant in a number of lawsuits in the ordinary course of business. In most instances, these claims are covered by the Company’s liability insurance coverage. Management believes that the ultimate settlement of the suits will not have a material adverse effect on the Company’s financial statements.

 

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12.  RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS

 

The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its subsidiaries may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.

 

The Company has entered into interest rate swap agreements that qualify and are designated as cash flow hedges designed to reduce the impact of interest rate changes on its variable rate debt.  Therefore, the interest rate swaps are recorded in the consolidated balance sheet at fair value and the related gains or losses are deferred in shareholders’ equity as Accumulated Other Comprehensive Loss.  These deferred gains and losses are amortized into interest expense during the period or periods in which the related interest payments affect earnings.  However, to the extent that the interest rate swaps are not perfectly effective in offsetting the change in value of the interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately.  Ineffectiveness was immaterial for all periods presented.

 

The Company formally assesses, both at inception of the hedge and on an on-going basis, whether each derivative is highly-effective in offsetting changes in cash flows of the hedged item. If management determines that a derivative is highly-effective as a hedge, it accounts for the derivative using hedge accounting, pursuant to which gains or losses inherent in the derivative do not impact the Company’s results of operations.  If management determines that a derivative is not highly-effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company will discontinue hedge accounting prospectively and will reflect in its statement of operations realized and unrealized gains and losses in respect of the derivative.

 

The Company had an interest rate cap agreement that effectively limited the interest rate on $40 million of credit facility borrowings at 5.50% per annum through January 2008.  The following table summarizes the terms and fair values of the Company’s derivative financial instruments at December 31, 2008 (in thousands):

 

 

 

 

 

Notional

 

 

 

 

 

 

 

Fair

 

Hedge Product

 

Hedge Type

 

Amount

 

Strike

 

Effective Date

 

Maturity

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swap

 

Cash flow

 

$

50,000

 

4.7725

%

8/24/2007

 

11/20/2009

 

$

(1,683

)

Swap

 

Cash flow

 

25,000

 

4.7160

%

9/4/2007

 

11/20/2009

 

(830

)

Swap

 

Cash flow

 

25,000

 

2.3400

%

3/28/2008

 

11/20/2009

 

(326

)

Swap

 

Cash flow

 

200,000

 

2.7625

%

5/28/2008

 

11/20/2009

 

(3,314

)

 

 

 

 

 

 

 

 

 

 

 

 

$

(6,153

)

 

13.  FAIR VALUE MEASUREMENTS

 

As stated in Note 2 “Summary of Significant Accounting Policies” on January 1, 2008, the Company adopted the methods of fair value as described in SFAS No. 157 to value its financial assets and liabilities. As defined in SFAS No. 157, fair value is based on the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

 

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

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Table of Contents

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk in its assessment of fair value.

 

Financial assets and liabilities carried at fair value as of December 31, 2008 are classified in the table below in one of the three categories described above (dollars in thousands):

 

 

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

Interest Rate Swap Derivative Liabilities

 

$

 

$

6,153

 

$

 

 

 

 

 

 

 

 

 

Total liabilities at fair value

 

$

 

$

6,153

 

$

 

 

For financial liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR yield curves, bank price quotes for forward starting swaps, NYMEX futures pricing and common stock price quotes. Below is a summary of valuation techniques for Level 2 financial liabilities:

 

·                  Interest rate swap derivative assets and liabilities — valued using LIBOR yield curves at the reporting date. Counterparties to these contracts are most often highly rated financial institutions none of which experienced any significant downgrades in 2008 that would reduce the amount owed by the Company.

 

14.  SHARE-BASED COMPENSATION PLANS

 

On May 9, 2007, the Company’s shareholders approved an equity-based employee compensation plan, the 2007 Equity Incentive Plan (the “2007 Plan”). On October 19, 2004, the Company’s sole shareholder approved a share-based employee compensation plan, the 2004 Equity Incentive Plan (the “2004 Plan” and collectively with the 2007 Plan, the “Plans”). The purpose of the Plans are to attract and retain highly qualified executive officers, Trustees and key employees and other persons and to motivate such officers, trustees, key employees and other persons to serve the Company and its affiliates to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plans provide for the grant of share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals. Share options granted under the Plans may be non-qualified share options or incentive share options.

 

The Plans are administered by the Compensation Committee of the Company’s Board of Trustees (the “Compensation Committee”), which is appointed by the Board of Trustees. The Compensation Committee interprets the Plans and determines the terms and provisions of option grants and share awards. A total of 3,900,000 and 3,000,000 common shares are reserved for issuance under the 2007 Plan and 2004 Plan, respectively. The maximum number of common shares underlying equity awards that may be granted to an individual participant under the 2004 Plan during any calendar year is 400,000 for options or share appreciation rights and 100,000 for restricted shares or restricted share units, and 500,000 for options or share appreciation rights and 100,000 for restricted shares or restricted share units under the 2007 Plan. The maximum number of common shares that can be awarded under the Plan to any person, other than pursuant to an option, share appreciation rights or time-vested restricted shares, is 250,000 per calendar year under the 2004 Plan.  In addition, under the 2007 Plan, the maximum number of performance awards that may be granted to an executive officer is 100,000 and the maximum value of performance shares that can be settled in cash and that can be granted in any year is $1.5 million. To the extent that options expire unexercised or are terminated, surrendered or canceled, the options and share awards become available for future grants under the Plans, unless the Plans have been terminated.  Under the Plans, the Compensation Committee determines the vesting schedule of each share award and option. The exercise price for options is equivalent to the fair market value of the underlying common shares at the grant date. The Compensation Committee also determines the term of each option, which shall not exceed 10 years from the grant date.

 

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Share Options

 

The fair values for options granted in 2007 and 2008 were estimated at the time the options were granted using the Black-Scholes option-pricing model applying the following weighted average assumptions:

 

Assumptions:

 

2006

 

2007

 

2008

 

Risk-free interest rate

 

5.0

%

4.7

%

3.4

%

Expected dividend yield

 

6.3

%

5.9

%

6.9

%

Volatility (a)

 

20.3

%

21.2

%

27.3

%

Weighted average expected life of the options (b)

 

7.5 years

 

9.4 years

 

9.0 years

 

Weighted average fair value of options granted per share

 

$

2.10

 

$

2.40

 

$

1.09

 

 


(a)  Expected volatility is based upon the level of volatility historically experienced.

(b)  Expected life is based upon our expectations of stock option recipients’ expected exercise and termination patterns.

 

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility. Volatility for the 2007 and 2008 grants was based on the trading history of the Company’s shares.

 

In 2008, 2007 and 2006, the Company recognized compensation expense related to options issued to employees and executives of approximately $1.4 million, $0.9 million and $0.4 million, respectively, which was recorded in General and administrative expense. As of December 31, 2008, the Company had approximately $1.4 million of unrecognized compensation cost related to unvested stock options that will be recorded over the next five years.

 

The table below summarizes the option activity under the Plan for the years ended December 31, 2008, 2007 and 2006:

 

 

 

 

 

 

 

Weighted Average

 

 

 

Number of Shares

 

Weighted Average

 

Remaining

 

 

 

Under Option

 

Exercise Price

 

Contractual Term

 

Balance at December 31, 2005

 

899,000

 

$

16.00

 

8.83

 

Options granted

 

867,500

 

18.38

 

10.00

 

Options canceled

 

(301,333

)

16.00

 

 

Options exercised

 

(186,667

)

16.00

 

8.36

 

Balance at December 31, 2006

 

1,278,500

 

$

17.62

 

8.92

 

Options granted

 

960,271

 

19.82

 

9.24

 

Options canceled

 

(322,000

)

16.21

 

 

Options exercised

 

 

 

 

Balance at December 31, 2007

 

1,916,771

 

$

18.95

 

8.74

 

Options granted

 

2,400,990

 

9.43

 

9.09

 

Options canceled

 

(1,006,662

)

13.08

 

 

Options exercised

 

 

 

 

Balance at December 31, 2008

 

3,311,099

 

$

13.84

 

8.42

 

 

 

 

 

 

 

 

 

Vested or expected to vest at December 31, 2008

 

3,311,099

 

13.84

 

8.42

 

Exercisable at December 31, 2008

 

577,715

 

18.64

 

7.57

 

 

At December 31, 2008, the aggregate intrinsic value of options outstanding, of options that vested or expected to vest and of options that were exercisable was $0.

 

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Table of Contents

 

Restricted Shares

 

The Company applies the fair value method of accounting for contingently issued shares.  As such, each grant is recognized ratably over the related vesting period.  Approximately 259,000 restricted shares were issued during 2008 for which the fair value of the restricted shares at their respective grant dates was approximately $1.8 million, which vest over three years.  During 2007, approximately 124,000 restricted shares were issued for which the fair value of the restricted shares at their respective grant dates was approximately $1.9 million.  As of December 31, 2008 the Company had approximately $0.7 million of remaining unrecognized compensation costs related to 2008 restricted share issuances that will be recognized over the next two years.

 

On December 22, 2005, 163,677 restricted share units were granted to certain executives.  The restricted share units were granted in the form of deferred share units, entitling the holders thereof to receive common shares at a future date. Holders of the deferred share units are not entitled to any of the rights of a shareholder with respect to the deferred share units unless and until the common shares relating to the deferred share unit award have been delivered to such holder. However, the holders of the deferred share units are entitled to receive dividend equivalent payments, upon the Company’s payment of a cash dividend on outstanding common shares.

 

The shares were equally divided between time-vesting shares and market-based shares with values of $20.62 and $13.82 per share, respectively.  The fair value of the restricted share units at grant date was approximately $3.0 million.  The Company used a Monte Carlo simulation analysis to estimate the fair value of the market-based shares. The time-vesting shares vest ratably over a five-year period, one-fifth per year on each of the first five anniversaries of the grant date. The market-based shares vest ratably over a five-year period, one-fifth per year on each of the first five anniversaries of the grant date if the average annual total shareholder return for the Company equals or exceeds ten percent. Additionally, any market-based shares that do not vest on a previous anniversary will vest on a subsequent anniversary date if the average annual total shareholder return from grant date equals or exceeds ten percent. Certain restricted share units awarded to the former Chief Executive Officer vest upon his retirement from the Company and since he reached the retirement age set forth in his award agreement prior to December 31, 2005, Robert J. Amsdell’s 72,745 restricted shares, valued at approximately $1.5 million, were recognized as share compensation expense in 2005.  During 2006, certain unvested shares vested early related to the termination of several executives under the terms of their respective employment agreements.  Accordingly, the Company recognized the related compensation expense in 2006.  As of December 31, 2006 the Company had no remaining unrecognized compensation cost related to the December 22, 2005 restricted share units.

 

The fair value for restricted share units granted in 2007 and 2008 were estimated at the time the units were granted. Awards that contain a market feature were valued using a Monte Carlo-pricing model applying the following weighted average assumptions:

 

Assumptions:

 

2007

 

2008

 

Risk-free interest rate

 

4.50

%

2.10

%

Volatility of total annual return

 

19.0

%

28.5

%

Weighted average expected life of the units

 

3 years

 

3 years

 

Weighted average fair value of units granted

 

$

11.70

 

$

4.14

 

 

In May 2005, the Company implemented the Deferred Trustees Plan, a component of the Plan, upon the approval of the Company’s Board of Trustees. Pursuant to the terms of the Deferred Trustees Plan, each non-employee member of the Board of Trustees may elect to receive all of his annual cash retainers and meeting fees payable for service on the Board of Trustees or any committee of the Board of Trustees in the form of either all common shares or all deferred share units.

 

Pursuant to the terms of the Deferred Trustees Plan, under the equity incentive plan, certain Trustees elected to receive their Board of Trustee fees in 2005 and 2006 in the form of deferred share units. On December 31, 2006 an aggregate of 8,564 deferred share units were granted to those Trustees and were valued at $20.55 per share and on December 31, 2005 and aggregate of 3,876 deferred share units were granted and were valued at $21.05 per share.  There was no similar activity in 2007 or 2008.

 

F-28



Table of Contents

 

In 2008, 2007 and 2006, the Company recognized compensation expense related to restricted shares and restricted share units issued to employees and Trustees of approximately $1.4 million, $1.1 million and $0.7 million, respectively; these amounts were recorded in General and administrative expense. The following table presents non-vested restricted share activity during 2008:

 

 

 

Number of Non-

 

 

 

Vested Restricted

 

 

 

Shares

 

Non-Vested at January 1, 2008

 

178,071

 

Granted

 

259,502

 

Vested

 

(53,871

)

Forfeited

 

(91,029

)

Non-Vested at December 31, 2008

 

292,673

 

 

15.  EARNINGS PER SHARE AND SHAREHOLDERS’ EQUITY

 

The following is a summary of the elements used in calculating basic and diluted earnings per share:

 

 

 

For the year ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

(Dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(17,540

)

$

(19,048

)

$

(13,524

)

Income from discontinued operations

 

20,332

 

5,971

 

4,973

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shares

 

$

2,792

 

$

(13,077

)

$

(8,551

)

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

57,621

 

57,497

 

57,287

 

Share options and restricted share units (1)

 

 

 

 

Weighted-average diluted shares outstanding

 

57,621

 

57,497

 

57,287

 

 

 

 

 

 

 

 

 

Income (loss) per Common Share:

 

 

 

 

 

 

 

Continuing operations

 

$

(0.30

)

$

(0.33

)

$

(0.24

)

Discontinued operations

 

0.35

 

0.11

 

0.09

 

Basic and diluted earnings (loss) per share

 

$

0.05

 

$

(0.22

)

$

(0.15

)

 


(1) For the years ended December 31, 2008, 2007 and 2006, the potentially dilutive shares of approximately 94,000, 22,000, and 121,000 respectively, were not included in the earnings per share calculation as their effect is antidilutive.

 

The operating partnership units and common shares have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the operating partnership. An operating partnership unit may be redeemed for cash, or at the Company’s option, common shares on a one-for-one basis. Outstanding minority interest units in the operating partnership were 5,079,928 as of December 31, 2008. There were 57,623,491 common shares outstanding as of December 31, 2008.

 

16.  INCOME TAXES

 

Deferred income taxes are established for temporary differences between financial reporting basis and tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if the Company believes that it is more likely than not that all or some portion of the deferred tax asset will not be realized. No valuation allowance was recorded at December 31, 2008 or 2007. The Company had net deferred tax assets of $0.5 million and $0.5 million, which are included in other assets, as of December 31, 2008 and 2007, respectively. The Company believes it is more likely than not the deferred tax assets will be realized.

 

F-29



Table of Contents

 

 

 

For the year ended December 31,

 

 

 

2008

 

2007

 

2006

 

Income tax provision

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

U.S. Federal

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

U.S. Federal

 

 

(0.1

)

(0.2

)

 

 

 

 

 

 

 

 

Income tax provision

 

$

 

$

(0.1

)

$

(0.2

)

 

 

 

 

 

 

 

 

Effective income tax rate

 

 

 

 

 

 

 

Statutory federal income tax rate

 

34.0

%

34.0

%

34.0

%

State and local income taxes

 

4.0

%

4.0

%

2.6

%

Effective income tax rate

 

38.0

%

38.0

%

36.6

%

 

 

 

As of December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

Assets

 

Liabilities

 

Assets

 

Liabilities

 

Assets

 

Liabilities

 

Deferred taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Share based compensation

 

$

1.3

 

$

1.2

 

$

0.7

 

$

0.6

 

$

0.8

 

$

0.8

 

Other

 

0.3

 

 

0.4

 

 

0.3

 

 

Deferred taxes

 

$

1.6

 

$

1.2

 

$

1.1

 

$

0.6

 

$

1.1

 

$

0.8

 

 

17.  PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

 

During 2007, the Company acquired 17 self-storage facilities for an aggregate purchase price of approximately $140.5 million and sold five properties for an aggregate purchase price of approximately $19.2 million.  During 2008, the Company acquired one self-storage facility for an aggregate purchase price of approximately $13.3 million and sold 23 properties for an aggregate purchase price of approximately $62.0 million.

 

The unaudited condensed consolidated pro forma financial information set forth below reflects adjustments to the Company’s historical financial data to give effect to each of the acquisitions and related financing activity (including the issuance of common shares) that occurred subsequent to January 1, 2007 as if each had occurred on January 1, of each respective year.  The unaudited pro forma information presented below does not purport to represent what the Company’s actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.

 

The following table summarizes, on a pro forma basis, our consolidated results of operations for the years ended December 31, 2008 and 2007 based on the assumptions described above:

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

Pro forma revenue

 

$

236,465

 

$

227,235

 

Pro forma loss from continuing operations

 

$

(17,177

)

$

(30,271

)

Loss per common share from continuing operations

 

 

 

 

 

Basic and diluted — as reported

 

$

(0.30

)

$

(0.33

)

Basic and diluted — as pro forma

 

$

(0.30

)

$

(0.53

)

 

F-30



Table of Contents

 

18.  ASSET IMPAIRMENT AND INSURANCE RECOVERIES

 

During 2008, the Company recorded $0.5 million of impairment charges related to property damage associated with Hurricane Ike and other extraordinary events including fires.  During 2007 the Company recorded $0.4 million of impairment charges related to property damage incurred at six properties as a result of either a fire or flood.  During 2006, insurance proceeds were sufficient to cover the insurance receivable and as such, no impairments were recorded.

 

19.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

 

The following is a summary of quarterly financial information for the years ended December 31, 2008 and 2007 (in thousands, except per share data):

 

 

 

Three months ended

 

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

 

2008

 

2008

 

2008

 

2008

 

Total revenues

 

$

57,895

 

$

58,630

 

$

60,370

 

$

59,505

 

Total operating expenses

 

$

49,545

 

$

51,151

 

$

50,861

 

$

50,169

 

Net income (loss)

 

$

(3,984

)

$

263

 

$

4,020

 

$

2,493

 

Basic and diluted earnings (loss) per share

 

$

(0.07

)

$

0.01

 

$

0.07

 

$

0.04

 

 

 

 

Three months ended

 

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

 

2007

 

2007

 

2007

 

2007

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

52,523

 

$

53,637

 

$

55,661

 

$

57,661

 

Total operating expenses

 

$

44,204

 

$

43,204

 

$

47,131

 

$

50,334

 

Net income (loss)

 

$

(3,358

)

$

295

 

$

(4,130

)

$

(5,884

)

Basic and diluted earnings (loss) per share

 

$

(0.06

)

$

 

$

(0.07

)

$

(0.10

)

 

The summation of quarterly earnings per share amounts do not necessarily equal the full year amounts.  The above information was updated to reclassify amounts to discontinued operations.  See note 10.

 

20.  LEASE ABANDONMENT CHARGE

 

In August 2007, the Company abandoned certain office space in Cleveland, OH that was previously used for its corporate offices.  The related leases have expiration dates ranging from December 31, 2008 through December 31, 2014. Upon vacating the space, the Company entered into a sub-lease agreement with a sub-tenant to lease the majority of the space for the duration of the term.

 

As a result of this exit activity, the Company recognized a “Lease abandonment charge” of $1.3 million during 2007.  The charge is comprised of approximately $0.8 million of costs that represent the present value of the net cash flows associated with leases and the sub-lease agreement (“Contract Termination Costs”) and approximately $0.5 million of costs associated with the write-off of certain assets related to the abandoned space (“Other Associated Costs”).  The Contract Termination Costs of $0.8 million are presented as “Accounts payable and accrued rent” and the Other Associated Costs of $0.5 million were accounted for as a reduction of “Storage facilities.”  The Company will amortize the Contract Termination Costs against rental expense over the remaining life of the respective leases.

 

21. COMPREHENSIVE INCOME (LOSS)

 

 

 

Year Ended December 31,

 

 

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

2,792

 

$

(13,077

)

$

(8,551

)

Other comprehensive loss:

 

 

 

 

 

 

 

Unrealized loss on derivative financial instruments

 

(4,608

)

(1,545

)

 

Unrealized loss on foreign currency translation

 

(1,281

)

(119

)

 

COMPREHENSIVE LOSS

 

$

(3,097

)

$

(14,741

)

$

(8,551

)

 

F-31



Table of Contents

 

U-STORE-IT

SCHEDULE III

REAL ESTATE AND RELATED DEPRECIATION

DECEMBER 31, 2008

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building
and
Improvements

 

Costs Sub-
sequent to
Acquisition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired /
Developed

 

Mobile, AL

 

129,035

 

(A)

 

226

 

2,524

 

1,331

 

301

 

3,781

 

4,081

 

1,378

 

1997

 

Chandler, AZ

 

47,520

 

 

 

327

 

1,257

 

253

 

327

 

1,510

 

1,837

 

293

 

2005

 

Glendale, AZ

 

56,830

 

 

 

201

 

2,265

 

950

 

418

 

2,998

 

3,416

 

837

 

1998

 

Green Valley, AZ

 

25,050

 

(B)

 

298

 

1,153

 

138

 

298

 

1,291

 

1,589

 

243

 

2005

 

Mesa I, AZ

 

52,375

 

 

 

920

 

2,739

 

137

 

921

 

2,875

 

3,796

 

499

 

2006

 

Mesa II, AZ

 

45,345

 

 

 

731

 

2,176

 

140

 

731

 

2,316

 

3,048

 

411

 

2006

 

Mesa III, AZ

 

58,264

 

 

 

706

 

2,101

 

161

 

706

 

2,262

 

2,968

 

399

 

2006

 

Phoenix I, AZ

 

100,812

 

 

 

1,134

 

3,376

 

272

 

1,135

 

3,647

 

4,782

 

632

 

2006

 

Phoenix II, AZ

 

45,270

 

 

 

756

 

2,251

 

170

 

756

 

2,421

 

3,178

 

422

 

2006

 

Scottsdale, AZ

 

81,125

 

 

 

443

 

4,879

 

1,645

 

883

 

6,084

 

6,967

 

1,698

 

1998

 

Tempe, AZ

 

53,840

 

(A)

 

749

 

2,159

 

173

 

749

 

2,332

 

3,081

 

413

 

2005

 

Tucson I, AZ

 

59,350

 

 

 

188

 

2,078

 

897

 

384

 

2,779

 

3,163

 

762

 

1998

 

Tucson II, AZ

 

43,950

 

 

 

188

 

2,078

 

841

 

391

 

2,716

 

3,107

 

753

 

1998

 

Tucson III, AZ

 

49,772

 

(C)

 

532

 

2,048

 

121

 

533

 

2,169

 

2,702

 

416

 

2005

 

Tucson IV, AZ

 

48,008

 

(C)

 

674

 

2,595

 

164

 

675

 

2,759

 

3,433

 

526

 

2005

 

Tucson V, AZ

 

45,234

 

(C)

 

515

 

1,980

 

182

 

515

 

2,161

 

2,676

 

412

 

2005

 

Tucson VI, AZ

 

40,766

 

(C)

 

440

 

1,692

 

163

 

440

 

1,854

 

2,294

 

359

 

2005

 

Tucson VII, AZ

 

52,688

 

(C)

 

670

 

2,576

 

207

 

670

 

2,783

 

3,453

 

526

 

2005

 

Tucson VIII, AZ

 

46,650

 

(C)

 

589

 

2,265

 

101

 

589

 

2,365

 

2,954

 

452

 

2005

 

Tucson IX, AZ

 

67,656

 

(C)

 

724

 

2,786

 

242

 

725

 

3,028

 

3,753

 

567

 

2005

 

Tucson X, AZ

 

46,350

 

(C)

 

424

 

1,633

 

148

 

425

 

1,781

 

2,205

 

337

 

2005

 

Tucson XI, AZ

 

42,800

 

(C)

 

439

 

1,689

 

229

 

439

 

1,918

 

2,357

 

352

 

2005

 

Tucson XII, AZ

 

42,325

 

(C)

 

671

 

2,582

 

153

 

672

 

2,735

 

3,406

 

518

 

2005

 

Tucson XIII, AZ

 

45,792

 

(C)

 

587

 

2,258

 

143

 

587

 

2,401

 

2,988

 

454

 

2005

 

Tucson XIV, AZ

 

49,170

 

 

 

707

 

2,721

 

154

 

708

 

2,875

 

3,582

 

543

 

2005

 

Apple Valley I, CA

 

73,340

 

(D)

 

140

 

1,570

 

1,527

 

476

 

2,761

 

3,237

 

738

 

1997

 

Apple Valley II, CA

 

62,115

 

(E)

 

160

 

1,787

 

1,181

 

431

 

2,698

 

3,128

 

766

 

1997

 

Benicia, CA

 

74,770

 

 

 

2,392

 

7,028

 

156

 

2,392

 

7,184

 

9,577

 

1,266

 

2005

 

Bloomington I, CA

 

28,425

 

 

 

42

 

463

 

528

 

100

 

933

 

1,033

 

265

 

1997

 

Bloomington II, CA

 

25,860

 

 

 

54

 

604

 

458

 

144

 

972

 

1,116

 

267

 

1997

 

Cathedral City, CA

 

129,048

 

 

 

2,194

 

10,046

 

132

 

2,195

 

10,177

 

12,372

 

1,786

 

2006

 

Citrus Heights, CA

 

75,620

 

(C)

 

1,633

 

4,793

 

144

 

1,634

 

4,936

 

6,570

 

959

 

2005

 

Diamond Bar, CA

 

103,034

 

 

 

2,522

 

7,404

 

233

 

2,524

 

7,635

 

10,159

 

1,482

 

2005

 

Escondido, CA

 

143,170

 

 

 

3,040

 

11,804

 

(772

)

3,040

 

11,033

 

14,073

 

796

 

2007

 

Fallbrook, CA

 

46,170

 

(F)

 

133

 

1,492

 

1,481

 

432

 

2,674

 

3,106

 

700

 

1997

 

Hemet, CA

 

66,040

 

(D)

 

125

 

1,396

 

1,296

 

417

 

2,400

 

2,817

 

645

 

1997

 

Highland I, CA

 

76,765

 

(D)

 

215

 

2,407

 

1,979

 

582

 

4,019

 

4,601

 

1,121

 

1997

 

Highland II, CA

 

62,257

 

 

 

1,277

 

5,847

 

239

 

1,277

 

6,086

 

7,363

 

944

 

2006

 

Lancaster, CA

 

60,825

 

(E)

 

390

 

2,247

 

919

 

556

 

3,000

 

3,556

 

821

 

2001

 

Long Beach, CA

 

125,213

 

 

 

3,138

 

14,368

 

243

 

3,138

 

14,611

 

17,749

 

2,292

 

2006

 

Murrieta, CA

 

49,840

 

 

 

1,883

 

5,532

 

155

 

1,903

 

5,667

 

7,570

 

1,008

 

2005

 

North Highlands, CA

 

57,244

 

(C)

 

868

 

2,546

 

214

 

868

 

2,760

 

3,628

 

528

 

2005

 

Orangevale, CA

 

50,542

 

(C)

 

1,423

 

4,175

 

141

 

1,423

 

4,316

 

5,739

 

839

 

2005

 

Palm Springs I, CA

 

72,775

 

 

 

1,565

 

7,164

 

113

 

1,566

 

7,276

 

8,842

 

1,146

 

2006

 

Palm Springs II, CA

 

122,370

 

 

 

2,131

 

9,758

 

308

 

2,132

 

10,065

 

12,197

 

1,569

 

2006

 

Pleasanton, CA

 

82,015

 

 

 

2,799

 

8,222

 

55

 

2,799

 

8,277

 

11,076

 

1,461

 

2005

 

Rancho Cordova, CA

 

53,928

 

(C)

 

1,094

 

3,212

 

186

 

1,095

 

3,398

 

4,492

 

659

 

2005

 

Redlands, CA

 

62,805

 

(F)

 

196

 

2,192

 

1,138

 

449

 

3,077

 

3,526

 

960

 

1997

 

Rialto I, CA

 

57,371

 

 

 

899

 

4,118

 

156

 

899

 

4,274

 

5,173

 

667

 

2006

 

Rialto II, CA

 

99,783

 

 

 

277

 

3,098

 

1,700

 

672

 

4,403

 

5,075

 

1,304

 

1997

 

Riverside I, CA

 

28,360

 

 

 

42

 

465

 

605

 

141

 

971

 

1,112

 

263

 

1997

 

Riverside II, CA

 

20,420

 

 

 

42

 

423

 

357

 

114

 

708

 

822

 

200

 

1997

 

Riverside III, CA

 

46,809

 

 

 

91

 

1,035

 

1,032

 

310

 

1,847

 

2,158

 

464

 

1998

 

Riverside IV, CA

 

67,320

 

 

 

1,351

 

6,183

 

206

 

1,351

 

6,389

 

7,739

 

993

 

2006

 

Riverside V, CA

 

85,496

 

 

 

1,170

 

5,359

 

270

 

1,170

 

5,629

 

6,799

 

876

 

2006

 

Riverside VI, CA

 

74,900

 

(K)

 

1,040

 

4,119

 

(185

)

1,040

 

3,933

 

4,973

 

284

 

2007

 

Roseville, CA

 

60,094

 

(C)

 

1,284

 

3,767

 

253

 

1,284

 

4,020

 

5,304

 

762

 

2005

 

Sacramento I, CA

 

50,839

 

(C)

 

1,152

 

3,380

 

207

 

1,152

 

3,587

 

4,739

 

691

 

2005

 

Sacramento II, CA

 

61,890

 

(C)

 

1,406

 

4,128

 

113

 

1,407

 

4,241

 

5,648

 

826

 

2005

 

San Bernardino I, CA

 

83,278

 

(F)

 

152

 

1,704

 

1,406

 

450

 

2,812

 

3,262

 

783

 

1997

 

San Bernardino II, CA

 

31,070

 

(A)

 

51

 

572

 

1,074

 

182

 

1,515

 

1,697

 

438

 

1997

 

San Bernardino III, CA

 

57,215

 

(F)

 

152

 

1,695

 

1,646

 

444

 

3,049

 

3,493

 

984

 

1997

 

San Bernardino IV, CA

 

41,546

 

(A)

 

112

 

1,251

 

1,153

 

306

 

2,210

 

2,516

 

713

 

1997

 

San Bernardino V, CA

 

35,671

 

(A)

 

98

 

1,093

 

941

 

242

 

1,890

 

2,132

 

638

 

1997

 

San Bernardino VI, CA

 

83,507

 

(E)

 

1,872

 

5,391

 

42

 

1,872

 

5,433

 

7,305

 

1,117

 

2005

 

San Bernardino VII, CA

 

56,795

 

 

 

783

 

3,583

 

313

 

783

 

3,896

 

4,679

 

598

 

2006

 

San Bernardino VIII, CA

 

118,456

 

 

 

1,205

 

5,518

 

210

 

1,205

 

5,728

 

6,933

 

986

 

2006

 

 

F-32



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building
and
Improvements

 

Costs Sub-
sequent to
Acquisition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired
/ Developed

 

San Bernardino IX, CA

 

78,839

 

 

 

1,475

 

6,753

 

276

 

1,476

 

7,028

 

8,503

 

1,095

 

2006

 

San Bernardino X, CA

 

111,904

 

 

 

1,691

 

7,741

 

266

 

1,692

 

8,005

 

9,697

 

1,415

 

2006

 

San Marcos, CA

 

37,430

 

(G)

 

775

 

2,288

 

69

 

776

 

2,355

 

3,132

 

459

 

2005

 

Santa Ana, CA

 

64,931

 

 

 

1,223

 

5,600

 

171

 

1,223

 

5,771

 

6,994

 

903

 

2006

 

South Palmetto, CA

 

80,555

 

 

 

292

 

3,289

 

1,889

 

688

 

4,782

 

5,470

 

1,229

 

1998

 

South Sacramento, CA

 

51,890

 

(C)

 

790

 

2,319

 

164

 

791

 

2,483

 

3,274

 

481

 

2005

 

Spring Valley, CA

 

55,080

 

 

 

1,178

 

5,394

 

290

 

1,178

 

5,684

 

6,862

 

885

 

2006

 

Sun City, CA

 

38,435

 

 

 

140

 

1,579

 

908

 

324

 

2,303

 

2,627

 

634

 

1998

 

Temecula I, CA

 

81,700

 

 

 

660

 

4,735

 

1,112

 

899

 

5,608

 

6,507

 

1,473

 

1998

 

Temecula II, CA

 

84,380

 

(K)

 

3,080

 

5,839

 

(62

)

3,080

 

5,777

 

8,857

 

416

 

2007

 

Thousand Palms, CA

 

72,970

 

 

 

1,493

 

6,835

 

314

 

1,493

 

7,149

 

8,642

 

1,126

 

2006

 

Vista I, CA

 

74,355

 

(D)

 

711

 

4,076

 

2,042

 

1,118

 

5,711

 

6,829

 

1,467

 

2001

 

Vista II, CA

 

147,721

 

 

 

4,629

 

13,599

 

85

 

4,629

 

13,684

 

18,313

 

2,410

 

2005

 

Walnut, CA

 

50,708

 

 

 

1,578

 

4,635

 

179

 

1,595

 

4,797

 

6,392

 

849

 

2005

 

West Sacramento, CA

 

39,715

 

 

 

1,222

 

3,590

 

104

 

1,222

 

3,694

 

4,916

 

649

 

2005

 

Westminster, CA

 

68,148

 

(G)

 

1,740

 

5,142

 

224

 

1,743

 

5,363

 

7,106

 

1,039

 

2005

 

Yucaipa, CA

 

77,560

 

(F)

 

198

 

2,221

 

1,546

 

525

 

3,439

 

3,965

 

980

 

1997

 

Aurora I, CO

 

75,667

 

(C)

 

1,343

 

2,986

 

231

 

1,343

 

3,216

 

4,559

 

639

 

2005

 

Aurora II, CO

 

57,609

 

 

 

736

 

1,637

 

256

 

736

 

1,893

 

2,629

 

363

 

2005

 

Aurora III, CO

 

28,730

 

 

 

352

 

783

 

169

 

352

 

952

 

1,304

 

182

 

2005

 

Aurora IV, CO

 

49,700

 

 

 

752

 

3,066

 

122

 

753

 

3,187

 

3,940

 

547

 

2006

 

Boulder I, CO

 

46,996

 

 

 

1,005

 

4,095

 

232

 

1,005

 

4,327

 

5,332

 

681

 

2006

 

Boulder II, CO

 

101,120

 

 

 

2,556

 

10,416

 

190

 

2,556

 

10,606

 

13,162

 

1,655

 

2006

 

Boulder III, CO

 

80,244

 

 

 

1,370

 

5,581

 

197

 

1,370

 

5,779

 

7,148

 

902

 

2006

 

Boulder IV, CO

 

95,148

 

 

 

2,102

 

8,563

 

153

 

2,102

 

8,716

 

10,818

 

1,359

 

2006

 

Colorado Springs I, CO

 

47,975

 

 

 

771

 

1,717

 

264

 

771

 

1,981

 

2,752

 

361

 

2005

 

Colorado Springs II, CO

 

62,400

 

1,961

 

657

 

2,674

 

180

 

656

 

2,855

 

3,511

 

409

 

2006

 

Denver I, CO

 

58,050

 

 

 

1,105

 

2,459

 

147

 

1,105

 

2,606

 

3,711

 

492

 

2005

 

Denver II, CO

 

59,200

 

 

 

673

 

2,741

 

145

 

674

 

2,885

 

3,559

 

496

 

2006

 

Denver III, CO

 

63,700

 

 

 

732

 

2,982

 

134

 

733

 

3,115

 

3,848

 

541

 

2006

 

Englewood, CO

 

51,000

 

 

 

981

 

2,183

 

157

 

981

 

2,340

 

3,321

 

446

 

2005

 

Federal Heights, CO

 

54,770

 

(C)

 

878

 

1,953

 

136

 

879

 

2,089

 

2,967

 

416

 

2005

 

Golden, CO

 

85,830

 

(C)

 

1,683

 

3,744

 

224

 

1,684

 

3,967

 

5,651

 

787

 

2005

 

Littleton I, CO

 

53,490

 

(C)

 

1,268

 

2,820

 

147

 

1,268

 

2,967

 

4,235

 

585

 

2005

 

Littleton II, CO

 

46,175

 

 

 

1,121

 

2,495

 

221

 

1,121

 

2,716

 

3,837

 

508

 

2005

 

Northglenn, CO

 

52,102

 

(C)

 

862

 

1,917

 

127

 

862

 

2,044

 

2,906

 

412

 

2005

 

Bloomfield, CT

 

48,700

 

 

 

78

 

880

 

2,195

 

360

 

2,793

 

3,153

 

760

 

1997

 

Branford, CT

 

50,679

 

 

 

217

 

2,433

 

1,114

 

504

 

3,260

 

3,764

 

1,156

 

1995

 

Bristol, CT

 

47,825

 

(E)

 

1,819

 

3,161

 

78

 

1,819

 

3,240

 

5,058

 

721

 

2005

 

East Windsor, CT

 

45,900

 

(A)

 

744

 

1,294

 

325

 

744

 

1,619

 

2,364

 

334

 

2005

 

Enfield, CT

 

52,875

 

(D)

 

424

 

2,424

 

294

 

473

 

2,670

 

3,142

 

991

 

2001

 

Gales Ferry, CT

 

54,230

 

 

 

240

 

2,697

 

1,353

 

489

 

3,801

 

4,290

 

1,348

 

1995

 

Manchester I, CT (6)

 

47,125

 

(D)

 

540

 

3,096

 

323

 

563

 

3,396

 

3,959

 

1,216

 

2002

 

Manchester II, CT

 

52,725

 

(E)

 

996

 

1,730

 

135

 

996

 

1,865

 

2,861

 

403

 

2005

 

Milford, CT

 

44,885

 

 

 

87

 

1,050

 

1,056

 

274

 

1,919

 

2,193

 

600

 

1994

 

Monroe, CT

 

58,500

 

(E)

 

2,004

 

3,483

 

543

 

2,004

 

4,026

 

6,030

 

856

 

2005

 

Mystic, CT

 

50,850

 

 

 

136

 

1,645

 

1,741

 

410

 

3,113

 

3,522

 

969

 

1994

 

Newington I, CT

 

42,520

 

(E)

 

1,059

 

1,840

 

71

 

1,059

 

1,911

 

2,969

 

426

 

2005

 

Newington II, CT

 

35,810

 

(E)

 

911

 

1,584

 

107

 

911

 

1,691

 

2,602

 

374

 

2005

 

Old Saybrook I, CT

 

87,500

 

(E)

 

3,092

 

5,374

 

263

 

3,092

 

5,637

 

8,729

 

1,250

 

2005

 

Old Saybrook II, CT

 

26,425

 

(E)

 

1,135

 

1,973

 

127

 

1,135

 

2,100

 

3,235

 

468

 

2005

 

South Windsor, CT

 

71,725

 

 

 

90

 

1,127

 

1,045

 

272

 

1,990

 

2,262

 

610

 

1994

 

Stamford, CT

 

28,957

 

(E)

 

1,941

 

3,374

 

55

 

1,941

 

3,428

 

5,370

 

769

 

2005

 

Washington, DC

 

62,695

 

 

 

871

 

12,759

 

102

 

871

 

11,870

 

12,741

 

591

 

2008

 

Boca Raton, FL

 

37,958

 

(F)

 

529

 

3,054

 

1,472

 

813

 

4,243

 

5,055

 

1,308

 

2001

 

Boynton Beach I, FL

 

61,987

 

(E)

 

667

 

3,796

 

1,597

 

958

 

5,102

 

6,060

 

1,615

 

2001

 

Boynton Beach II, FL

 

61,751

 

(A)

 

1,030

 

2,968

 

205

 

1,030

 

3,173

 

4,203

 

611

 

2005

 

Bradenton I, FL

 

68,466

 

 

 

1,180

 

3,324

 

131

 

1,180

 

3,455

 

4,635

 

741

 

2004

 

Bradenton II, FL

 

87,810

 

 

 

1,931

 

5,561

 

266

 

1,931

 

5,827

 

7,758

 

1,245

 

2004

 

Cape Coral, FL

 

76,592

 

(F)

 

472

 

2,769

 

2,335

 

830

 

4,746

 

5,576

 

1,499

 

2000

 

Dania Beach, FL (6)

 

182,693

 

 

 

3,584

 

10,324

 

618

 

3,584

 

10,942

 

14,526

 

2,320

 

2004

 

Dania, FL

 

58,270

 

 

 

205

 

2,068

 

1,331

 

481

 

3,123

 

3,604

 

982

 

1994

 

Davie, FL

 

81,035

 

(D)

 

1,268

 

7,183

 

628

 

1,373

 

7,707

 

9,079

 

2,681

 

2001

 

Deerfield Beach, FL

 

57,350

 

(A)

 

946

 

2,999

 

1,836

 

1,311

 

4,470

 

5,781

 

1,029

 

1998

 

Delray Beach, FL

 

67,821

 

(A)

 

798

 

4,539

 

583

 

883

 

5,037

 

5,920

 

1,771

 

2001

 

Fernandina Beach, FL

 

112,165

 

 

 

189

 

2,111

 

4,843

 

523

 

6,620

 

7,143

 

1,522

 

1996

 

Ft. Lauderdale, FL

 

70,593

 

(D)

 

937

 

3,646

 

2,237

 

1,384

 

5,437

 

6,820

 

1,288

 

1999

 

Ft. Myers, FL

 

67,546

 

(A)

 

303

 

3,329

 

376

 

328

 

3,680

 

4,008

 

1,323

 

1998

 

Jacksonville I, FL

 

80,336

 

 

 

1,862

 

5,362

 

36

 

1,862

 

5,397

 

7,260

 

882

 

2005

 

Jacksonville II, FL

 

65,020

 

 

 

950

 

7,004

 

(643

)

950

 

6,360

 

7,310

 

458

 

2007

 

Jacksonville III, FL

 

65,595

 

 

 

860

 

7,409

 

249

 

1,670

 

6,847

 

8,518

 

495

 

2007

 

Jacksonville IV, FL

 

78,374

 

(K)

 

870

 

8,049

 

(23

)

870

 

8,026

 

8,896

 

579

 

2007

 

Jacksonville V, FL

 

81,995

 

 

 

1,220

 

8,210

 

(505

)

1,220

 

7,705

 

8,925

 

557

 

2007

 

Lake Worth, FL

 

161,828

 

(F)

 

183

 

6,597

 

5,298

 

183

 

11,895

 

12,078

 

4,277

 

1998

 

Lakeland I, FL

 

49,007

 

(A)

 

81

 

896

 

948

 

256

 

1,669

 

1,925

 

664

 

1994

 

Kendall, FL

 

75,395

 

(K)

 

2,350

 

8,106

 

(719

)

2,350

 

7,387

 

9,737

 

532

 

2007

 

 

F-33



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building and
Improvements

 

Costs Sub-
sequent to
Acquisition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired /
Developed

 

Lutz I, FL

 

66,595

 

 

 

901

 

2,478

 

99

 

901

 

2,577

 

3,478

 

557

 

2004

 

Lutz II, FL

 

69,232

 

 

 

992

 

2,868

 

198

 

992

 

3,066

 

4,058

 

651

 

2004

 

Margate I, FL

 

54,405

 

(A)

 

161

 

1,763

 

1,714

 

399

 

3,239

 

3,638

 

988

 

1994

 

Margate II, FL

 

65,186

 

 

 

132

 

1,473

 

1,679

 

383

 

2,901

 

3,284

 

834

 

1996

 

Merrit Island, FL

 

50,447

 

(A)

 

716

 

2,983

 

448

 

796

 

3,351

 

4,147

 

1,052

 

2000

 

Miami I, FL

 

46,925

 

(D)

 

179

 

1,999

 

1,601

 

484

 

3,296

 

3,779

 

1,132

 

1995

 

Miami II, FL

 

67,060

 

(E)

 

253

 

2,544

 

1,398

 

561

 

3,634

 

4,195

 

1,171

 

1994

 

Miami IV, FL

 

150,510

 

 

 

4,577

 

13,185

 

378

 

4,577

 

13,563

 

18,140

 

2,244

 

1905

 

Naples I, FL

 

48,150

 

 

 

90

 

1,010

 

2,318

 

270

 

3,147

 

3,418

 

938

 

1996

 

Naples II, FL

 

65,850

 

(E)

 

148

 

1,652

 

4,215

 

558

 

5,457

 

6,015

 

1,454

 

1997

 

Naples III, FL

 

80,699

 

(A)

 

139

 

1,561

 

3,705

 

598

 

4,806

 

5,405

 

1,755

 

1997

 

Naples IV, FL

 

40,725

 

 

 

262

 

2,980

 

477

 

407

 

3,311

 

3,719

 

1,013

 

1998

 

Ocoee, FL

 

76,280

 

 

 

1,286

 

3,705

 

81

 

1,286

 

3,786

 

5,073

 

724

 

1905

 

Orange City, FL

 

59,586

 

 

 

1,191

 

3,209

 

(30

)

1,191

 

3,179

 

4,370

 

711

 

2004

 

Orlando I, FL (6)

 

52,170

 

 

 

187

 

2,088

 

460

 

240

 

2,496

 

2,735

 

1,018

 

1997

 

Orlando II, FL

 

63,114

 

(E)

 

1,589

 

4,576

 

53

 

1,589

 

4,628

 

6,217

 

892

 

1905

 

Orlando III, FL

 

104,165

 

 

 

1,209

 

7,768

 

183

 

1,209

 

7,951

 

9,160

 

1,110

 

2006

 

Oviedo, FL

 

49,051

 

 

 

440

 

2,824

 

279

 

440

 

3,104

 

3,543

 

435

 

2006

 

Pembroke Pines, FL

 

67,337

 

(D)

 

337

 

3,772

 

2,594

 

953

 

5,750

 

6,703

 

1,591

 

1997

 

Royal Palm Beach I, FL

 

67,755

 

(F)

 

205

 

2,148

 

2,632

 

741

 

4,244

 

4,985

 

1,385

 

1994

 

Royal Palm Beach II, FL

 

81,440

 

(K)

 

1,640

 

8,607

 

(497

)

1,640

 

8,110

 

9,750

 

586

 

2007

 

Sanford, FL

 

61,960

 

 

 

453

 

2,911

 

84

 

453

 

2,995

 

3,449

 

426

 

1905

 

Sarasota, FL

 

71,102

 

(A)

 

333

 

3,656

 

1,081

 

529

 

4,541

 

5,070

 

1,540

 

1998

 

St. Augustine, FL

 

59,725

 

 

 

135

 

1,515

 

3,139

 

383

 

4,406

 

4,789

 

1,254

 

1996

 

Stuart, FL

 

86,883

 

(E)

 

324

 

3,625

 

2,609

 

685

 

5,873

 

6,558

 

1,631

 

1997

 

SW Ranches, FL

 

64,955

 

 

 

1,390

 

7,598

 

(870

)

1,390

 

6,727

 

8,117

 

486

 

2007

 

Tampa I, FL

 

55,997

 

 

 

330

 

1,887

 

553

 

330

 

2,440

 

2,770

 

798

 

2001

 

Tampa II, FL

 

83,763

 

 

 

2,670

 

6,249

 

(474

)

2,670

 

5,774

 

8,444

 

416

 

2007

 

West Palm Beach I, FL

 

68,063

 

 

 

719

 

3,420

 

1,446

 

835

 

4,750

 

5,585

 

1,640

 

2001

 

West Palm Beach II, FL

 

93,903

 

 

 

2,129

 

8,671

 

234

 

2,129

 

8,904

 

11,034

 

2,200

 

2005

 

Alpharetta, GA

 

90,485

 

(F)

 

806

 

4,720

 

875

 

967

 

5,434

 

6,401

 

2,098

 

2001

 

Austell, GA

 

83,525

 

 

 

1,635

 

4,711

 

146

 

1,643

 

4,849

 

6,492

 

609

 

2006

 

Decatur, GA

 

148,480

 

 

 

616

 

6,776

 

27

 

616

 

6,803

 

7,419

 

2,136

 

1998

 

Norcross, GA

 

85,390

 

(D)

 

514

 

2,930

 

667

 

632

 

3,479

 

4,111

 

1,114

 

2001

 

Peachtree City, GA

 

49,845

 

1705

 

435

 

2,532

 

521

 

529

 

2,959

 

3,488

 

965

 

2001

 

Smyrna, GA

 

56,820

 

(F)

 

750

 

4,271

 

116

 

750

 

4,387

 

5,137

 

1,599

 

2001

 

Snellville, GA

 

80,000

 

 

 

1,660

 

4,781

 

107

 

1,660

 

4,888

 

6,548

 

509

 

2007

 

Suwanee I, GA

 

85,600

 

 

 

1,737

 

5,010

 

119

 

1,737

 

5,129

 

6,866

 

530

 

2007

 

Suwanee II, GA

 

79,390

 

(K)

 

800

 

6,942

 

(329

)

800

 

6,614

 

7,414

 

478

 

2007

 

Addison, IL

 

31,325

 

(I)

 

428

 

3,531

 

189

 

428

 

3,720

 

4,148

 

786

 

2004

 

Aurora, IL

 

74,085

 

 

 

644

 

3,652

 

44

 

644

 

3,696

 

4,340

 

803

 

2004

 

Bartlett, IL

 

51,425

 

 

 

931

 

2,493

 

120

 

931

 

2,613

 

3,544

 

554

 

2004

 

Hanover, IL

 

41,174

 

(E)

 

1,126

 

2,197

 

115

 

1,126

 

2,312

 

3,438

 

494

 

2004

 

Bellwood, IL

 

86,525

 

(E)

 

1,012

 

5,768

 

540

 

1,012

 

6,308

 

7,320

 

2,250

 

2001

 

Des Plaines, IL (6)

 

74,400

 

(I)

 

1,564

 

4,327

 

201

 

1,564

 

4,528

 

6,092

 

966

 

2004

 

Elk Grove Village, IL

 

64,304

 

(I)

 

1,446

 

3,535

 

208

 

1,446

 

3,743

 

5,189

 

817

 

2004

 

Glenview, IL

 

100,115

 

(I)

 

3,740

 

10,367

 

105

 

3,740

 

10,472

 

14,212

 

2,259

 

2004

 

Gurnee, IL

 

80,275

 

(I)

 

1,521

 

5,440

 

198

 

1,521

 

5,638

 

7,159

 

1,211

 

2004

 

Harvey, IL

 

60,140

 

(I)

 

869

 

3,635

 

56

 

869

 

3,691

 

4,560

 

800

 

2004

 

Joliet, IL

 

74,350

 

(I)

 

547

 

4,704

 

114

 

547

 

4,818

 

5,365

 

1,032

 

2004

 

Kildeer, IL

 

46,475

 

(I)

 

2,102

 

2,187

 

91

 

2,102

 

2,278

 

4,380

 

488

 

2004

 

Lombard, IL

 

58,088

 

(I)

 

1,305

 

3,938

 

518

 

1,305

 

4,456

 

5,761

 

932

 

2004

 

Mount Prospect, IL

 

64,900

 

(I)

 

1,701

 

3,114

 

161

 

1,701

 

3,275

 

4,976

 

689

 

2004

 

Mundelein, IL

 

44,700

 

(I)

 

1,498

 

2,782

 

124

 

1,498

 

2,906

 

4,404

 

624

 

2004

 

North Chicago, IL

 

53,300

 

(I)

 

1,073

 

3,006

 

192

 

1,073

 

3,198

 

4,271

 

681

 

2004

 

Plainfield I, IL

 

53,900

 

 

 

1,770

 

1,715

 

146

 

1,770

 

1,861

 

3,631

 

406

 

2004

 

Plainfield II, IL

 

52,100

 

 

 

694

 

2,000

 

108

 

694

 

2,108

 

2,802

 

413

 

2005

 

Schaumburg, IL

 

31,235

 

 

 

538

 

645

 

107

 

538

 

752

 

1,290

 

171

 

2004

 

Streamwood, IL

 

64,305

 

(A)

 

1,447

 

1,662

 

218

 

1,447

 

1,880

 

3,327

 

404

 

2004

 

Warrensville, IL

 

48,796

 

(A)

 

1,066

 

3,072

 

144

 

1,066

 

3,216

 

4,282

 

598

 

2005

 

Waukegan, IL

 

79,750

 

(I)

 

1,198

 

4,363

 

189

 

1,198

 

4,552

 

5,750

 

972

 

2004

 

West Chicago, IL

 

48,425

 

(E)

 

1,071

 

2,249

 

129

 

1,071

 

2,378

 

3,449

 

512

 

2004

 

Westmont, IL

 

53,700

 

(I)

 

1,155

 

3,873

 

63

 

1,155

 

3,936

 

5,091

 

850

 

2004

 

Wheeling I, IL

 

54,210

 

(A)

 

857

 

3,213

 

174

 

857

 

3,387

 

4,244

 

730

 

2004

 

Wheeling II, IL

 

67,825

 

(I)

 

793

 

3,816

 

182

 

793

 

3,998

 

4,791

 

859

 

2004

 

Woodridge, IL

 

50,725

 

(I)

 

943

 

3,397

 

70

 

943

 

3,467

 

4,410

 

749

 

2004

 

Indianapolis I, IN

 

43,600

 

(I)

 

1,871

 

1,230

 

126

 

1,871

 

1,356

 

3,227

 

295

 

2004

 

Indianapolis II, IN

 

44,900

 

(I)

 

669

 

2,434

 

117

 

669

 

2,551

 

3,220

 

561

 

2004

 

Indianapolis III, IN

 

60,850

 

(I)

 

1,229

 

2,834

 

92

 

1,229

 

2,926

 

4,155

 

626

 

2004

 

Indianapolis IV, IN

 

62,909

 

 

 

641

 

3,154

 

(9

)

552

 

3,234

 

3,786

 

708

 

2004

 

Indianapolis V, IN

 

74,825

 

(I)

 

2,138

 

3,633

 

145

 

2,138

 

3,778

 

5,916

 

810

 

2004

 

Indianapolis VI, IN

 

73,353

 

(A)

 

406

 

3,496

 

169

 

406

 

3,665

 

4,071

 

782

 

2004

 

Indianapolis VII, IN

 

91,807

 

(I)

 

908

 

4,755

 

426

 

908

 

5,181

 

6,089

 

1,089

 

2004

 

Indianapolis VIII, IN

 

80,000

 

(I)

 

887

 

3,548

 

154

 

887

 

3,702

 

4,589

 

792

 

2004

 

Indianapolis IX, IN

 

61,732

 

(I)

 

1,133

 

4,103

 

153

 

1,133

 

4,256

 

5,389

 

913

 

2004

 

 

F-34



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building and
Improvements

 

Costs Sub-
sequent to
Acquisition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired /
Developed

 

Baton Rouge I, LA

 

41,300

 

 

 

112

 

1,248

 

506

 

208

 

1,659

 

1,866

 

543

 

1997

 

Baton Rouge II, LA

 

80,327

 

(A)

 

118

 

1,181

 

1,788

 

331

 

2,756

 

3,087

 

781

 

1997

 

Slidell, LA

 

79,540

 

(D)

 

188

 

3,175

 

1,594

 

802

 

4,155

 

4,957

 

1,253

 

2001

 

Boston, MA

 

60,270

 

(F)

 

1,516

 

8,628

 

203

 

1,516

 

8,831

 

10,347

 

3,100

 

2002

 

Leominster, MA

 

53,823

 

(D)

 

90

 

1,519

 

2,344

 

338

 

3,616

 

3,953

 

1,012

 

1998

 

Medford, MA

 

58,292

 

(K)

 

1,330

 

7,165

 

(521

)

1,330

 

6,644

 

7,974

 

479

 

2007

 

Baltimore, MD

 

93,625

 

(E)

 

1,050

 

5,997

 

925

 

1,173

 

6,799

 

7,972

 

2,372

 

2001

 

California, MD

 

77,840

 

 

 

1,486

 

4,280

 

89

 

1,486

 

4,369

 

5,855

 

937

 

2004

 

Gaithersburg, MD

 

86,970

 

6150

 

3,124

 

9,000

 

137

 

3,124

 

9,137

 

12,261

 

1,880

 

2005

 

Laurel, MD

 

104,200

 

(F)

 

1,409

 

8,035

 

3,324

 

1,928

 

10,841

 

12,768

 

3,227

 

2001

 

Temple Hills, MD

 

97,250

 

(D)

 

1,541

 

8,788

 

2,046

 

1,800

 

10,575

 

12,375

 

3,240

 

2001

 

Grand Rapids, MI

 

87,381

 

(A)

 

185

 

1,821

 

1,368

 

325

 

3,049

 

3,374

 

1,156

 

1996

 

Portage, MI (6)

 

50,280

 

 

 

104

 

1,160

 

789

 

237

 

1,817

 

2,053

 

669

 

1996

 

Romulus, MI

 

42,050

 

(A)

 

308

 

1,743

 

605

 

418

 

2,238

 

2,656

 

683

 

1997

 

Wyoming, MI

 

91,158

 

(A)

 

191

 

2,135

 

1,087

 

354

 

3,059

 

3,413

 

1,166

 

1996

 

Gulfport, MS

 

61,251

 

(E)

 

172

 

1,928

 

872

 

338

 

2,634

 

2,972

 

819

 

1997

 

Belmont, NC

 

80,948

 

 

 

385

 

2,196

 

521

 

451

 

2,651

 

3,102

 

930

 

2001

 

Burlington I, NC

 

109,446

 

(A)

 

498

 

2,837

 

401

 

498

 

3,239

 

3,736

 

1,109

 

2001

 

Burlington II, NC

 

42,880

 

 

 

320

 

1,829

 

238

 

340

 

2,047

 

2,387

 

701

 

2001

 

Cary, NC

 

111,772

 

(A)

 

543

 

3,097

 

359

 

543

 

3,457

 

3,999

 

954

 

2001

 

Charlotte, NC

 

69,000

 

(F)

 

782

 

4,429

 

1,361

 

1,068

 

5,505

 

6,572

 

1,609

 

2005

 

Fayetteville I, NC

 

41,400

 

 

 

156

 

1,747

 

773

 

301

 

2,375

 

2,676

 

818

 

1997

 

Fayetteville II, NC

 

54,225

 

(F)

 

213

 

2,301

 

708

 

399

 

2,823

 

3,222

 

871

 

1997

 

Raleigh, NC

 

48,675

 

 

 

209

 

2,398

 

218

 

296

 

2,530

 

2,825

 

772

 

1998

 

Brick, NJ

 

52,740

 

 

 

234

 

2,762

 

1,283

 

485

 

3,794

 

4,279

 

1,277

 

1994

 

Clifton, NJ

 

105,550

 

(A)

 

4,346

 

12,520

 

123

 

4,346

 

12,643

 

16,989

 

2,276

 

2005

 

Cranford, NJ

 

91,250

 

 

 

290

 

3,493

 

2,044

 

779

 

5,048

 

5,827

 

1,600

 

1994

 

East Hanover, NJ

 

107,679

 

 

 

504

 

5,763

 

3,807

 

1,315

 

8,759

 

10,074

 

2,698

 

1994

 

Elizabeth, NJ

 

38,945

 

 

 

751

 

2,164

 

269

 

751

 

2,433

 

3,184

 

424

 

2005

 

Fairview, NJ

 

27,925

 

 

 

246

 

2,759

 

244

 

246

 

3,003

 

3,249

 

1,066

 

1997

 

Hamilton, NJ

 

70,550

 

 

 

1,885

 

5,430

 

143

 

1,893

 

5,565

 

7,458

 

697

 

2006

 

Hoboken, NJ

 

34,180

 

 

 

1,370

 

3,947

 

501

 

1,370

 

4,448

 

5,818

 

777

 

2005

 

Jersey City, NJ

 

91,311

 

 

 

397

 

4,507

 

2,607

 

1,010

 

6,501

 

7,511

 

2,064

 

1994

 

Linden, NJ

 

100,125

 

 

 

517

 

6,008

 

1,770

 

1,077

 

7,218

 

8,295

 

2,623

 

1994

 

Morris Township, NJ (5)

 

71,776

 

(D)

 

500

 

5,602

 

2,512

 

1,072

 

7,542

 

8,614

 

2,304

 

1997

 

Parsippany, NJ

 

66,325

 

 

 

475

 

5,322

 

1,900

 

844

 

6,853

 

7,697

 

2,159

 

1997

 

Randolph, NJ

 

52,565

 

(D)

 

855

 

4,872

 

1,247

 

1,108

 

5,866

 

6,974

 

1,934

 

2002

 

Sewell, NJ

 

57,830

 

(F)

 

484

 

2,766

 

1,146

 

706

 

3,690

 

4,396

 

1,216

 

2001

 

Albuquerque I, NM

 

65,927

 

(C)

 

1,039

 

3,395

 

181

 

1,039

 

3,576

 

4,615

 

734

 

2005

 

Albuquerque II, NM

 

58,798

 

(C)

 

1,163

 

3,801

 

151

 

1,163

 

3,952

 

5,115

 

803

 

2005

 

Albuquerque III, NM

 

41,016

 

 

 

519

 

1,697

 

220

 

519

 

1,917

 

2,436

 

386

 

2005

 

Albuquerque IV, NM

 

57,611

 

(C)

 

664

 

2,171

 

195

 

664

 

2,365

 

3,030

 

479

 

2005

 

Albuquerque V, NM

 

52,217

 

 

 

915

 

2,996

 

147

 

915

 

3,143

 

4,059

 

552

 

2006

 

Carlsbad, NM

 

39,999

 

(B)

 

490

 

1,613

 

94

 

491

 

1,706

 

2,197

 

349

 

2005

 

Deming, NM

 

33,005

 

(B)

 

338

 

1,114

 

110

 

339

 

1,223

 

1,562

 

252

 

2005

 

Las Cruces, NM

 

21,890

 

 

 

354

 

1,256

 

2

 

354

 

1,260

 

1,614

 

63

 

2008

 

Las Cruces, NM

 

43,850

 

(B)

 

611

 

2,012

 

155

 

612

 

2,166

 

2,778

 

441

 

2005

 

Lovington, NM

 

15,750

 

(B)

 

168

 

554

 

(181

)

111

 

430

 

542

 

85

 

2005

 

Silver City, NM

 

26,875

 

(B)

 

153

 

504

 

89

 

153

 

592

 

746

 

125

 

2005

 

Truth or Consequences, NM

 

24,010

 

(B)

 

10

 

34

 

74

 

11

 

108

 

118

 

30

 

2005

 

Las Vegas I, NV

 

41,590

 

 

 

1,851

 

2,986

 

165

 

1,851

 

3,151

 

5,002

 

488

 

2006

 

Las Vegas II, NV

 

48,900

 

 

 

3,354

 

5,411

 

146

 

3,355

 

5,556

 

8,911

 

845

 

2006

 

Jamaica, NY

 

88,815

 

(D)

 

2,043

 

11,658

 

472

 

2,043

 

12,129

 

14,173

 

4,207

 

2001

 

New Rochelle, NY

 

48,431

 

(A)

 

1,673

 

4,827

 

102

 

1,673

 

4,929

 

6,602

 

941

 

2005

 

North Babylon, NY

 

78,338

 

(F)

 

225

 

2,514

 

3,982

 

568

 

6,153

 

6,721

 

1,861

 

1998

 

Riverhead, NY

 

38,640

 

 

 

1,068

 

1,149

 

100

 

1,068

 

1,249

 

2,317

 

286

 

1905

 

Southold, NY

 

58,609

 

 

 

2,079

 

2,238

 

192

 

2,079

 

2,430

 

4,510

 

541

 

2005

 

Avon, CO

 

28,227

 

 

 

1,012

 

2,252

 

155

 

1,012

 

2,407

 

3,418

 

452

 

2005

 

Boardman, OH

 

65,495

 

(F)

 

64

 

745

 

2,156

 

287

 

2,678

 

2,965

 

1,394

 

1980

 

Brecksville, OH

 

58,452

 

 

 

228

 

2,545

 

1,055

 

442

 

3,386

 

3,828

 

993

 

1998

 

Canton I, OH

 

39,750

 

 

 

138

 

679

 

183

 

137

 

863

 

1,000

 

175

 

2005

 

Canton II, OH

 

26,200

 

 

 

122

 

595

 

113

 

120

 

710

 

830

 

146

 

2005

 

Centerville I, OH

 

86,390

 

(I)

 

471

 

3,705

 

116

 

471

 

3,821

 

4,292

 

817

 

2004

 

Centerville II, OH

 

43,350

 

(E)

 

332

 

1,757

 

150

 

332

 

1,907

 

2,239

 

403

 

2004

 

Cleveland I, OH

 

45,950

 

 

 

525

 

2,592

 

118

 

524

 

2,711

 

3,235

 

553

 

2005

 

Cleveland II, OH

 

58,425

 

 

 

290

 

1,427

 

156

 

289

 

1,584

 

1,873

 

334

 

2005

 

Columbus, OH

 

72,075

 

 

 

1,234

 

3,151

 

(55

)

1,239

 

3,091

 

4,329

 

439

 

2006

 

Dayton I, OH

 

43,100

 

(E)

 

323

 

2,070

 

91

 

323

 

2,161

 

2,484

 

467

 

2004

 

Dayton II, OH

 

48,149

 

 

 

441

 

2,176

 

113

 

440

 

2,290

 

2,730

 

466

 

2005

 

Euclid I, OH

 

46,910

 

 

 

200

 

1,053

 

1,906

 

317

 

2,842

 

3,159

 

1,511

 

1998

 

Euclid II, OH

 

47,275

 

 

 

359

 

 

1,638

 

461

 

1,535

 

1,997

 

402

 

1988

 

Grove City, OH

 

89,290

 

 

 

1,756

 

4,485

 

100

 

1,761

 

4,581

 

6,342

 

614

 

2006

 

Hilliard, OH

 

89,715

 

 

 

1,361

 

3,476

 

96

 

1,366

 

3,566

 

4,932

 

477

 

2006

 

Lakewood, OH

 

39,337

 

 

 

405

 

854

 

449

 

405

 

1,303

 

1,708

 

727

 

1989

 

Louisville, OH

 

53,960

 

 

 

257

 

1,260

 

117

 

255

 

1,379

 

1,634

 

295

 

2005

 

 

F-35



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building and
Improvements

 

Costs Sub-
sequent to
Acquisition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired /
Developed

 

Marblehead, OH

 

52,300

 

 

 

374

 

1,843

 

158

 

373

 

2,002

 

2,375

 

404

 

2005

 

Mason, OH

 

33,900

 

 

 

127

 

1,419

 

95

 

149

 

1,492

 

1,641

 

501

 

1998

 

Mentor, OH

 

51,225

 

 

 

206

 

1,011

 

1,428

 

204

 

2,440

 

2,645

 

323

 

2005

 

Miamisburg, OH

 

59,930

 

(I)

 

375

 

2,410

 

172

 

375

 

2,582

 

2,957

 

548

 

2004

 

Middleburg Heights, OH

 

93,125

 

 

 

63

 

704

 

1,938

 

332

 

2,373

 

2,705

 

689

 

1980

 

North Canton I, OH

 

45,400

 

 

 

209

 

846

 

502

 

299

 

1,258

 

1,557

 

881

 

1983

 

North Canton II, OH

 

44,180

 

 

 

70

 

1,226

 

11

 

239

 

1,068

 

1,307

 

265

 

1983

 

North Olmsted I, OH

 

48,665

 

 

 

63

 

704

 

1,170

 

214

 

1,723

 

1,937

 

582

 

1979

 

North Olmsted II, OH

 

47,850

 

(F)

 

290

 

1,129

 

1,044

 

469

 

1,994

 

2,463

 

982

 

1988

 

North Randall, OH

 

80,099

 

(F)

 

515

 

2,323

 

2,802

 

898

 

4,743

 

5,640

 

1,424

 

1988

 

Perry, OH

 

63,700

 

 

 

290

 

1,427

 

112

 

288

 

1,540

 

1,829

 

320

 

2005

 

Reynoldsburg, OH

 

66,895

 

 

 

1,290

 

3,295

 

186

 

1,295

 

3,476

 

4,771

 

455

 

2006

 

Strongsville, OH

 

43,927

 

(K)

 

570

 

3,486

 

(291

)

570

 

3,195

 

3,765

 

229

 

2007

 

Warrensville Heights, OH

 

90,331

 

 

 

525

 

766

 

2,858

 

935

 

3,214

 

4,149

 

829

 

1980

 

Westlake, OH

 

62,750

 

 

 

509

 

2,508

 

126

 

508

 

2,635

 

3,143

 

544

 

2005

 

Willoughby, OH

 

34,064

 

 

 

239

 

1,178

 

148

 

238

 

1,327

 

1,565

 

272

 

2005

 

Youngstown, OH

 

65,950

 

(A)

 

67

 

 

1,700

 

204

 

1,563

 

1,767

 

851

 

1977

 

Levittown, PA

 

76,230

 

(F)

 

926

 

5,296

 

803

 

926

 

6,099

 

7,025

 

2,081

 

2001

 

Philadelphia, PA

 

100,353

 

(D)

 

1,461

 

8,334

 

1,125

 

1,461

 

9,459

 

10,920

 

3,865

 

2001

 

Alcoa, TN

 

42,325

 

(J)

 

254

 

2,113

 

65

 

254

 

2,177

 

2,432

 

419

 

2005

 

Antioch, TN

 

76,020

 

 

 

588

 

4,906

 

125

 

588

 

5,031

 

5,619

 

850

 

2005

 

Cordova I, TN

 

54,225

 

(G)

 

296

 

2,482

 

152

 

297

 

2,633

 

2,930

 

510

 

2005

 

Cordova II, TN

 

67,550

 

 

 

429

 

3,580

 

238

 

429

 

3,818

 

4,247

 

555

 

2006

 

Knoxville I, TN

 

29,377

 

 

 

99

 

1,113

 

172

 

102

 

1,282

 

1,384

 

427

 

1997

 

Knoxville II, TN

 

38,000

 

 

 

117

 

1,308

 

204

 

129

 

1,501

 

1,629

 

490

 

1997

 

Knoxville III, TN

 

45,736

 

 

 

182

 

2,053

 

649

 

331

 

2,554

 

2,884

 

741

 

1998

 

Knoxville IV, TN

 

58,852

 

 

 

158

 

1,771

 

715

 

310

 

2,334

 

2,644

 

631

 

1998

 

Knoxville V, TN

 

42,790

 

 

 

134

 

1,493

 

397

 

235

 

1,789

 

2,024

 

595

 

1998

 

Knoxville VI, TN

 

63,440

 

(J)

 

439

 

3,653

 

88

 

440

 

3,740

 

4,180

 

715

 

1998

 

Knoxville VII, TN

 

55,094

 

(J)

 

312

 

2,594

 

178

 

312

 

2,771

 

3,083

 

520

 

2005

 

Knoxville VIII, TN

 

95,868

 

(J)

 

585

 

4,869

 

113

 

586

 

4,981

 

5,567

 

950

 

2005

 

Memphis I, TN

 

91,000

 

(E)

 

677

 

3,880

 

1,211

 

677

 

5,090

 

5,768

 

1,647

 

2001

 

Memphis II, TN

 

71,910

 

 

 

395

 

2,276

 

215

 

395

 

2,491

 

2,886

 

902

 

2001

 

Memphis III, TN

 

41,017

 

(G)

 

212

 

1,779

 

187

 

213

 

1,965

 

2,178

 

381

 

2005

 

Memphis IV, TN

 

38,714

 

(G)

 

160

 

1,342

 

187

 

160

 

1,529

 

1,689

 

294

 

2005

 

Memphis V, TN

 

60,120

 

(G)

 

209

 

1,753

 

413

 

210

 

2,165

 

2,375

 

388

 

2005

 

Memphis VI, TN

 

110,171

 

 

 

462

 

3,851

 

265

 

462

 

4,116

 

4,577

 

609

 

2006

 

Memphis VII, TN

 

115,303

 

 

 

215

 

1,792

 

412

 

215

 

2,204

 

2,419

 

317

 

2006

 

Memphis VIII, TN

 

68,700

 

 

 

355

 

2,959

 

243

 

355

 

3,202

 

3,557

 

476

 

2006

 

Nashville I, TN

 

103,830

 

 

 

405

 

3,379

 

411

 

405

 

3,790

 

4,195

 

614

 

2005

 

Nashville II, TN

 

83,274

 

 

 

593

 

4,950

 

197

 

593

 

5,147

 

5,740

 

854

 

2005

 

Nashville III, TN

 

101,475

 

 

 

416

 

3,469

 

270

 

416

 

3,740

 

4,156

 

599

 

2006

 

Nashville IV, TN

 

102,425

 

 

 

992

 

8,274

 

208

 

992

 

8,482

 

9,474

 

1,374

 

2006

 

Austin I, TX

 

59,595

 

 

 

2,239

 

2,038

 

164

 

2,239

 

2,201

 

4,440

 

384

 

2005

 

Austin II, TX

 

65,401

 

 

 

734

 

3,894

 

131

 

738

 

4,020

 

4,759

 

577

 

2006

 

Austin III, TX

 

71,010

 

 

 

1,030

 

5,468

 

138

 

1,035

 

5,600

 

6,635

 

704

 

2006

 

Baytown, TX

 

38,950

 

 

 

946

 

863

 

64

 

948

 

926

 

1,874

 

181

 

2005

 

Bryan, TX

 

60,450

 

 

 

1,394

 

1,268

 

109

 

1,396

 

1,375

 

2,771

 

262

 

2005

 

College Station, TX

 

26,550

 

(H)

 

812

 

740

 

76

 

813

 

815

 

1,628

 

154

 

2005

 

Dallas, TX

 

58,907

 

 

 

2,475

 

2,253

 

175

 

2,475

 

2,428

 

4,903

 

433

 

2005

 

Denton, TX

 

60,836

 

2026

 

553

 

2,936

 

122

 

569

 

3,041

 

3,611

 

374

 

2006

 

El Paso I, TX

 

59,702

 

(C)

 

1,983

 

1,805

 

146

 

1,984

 

1,951

 

3,934

 

368

 

2005

 

El Paso II, TX

 

48,704

 

(C)

 

1,319

 

1,201

 

101

 

1,320

 

1,302

 

2,622

 

245

 

2005

 

El Paso III, TX

 

71,276

 

(C)

 

2,408

 

2,192

 

133

 

2,409

 

2,324

 

4,733

 

432

 

2005

 

El Paso IV, TX

 

58,958

 

(C)

 

2,073

 

1,888

 

(62

)

2,074

 

1,826

 

3,900

 

381

 

2005

 

El Paso V, TX

 

62,300

 

(B)

 

1,758

 

1,617

 

102

 

1,761

 

1,716

 

3,477

 

317

 

2005

 

El Paso VI, TX

 

36,620

 

(B)

 

660

 

607

 

85

 

662

 

690

 

1,352

 

132

 

2005

 

El Paso VII, TX

 

 

(B)

 

563

 

517

 

(1,080

)

 

 

 

110

 

2005

 

Fort Worth I, TX

 

49,778

 

 

 

1,253

 

1,141

 

86

 

1,253

 

1,226

 

2,480

 

220

 

2005

 

Fort Worth II, TX

 

72,925

 

 

 

868

 

4,607

 

110

 

874

 

4,710

 

5,585

 

671

 

2006

 

Frisco I, TX

 

50,854

 

(A)

 

1,093

 

3,148

 

70

 

1,093

 

3,218

 

4,311

 

607

 

2005

 

Frisco II, TX

 

71,239

 

3363

 

1,564

 

4,507

 

87

 

1,564

 

4,594

 

6,159

 

870

 

2005

 

Frisco III, TX

 

75,225

 

 

 

1,147

 

6,088

 

119

 

1,154

 

6,201

 

7,354

 

882

 

2006

 

Garland I, TX

 

70,120

 

3224

 

751

 

3,984

 

299

 

767

 

4,267

 

5,034

 

516

 

2006

 

Garland II, TX

 

68,475

 

 

 

862

 

4,578

 

52

 

862

 

4,629

 

5,491

 

525

 

2006

 

Greenville I, TX

 

59,385

 

 

 

1,848

 

1,682

 

63

 

1,848

 

1,745

 

3,592

 

315

 

2005

 

Greenville II, TX

 

44,900

 

 

 

1,337

 

1,217

 

59

 

1,337

 

1,276

 

2,613

 

229

 

2005

 

Houston I, TX

 

101,350

 

 

 

1,420

 

1,296

 

111

 

1,422

 

1,405

 

2,827

 

270

 

2005

 

Houston II, TX

 

71,300

 

 

 

1,510

 

1,377

 

(49

)

1,512

 

1,326

 

2,838

 

300

 

2005

 

Houston III, TX

 

61,145

 

532

 

575

 

524

 

182

 

576

 

705

 

1,280

 

128

 

2005

 

Houston IV, TX

 

43,775

 

(H)

 

960

 

875

 

67

 

961

 

940

 

1,902

 

180

 

2005

 

Houston V, TX

 

101,045

 

4477

 

1,153

 

6,122

 

231

 

1,156

 

6,350

 

7,506

 

751

 

2006

 

Keller, TX

 

61,885

 

2,548

 

890

 

4,727

 

80

 

890

 

4,806

 

5,697

 

699

 

2006

 

 

F-36



Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

 

 

 

 

 

 

 

 

 

Initial Cost

 

 

 

at December 31, 2008

 

 

 

 

 

Description

 

Square
Footage

 

Encumbrances

 

Land

 

Building and
Improvements

 

Costs Sub-
sequent to Acqui-
sition

 

Land

 

Building and
Improvements

 

Total

 

Accumulated
Depreciation (L)

 

Year Acquired /
Developed

 

La Porte, TX

 

45,100

 

 

 

842

 

761

 

207

 

843

 

967

 

1,810

 

174

 

2005

 

Lewisville, TX

 

58,190

 

1843

 

476

 

2,525

 

232

 

492

 

2,741

 

3,233

 

329

 

2006

 

Mansfield, TX

 

63,075

 

 

 

837

 

4,443

 

80

 

843

 

4,516

 

5,360

 

646

 

2006

 

McKinney I, TX

 

47,020

 

1342

 

1,632

 

1,486

 

71

 

1,634

 

1,555

 

3,189

 

274

 

2005

 

McKinney II, TX

 

70,050

 

4,237

 

855

 

5,076

 

54

 

857

 

5,128

 

5,985

 

752

 

2006

 

North Richland Hills, TX

 

57,175

 

 

 

2,252

 

2,049

 

101

 

2,252

 

2,150

 

4,402

 

384

 

2005

 

Roanoke, TX

 

59,300

 

 

 

1,337

 

1,217

 

87

 

1,337

 

1,304

 

2,641

 

234

 

2005

 

San Antonio I, TX

 

73,930

 

 

 

2,895

 

2,635

 

51

 

2,895

 

2,686

 

5,581

 

467

 

2005

 

San Antonio II, TX

 

73,180

 

 

 

1,047

 

5,558

 

56

 

1,052

 

5,610

 

6,662

 

648

 

2006

 

San Antonio III, TX

 

72,375

 

 

 

996

 

5,286

 

24

 

996

 

5,310

 

6,306

 

531

 

2007

 

Sherman I, TX

 

55,050

 

1561

 

1,904

 

1,733

 

67

 

1,906

 

1,798

 

3,704

 

317

 

2005

 

Sherman II, TX

 

48,425

 

1,862

 

1,337

 

1,217

 

64

 

1,337

 

1,281

 

2,618

 

228

 

2005

 

Spring, TX

 

72,801

 

 

 

580

 

3,081

 

(2

)

580

 

3,079

 

3,660

 

459

 

2006

 

Murray I, UT

 

60,280

 

(C)

 

3,847

 

1,017

 

168

 

3,848

 

1,184

 

5,032

 

227

 

2005

 

Murray II, UT

 

48,896

 

(C)

 

1,182

 

312

 

105

 

1,182

 

417

 

1,599

 

81

 

2005

 

Salt Lake City I, UT

 

56,446

 

(C)

 

2,695

 

712

 

154

 

2,696

 

865

 

3,561

 

174

 

2005

 

Salt Lake City II, UT

 

53,676

 

(C)

 

2,074

 

548

 

144

 

2,075

 

691

 

2,766

 

137

 

2005

 

Fredericksburg I, VA

 

69,475

 

 

 

1,680

 

4,840

 

233

 

1,680

 

5,073

 

6,753

 

778

 

2005

 

Fredericksburg II, VA

 

61,452

 

 

 

1,757

 

5,062

 

288

 

1,758

 

5,349

 

7,108

 

811

 

2005

 

Milwaukee, WI

 

58,515

 

(I)

 

375

 

4,333

 

125

 

375

 

4,458

 

4,833

 

967

 

2004

 

USIFB

 

 

 

 

 

7,057

 

 

 

5,443

 

5,443

 

130

 

2007

 

Corporate Office

 

 

 

 

 

 

 

 

 

10,114

 

10,114

 

3,321

 

1977

 

Construction in Progress

 

 

 

 

 

 

 

 

 

600

 

600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,894,291

 

(M)

 

359,848

 

1,315,514

 

204,651

 

387,443

 

1,500,680

 

1,888,123

 

328,165

 

 

 

 


(A) This facility is part of Yasky Loan portfolio, with a balance of $80,000 as of December 31, 2008.

(B) This facility is part of the YSI XXV Loan portfolio, with a balance of $8,093 as of December 31, 2008.

(C) This facility is part of the YSI XX Loan portfolio, with a balance of $65,953 as of December 31, 2008.

(D) This facility is part of the YSI II Loan portfolio, with a balance of $85,213 as of December 31, 2008.

(E) This facility is part of the YSI VI Loan portfolio, with a balance of $78,543 as of December 31, 2008.

(F) This facility is part of the YSI I Loan portfolio, with a balance of $85,105 as of December 31, 2008.

(G) This facility is part of the YSI XXVI Loan portfolio, with a balance of $9,724 as of December 31, 2008.

(H) This facility is part of the YSI XXVIII Loan portfolio, with a balance of $1,638 as of December 31, 2008.

(I) This facility is part of the YSI III Loan portfolio, with a balance of $85,020 as of December 31, 2008.

(J) This facility is part of the YSI XXX Loan portfolio, with a balance of $7,804 as of December 31, 2008.

(K) This facility is part of the YSI RT Secured Term Loan portfolio, with a balance of $57,419 as of December 31, 2008.

(L) Depreciation on the buildings and improvements is recorded on a straight-line basis over their estimated useful lives, which range from five to 39 years.

(M) Total square footage excludes held-for-sale asset

 

Activity in real estate facilities during 2008, 2007, and 2006 was as follows (in thousands):

 

 

 

2008

 

2007

 

2006

 

Storage facilities

 

 

 

 

 

 

 

Balance at beginning of year

 

$

1,916,396

 

$

1,771,864

 

$

1,386,786

 

Acquisitions & improvements

 

30,295

 

160,256

 

384,130

 

Dispositions and other

 

(59,168

)

(21,206

)

(534

)

Contstruction in progress

 

600

 

5,482

 

1,482

 

Balance at end of year

 

$

1,888,123

 

$

1,916,396

 

$

1,771,864

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

Balance at beginning of year

 

$

269,278

 

$

205,049

 

$

140,491

 

Depreciation expense

 

77,580

 

68,355

 

64,728

 

Dispositions and other

 

(18,693

)

(4,126

)

(170

)

Balance at end of year

 

$

328,165

 

$

269,278

 

$

205,049

 

 

 

 

 

 

 

 

 

Net Storage facility assets

 

$

1,559,958

 

$

1,647,118

 

$

1,566,815

 

 

F-37