Domingo 19 de Noviembre 2017

Life Storage, Inc. Reports Third Quarter Results

BUFFALO, N.Y.–(BUSINESS WIRE)–$LSI #FFO–Life Storage, Inc. (NYSE:LSI) (formerly Sovran Self Storage, Inc.), a
self storage real estate investment trust (REIT), reported operating
results for the quarter ended September 30, 2016.

The Company incurred a loss for the third quarter of 2016 of $4.7
million or $0.10 per fully diluted common share. This compares to net
income of $31.5 million in the third quarter of 2015, or $0.88 per fully
diluted common share. The loss in the third quarter of 2016 was
attributable to one time transaction expenses associated with the
Company’s acquisition of LifeStorage, L.P. and the related financing
costs.

Highlights for the 3rd
Quarter Included
:

  • Increased same store revenue by 4.5% and net operating income (“NOI”)(1)
    by 5.8% as compared to the third quarter of 2015.
  • Grew same store average occupancy for the quarter by 30 basis points
    to 92.3% compared to the same period in 2015 and quarter-end occupancy
    by 50 basis points to 91.9% at September 30, 2016.
  • Achieved adjusted funds from operations (“FFO”)(2) per
    fully diluted common share of $1.34.
  • Paid a quarterly dividend of $0.95 per share of common stock.
  • Issued $200 million of 12 year unsecured term notes at a fixed rate of
    3.67% on July 21, 2016.

LifeStorage Acquisition and Integration Update:

  • Completed the previously announced acquisition of 83 LifeStorage
    properties for $1.3 billion on July 15, 2016.
  • Integration of onsite personnel and Company platforms were completed
    with minimal disruption.
  • Operations are on track to meeting original 2017 underwriting.
  • Lack of aggressive property management between the announcement and
    close of the acquisition resulted in less active rent roll management
    and property maintenance that the Company expects to have corrected by
    the end of the fourth quarter 2016.
  • Changed the Company name from Sovran Self Storage, Inc. to Life
    Storage, Inc. and announced its intention to rebrand all Uncle Bob’s
    Self Storage locations to Life Storage®. The rebranding of the
    portfolio is expected to be complete by April 2017.

Funds from operations for the quarter were $0.79 per fully diluted
common share compared to $1.29 for the same period last year. Absent
$25.2 million of acquisition related costs (including $15.5 million of
loan defeasance and pre-payment penalties, and $9.7 million of advisory
and other transaction costs) incurred in the third quarter of 2016, and
$1.0 million of acquisition costs in the third quarter of 2015, adjusted
FFO per fully diluted common share was $1.34 and $1.32 for the quarters
ended September 30, 2016 and 2015, respectively. The quarter ended
September 30, 2016 earnings and adjusted FFO include approximately $0.05
per share of dilution resulting from the early issuance of 6.9 million
shares of common stock and $600 million of long term debt to fund the
LifeStorage, L.P. acquisition.

The Company is initiating, and expects to continue to provide on a
quarterly basis, a supplemental information package containing detailed
operating and financial information. The supplement can be found on the
investor relations page of the Company’s website under Financial
Information > Quarterly Earnings
.

During the quarter the Company incurred unexpected charges that impacted
the quarter’s results, including flooding that caused the temporary
closing of two stores in Louisiana and one in Missouri, an increase in
move-in incentives in Houston and other markets in order to increase
occupancy ahead of the slower rental season, and higher than expected
legal costs associated with the defense of a class action claim in New
Jersey.

OPERATIONS:

Total revenues increased 33.9% over last year’s third quarter while
operating costs increased 37.4%, resulting in an NOI increase of 32.3%.

Revenues for the 417 stabilized stores wholly owned by the Company since
December 31, 2014 increased 4.5% from those of the third quarter of
2015, the result of a 30 basis point increase in average occupancy, a
3.7% increase in rental rates and increases in tenant insurance
administrative fees.

Same store operating expenses increased 1.8% for the third quarter of
2016 compared to the prior year period. Higher property taxes and
maintenance expenses were offset by reductions in utility costs,
advertising, and insurance expense.

Consequently, same store NOI this period increased 5.8% over the third
quarter of 2015.

General and administrative expenses increased by approximately $1.5
million over the same period in 2015. Increases in personnel costs
associated with operating 118 more stores during the quarter than at
this time last year, and higher legal fees related to the aforementioned
lawsuit were the reason for the higher than expected expense.

During the third quarter of 2016, the Company experienced same store
revenue growth in 28 of its 29 major markets in the same store pool.
Overall, the markets with the strongest revenue impact include Downstate
NY/NJ; Atlanta, GA; and all Florida markets, particularly Miami and
Tampa.

PROPERTIES:

On July 15, 2016, the Company completed its acquisition of LifeStorage,
L.P. for approximately $1.3 billion. This transaction added 83 wholly
owned stores to the Company’s portfolio, and four third-party managed
locations.

In addition to the LifeStorage portfolio, the Company acquired three
other stores during the quarter: one in Denver, CO; one in Ft. Myers,
FL; and a certificate of occupancy property in Charleston, SC. The
properties total approximately 205,000 sq. ft. and the combined purchase
price of the properties was $28.0 million.

While the Company entered into no new purchase agreements during the
quarter, it remains in contract on three certificate of occupancy
stores, anticipated to close at various dates between the fourth quarter
of 2016 and the fourth quarter of 2017. Two of these properties are
located in Chicago, IL and one is in Charlotte, NC. The combined
purchase price is approximately $31.0 million. It also expects to
purchase a stabilized property in Orlando, FL in November at a cost of
$9.8 million.

As part of the LifeStorage acquisition, the Company assumed contracts
for three certificate of occupancy stores in Austin, TX at a cost of
$44.8 million. These stores are expected to be delivered in 2017.

CAPITAL TRANSACTIONS:

Illustrated below are key financial ratios at September 30, 2016:
 

– Debt to Enterprise Value (at $88.94/share)

28.5%

– Debt to Book Cost of Storage Facilities

39.3%

– Debt to Annualized EBITDA

5.2x

– Debt Service Coverage

5.6x
 

At September 30, 2016, the Company had approximately $16.1 million of
cash on hand, and $260 million available on its line of credit.

On July 21, the Company issued $200 million of 12 year notes at an
interest rate of 3.67%.

In July, the Company issued approximately 27,059 shares at a price of
$103.62 through its Dividend Reinvestment Plan.

COMMON STOCK DIVIDEND:

Subsequent to quarter-end, the Company’s Board of Directors approved a
quarterly dividend of $0.95 per share or $3.80 annualized.

YEAR 2016 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in
formulating guidance for the fourth quarter and full year 2016:

 

Same Store
Projected Increases Over 2015

4Q 2016

     

Full Year 2016

Revenue 4.0 – 4.5% 5.0 – 6.0%
Operating Costs (excluding property taxes) 2.5 – 3.5% 1.0 – 2.0%
Property Taxes 11.5 – 12.5% 6.5 – 7.5%
Total Operating Expenses 5.5 – 6.5% 2.5 – 3.5%
Net Operating Income 3.0 – 4.0% 6.0 – 7.0%
 

The Company’s 2016 same store pool consists of the 417 stabilized stores
owned since December 31, 2014 (three stores impacted by flooding were
removed from the same store pool in the third quarter). The stores
purchased in 2014 at certificate of occupancy or that were in the early
stages of lease-up are not included, regardless of their current
occupancies. The Company believes that occupancy levels achieved during
the lease-up period, using discounted rates, are not truly indicative of
a new store’s performance, and therefore do not result in a meaningful
year-over-year comparison in future years. The Company will include such
stores in its same store pool in the first year after the stores achieve
80% sustained occupancy using market rates and incentives.

The Houston market is expected to comprise approximately 9.1% of the
2016 forecasted NOI of the Company’s wholly owned stores. The fourth
quarter forecast for the 41 same store pool of properties in the
Company’s Houston market includes flat to negative revenue growth
compared to the prior year fourth quarter of 0.0% to (2.0%), operating
expense increases of 10.0% – 10.5% (inclusive of a 19.4% projected
increase in property taxes), resulting in negative NOI growth of between
(6.5%) and (7.5%).

The Company plans to complete $25 – $30 million of expansions in 2016,
and expects to incur up to $22 million in costs pertaining to the
rebranding of Uncle Bob’s Self Storage to Life Storage. The rebranding
process commenced during August, 2016 and will proceed on a market by
market basis through its expected completion in April, 2017.

The Company has assumed an additional $10 million of accretive
acquisitions in the fourth quarter of 2016. Per share FFO guidance is
projected after adding back third party acquisition costs. Purchases of
these additional properties are expected to be funded via draws on its
line of credit which carries an interest rate of LIBOR plus 1.10%.

At the conclusion of 2015, the Company operated six self-storage
facilities that it acquired during 2014 and 2015 upon issuance of
certificate of occupancy or in the early stages of lease-up. It also
acquired one each in Phoenix, AZ and Miami, FL in February 2016, one in
Los Angeles, CA in March 2016 and one in Charleston, SC in July 2016.
Further, it is under contract to acquire six more such certificate of
occupancy facilities at various dates later in 2016 and 2017 including
three locations contracted by the previous owners of LifeStorage, L.P.
Upon acquisition, these properties have insufficient rental revenue to
cover operating costs; accordingly, for the first 24 to 36 months of
operation, ownership of these facilities is dilutive to earnings and FFO
per share. The Company expects that during the fourth quarter of 2016,
it will incur such dilution to the extent of $0.01 to $0.03 per share
due to the aforementioned acquisitions.

Annual general and administrative expenses are expected to be
approximately $43 – $44 million. The increase over the prior year is
primarily due to the need for additional personnel required for recent
acquisitions.

As a result of the above assumptions, management expects adjusted funds
from operations for the full year 2016 to be approximately $5.19 to
$5.21 per share, and between $1.30 and $1.34 per share for the fourth
quarter of 2016.

FORWARD LOOKING STATEMENTS:

When used within this news release, the words “intends,” “believes,”
“expects,” “anticipates,” and similar expressions are intended to
identify “forward looking statements” within the meaning of that term in
Section 27A of the Securities Act of 1933, and in Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievements of the Company to
be materially different from those expressed or implied by such forward
looking statements. Such factors include, but are not limited to, the
effect of competition from new self storage facilities, which could
cause rents and occupancy rates to decline; the Company’s ability to
evaluate, finance and integrate acquired businesses into the Company’s
existing business and operations; the Company’s ability to enter new
markets where it has little or no operational experience; the Company’s
existing indebtedness may mature in an unfavorable credit environment,
preventing refinancing or forcing refinancing of the indebtedness on
terms that are not as favorable as the existing terms; interest rates
may fluctuate, impacting costs associated with the Company’s outstanding
floating rate debt; the Company’s ability to comply with debt covenants;
the future ratings on the Company’s debt instruments; the regional
concentration of the Company’s business may subject it to economic
downturns in the states of Florida and Texas; the Company’s ability to
effectively compete in the industries in which it does business; the
Company’s reliance on its call center; the Company’s cash flow may be
insufficient to meet required payments of principal, interest and
dividends; and tax law changes which may change the taxability of future
income.

CONFERENCE CALL:

Life Storage will hold its Third Quarter Earnings Release Conference
Call at 9:00 a.m. Eastern Time on Thursday, November 3, 2016. To help
avoid connection delays, participants are encouraged to pre-register
using this
link
. Anyone unable to pre-register may access the conference call
at 877.737.7051 (domestic) or 201.689.8878 (international). Management
will accept questions from registered financial analysts after prepared
remarks; all others are encouraged to listen to the call via webcast by
accessing the investor relations tab at lifestorage.com/.

The webcast will be archived for 90 days; a telephone replay will also
be available for 72 hours by calling 877.660.6853 and entering
conference ID 13646921.

ABOUT LIFE STORAGE, INC:

Life Storage, Inc. is a self-administered and self-managed equity REIT
that is in the business of acquiring and managing self storage
facilities. The Company operates more than 650 self storage facilities
in 29 states under the names Life Storage and Uncle Bob’s Self Storage.
For more information, visit http://invest.lifestorage.com/.

Life Storage, Inc.
6467 Main St., Buffalo, NY 14221
(716)
633-1850

 
LIFE STORAGE, INC.
BALANCE SHEET DATA
 
  September 30,      
2016 December 31,
(dollars in thousands) (unaudited)       2015
Assets
Investment in storage facilities:
Land $ 785,866 $ 480,176
Building, equipment and construction in progress   3,416,823     2,011,526  
4,202,689 2,491,702
Less: accumulated depreciation   (513,716 )   (465,195 )
Investment in storage facilities, net 3,688,973 2,026,507
Cash and cash equivalents 16,146 7,032
Accounts receivable 5,973 6,805
Receivable from joint venture 747 929
Investment in joint venture 66,667 62,520
Prepaid expenses 7,772 5,431
Fair value of interest rate swap agreements 550
Intangible asset – in-place customer leases (net of accumulated
amortization of $37,410 in 2016 and $21,017 in 2015) 38,044 1,303
Trade name 16,500
Other assets   7,294     7,745  
Total Assets $ 3,848,116   $ 2,118,822  
 
Liabilities
Line of credit $ 240,000 $ 79,000
Term notes, net 1,387,119 746,650
Accounts payable and accrued liabilities 62,155 47,839
Deferred revenue 9,996 7,511
Fair value of interest rate swap agreements 19,248 15,343
Mortgages payable   10,134     1,993  
Total Liabilities 1,728,652 898,336
 
Noncontrolling redeemable Operating Partnership Units at redemption
value
17,996 18,171
 
Equity
Common stock 464 367
Additional paid-in capital 2,343,581 1,388,343
Accumulated deficit (214,703 ) (171,980 )
Accumulated other comprehensive loss   (27,932 )   (14,415 )
Total Shareholders’ Equity 2,101,410 1,202,315
Noncontrolling interest in consolidated subsidiary   58      
Total Equity   2,101,468     1,202,315  
Total Liabilities and Equity $ 3,848,116   $ 2,118,822  
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
  July 1, 2016       July 1, 2015       January 1, 2016       January 1, 2015
to to to to
(dollars in thousands, except share data)

September 30, 2016

September 30, 2015 September 30, 2016 September 30, 2015
 
Revenues
Rental income $ 118,319 $ 88,066 $ 308,655 $ 250,439
Other operating income 7,893 5,838 20,782 16,780
Management fee income   1,589     1,524     4,492     4,344  
Total operating revenues 127,801 95,428 333,929 271,563
 
Expenses
Property operations and maintenance 28,382 20,954 74,396 61,001
Real estate taxes 13,102 9,247 34,670 27,311
General and administrative 10,909 9,367 31,486 28,459
Acquisition related costs 25,220 1,046 29,297 2,415
Operating leases of storage facilities 683
Depreciation and amortization 27,908 13,954 59,573 40,734
Amortization of in-place customer leases   13,497     717     16,509     2,703  
Total operating expenses   119,018     55,285     245,931     163,306  
 
Income from operations 8,783 40,143 87,998 108,257
 
Other income (expense)
Interest expense (A) (14,647 ) (9,419 ) (32,024 ) (27,796 )
Interest expense – acquisition bridge loan commitment fee (7,329 )
Interest income 13 1 56 4

Gain (loss) on sale of real estate

15,270 (7 )
Equity in income of joint ventures   882     936     2,795     2,436  
 
Net (loss) income (4,969 ) 31,661 66,766 82,894
Noncontrolling interests in the Operating Partnership 21 (157 ) (317 ) (407 )
Noncontrolling interests in consolidated subsidiaries   210         609      
Net (loss) income attributable to common shareholders $ (4,738 ) $ 31,504   $ 67,058   $ 82,487  
 
(Loss) earnings per common share attributable to common
shareholders – basic
$ (0.10 ) $ 0.88   $ 1.59   $ 2.35  
 
(Loss) earnings per common share attributable to common
shareholders – diluted
$ (0.10 ) $ 0.88   $ 1.58   $ 2.33  
 
Common shares used in basic
(loss) earnings per share calculation 46,139,079 35,700,375 42,176,762 35,135,946
 
Common shares used in diluted
(loss) earnings per share calculation 46,139,079 35,917,105 42,414,623 35,358,332
 
Dividends declared per common share $ 0.95   $ 0.85   $ 2.75   $ 2.35  
 
 
(A) Interest expense for the period ending September 30 consists
of the following
Interest expense $ 14,136 $ 9,123 $ 30,807 $ 26,908
Amortization of debt issuance costs   511     296     1,217     888  
Total interest expense $ 14,647   $ 9,419   $ 32,024   $ 27,796  
 
 
COMPUTATION OF FUNDS FROM OPERATIONS (FFO) (2) – (unaudited)
 
  July 1, 2016     July 1, 2015     January 1, 2016     January 1, 2015
to to to to
(dollars in thousands, except share data) September 30, 2016 September 30, 2015   September 30, 2016 September 30, 2015
 
Net (loss) income attributable to common shareholders $ (4,738 ) $ 31,504 $ 67,058 $ 82,487
Noncontrolling interests in the Operating Partnership (21 ) 157 317 407
Depreciation of real estate and amortization of intangible
assets exclusive of debt issuance costs 41,024 14,430 74,913 42,649
Depreciation and amortization from unconsolidated joint ventures 738 610 1,891 1,845

Gain (loss) on sale of real estate

(15,270 ) 7
Funds from operations allocable to noncontrolling
interest in Operating Partnership   (164 )   (231 )   (593 )   (625 )
Funds from operations available to common
shareholders   36,839     46,470     128,316     126,770  
FFO per share – diluted $ 0.79 $ 1.29 $ 3.03 $ 3.59
 

Adjustments to FFO

Acquisition costs expensed 25,220 1,046 29,297 2,415
Interest expense – acquisition bridge loan commitment fee 7,329
Operating leases straight line rent adjustment 146
Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership   (112 )   (5 )   (165 )   (12 )
Adjusted funds from operations available to common
shareholders   61,947     47,511     164,777     129,319  
Adjusted FFO per share – diluted $ 1.34 $ 1.32 $ 3.88 $ 3.66
 
Common shares – diluted 46,353,344 35,917,105 42,414,623 35,358,332
 
                 
QUARTERLY SAME STORE DATA (3) * 417 mature stores owned since
12/31/14 (unaudited)
July 1, 2016 July 1, 2015
to to

Percentage

(dollars in thousands) September 30, 2016 September 30, 2015   Change    

Change

 
Revenues:
Rental income $ 87,271 $ 83,702 $ 3,569 4.3 %
Tenant insurance 3,316 2,892 424 14.7 %
Other operating income   1,546   1,556   (10 ) -0.6 %
Total operating revenues 92,133 88,150 3,983 4.5 %
 
Expenses:
Payroll and benefits 7,391 7,290 101 1.4 %
Real estate taxes 9,102 8,769 333 3.8 %
Utilities 3,315 3,378 (63 ) -1.9 %
Repairs and maintenance 3,198 3,008 190 6.3 %
Office and other operating expense 2,983 2,880 103 3.6 %
Insurance 990 1,103 (113 ) -10.2 %
Advertising & yellow pages 266 332 (66 ) -19.9 %
Internet marketing   1,427   1,416   11   0.8 %
Total operating expenses   28,672   28,176   496   1.8 %
 
Net operating income (1) $ 63,461 $ 59,974 $ 3,487   5.8 %
 
 
QTD Same store move ins 42,720 42,238 482
 
QTD Same store move outs 44,598 46,977 (2,379 )
 
 
OTHER COMPARABLE QUARTERLY SAME STORE DATA * (unaudited) July 1, 2016 July 1, 2015
to to

Percentage

September 30, 2016 September 30, 2015   Change    

Change

Stores owned since 12/31/13 (389 stores)
Revenues $ 84,311 $ 80,838 $ 3,473 4.3 %
Expenses   26,035   25,574   461   1.8 %
Net operating income $ 58,276 $ 55,264 $ 3,012   5.5 %
 
 
 
Stores owned since 12/31/12 (374 stores)
Revenues $ 78,905 $ 75,654 $ 3,251 4.3 %
Expenses   24,419   23,807   612   2.6 %
Net operating income $ 54,486 $ 51,847 $ 2,639   5.1 %
 
 
* See exhibit A for supplemental quarterly same store data.
 
 
YEAR TO DATE SAME STORE DATA (3) * 417 mature stores owned since
12/31/14 (unaudited)

January 1, 2016

January 1, 2015

to to Percentage
(dollars in thousands) September 30, 2016 September 30, 2015   Change     Change
 
Revenues:
Rental income $ 254,365 $ 241,300 $ 13,065 5.4 %
Tenant insurance 9,681 8,428 1,253 14.9 %
Other operating income   4,445   4,501   (56 ) -1.2 %
Total operating revenues 268,491 254,229 14,262 5.6 %
 
Expenses:
Payroll and benefits 22,136 21,502 634 2.9 %
Real estate taxes 27,692 26,307 1,385 5.3 %
Utilities 8,611 9,202 (591 ) -6.4 %
Repairs and maintenance 9,627 9,899 (272 ) -2.7 %
Office and other operating expense 8,774 8,381 393 4.7 %
Insurance 3,045 3,308 (263 ) -8.0 %
Advertising & yellow pages 845 1,034 (189 ) -18.3 %
Internet marketing   4,782   4,294   488   11.4 %
Total operating expenses   85,512   83,927   1,585   1.9 %
 
Net operating income (1) $ 182,979 $ 170,302 $ 12,677   7.4 %
 
 
YTD Same store move ins 125,777 130,843 (5,066 )
 
YTD Same store move outs 119,797 123,916 (4,119 )
 
     
OTHER DATA – unaudited Same Store (3) All Stores (4)

2016

   

2015

2016

 

2015

 
Weighted average quarterly occupancy 92.3 % 92.0 % 90.9 % 91.5 %
 
Occupancy at September 30 91.9 % 91.4 % 90.3 % 90.6 %
 
Rent per occupied square foot $ 13.38 $ 12.90 $ 13.40 $ 12.79
 
 

Investment in Storage Facilities: (unaudited)

The following summarizes activity in storage facilities during the
nine months ended September 30, 2016:
 
Beginning balance $ 2,491,702
Property acquisitions 1,695,752
Improvements and equipment additions:
Expansions 18,343
Roofing, paving, and equipment:
Stabilized stores 14,389
Recently acquired stores 5,550
Additions to consolidated subsidiary 2,164
Change in construction in progress (Total CIP $11.9 million) 4,919
Dispositions and Impairments   (30,130 )
Storage facilities at cost at period end $ 4,202,689  
 
 

Comparison of Selected G&A Costs (unaudited)

Quarter Ended
September 30, 2016 September 30, 2015
 
Management and administrative salaries and benefits 6,057 5,787
Training 386 235
Call center 596 484
Uncle Bob’s Management costs 99 77
Income taxes 232 616
Legal, accounting and professional 1,063 490
Other administrative expenses (5)   2,476     1,678  
$ 10,909   $ 9,367  
 
 

Net rentable square feet

September 30, 2016
Wholly owned properties 39,364,024
Joint venture properties 5,191,293
Third party managed properties   1,523,455  
46,078,772
 
 
September 30, 2016 September 30, 2015
 
Common shares outstanding 46,396,450 36,168,440
Operating Partnership Units outstanding 196,008 178,866
 
 
(1) Net operating income or “NOI” is a non-GAAP (generally accepted
accounting principles) financial measure that we define as total
continuing revenues less continuing property operating expenses. NOI
also can be calculated by adding back to net income: interest
expense, impairment and casualty losses, depreciation and
amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from
discontinued operations, interest income, gain on sale of real
estate, and equity in income of joint ventures. We believe that NOI
is a meaningful measure to investors in evaluating our operating
performance, because we utilize NOI in making decisions with respect
to capital allocations, in determining current property values, and
comparing period-to-period and market-to-market property operating
results. Additionally, NOI 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 on accounting methods and book value of
assets. 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.
 
(2) We believe that Funds from Operations (“FFO”) provides relevant
and meaningful information about our operating performance that is
necessary, along with net earnings and cash flows, for an
understanding of our operating results. FFO adds back historical
cost depreciation, which assumes the value of real estate assets
diminishes predictably in the future. In fact, real estate asset
values increase or decrease with market conditions. Consequently, we
believe FFO is a useful supplemental measure in evaluating our
operating performance by disregarding (or adding back) historical
cost depreciation.
 
Funds from operations is defined by the National Association of Real
Estate Investment Trusts, Inc. (“NAREIT”) as net income available to
common shareholders computed in accordance with generally accepted
accounting principles (“GAAP”), excluding gains or losses on sales
of properties, plus impairment of real estate assets, plus
depreciation and amortization and after adjustments to record
unconsolidated partnerships and joint ventures on the same basis. We
believe that to further understand our performance, FFO should be
compared with our reported net income and cash flows in accordance
with GAAP, as presented in our consolidated financial statements.
 
Our computation of FFO may not be comparable to FFO reported by
other REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with
GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance, as an alternative to net cash flows from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, or as an indicator of our ability to make cash
distributions.
 
(3) Includes the stores owned and/or managed by the Company for the
entire periods presented that are consolidated in our financial
statements. Does not include unconsolidated joint ventures or other
stores managed by the Company.
 
(4) Does not include unconsolidated joint venture stores or other
stores managed by the Company
 
(5) Other administrative expenses include office rent, travel
expense, investor relations and miscellaneous other expenses.

Contacts

Life Storage, Inc.
Diane Piegza, Vice President Investor Relations
& Community Affairs
716-650-6115

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