Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter ended June 30, 2021. Certain share and per share information has been retrospectively adjusted to reflect the January 2021 three-for-two stock split made in the form of a 50% stock dividend.

Highlights for the Second Quarter Included:

  • Generated net income attributable to common shareholders of $57.5 million, or $0.74 per fully diluted common share.
  • Achieved adjusted funds from operations (“FFO”)(1) per fully diluted common share of $1.20, a 27.7% increase over the same period in 2020.
  • Increased same store revenue by 14.7% and same store net operating income (“NOI”)(2) by 20.2%, year-over-year.
  • Acquired 17 stores for $267.5 million, including nine stores from the Company’s third-party management platform.
  • Added 26 stores (gross) to the Company’s third-party management platform.

Joe Saffire, the Company’s Chief Executive Officer, stated, “I cannot be more pleased with how our team has performed during the past year. We continue to grow occupancy and drive revenue growth while controlling costs. We also continue to find accretive acquisitions, having invested a record $534 million in wholly owned stores during the first half of the year and our acquisition pipeline remains robust. We are excited about our new joint venture, which is adding 17 class A lease-up stores to our platform and providing further opportunity for growth. Our third-party management business continues to surpass our expectations as independent owners are attracted to our performance and innovative technology. Warehouse Anywhere, our unique and innovative tech-enabled business, continues to successfully execute on its growing pipeline of new clients in search of inventory management and last-mile logistics support.”

FINANCIAL RESULTS:

In the second quarter of 2021, the Company generated net income attributable to common shareholders of $57.5 million or $0.74 per fully diluted common share, compared to net income attributable to common shareholders of $36.5 million, or $0.52 per fully diluted common share, in the second quarter of 2020.

Funds from operations for the quarter were $1.22 per fully diluted common share compared to $0.94 for the same period last year. Adjusted FFO per fully diluted common share for the quarter was $1.20, after adjusting for a $1.3 million acquisition fee, compared to $0.94 for the quarter ended June 30, 2020.

OPERATIONS:

Revenues for the 531 stabilized stores wholly owned by the Company since December 31, 2019 increased 14.7% in the second quarter of 2021 compared to the same quarter of 2020. The increase largely resulted from the net impact of a 420 basis point increase in average occupancy and the net impact of an 8.3% increase in realized rental rates.

Same store operating expenses increased 3.9% for the second quarter of 2021 compared to the prior year period, primarily due to increased real estate taxes and repair and maintenance costs. The increases were partially offset by decreases in marketing expenses. Same store NOI increased 20.2% in the second quarter of 2021 as compared to the same quarter last year.

During the second quarter of 2021, the Company achieved same store revenue growth in each of its 31 major markets. Overall, the markets with the strongest positive revenue impact were: New York-Newark-Jersey City; Houston, TX; Chicago, IL; New England-Other and Buffalo-Upstate.

PORTFOLIO TRANSACTIONS:

Wholly Owned Portfolio

During the quarter, the Company acquired 17 stores in New Jersey (5), Texas (4), Florida (3), North Carolina (3) and New Hampshire (2) for a total purchase price of $267.5 million.

At June 30, 2021, the Company was under contract to acquire four self-storage facilities in New Hampshire (2), Arizona (1) and Florida (1) for an aggregate purchase price of $54.1 million. The Company acquired two of these facilities subsequent to quarter end for $22.1 million. Also subsequent to quarter end, the Company entered into a contract to acquire four self-storage facilities in Texas for an aggregate purchase price of $47.5 million. The purchases of the remaining facilities are subject to customary conditions to closing, and there is no assurance that any of these facilities will be acquired.

As of the date of this press release, the Company has acquired 35 stores for $555.8 million since January 1, 2021.

Joint Venture Portfolio

During the quarter, the Company acquired a 20% minority interest, for which the Company contributed $28.7 million, in 17 stores in Wisconsin (5), Florida (4), Georgia (2), Illinois (2), Connecticut (1), New Jersey (1), New York (1) and North Carolina (1).

THIRD-PARTY MANAGEMENT:

The Company continues to aggressively and profitably grow its third-party management platform. During the quarter, the Company added 26 stores (gross). As of quarter end, the Company managed 340 facilities in total, including those in which it owns a minority interest.

FINANCIAL POSITION:

At June 30, 2021, the Company had approximately $29.9 million of cash on hand, and approximately $359.9 million available on its line of credit.

During the three months ended June 30, 2021, the Company issued 1,520,125 shares of common stock under its continuous equity offering program at a weighted average issue price of $98.67 per share, generating net proceeds after expenses of $148.5 million.

Below are key financial ratios at June 30, 2021:

  • Debt to Enterprise Value (at $107.35/share)    21.9%
  • Debt to Book Cost of Storage Facilities            40.0%
  • Debt to Recurring Annualized EBITDA              5.0x
  • Debt Service Coverage                                     5.3x

COMMON STOCK DIVIDEND:

Subsequent to quarter end, the Company’s Board of Directors approved a quarterly dividend of $0.74 per share, or $2.96 annualized, on a post-split basis. The dividend was paid on July 26, 2021 to shareholders of record on July 14, 2021.

YEAR 2021 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in formulating guidance for 2021:

Year 2021 Earnings Guidance

 

Current Guidance Range

Prior Guidance Range

(May 4, 2021)

Same Store Revenue

 

10.50%

-

11.50%

 

5.50%

-

6.50%

Same Store Operating Costs (excluding property taxes)

 

2.25%

-

3.25%

 

2.25%

-

3.25%

Same Store Property Taxes

 

6.75%

-

7.75%

 

6.75%

-

7.75%

Total Same Store Operating Expenses

 

4.00%

-

5.00%

 

4.00%

-

5.00%

Same Store Net Operating Income

 

13.5%

-

14.5%

 

6.50%

-

7.50%

General & Administrative

 

$59.5M

-

$60.5M

 

$57M

-

$58M

Expansions & Enhancements

 

$40M

-

$50M

 

$40M

-

$50M

Capital Expenditures

 

$21M

-

$26M

 

$21M

-

$26M

Wholly Owned Acquisitions

 

$800M

-

$1,000M

 

$550M

-

$600M

Joint Venture Investments

 

$28M

-

$30M

 

$20M

-

$25M

 

 

 

 

 

 

 

 

 

Adjusted Funds from Operations per Share

 

$4.69

-

$4.79

 

$4.33

-

$4.41

 

Reconciliation of Guidance

3Q 2021

Range or Value

FY 2021

Range or Value

Earnings per share attributable to common shareholders – diluted

$0.73 - $0.77

$2.72 - $2.82

Plus: real estate depreciation and amortization

0.51 - 0.51

1.97 - 1.97

FFO per share

$1.24 - $1.28

$4.69 - $4.79

 

 

 

The Company’s 2021 same store pool consists of the 531 stabilized stores wholly owned since December 31, 2019. Thirty of the stores purchased through June 30, 2021 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 second year after the stores achieve 80% sustained occupancy using market rates and incentives.

FORWARD LOOKING STATEMENTS:

When used in 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 our actual results, performance or achievements 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 would cause rents and occupancy rates to decline; risks associated with the COVID-19 global health crisis or similar events, including but not limited to (i) the impact to the health of our employees and/or customers, (ii) the negative impacts to the economy and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, (iii) reducing or eliminating our ability to increase rents charged to our current or future customers, (iv) limiting our ability to collect rent from or evict past due customers, (v) we could see an increase in move-outs of longer-term customers due to the economic uncertainty and significant rise in unemployment resulting from the COVID-19 global health crisis which could lead to lower occupancies and reduced average rental rates as longer-term customers are replaced with new customers at lower rates, and (vi) potential negative impacts on the cost and availability of debt and equity which could have a negative impact on our capital and growth plans; the Company’s ability to evaluate, finance and integrate acquired self-storage facilities into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; 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; any future ratings on the Company’s debt instruments; regional concentration of the Company’s business may subject it to economic downturns in the states of Florida and Texas; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and tax law changes that may change the taxability of future income.

CONFERENCE CALL:

Life Storage will hold its Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Wednesday, August 4, 2021. 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 888.506.0062 (domestic) or 973.528.0011 (international); passcode 674512 or request to be joined into the Life Storage call. 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 a period of 90 days; a telephone replay will also be available for 14 days by calling 877.481.4010 and entering passcode 42035.

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. Located in Buffalo, New York, the Company operates more than 950 storage facilities in 33 states. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to more than 575,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.

Life Storage, Inc.  
Balance Sheet Data  
(unaudited)  
   

June 30,

  

December 31,

(dollars in thousands)

2021

  

2020

Assets  
Investment in storage facilities:  
Land

$

1,038,136

 

 

$

951,813

 

Building, equipment and construction in progress

 

4,849,523

 

 

 

4,378,510

 

 

5,887,659

 

 

 

5,330,323

 

Less: accumulated depreciation

 

(937,451

)

 

 

(873,178

)

Investment in storage facilities, net

 

4,950,208

 

 

 

4,457,145

 

Cash and cash equivalents

 

29,881

 

 

 

54,400

 

Accounts receivable

 

14,087

 

 

 

15,464

 

Receivable from joint ventures

 

635

 

 

 

1,064

 

Investment in joint ventures

 

139,495

 

 

 

143,042

 

Prepaid expenses

 

10,211

 

 

 

8,326

 

Intangible asset - in-place customer leases

 

7,155

 

 

 

5,409

 

Trade name

 

16,500

 

 

 

16,500

 

Other assets

 

26,916

 

 

 

26,498

 

Total Assets

$

5,195,088

 

 

$

4,727,848

 

   
Liabilities  
Line of credit

$

140,000

 

 

$

-

 

Term notes, net

 

2,156,823

 

 

 

2,155,457

 

Accounts payable and accrued liabilities

 

109,508

 

 

 

112,654

 

Deferred revenue

 

22,587

 

 

 

17,416

 

Mortgages payable

 

37,406

 

 

 

37,777

 

Total Liabilities

 

2,466,324

 

 

 

2,323,304

 

   
Noncontrolling redeemable Operating Partnership Units at redemption value

 

35,765

 

 

 

26,446

 

   
Equity  
Common stock

 

781

 

 

 

495

 

Additional paid-in capital

 

3,002,782

 

 

 

2,671,311

 

Accumulated deficit

 

(305,981

)

 

 

(288,667

)

Accumulated other comprehensive loss

 

(4,583

)

 

 

(5,041

)

Total Shareholders' Equity

 

2,692,999

 

 

 

2,378,098

 

Total Liabilities and Shareholders' Equity

$

5,195,088

 

 

$

4,727,848

 

   
Life Storage, Inc.
Consolidated Statements of Operations
(unaudited)
April 1, 2021April 1, 2020January 1, 2021January 1, 2020
totototo
(dollars in thousands, except share data)June 30, 2021June 30, 2020June 30, 2021June 30, 2020
 
Revenues
Rental income

$

163,096

 

$

128,828

 

$

313,379

 

$

257,736

 

Other operating income

 

18,026

 

 

14,009

 

 

35,040

 

 

27,631

 

Management and acquisition fee income

 

6,140

 

 

4,176

 

 

10,730

 

 

8,589

 

Total operating revenues

 

187,262

 

 

147,013

 

 

359,149

 

 

293,956

 

 
Expenses
Property operations and maintenance

 

38,794

 

 

32,247

 

 

77,315

 

 

65,097

 

Real estate taxes

 

20,510

 

 

17,614

 

 

40,397

 

 

35,022

 

General and administrative

 

15,083

 

 

12,223

 

 

29,266

 

 

25,129

 

Depreciation and amortization

 

33,118

 

 

27,536

 

 

64,406

 

 

54,564

 

Amortization of in-place customer leases

 

2,653

 

 

1,451

 

 

4,724

 

 

2,753

 

Total operating expenses

 

110,158

 

 

91,071

 

 

216,108

 

 

182,565

 

 
Gain on sale of real estate

 

-

 

 

-

 

 

-

 

 

302

 

Income from operations

 

77,104

 

 

55,942

 

 

143,041

 

 

111,693

 

 
Other income (expense)
Interest expense (A)

 

(20,774

)

 

(20,266

)

 

(41,119

)

 

(40,513

)

Interest and dividend income

 

7

 

 

2

 

 

786

 

 

7

 

Equity in income of joint ventures

 

1,428

 

 

970

 

 

2,649

 

 

2,086

 

 
Net income

 

57,765

 

 

36,648

 

 

105,357

 

 

73,273

 

Net income attributable to noncontrolling interests in the Operating Partnership

 

(249

)

 

(191

)

 

(459

)

 

(383

)

Net income attributable to common shareholders

$

57,516

 

$

36,457

 

$

104,898

 

$

72,890

 

 
Earnings per common share attributable to common shareholders - basic

$

0.75

 

$

0.52

 

$

1.38

 

$

1.04

 

 
Earnings per common share attributable to common shareholders - diluted

$

0.74

 

$

0.52

 

$

1.37

 

$

1.04

 

 
Common shares used in basic earnings per share calculation

 

77,057,520

 

 

70,267,332

 

 

76,222,426

 

 

70,141,595

 

 
Common shares used in diluted earnings per share calculation

 

77,219,999

 

 

70,359,207

 

 

76,365,100

 

 

70,242,776

 

 
Dividends declared per common share

$

0.7400

 

$

0.7133

 

$

1.4800

 

$

1.4267

 

 
 
(A) Interest expense for the period ending June 30 consists of the following
Interest expense

$

20,171

 

$

19,678

 

$

39,914

 

$

39,311

 

Amortization of debt issuance costs

 

603

 

 

588

 

 

1,205

 

 

1,202

 

Total interest expense

$

20,774

 

$

20,266

 

$

41,119

 

$

40,513

 

Life Storage, Inc.
Computation of Funds From Operations (FFO) (1)
(unaudited)
April 1, 2021April 1, 2020January 1, 2021January 1, 2020
totototo
(dollars in thousands, except share data)June 30, 2021June 30, 2020June 30, 2021June 30, 2020
 
Net income attributable to common shareholders

$

57,516

 

$

36,457

 

$

104,898

 

$

72,890

 

Noncontrolling interests in the Operating Partnership

 

249

 

 

191

 

 

459

 

 

383

 

Depreciation of real estate and amortization of intangible
assets exclusive of debt issuance costs

 

35,257

 

 

28,398

 

 

68,076

 

 

56,140

 

Depreciation and amortization from unconsolidated joint ventures

 

1,241

 

 

1,682

 

 

2,443

 

 

3,478

 

Funds from operations allocable to noncontrolling
interest in Operating Partnership

 

(407

)

 

(348

)

 

(766

)

 

(694

)

Funds from operations available to common shareholders

 

93,856

 

 

66,380

 

 

175,110

 

 

132,197

 

FFO per share - diluted

$

1.22

 

$

0.94

 

$

2.29

 

$

1.88

 

 
Adjustments to FFO
Gain on sale of land

 

-

 

 

-

 

 

-

 

 

(302

)

Acquisition fee

 

(1,280

)

 

-

 

 

(1,280

)

 

(217

)

Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership

 

5

 

 

-

 

 

5

 

 

3

 

Adjusted funds from operations available to common shareholders

 

92,581

 

 

66,380

 

 

173,835

 

 

131,681

 

Adjusted FFO per share - diluted

$

1.20

 

$

0.94

 

$

2.28

 

$

1.87

 

 
Common shares - diluted

 

77,219,999

 

 

70,359,207

 

 

76,365,100

 

 

70,242,776

 

Life Storage, Inc.
Computation of Net Operating Income (2)
(unaudited)
April 1, 2021April 1, 2020January 1, 2021January 1, 2020
totototo
(dollars in thousands)June 30, 2021June 30, 2020June 30, 2021June 30, 2020
 
Net Income

$

57,765

 

$

36,648

 

$

105,357

 

$

73,273

 

General and administrative

 

15,083

 

 

12,223

 

 

29,266

 

 

25,129

 

Depreciation and amortization

 

35,771

 

 

28,987

 

 

69,130

 

 

57,317

 

Gain on sale of real estate

 

-

 

 

-

 

 

-

 

 

(302

)

Interest expense

 

20,774

 

 

20,266

 

 

41,119

 

 

40,513

 

Interest and dividend income

 

(7

)

 

(2

)

 

(786

)

 

(7

)

Equity in income of joint ventures

 

(1,428

)

 

(970

)

 

(2,649

)

 

(2,086

)

Net operating income

$

127,958

 

$

97,152

 

$

241,437

 

$

193,837

 

 
Same store (4)

$

98,534

 

$

81,949

 

$

188,469

 

$

164,758

 

Net operating income related to tenant reinsurance

 

8,280

 

 

7,319

 

 

16,118

 

 

14,195

 

Other stores and management fee income

 

21,144

 

 

7,884

 

 

36,850

 

 

14,884

 

Total net operating income

$

127,958

 

$

97,152

 

$

241,437

 

$

193,837

 

 
Life Storage, Inc.
Quarterly Same Store Data (3) (4) 531 mature stores owned since 12/31/19
(unaudited)
April 1, 2021April 1, 2020
totoPercentage
(dollars in thousands)June 30, 2021June 30, 2020ChangeChange
 
Revenues:
Rental income

$

140,269

$

122,383

$

17,886

 

14.6

%

Other operating income

 

1,778

 

1,463

 

315

 

21.5

%

Total operating revenues

 

142,047

 

123,846

 

18,201

 

14.7

%

 
Expenses:
Payroll and benefits

 

9,423

 

9,420

 

3

 

0.0

%

Real estate taxes

 

17,516

 

16,592

 

924

 

5.6

%

Utilities

 

3,301

 

3,212

 

89

 

2.8

%

Repairs and maintenance

 

4,146

 

3,449

 

697

 

20.2

%

Office and other operating expense

 

3,791

 

3,479

 

312

 

9.0

%

Insurance

 

1,566

 

1,500

 

66

 

4.4

%

Advertising

 

48

 

64

 

(16

)

-25.0

%

Internet marketing

 

3,722

 

4,181

 

(459

)

-11.0

%

Total operating expenses

 

43,513

 

41,897

 

1,616

 

3.9

%

 
Net operating income (2)

$

98,534

$

81,949

$

16,585

 

20.2

%

 
 
QTD Same store move ins

 

51,060

 

53,371

 

(2,311

)

 
QTD Same store move outs

 

44,668

 

43,027

 

1,641

 

Other Comparable Quarterly Same Store Data (4)
(unaudited)
April 1, 2021April 1, 2020
totoPercentage
June 30, 2021June 30, 2020ChangeChange
2020 Same store pool (515 stores)
Revenues

$

137,566

$

119,932

$

17,634

14.7

%

Expenses

 

42,209

 

40,640

 

1,569

3.9

%

Net operating income

$

95,357

$

79,292

$

16,065

20.3

%

 
 
2019 Same store pool (502 stores)
Revenues

$

134,557

$

117,456

$

17,101

14.6

%

Expenses

 

41,121

 

39,602

 

1,519

3.8

%

Net operating income

$

93,436

$

77,854

$

15,582

20.0

%

Life Storage, Inc.
Year to Date Same Store Data (3) (4) 531 mature stores owned since 12/31/19
(unaudited)
January 1, 2021January 1, 2020
totoPercentage
(dollars in thousands)June 30, 2021June 30, 2020ChangeChange
 
Revenues:
Rental income

$

273,412

$

246,494

$

26,918

 

10.9

%

Other operating income

 

3,371

 

2,957

 

414

 

14.0

%

Total operating revenues

 

276,783

 

249,451

 

27,332

 

11.0

%

 
Expenses:
Payroll and benefits

 

19,445

 

19,261

 

184

 

1.0

%

Real estate taxes

 

34,940

 

33,184

 

1,756

 

5.3

%

Utilities

 

7,095

 

6,832

 

263

 

3.8

%

Repairs and maintenance

 

8,848

 

7,494

 

1,354

 

18.1

%

Office and other operating expense

 

7,827

 

7,282

 

545

 

7.5

%

Insurance

 

3,089

 

3,006

 

83

 

2.8

%

Advertising

 

96

 

128

 

(32

)

-25.0

%

Internet marketing

 

6,974

 

7,506

 

(532

)

-7.1

%

Total operating expenses

 

88,314

 

84,693

 

3,621

 

4.3

%

 
Net operating income (2)

$

188,469

$

164,758

$

23,711

 

14.4

%

 
 
YTD Same store move ins

 

97,898

 

99,760

 

(1,862

)

 
YTD Same store move outs

 

86,826

 

87,485

 

(659

)

Life Storage, Inc.
Other Data - unauditedSame Store (3)All Stores (5)

 

2021

 

2020

 

2021

 

2020

 
Weighted average quarterly occupancy

 

95.1%

 

90.9%

 

94.7%

 

90.0%

 
Occupancy at June 30

 

95.7%

 

91.8%

 

95.0%

 

91.0%

 
Rent per occupied square foot

$15.34

$14.17

$15.32

$14.12

 
Life Storage, Inc.
Other Data - unaudited (continued)
 
Investment in Storage Facilities: (unaudited)
The following summarizes activity in storage facilities during the six months ended June 30, 2021:
 
Beginning balance

$

5,330,323

 

Property acquisitions

 

527,214

 

Improvements and equipment additions:
Expansions

 

4,469

 

Roofing, paving, and equipment:
Stabilized stores

 

10,970

 

Recently acquired stores

 

1,792

 

Change in construction in progress (Total CIP $31.9 million)

 

13,232

 

Dispositions and Impairments

 

(341

)

Storage facilities at cost at period end

$

5,887,659

 

 
 
Comparison of Selected G&A Costs (unaudited)Quarter Ended
June 30, 2021June 30, 2020
 
Management and administrative salaries and benefits

$

9,784

 

$

6,704

Training

 

143

 

 

186

Call center

 

751

 

 

750

Life Storage Solutions costs

 

277

 

 

150

Income taxes

 

568

 

 

871

Legal, accounting and professional

 

893

 

 

911

Other administrative expenses (6)

 

2,667

 

 

2,651

$

15,083

 

$

12,223

 
Net rentable square feetJune 30, 2021
Wholly owned properties

 

45,795,071

 

Joint venture properties

 

7,896,032

 

Third party managed properties

 

17,716,675

 

 

71,407,778

 

 
June 30, 2021June 30, 2020
 
Common shares outstanding

 

78,041,891

 

 

70,377,668

Operating Partnership Units outstanding

 

332,399

 

 

365,949

(1) 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.
 
(2) 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, operating lease expenses, depreciation and amortization expense, any losses on sale of real estate, acquisition related costs, general and administrative expense, and deducting from net income: income from discontinued operations, interest income, any gains 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 in 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.
 
(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) Revenues and expenses do not include items related to tenant reinsurance.
 
(5) Does not include unconsolidated joint venture stores or other stores managed by the Company.
 
(6) Other administrative expenses include office rent, travel expense, investor relations and miscellaneous other expenses.