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CubeSmart Reports 2018 Annual Results

/EIN News/ -- MALVERN, Pa., Feb. 21, 2019 (GLOBE NEWSWIRE) -- CubeSmart (NYSE: CUBE) today announced its operating results for the three and twelve months ended December 31, 2018.

“This past year marks the third year in a row that we have increased our total stores under management by at least 16%, further leveraging the scale benefits of our operating platform and expanding our brand in the most desirable storage markets,” commented President and Chief Executive Officer Christopher P. Marr. “Despite new supply’s impact on fundamentals in select submarkets, demand continues to remain steady and broad-based. Looking forward to 2019, we remain focused on maximizing store performance and maintaining our disciplined investment strategy to generate attractive long-term risk-adjusted returns for shareholders.”

Key Highlights for the Fourth Quarter

  • Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of $0.26.
  • Reported funds from operations (“FFO”) per share, as adjusted, of $0.42, representing a year-over-year increase of 2.4%.
  • Increased same-store (456 stores) net operating income (“NOI”) 1.9% year over year, driven by 3.2% revenue growth and a 6.9% increase in property operating expenses.
  • Same-store occupancy during the quarter averaged 91.8% and ended the quarter at 91.2%.  
  • Closed on four property acquisitions totaling $117.7 million.
  • Closed on one property that the Company previously had under contract to acquire upon completion of construction and issuance of certificate of occupancy (“C/O”) for $19.1 million.
  • Closed on two property dispositions totaling $17.5 million
  • Increased the quarterly dividend 6.7% to an annualized rate of $1.28 per common share from the previous annualized rate of $1.20 per common share.
  • Sold 0.7 million common shares at an average sales price of $32.25 per share, resulting in net proceeds of $23.5 million. 
  • Added 61 stores to our third-party management platform during the quarter, bringing our total third-party managed store count to 593.

Financial Results

Net income attributable to the Company’s common shareholders was $48.2 million for the fourth quarter of 2018, compared with $39.5 million for the fourth quarter of 2017.  EPS attributable to the Company’s common shareholders was $0.26 for the fourth quarter of 2018, compared with $0.22 for the same period last year.

Net income attributable to the Company’s common shareholders for the year ended December 31, 2018 was $163.9 million, compared with $134.3 million for the year ended December 31, 2017. EPS increased 20.3% to $0.89 for the year ended December 31, 2018 compared with $0.74 for the prior year. 

FFO, as adjusted, was $79.9 million for the fourth quarter of 2018, compared with $76.3 million for the fourth quarter of 2017.  FFO per share, as adjusted, increased 2.4% to $0.42 for the fourth quarter of 2018, compared with $0.41 for the same period last year. 

FFO, as adjusted, for the year ended December 31, 2018 was $307.8 million, compared with $291.5 million for the year ended December 31, 2017. FFO per share, as adjusted, increased 3.1% to $1.64 for the year ended December 31, 2018, compared with $1.59 for the year ended December 31, 2017.

Investment Activity

Acquisition Activity

The Company acquired four stores located in California, Illinois, New York, and Texas for $117.7 million during the three months ended December 31, 2018. For the full year, the Company acquired nine stores for $208.4 million, excluding one property acquired at C/O. Additionally, the Company is under contract to acquire two stores for $70.5 million.

Disposition Activity

During the three months and full year ended December 31, 2018, the Company sold two properties in Arizona for $17.5 million.

Unconsolidated Real Estate Venture Activity

During the fourth quarter of 2018, the Company’s real estate venture, HVP IV, acquired two properties located in Connecticut for $15.1 million. For the year ended December 31, 2018, HVP IV acquired 12 properties for $129.4 million, of which the Company contributed $14.1 million. Additionally, HVP IV has one property under contract for $10.7 million that is expected to close during the first quarter of 2019.

Development Activity

The Company has agreements with developers for the construction of Class A self-storage properties in high-barrier-to-entry locations. These agreements are structured as either purchases at C/O or as joint venture developments. During the fourth quarter of 2018, the Company acquired one property at C/O, located in California, for $19.1 million. For the year ended December 31, 2018, the Company acquired one store at C/O and opened for operation one joint venture development property for an aggregate total cost of $111.2 million.

As of December 31, 2018, the Company had six joint venture development properties under construction. The Company anticipates investing a total of $160.0 million related to these projects and had invested $82.6 million of that total as of year-end.  These stores are located in New York (3), Massachusetts (2), and New Jersey (1). The six projects are expected to open at various times between the first quarter of 2019 and the second quarter of 2020. 

Third-Party Management

As of December 31, 2018, the Company’s third-party management program included 593 stores totaling 38.5 million square feet.  During the three and twelve months ended December 31, 2018, the Company added 61 stores and 209 stores, respectively, to its third-party management platform. 

Same-Store Results

The Company’s same-store portfolio at December 31, 2018 included 456 stores containing approximately 31.4 million rentable square feet, or approximately 90.8% of the aggregate rentable square feet of the Company’s 493 owned stores.  These same-store properties represented approximately 93.0% of property NOI for the quarter ended December 31, 2018.

Same-store physical occupancy at period end for the fourth quarter of 2018 was 91.2%, compared with 91.5% for the same quarter of last year.  Same-store revenues for the fourth quarter of 2018 increased 3.2%, and same-store operating expenses increased 6.9% from the same quarter in 2017.  Same-store NOI increased 1.9%, as compared with the same period in 2017.

For the year ended December 31, 2018, same-store revenues increased 3.3%, same-store operating expenses increased 3.5%, and same-store NOI increased 3.3%, as compared with the year ended December 31, 2017.

Operating Results

As of December 31, 2018, the Company’s total owned portfolio included 493 stores containing 34.6 million rentable square feet with a physical occupancy of 89.0%.

Revenues increased $10.4 million and property operating expenses increased $5.2 million in the fourth quarter of 2018, as compared with the same period in 2017.  Increases in revenues were primarily attributable to increased net effective rents in the same-store portfolio and revenues generated from property acquisitions and recently opened development properties.  Increases in property operating expenses were primarily attributable to a $2.7 million increase in property taxes.

General and administrative expenses increased from $8.2 million during the three months ended December 31, 2017 to $10.8 million during the three months ended December 31, 2018, an increase of $2.6 million. The change is primarily attributable to increased professional fees, a $1.8 million charge associated with the settlement of a legal action, and payroll expenses resulting from additional employee headcount to support our growth.

Interest expense increased from $14.9 million during the three months ended December 31, 2017 to $16.3 million during the three months ended December 31, 2018, an increase of $1.4 million.  The increase is attributable to a higher amount of outstanding debt and higher interest rates during the 2018 period. To fund a portion of the Company’s growth, the average debt balance during the three months ended December 31, 2018 increased approximately $91 million from the same period in 2017 from $1,655 million to $1,746 million. The weighted average effective interest rate on our outstanding debt increased from 3.83% for the three months ended December 31, 2017 to 3.98% for the three months ended December 31, 2018. 

Financing Activity

During the fourth quarter, the Company sold 0.7 million common shares of beneficial interest through its “at-the-market” equity program (“ATM”) at an average sales price of $32.25 per share, resulting in net proceeds of $23.5 million, after deducting offering costs. For the full year, the company sold 4.3 million shares of beneficial interest at an average sales price of $31.09 per share and raised $131.8 million of net proceeds through the ATM program, after deducting offering costs. As of December 31, 2018, the Company had 10.5 million shares available for issuance under the existing equity distribution agreements.

On January 30, 2019, the Operating Partnership issued $350.0 million in aggregate principal amount of unsecured senior notes due February 15, 2029 which bear interest at a rate of 4.375% per annum (the “2029 Notes”). The 2029 Notes were priced at 99.356% of the principal amount to yield 4.455% to maturity. Net proceeds from the offering were used to repay all of the outstanding indebtedness under the Company’s $200.0 million unsecured term loan portion of its credit facility that was scheduled to mature in January 2019. The remaining proceeds from the offering were used to repay a portion of the outstanding indebtedness under the revolving portion of the Company’s credit facility.

Quarterly Dividend

On December 13, 2018, the Company declared a dividend of $0.32 per common share, a 6.7% increase compared with the Company’s previously declared quarterly dividend of $0.30 per common share. The dividend was paid on January 15, 2019 to common shareholders of record on January 2, 2019.

2019 Financial Outlook

“Our same-store growth expectations for 2019 are primarily driven by modest increases in net effective rents, continued pressure on real estate taxes, and the rolling three-year impact from new supply on our portfolio,” stated Chief Financial Officer Tim Martin. “Our FFO guidance reflects the impact of our January 2019 bond offering and the near-term dilution generated by our value creation pipeline of new development assets. With access to a variety of capital sources, our balance sheet remains well positioned to support the Company’s strategic growth initiatives.”  

The Company estimates that its fully diluted FFO per share, as adjusted, for 2019 will be between $1.64 and $1.69, and that its fully diluted earnings per share for the period will be between $0.84 and $0.89.  Due to uncertainty related to the timing and terms of transactions, the impact of any potential future speculative investment activity is excluded from guidance.  For 2019, the same-store pool will consist of 468 properties totaling 32.5 million square feet.

                 
    Current Ranges for
2019 Full Year Guidance Range Summary   Annual Assumptions
Same-store revenue growth     1.50 %   to     2.50 %
Same-store expense growth     3.0 %   to     4.0 %
Same-store NOI growth     1.00 %   to     2.25 %
                 
Acquisition of wholly-owned operating properties   $ 75.0M     to   $ 150.0M  
Acquisition of properties at C/O   $ 0         $ 0  
New development openings   $ 129.4M         $ 129.4M  
Dispositions   $ 0     to   $ 50.0M  
Dilution from properties in lease-up   $ (0.09 )   to   $ (0.10 )
                 
Property management fee income   $ 22.0M     to   $ 24.0M  
General and administrative expenses   $ 38.5M     to   $ 39.5M  
Interest and loan amortization expense   $ 76.5M     to   $ 78.5M  
Weighted average shares and units     190.0M           190.0M  
                 
Earnings per diluted share allocated to common shareholders   $ 0.84     to   $ 0.89  
Plus: real estate depreciation and amortization   $ 0.80         $ 0.80  
FFO per diluted share, as adjusted   $ 1.64     to   $ 1.69  
                     


                   
1st Quarter 2019 Guidance   Range or Value  
Earnings per diluted share allocated to common shareholders   $ 0.18   to   $ 0.19  
Plus: real estate depreciation and amortization     0.21         0.21  
FFO per diluted share, as adjusted   $ 0.39   to   $ 0.40  
                   

Conference Call

Management will host a conference call at 11:00 a.m. ET on Friday, February 22, 2019 to discuss financial results for the three and twelve months ended December 31, 2018.

A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.cubesmart.com.  Telephone participants may avoid any delays in joining the conference call by pre-registering for the call using the following link to receive a special dial-in number and PIN: http://dpregister.com/10127558.

Telephone participants who are unable to pre-register for the conference call may join on the day of the call using 1-877-506-3281 for domestic callers, +1-412-902-6677 for international callers, and 1-855-669-9657 for callers in Canada.   After the live webcast, the call will remain available on CubeSmart's website for 30 days.  In addition, a telephonic replay of the call will be available through March 22, 2019.  The replay numbers are 1-877-344-7529 for domestic callers, +1-412-317-0088 for international callers, and 1-855-669-9658 for callers in Canada.  For callers accessing a telephonic replay, the conference number is 10127558.

Supplemental operating and financial data as of December 31, 2018 is available on the Company’s corporate website under Investor Relations - Financial Information - Financial Reports.

About CubeSmart

CubeSmart is a self-administered and self-managed real estate investment trust.  The Company's self-storage properties are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers.  According to the 2019 Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in the United States.

Non-GAAP Financial Measures

Funds from operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance.  The April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (the “White Paper”), as amended, defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate and related impairment charges, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.   

Management uses FFO as a key performance indicator in evaluating the operations of the Company's stores. Given the nature of its business as a real estate owner and operator, the Company considers FFO a key measure of its operating performance that is not specifically defined by accounting principles generally accepted in the United States. The Company believes that FFO is useful to management and investors as a starting point in measuring its operational performance because FFO excludes various items included in net income that do not relate to or are not indicative of its operating performance such as gains (or losses) from sales of real estate, gains from remeasurement of investments in real estate ventures, impairments of depreciable assets, and depreciation, which can make periodic and peer analyses of operating performance more difficult. The Company’s computation of FFO may not be comparable to FFO reported by other REITs or real estate companies.  

FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of the Company’s ability to make cash distributions. The Company believes that to further understand its performance, FFO should be compared with its reported net income and considered in addition to cash flows computed in accordance with GAAP, as presented in its Consolidated Financial Statements.

FFO, as adjusted represents FFO as defined above, excluding the effects of acquisition related costs, gains or losses from early extinguishment of debt, and other non-recurring items, which the Company believes are not indicative of the Company’s operating results.

The Company defines net operating income, which it refers 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, loan procurement amortization expense – early repayment of debt, acquisition related costs, equity in losses of real estate ventures, other expense, depreciation and amortization expense, general and administrative expense, and deducting from net income (loss): gains from sale of real estate, net, other income, gains from remeasurement of investments in real estate ventures and interest income.  NOI is not a measure of performance calculated in accordance with GAAP.

Management uses NOI as a measure of operating performance at each of its stores, and for all of its stores in the aggregate. NOI should not be considered as a substitute for 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. The Company believes NOI is useful to investors in evaluating operating performance because it is one of the primary measures used by management and store managers to evaluate the economic productivity of the Company’s stores, including the ability to lease stores, increase pricing and occupancy, and control property operating expenses. Additionally, NOI helps the Company’s investors meaningfully compare the results of its operating performance from period to period by removing the impact of its capital structure (primarily interest expense on outstanding indebtedness) and depreciation of the basis in its assets from operating results.

Forward-Looking Statements

This presentation, together with other statements and information publicly disseminated by CubeSmart (“we,” “us,” “our” or the “Company”), contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Forward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates,” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. 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. As a result, you should not rely on or construe any forward-looking statements in this presentation, or which management or persons acting on their behalf may make orally or in writing from time to time, as predictions of future events or as guarantees of future performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation or as of the dates otherwise indicated in such forward-looking statements. All of our forward-looking statements, including those in this presentation, are qualified in their entirety by this statement.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this presentation. Any forward-looking statements should be considered in light of the risks and uncertainties referred to in Item 1A. “Risk Factors” in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (“SEC”). These risks include, but are not limited to, the following:

  • adverse changes in the national and local economic, business, real estate and other market conditions;
  • the effect of competition from existing and new self-storage properties on our ability to maintain or raise occupancy and rental rates;
  • the execution of our business plan;
  • reduced availability and increased costs of external sources of capital;
  • financing risks, including the risk of over-leverage 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;
  • risks related to our ability to maintain our qualification as a real estate investment trust (“REIT”) for federal income tax purposes;
  • failure of acquisitions and developments to close on expected terms, or at all, or to perform as expected;
  • increases in taxes, fees, and assessments from state and local jurisdictions;
  • the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;
  • reductions in asset valuations and related impairment charges;
  • cyber security breaches or a failure of our networks, systems or technology, which could adversely impact our business, customer and employee relationships;
  • changes in real estate and zoning laws or regulations;
  • risks related to natural disasters or acts of violence, terrorism, or war that affect the markets in which we operate;
  • potential environmental and other liabilities;
  • uninsured losses;
  • other factors affecting the real estate industry generally or the self-storage industry in particular; and
  • other risks identified in Item 1A of our Annual Report on Form 10-K and, from time to time, in other reports that we file with the SEC or in other documents that we publicly disseminate.

Given these uncertainties, we caution readers not to place undue reliance on forward-looking statements.  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.

Contact:

CubeSmart
Charles Place
Director, Investor Relations
(610) 535-5700

CUBESMART AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

  December 31, 
  2018   2017
           
ASSETS          
Storage properties $  4,463,455     $  4,161,715  
Less: Accumulated depreciation    (862,487 )      (752,925 )
Storage properties, net (including VIE assets of $330,986 and $291,496, respectively)    3,600,968        3,408,790  
Cash and cash equivalents    3,764        5,268  
Restricted cash    2,718        3,890  
Loan procurement costs, net of amortization    963        1,592  
Investment in real estate ventures, at equity    95,796        91,206  
Other assets, net    48,763        34,590  
Total assets $  3,752,972     $  3,545,336  
           
LIABILITIES AND EQUITY          
Unsecured senior notes, net $  1,143,524     $  1,142,460  
Revolving credit facility    195,525        81,700  
Unsecured term loans, net    299,799        299,396  
Mortgage loans and notes payable, net    108,246        111,434  
Accounts payable, accrued expenses and other liabilities    149,914        143,344  
Distributions payable    60,627        55,297  
Deferred revenue    22,595        21,529  
Security deposits    474        486  
Total liabilities    1,980,704        1,855,646  
           
Noncontrolling interests in the Operating Partnership    55,819        54,320  
           
Commitments and contingencies          
           
Equity          
Common shares $.01 par value, 400,000,000 shares authorized, 187,145,103 and 182,215,735 shares issued and outstanding at December 31, 2018 and 2017, respectively    1,871        1,822  
Additional paid-in capital    2,500,751        2,356,620  
Accumulated other comprehensive (loss) income    (1,029 )      3  
Accumulated deficit    (791,915 )      (729,311 )
Total CubeSmart shareholders’ equity    1,709,678       1,629,134  
Noncontrolling interests in subsidiaries    6,771        6,236  
Total equity    1,716,449       1,635,370  
Total liabilities and equity $  3,752,972     $ 3,545,336  
               

CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)

  For the year ended December 31, 
  2018   2017   2016
                 
REVENUES                
Rental income $  517,535     $  489,043     $ 449,601  
Other property related income    60,156        55,001       50,255  
Property management fee income    20,253        14,899       10,183  
Total revenues    597,944       558,943       510,039  
OPERATING EXPENSES                
Property operating expenses    196,866        181,508       165,847  
Depreciation and amortization    143,350        145,681       161,865  
General and administrative    37,712        34,745       32,823  
Acquisition related costs    —        1,294       6,552  
Total operating expenses    377,928       363,228       367,087  
OTHER (EXPENSE) INCOME                
Interest:                
Interest expense on loans    (62,132 )      (56,952 )     (50,399 )
Loan procurement amortization expense    (2,313 )      (2,638 )     (2,577 )
Equity in losses of real estate ventures    (865 )      (1,386 )      (2,662 )
Gains from sale of real estate, net    10,576        —        —  
Other    206        872        1,062  
Total other expense    (54,528 )      (60,104 )      (54,576 )
NET INCOME    165,488        135,611        88,376  
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS                
Noncontrolling interests in the Operating Partnership    (1,820 )      (1,593 )      (941 )
Noncontrolling interest in subsidiaries    221        270        470  
NET INCOME ATTRIBUTABLE TO THE COMPANY    163,889        134,288        87,905  
Distribution to preferred shareholders    —        —        (5,045 )
Preferred share redemption charge    —        —        (2,937 )
NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS $  163,889     $  134,288     $  79,923  
                 
Basic earnings per share attributable to common shareholders $  0.89     $  0.74     $  0.45  
Diluted earnings per share attributable to common shareholders $  0.88     $  0.74     $  0.45  
                 
Weighted-average basic shares outstanding    184,653        180,525       178,246  
Weighted-average diluted shares outstanding    185,495        181,448       179,533  
                 

Same-Store Facility Results (456 stores)
(in thousands, except percentage and per square foot data)
(unaudited)

                                   
  Three Months Ended         Year Ended      
  December 31,    Percent    December 31,    Percent 
  2018   2017   Change   2018   2017   Change
                                   
REVENUES                                  
Rental income $  122,313     $  118,588     3.1   $  483,421     $  468,090     3.3 %
Other property related income    12,426        11,935     4.1      49,888        48,105     3.7 %
Total revenues    134,739        130,523     3.2      533,309        516,195     3.3 %
                                   
OPERATING EXPENSES                                  
Property taxes    13,840        11,856     16.7      55,816        52,105     7.1 %
Personnel expense    10,595        10,417     1.7      42,618        41,988     1.5 %
Advertising    1,739        2,145     (18.9 )%       8,112        8,128     (0.2 )%
Repair and maintenance    1,904        1,747     9.0      6,173        6,204     (0.5 )%
Utilities    3,633        3,521     3.2      15,560        15,220     2.2 %
Property insurance    658        668     (1.5 )%       2,696        2,773     (2.8 )%
Other expenses    5,407        4,972     8.7      21,467        20,916     2.6 %
                                   
Total operating expenses    37,776        35,326     6.9      152,442        147,334     3.5 %
                                   
Net operating income (1) $  96,963     $  95,197     1.9   $  380,867     $  368,861     3.3 %
                                   
Gross margin   72.0 %     72.9 %           71.4 %     71.5 %      
                                   
Period end occupancy (2)   91.2 %     91.5 %           91.2 %     91.5 %      
                                   
Period average occupancy (3)   91.8 %     92.2 %           92.7 %     92.9 %      
                                   
Total rentable square feet    31,434                    31,434              
                                   
Realized annual rent per occupied square foot (4) $  16.96     $  16.38     3.5   $  16.60     $  16.03     3.6 %
                                   
Reconciliation of Same-Store Net Operating Income to Operating Income                                  
                                   
Same-store net operating income (1) $  96,963     $  95,197           $  380,867     $  368,861        
Non same-store net operating income (1)    7,244        4,307              22,578        13,006        
Indirect property overhead (5)    (154 )      (683 )            (2,367 )      (4,432 )      
Depreciation and amortization    (38,099 )      (34,855 )            (143,350 )      (145,681 )      
General and administrative expense    (10,847 )      (8,223 )            (37,712 )      (34,745 )      
Acquisition related costs    -        (232 )            -        (1,294 )      
Interest expense on loans    (16,335 )      (14,924 )            (62,132 )      (56,952 )      
Loan procurement amortization expense    (578 )      (579 )            (2,313 )      (2,638 )      
Equity in losses of real estate ventures    (80 )      (81 )            (865 )      (1,386 )      
Gains from sale of real estate, net    10,576        -              10,576        -        
Other    (54 )      (69 )            206        872        
                                   
Net income $  48,636     $  39,858           $  165,488     $  135,611        
                                   

(1) Net operating income (“NOI”) in a non-GAAP (generally accepted accounting principles) financial measure. The above table reconciles same-store NOI to GAAP Net income.
(2) Represents occupancy at December 31 of the respective year.
(3) Represents the weighted average occupancy for the period.
(4) Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.
(5) Includes property management income earned in conjunction with managed properties.

Non-GAAP Measure – Computation of Funds From Operations
(in thousands, except per share data)
(unaudited)

  Three Months Ended   Year Ended
  December 31,    December 31, 
  2018    2017   2018   2017
                         
Net income attributable to the Company's common shareholders $  48,156     $  39,547     $  163,889     $  134,288  
                         
Add (deduct):                        
Real estate depreciation and amortization:                        
Real property    37,396        34,136        140,538        142,961  
Company's share of unconsolidated real estate ventures    2,523        2,527        10,286        10,243  
Gains from sale of real estate, net    (10,576 )      —        (10,576 )      —  
Noncontrolling interests in the Operating Partnership    535        399        1,820        1,593  
                         
FFO attributable to common shareholders and OP unitholders $  78,034     $  76,609     $  305,957     $  289,085  
                         
Add (deduct):                        
Loan procurement amortization expense - early repayment of debt    —        —        —        190  
Acquisition related costs    —        257        —        1,319  
Loss related to settlement of legal action    1,828        —        1,828        —  
Property damage related to hurricanes, net of expected insurance proceeds (1)    —        (550 )      —        874  
                         
FFO, as adjusted, attributable to common shareholders and OP unitholders $  79,862     $  76,316     $  307,785     $  291,468  
                         
Earnings per share attributable to common shareholders - basic $  0.26     $  0.22     $  0.89     $  0.74  
Earnings per share attributable to common shareholders - diluted $  0.26     $  0.22     $  0.88     $  0.74  
FFO per share and unit - fully diluted $  0.41     $  0.42     $  1.63     $  1.57  
FFO, as adjusted per share and unit - fully diluted $  0.42     $  0.41     $  1.64     $  1.59  
                         
Weighted-average basic shares outstanding    186,485        181,437        184,653        180,525  
Weighted-average diluted shares outstanding    187,329        182,432        185,495        181,448  
Weighted-average diluted shares and units outstanding    189,363        184,310        187,516        183,598  
                         
Dividend per common share and unit $  0.32     $  0.30     $  1.22     $  1.11  
Payout ratio of FFO, as adjusted    76.2 %      73.2 %      74.4 %      69.8 %
                               
  1. Year ended December 31, 2017 includes $0.1 million of storm damage related costs that are included in the Company’s share of equity in losses of real estate ventures.

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