PUBLIC STORAGE, INC. Financial Analysis For the Quarter Ended September 30, 1999

Transcription

1 PUBLIC STORAGE, INC. Financial Analysis For the Quarter Ended September 30, 1999

2 INDEX I. Historical Financial Data...1 II. III. Organization Chart....2 Special Distribution...3 IV. Facilities in Which PSI Has an Interest V. Overview of Merger with Storage Trust... 6 VI. VII. VIII. IX. Investments in Real Estate Entities...7 Notes Payable 7 Same Store Property Operations...8 Results of PS Business Parks, Inc.9 X. Funds from Operations XI. Development Activities XII. Financial ratios XIII. Ratio of FFO to Fixed Charges.. 16

3 I. Historical Financial Data Selected Historical Financial Data: For the nine months ended For the year ended December 31, September 30, Revenues: (In thousands, except per share data) Rental income Storage facilities $ 456,633 $ 379,019 $ 512,757 $ 393,433 $ 270,850 Commercial properties 5,973 21,229 23,112 40,575 23,576 Equity in earnings of real estate entities 23,969 16,598 26,602 17,569 22,121 Interest and other income 12,640 15,950 18,614 17,474 19, , , , , ,376 Expenses: Cost of operations Storage facilities 156, , , ,049 83,535 Commercial properties 1,993 7,187 7,951 16,665 10,750 Depreciation and amortization 101,565 82, ,799 92,750 64,999 General and administrative 9,371 9,591 11,635 13,462 5,698 Interest expense 5,870 2,926 4,507 6,792 8, , , , , ,464 Income before minority interest 224, , , , ,912 Minority interest in income (12,149) (16,141) (20,290) (11,684) (9,363) Net income $ 212,245 $ 167,849 $ 227,019 $ 178,649 $ 153,549 Funds from operations (FFO) $ 317,232 $ 247,955 $ 336,363 $ 272,234 $ 224,476 FFO available to common shareholders $ 247,466 $ 188,633 $ 257,988 $ 197,253 $ 155,877 Per Common Share: Distributions per common share $0.66 $0.66 $0.88 $0.88 $0.88 Net income - Diluted $1.13 $0.95 $1.30 $0.91 $1.10 Net income - Basic $1.13 $0.96 $1.30 $0.92 $1.10 Weighted average common shares - Diluted 125, , ,357 98,961 77,358 Weighted average common shares - Basic 125, , ,929 98,446 77,117 Total assets $ 4,206,139 $ 3,411,833 $ 3,403,904 $3,311,645 $2,572,152 Total debt $ 171,952 $ 85,617 $ 81,426 $ 103,558 $ 108,443 Minority interest $ 136,393 $ 150,532 $ 139,325 $ 288,479 $ 116,805 Shareholders' equity $ 3,798,141 $ 3,098,304 $ 3,119,340 $2,848,960 $2,305,437 1

4 II. Organization Public Storage Organization As of September 30,1999 Consolidated assets Unconsolidated assets (1) Real Estate facilities Ancillary Operations Property Management Operations Real Estate facilities Wholly-owned Facilities Consolidated Entities Locks and Box Sales, Truck rentals Limited Partnerships (14 entities) PS Business Parks 633 storage facilities 1 commercial facility 568 storage facilities 122 storage facilities 123 commercial facilites Commercial Prop. Mgt. (1) Public Storage s interest in the Unconsolidated Entities are accounted for under the equity method. 2

5 III. Special Distribution On November 4, 1999, the Board of Directors declared a special distribution to the Company s common shareholders. The special distribution is comprised of (i) $.65 per common share payable in depositary shares, representing interests in Equity Stock, Series A, with cash being paid in lieu of fractional shares or (ii) at the election of each common shareholder $.62 per common share payable in cash. The special distribution is payable on January 14, 2000 to shareholders of record as of November 15, The federal income tax rules applicable to REITs impose an excise tax if a REIT does not meet certain minimum distribution requirements. For 1999, after taking into account our regular distributions on our common and preferred stocks, we estimate we need an additional distribution in order to avoid incurring that excise tax. The special distribution is intended to meet our distribution requirement for 1999 and will be taxable to our common shareholders, and deductible by the Company, in No shares of Equity Stock, Series A are presently outstanding, and no market currently exists for the Equity Stock. The fair value of depositary shares on the date of payment is expected to be $20 per depositary share. The valuation of the depositary shares will be determined by our Board of Directors based on advice from a financial advisor. The creation of the Equity Stock, Series A may expand our financial flexibility by providing us with a third permanent equity security. If the Equity Stock is well received by the shareholders and the market, the Company may be able to continue its growth by issuing additional Equity Stock and preferred stock. Using those sources of permanent capital, rather than issuing additional common stock, may be less likely to dilute the interest of existing common shareholders in future growth. The following summarizes the terms of the depositary shares representing the Equity Stock, Series A: (i) (ii) (iii) (iv) (v) (vi) Distributions: During any calendar year (prorated for the year 2000), each depositary share shall receive the lesser of: a) five times the per share dividend on the Common Stock or b) $2.45. Redemption: except in order to preserve the Company s federal income tax status as a REIT, the Company may not redeem the depositary shares before March 31, On or after March 31, 2005, the Company may, at its option, redeem the depositary shares at $24.50 per depositary share. Liquidation: if the Company is liquidated, the amount payable per depositary share is the same as the amount payable per share of the Company s common stock, but cannot exceed $24.50 per depositary share. Preferences: the depositary shares have no preference over the Company s common stock either as to dividends or in liquidation, and the Company has no obligation to redeem the depositary shares. Conversion: if the Company fails to preserve its federal income tax status as a REIT, the depositary shares will be convertible into common stock. The depositary shares are otherwise not convertible into common stock. Voting rights: holders of depositary shares vote as a single class with our holders of common stock on shareholder matters, but the depositary shares have the equivalent of one-tenth of a vote per depositary share. 3

6 IV. Facilities in which has an interest: The Company owns interests in a total of 1,323 storage facilities, representing substantially all of the facilities operated under the Public Storage name in the United States, and 124 commercial facilities. Some of these facilities are owned by entities which for accounting purposes are not consolidated with the Company because the Company does not have a controlling interest (generally, less than 50%). The largest of these unconsolidated entities is PS Business Parks, Inc. ( PSBP ). The table below illustrates the changes to the Company s pool of consolidated real estate facilities and the corresponding changes to the pool of facilities which are owned by Unconsolidated Entities: 1. Pool of Facilities Consolidated with the Company: Number of Facilities in which the Company has an ownership interest Commercial Storage Properties Total Number at December 31, Acquired in the merger with Storage Trust Other third party acquisitions Newly Developed Completed developed properties at December 31, 1998 that were transferred to the development joint venture... (2) - (2) Acquired through Partnership acquisition Disposition/Sale (A)... (8) - (8) Number at September 30, , , Pool of Facilities owned by Unconsolidated Entities 1 : Number at December 31, Acquired in the merger with Storage Trust Acquired from third parties by PSBP Completed developed properties at December 31, 1998 that were transferred to the development joint venture Reduced through Partnership acquisitions... (40) - (40) Newly developed Number at September 30, (A) Consists of the sale of six properties acquired in the merger with Storage Trust and the condemnation of two facilities. 1 Storage facilities at September 30, 1999 are owned primarily by institutional partnerships, certain public limited partnerships, and the Development Joint Venture. Commercial Properties at September 30, 1999 are owned by PS Business Parks, Inc. 4

7 The table below summarizes the number of facilities consolidated at September 30, 1999 and those owned by Unconsolidated real estate entities: Number of facilities in which the Company has an ownership interest Net Rentable Square Footage (in thousands) Commercial Commercial Storage Properties Total Storage Properties Total Wholly-owned facilities , ,717 Facilities owned by Consolidated Partnerships ,429-32,429 Total consolidated facilities... 1, ,202 71, ,146 Facilities owned by Unconsolidated Entities ,171 11,986 19,157 Total facilities in which the Company has an ownership interest... 1, ,447 78,308 11,995 90,303 5

8 V. Overview of Merger with Storage Trust: On March 12, 1999, the merger with Storage Trust was completed. The following chart summarizes the accounting for the merger (000 s): Total merger consideration (amount paid for Storage Trust): Cash payoff of Storage Trust s line of credit... $98,200 Cash other expenses of the merger... 7,039 Common Stock 13,009,485 shares ($26.69 per share) (A) ,223 Assumption of Storage Trust s senior notes ,000 Public Storage s preexisting investment in Storage Trust... 23,214 Total merger consideration... $575,676 Fair market value of the assets and liabilities acquired: Real estate facilities (B)... $598,577 Construction in process... 11,449 Investment in real estate entities interests in 2 properties Mortgage loans receivable... 6,739 Minority interest (1,011,963 OP units convertible into PSA shares) (C). (27,009) Other assets and liabilities... (14,436) Net assets acquired... $575,676 (A) Common stock was valued at the market price upon the merger announcement date. (B) Does not include an estimated $15 million that the Company will spend in the 18 month period following the merger in property improvements to the properties acquired in the merger. (C) 1,011,963 operating partnership units held by minority interests in Storage Trust s operating partnership were assumed in the merger. These operating partnership units are convertible on a one-for-one basis into common shares of Public Storage (subject to certain limitations) at the option of the OP unit holder. The OP unitholder s share of net income and funds from operations, respectively, are equal to that of the common shareholders, and are reflected on the income statement as minority interest in income, and distributions to minority interests for FFO purposes, respectively. All of the properties acquired in the merger are held in Storage Trust s operating partnership. Two properties are accounted for as properties that are held in unconsolidated entities, while the remaining properties are being held by the consolidated entities. Effective April 30, 1999, the Company disposed of six properties acquired in the merger with Storage Trust for an aggregate consideration of approximately $10.5 million and granted the acquiror an option to acquire, in January 2000, an additional eight properties acquired in the merger with Storage Trust for an aggregate of approximately $18.8 million. The Company is now leasing these eight properties to the acquiror. 6

9 VI. Investments in real estate entities: The Company s investments in real estate entities principally consists of its ownership interests in Unconsolidated entities summarized as follows: Summary of Investments At September 30, 1999 (Book Values) Investment in: PS Business Parks, Inc... $ 243,952,000 Development Joint Venture... 60,094,000 Other equity investments ,333,000 Book value at September 30, $ 440,379,000 VII. Notes Payable: At September 30, 1999, the Company had total outstanding notes payable of approximately $172 million. Approximate principal maturities of notes payable at September 30, 1999 are as follows: Unsecured Senior Notes Fixed Rate Mortgage Debt (Amounts in thousands) Total 1999 (remainder of)... $ 4,000 $ 924 $ 4, ,750 2,622 11, ,500 2,910 12, ,450 3,229 27, ,900 3,584 39,484 Thereafter... 59,400 16,683 76,083 $142,000 $ 29,952 $ 171,952 Weighted Average Rate 7.4% 10.3% 7.9% 7

10 VIII. Same Store Property Operations: In order to evaluate how the Company s overall portfolio has performed, management analyzes the operating performance of a consistent group of storage facilities representing 978 (57.2 million net rentable square feet) of the 1,323 storage facilities (herein referred to as the Same Store storage facilities). The 978 facilities represent a consistent pool of properties which have been operated under the Public Storage name, at a stabilized level, by the Company since January 1, From time to time, the Company removes facilities from the Same Store pool as a result of expansions or other activities which make such facilities results not comparable to previous periods. The Same Store group of properties includes 896 consolidated facilities and 82 facilities owned by Unconsolidated Entities. The following table summarizes the pre-depreciation historical operating results of the Same Store storage facilities: Same Store mini-warehouse facilities (978 facilities): (historical property operations) Three months ended September 30, Nine months ended September 30, Change Change (dollar amounts in thousands) Rental income... $ 140,494 $ 134, % $ 406,592 $ 388, % Cost of operations (includes an imputed 6% property management fee) (1)... 46,386 45, % 139, , % Net operating income... $ 94,108 $ 89, % $ 267,350 $ 253, % Gross profit margin (2) % 66.3% 0.7% 65.8% 65.2% 0.6% Weighted Average: Occupancy % 93.7% (0.3)% 92.7% 92.7% 0.0% Annualized Realized rent per occupied sq. ft. for period (3) $ $ % $ $ % Annualized Scheduled rent per sq. ft. for period (3)... $ $ % $ $ % 1. Assumes payment of property management fees on all facilities, including those facilities owned by the Company for which effective November 16, 1995 no fee is paid. 2. Gross profit margin is computed by dividing property net operating income (which excludes depreciation expense) by rental revenues. Cost of operations includes a 6% management fee. The gross profit margin excluding the property management fee was 73.0% and 72.3% for the three months ended September 30, 1999 and 1998, respectively; and 71.8% and 71.2% for the nine months ended September 30, 1999 and 1998, respectively. 3. Realized rent per square foot represents the actual revenue earned per occupied square foot during the period annualized. Management believes this is a more relevant measure than the scheduled rental rates, since scheduled rates can be discounted through the use of promotions. Rental income: For the three months: Includes discounts totaling $3.1 million in 1999 versus $3.6 in For the nine months: Includes discounts totaling $11.1 million in 1999 versus $11.9 in

11 IX. Results of PS Business Parks, Inc.: The following table summarizes the results of PS Business Parks, Inc.: For the three months ended For the nine months ended September 30, % September 30, % Change Change Income Statement Data: Total revenues $ 33,281,000 $ 26,277, % $ 93,780,000 $ 62,976, % Net income 10,655,000 9,748, % 30,352,000 21,124, % Weighted average shares outstanding: Basic 23,641,000 23,636, % 23,639,000 17,920, % Diluted 23,724,000 23,696, % 23,713,000 17,990, % Net income per share: Basic $ 0.40 $ 0.41 (2.4%) $ 1.19 $ % Diluted $ 0.40 $ 0.41 (2.4%) $ 1.19 $ % Funds from Operations: Funds from operations to common $ 14,709,000 $ 12,796, % $ 43,395,000 $ 28,604, % Weighted average shares 23,724,000 23,696, % 23,713,000 17,990, % Diluted FFO per Share $ 0.62 $ % $ 1.83 $ % Same Store Data (62 Properties): Average occupancy 96.7% 95.3% 1.4% 96.7% 94.4% 2.3% Realized rent per occupied square foot $ $ % $ $ % PSI's Ownership of PSBP: At December 31, % At September 30, % 9

12 X. Funds From Operations: Funds from Operations 2 have been in excess of actual distributions. Dividends per common share for these periods were less than corresponding Funds from Operations. As a result, the Company has been able to retain a portion of its Funds from Operations for reinvestment in its portfolio, debt reduction and general corporate purposes. For the nine months ended September 30, (in thousands) Net Income... $ 212,245 $ 167,849 Depreciation and amortization ,565 82,683 Less Depreciation with respect to non-real estate assets... (3,631) (3,055) Depreciation from equity investments... 14,405 9,902 Minority interest in income... 12,149 16,141 Total Consolidated FFO , ,520 FFO allocable to minority interests... (19,501) (25,565) FFO allocable to the Company's shareholders , ,955 Less: Preferred stock dividends (69,766) (59,322) FFO available to common shareholders , ,633 Capital improvements to maintain facilities... (18,158) (19,257) Add back: minority interest share of capital improvements to maintain facilities ,582 Funds available for principal payments on debt, common dividends and reinvestment , ,958 Cash distributions to common shareholders... (85,096) (75,270) Funds available for principal payments on debt and reinvestment... $ 145,100 $ 95,688 2 Funds from Operations ( FFO ) is a NAREIT defined term by which REITs may be compared. It is defined as net income before depreciation and extraordinary items. FFO computations do not factor out the REIT s requirements to make either capital improvements or principal payments on debt. 10

13 The following table calculates FFO per share: For the nine months ended September 30, (in thousands, except per share data) Net Income... $ 212,245 $ 167,849 Depreciation and amortization ,565 82,683 Less Depreciation with respect to non-real estate assets... (3,631) (3,055) Depreciation from equity investments... 14,405 9,902 Minority interest in income... 12,149 16,141 Total Consolidated FFO , ,520 FFO allocable to minority interests... (19,501) (25,565) FFO allocable to the Company's shareholders , ,955 Less: preferred stock dividends... (69,766) (59,322) FFO available to common sharholders , ,633 Adjust for effects of dilutive preferred stock: 8.25% Convertible preferred dividends ,163 Adjusted FFO for fully-diluted purposes... $ 247,466 $ 190,796 Determination of Fully-diluted shares: Diluted weighted average shares of common stock (FAS 128 definition) , ,762 Add: Weighted average shares assuming conversion of the 8.25% Convertible Preferred Stock ,357 Weighted average common shares - fully-diluted , ,119 Fully-diluted FFO per common share... $1.97 $1.64 Contractual FFO per common share (A)... $1.86 $1.55 (A) Contractual FFO per common share reflects the assumed conversion of all convertible preferred stock and the Class B common stock. Contractual FFO per common share is used as a measure in determining timing as to when the Class B common stock will begin to participate in dividends and the timing of their conversion into the Company s common stock. Fully-diluted FFO per Common Share $2.50 $2.00 $ $2.24 $1.00 $0.50 $0.60 $0.49 $0.67 $0.70 $0.55 $0.60 $0.60 $- 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Quarterly Incr. 22.4% 21.8% 16.7% YTD increase 22.4% 22.1% 20.1% 11

14 XI. Development Activities: Since the Company began to develop facilities in 1995 it has opened 50 mini-warehouse facilities (including 41 mini-warehouse facilities belonging to the Development Joint Venture) through September 30, At September 30, 1999, the Company had 29 mini-warehouse facilities (including 5 facilities belonging to the Development Joint Venture) under construction. SUMMARY OF COMPLETED DEVELOPMENT FACILITIES Net Rentable Total Date Opened Location (State) Sq. Ft. Development Cost (amounts in thousands) Public Storage Inc. 08/12/95 Georgia 64 $ 4,245 03/08/96 Georgia 66 4,550 07/22/96 Colorado 54 2,835 08/13/96 Georgia 59 4,073 12/05/96 California 65 3,650 01/22/97 Texas 64 3,889 05/12/97 Louisiana 54 4,098 05/22/99 Texas 62 3,652 07/03/99 New Jersey 73 6,610 Total Public Storage Inc. (9 properties) ,602 Development Joint Venture 03/12/97 Florida 56 3,506 04/23/97 Texas 60 3,867 05/31/97 New Jersey 62 4,491 06/02/97 Hawaii 88 18,117 07/25/97 Florida 42 3,238 12/16/97 Illinois 61 3,205 12/24/97 New York 65 4,367 01/20/98 Colorado 50 2,348 03/02/98 Missouri 64 3,699 03/09/98 Maryland 55 3,999 03/14/98 Texas 54 5,715 04/28/98 Alabama 64 4,360 06/22/98 California 61 6,425 06/22/98 Maryland 65 4,485 06/25/98 Illinois 65 5,170 07/22/98 Tennessee 59 3,318 07/27/98 Washington 57 4,166 07/28/98 California 50 4,283 08/17/98 Hawaii 50 10,526 08/24/98 Florida 43 2,951 09/24/98 Illinois 67 4,116 10/02/98 Florida 66 4,377 11/04/98 Maryland 70 5,031 12/09/98 Arizona 64 3,420 12/22/98 Washington 68 4,067 12/23/98 Louisiana 67 4,003 01/08/99 New York 59 4,774 01/29/99 Florida 67 4,226 03/06/99 California 65 10,534 04/30/99 Tennessee 61 3,195 06/09/99 California 65 5,162 07/05/99 Illinois 56 2,781 07/07/99 California 71 5,553 07/30/99 Illinois 65 2,938 08/11/99 California 59 5,417 08/23/99 California 57 3,206 08/24/99 Illinois 66 2,884 08/25/99 North Carolina 42 3,991 08/28/99 California 39 3,676 09/08/99 Illinois 67 4,120 09/16/99 Arizona 64 3,416 Total Development Joint Venture (41 properties) 2, ,123 3,037 $ 230,725 Performance of Developed Facilities: The 11 facilities (670,000 net rentable square feet) which have been opened by the joint venture or the Company between January 1, 1996 and September 30, 1997 (and therefore open at least two years at September 30, 1999) have 12

15 average occupancies of approximately 88.6% at September 30, The 36 facilities (2,172,000 net rentable square feet) which opened between October 1, 1997 and September 1, 1999 have been open an average of 10 months, and have average occupancies of approximately 58.1% at September 30, Construction in Process: PUBLIC STORAGE DEVELOPMENT SUMMARY # of Properties Total Estimated Development Costs Costs Incurred through 9/30/99 (Amounts in thousands) Expansion project of existing storage facilities 10 $ 25,035 $ 12,687 Pending transfer to PSAF Development, LP 1 4,962 4,686 Other mini-warehouses - Internal or subsequent Joint Venture , ,109 Projects to be developed: Expansion project of existing storage facilities 8 23, Other mini-warehouses - Internal or subsequent Joint ,311 20,468 Venture Total miniwarehouse development 79 $ 373,208 $ 138,531 The amounts above do not include costs of the projects transferred to the development joint venture, since the joint venture is not consolidated by the Company. Development Pipeline: Excluding the projects that are being reviewed by the Development Joint Venture or are currently being developed by the Development Joint Venture, the Company has plans to develop a total of 60 additional storage facilities. Total estimated costs of construction are approximately $320 million, and completions are expected over approximately the next 18 to 24 months. This development is composed of the 37 projects that are in process and the 23 projects to be developed noted in the tables above. The Company will fund this development either through a second development joint venture, or alone through a combination of retained cash flow, borrowings on the Company s line of credit, or the private or public placement of equity securities. DEVELOPMENT JOINT VENTURE SUMMARY # of Propertie s Net Rentable Sq. Ft. Total Estimated Development Costs (Amounts in thousands) Costs Incurred through 9/30/99 Completed Projects 41 2, , ,123 Construction In Progress ,834 19,214 Approved by PSAF Development, LP 46 2, , ,337 Pending approval by and transfer to Joint Venture Completed Projects ,610 6,610 Construction In Progress ,962 4,686 Total pending approval and transfer ,572 11,296 Total approved and pending approval 48 2, , ,633 (A) (A) The total costs of projects approved and pending approval is estimated at $234 million. The amount funded by the Joint Venture is reduced to more closely approximate the $220 million commitment. In April 1997, the Company formed a joint venture partnership with an unaffiliated partner for the development of approximately $220 million of self-storage facilities. At September 30, 1999, the joint venture was committed to develop 46 facilities with an estimated development cost of $221,957,000, of which 41 facilities were completed with an aggregate cost of $193,123,000. The Company has submitted 2 additional facilities for approval with total estimated costs of $11,572,000; the Company has incurred $11,296,000 through September 30, 1999 with respect to these 2 projects. The venture is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Company s investment in the Joint Venture s real estate facilities at September 30, 1999 is thus 30% of the costs incurred at September 30, 1999 ($212,337,000), or $63,701,

16 XII. Financial Ratios: The following illustrates the Company's composition of equity as of September 30, 1999: Composition of Total Capitalization At September 30, 1999 (based on Book values) Senior Pref. 29% Debt 4% Common 67% Composition of Total Capitalization At September 30, 1999 (based on Market values) Senior Pref. 24% Debt 4% Common 72% 14

17 9/30/99 9/30/98 Fixed Charge Coverage Ratio 4.10x 3.85x Debt to Total Equity (book) 4.53% 2.76% Debt and Total Preferred Stock to Total Capitalization (book) 33.43% 29.98% Market Capitalization: Shares 9/30/99 Price Total value (in 000 s) Publicly Traded: Common stock 128,925,283 $25.19 $3,247,600 Senior Preferred 46,206,000 $ ,155,200 Total for public 4,402,800 Non-public: Class B common stock 7,000,000 $ ,000 OP Units 770,892 $ ,400 Total for non-public 159,400 Total Estimated Market Cap $4,562,200 15

18 Nine months Ended September 30, For the year ended December 31, XIII. Ratio of Funds from Operations ( FFO ) to fixed charges: FFO $ 317,232 $ 247,955 $ 336,363 $ 272,234 $ 224,476 $ 105,199 Interest expense 5,870 2,926 4,507 6,792 8,482 8,508 Adjusted FFO available to cover fixed charges $ 323,102 $ 250,881 $ 340,870 $ 279,026 $ 232,958 $ 113,707 Total Fixed Charges - Interest expense (A) $ 9,101 $ 6,203 $ 7,988 $ 9,220 $ 10,343 $ 8,815 Total Preferred Stock dividends $ 69,766 $ 59,322 $ 78,375 $ 88,393 $ 68,599 $ 31,124 Total Combined Fixed Charges and Preferred Stock dividends $ 78,867 $ 65,525 $ 86,363 $ 97,613 $ 78,942 $ 39,939 Ratio of FFO to Fixed Charges 35.50x 40.45x 42.67x 30.26x 22.52x 12.90x Ratio of FFO to Combined Fixed Charges and Preferred Stock dividends 4.10x 3.83x 3.95x 2.86x 2.95x 2.85x Ratio of FFO to Combined Fixed Charges and Preferred Stock dividends (B) 3.31x (A) Includes interest expense plus capitalized interest. (B) Supplemental ratio after elimination of $13,412,000 non-recurring special dividend on Series CC Preferred Stock. 16