Public Storage has rough quarter

Glendale-based Public Storage Inc. this week attributed losses on the foreign currency exchange to a nearly $75-million decrease in net income during the second quarter of 2010.

Public Storage reported income of $131 million in the second quarter, compared with $205 million in the same period last year. Shifts on the currency exchange are linked to the company’s 2006 acquisition of Shurgard Storage and Shurgard Europe, and a loan made in euros from Public Storage to Shurgard Europe.

While losses on the exchange accounted for $49.2 million of the decline this quarter, the firm earned more than $33 million on the exchange rate between the dollar and the euro in the same quarter a year ago.

In a call with investors Friday, company officials said same-store revenues were down slightly in the quarter because of lower return per square foot, driven by discounted prices or special offers to new customers. That was nearly balanced by an increase in occupancy.

Public Storage Chief Executive Ronald Havner said occupancy grew toward the end of the quarter and reached nearly 92% in July.

But the Los Angeles area, one of Public Storage’s strongholds, was a soft spot, with occupancy rates dropping 2%, Havner said. Business was stronger in Europe and in the Northeast corridor cities, including Baltimore and New York, he added.

George Van Horn, an industry analyst with L.A.-based economic research firm IBISWorld USA, said Public Storage is the dominant player in the U.S. market, with about 24% of the overall market share.

He said the quarterly results were disappointing, but show increased stability for the company and the sector.

“The market is becoming a little more in balance as far as filling up space,” Van Horn said.

But because of a drop in rental income and discounts for new customers, he said, “that doesn’t help profitability. It actually puts a strain on profitability.”

In the last six months, Public Storage was aggressive in acquiring competitors, including a $189-million transaction in April that added 30 locations, including 28 in Los Angeles, to the company’s portfolio.

Havner said the firm would continue to look to acquire properties, including from lenders trying to shed sites in foreclosure.

“We’re a buyer,” he said.

Public Storage employs about 320 people at its corporate headquarters and call center on Western Avenue in Glendale.