Segment Information

6 Months Ended

Jun. 30, 2020

11.Segment Information

Our reportable segments reflect the significant components of our operations where discrete financial information is evaluated separately by our chief operating decision maker (“CODM”). We organize our segments based primarily upon the nature of the underlying products and services, as well as the drivers of profitability growth. The net income for each reportable segment included in the tables below are in conformity with GAAP and our significant accounting policies as denoted in Note 2. The amounts not attributable to reportable segments are aggregated under “other items not allocated to segments.”

Following is a description of and basis for presentation for each of our reportable segments.

Self-Storage Operations

The Self-Storage Operations segment reflects the rental operations from all self-storage facilities we own. Our CODM reviews the net operating income (“NOI”) of this segment, which represents the related revenues less cost of operations (prior to depreciation expense), in assessing performance and making resource allocation decisions. The presentation in the tables below sets forth the NOI of this segment, as well as the depreciation expense for this segment, which while reviewed by our CODM and included in net income, is not considered by the CODM in assessing performance and decision making. For all periods presented, substantially all of our real estate facilities, goodwill and other intangible assets, other assets, and accrued and other liabilities are associated with the Self-Storage Operations segment.

Ancillary Operations

The Ancillary Operations segment reflects the sale of merchandise and reinsurance of policies against losses to goods stored by our self-storage tenants, activities which are incidental to our primary self-storage rental

activities. Our CODM reviews the NOI of these operations in assessing performance and making resource allocation decisions.

Investment in PSB

This segment represents our approximate 42% equity interest in PSB, a publicly-traded REIT that owns, operates, acquires and develops commercial properties, primarily multi-tenant flex, office, and industrial space. PSB has a separate management team and board of directors that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in PSB, the CODM reviews PSB’s net income, which is detailed in PSB’s periodic filings with the SEC. The segment presentation in the tables below includes our equity earnings from PSB.

Investment in Shurgard

This segment represents our approximate 35% equity interest in Shurgard, a publicly held company which owns and operates self-storage facilities located in seven countries in Western Europe. Shurgard has a separate management team and board of trustees that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in Shurgard, the CODM reviews Shurgard’s net income. The segment presentation below includes our equity earnings from Shurgard.

Presentation of Segment Information

The following table reconciles NOI (as applicable) and net income of each segment to our consolidated net income (amounts in thousands):

‎


		Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
		(amounts in thousands)
Self-Storage Segment
Revenue	$	664,542	$	669,339	$	1,338,743	$	1,319,747
Cost of operations		(213,825)		(196,083)		(421,750)		(389,739)
Net operating income		450,717		473,256		916,993		930,008
Depreciation and amortization		(137,618)		(126,859)		(273,518)		(248,800)
Net income		313,099		346,397		643,475		681,208

Ancillary Segment
Revenue		44,743		41,611		86,624		80,241
Cost of operations		(11,782)		(11,653)		(22,727)		(22,198)
Net operating income		32,961		29,958		63,897		58,043

Investment in PSB Segment (a) - Equity in earnings of unconsolidated entities		13,228		14,864		34,965		28,584

Investment in Shurgard Segment (a) - Equity in earnings of unconsolidated entities		4,427		4,050		6,658		8,002

Total net income allocated to segments		363,715		395,269		748,995		775,837

Other items not allocated to segments:
General and administrative		(20,294)		(15,264)		(41,358)		(34,767)
Interest and other income		5,831		8,582		12,310		15,547
Interest expense		(14,145)		(12,254)		(27,766)		(20,397)
Foreign currency exchange (loss) gain		(19,295)		(5,218)		(10,350)		2,573
Gain on sale of real estate		-		341		1,117		341
Net income	$	315,812	$	371,456	$	682,948	$	739,134

(a) See Note 4 for a reconciliation of these amounts to our total Equity in Earnings of Unconsolidated Real Estate Entities on our income statements.