SEATTLE-Shurgard Storage Centers' fourth quarter FFO fell 5% in part due to increased costs related to debt. The self-storage real estate investment trust reported fourth quarter funds from operations of $23.9 million, or $0.50 a share, compared with $25.2 million, or $0.53 a share, in the year-ago period. Analysts' average estimate ranged from $0.47 to $0.51 depending on the source. For all of 2005, FFO was $68.5 million, or $1.44 per share, compared to $96.3 million, or $2.07 per share, for 2004. The average analyst estimate for the year was $1.76.

Shurgard's share price has been elastic since the start of March, when its closing stock price was $63.70. On March 8, the day after it announced a $3.2-billion merger agreement with Public Storage, the company's share price rose 4.3% from $62.60 to $65.32 and continued to rise for the next week, topping out at $68.06 on March 15. Today, following the earnings news, shares are trading off $0.54 (0.8%) at $66.05.

Shurgard says Q4 FFO benefited from a 110% increase in income from operations compared to the fourth quarter of 2004. However, the increase was negated by increases in net interest of $9.1 million due to higher borrowings and interest rates and fluctuations in foreign currency exchange rates and derivatives.

Shurgard operates 646 storage centers with 40.5 million net rentable sf. The company opened nine storage centers during the quarter, eight of which were in Europe. During the year, the company added 27 storage centers, of 17 were developed and 10 were acquired. Of the developed properties, 14 were in Europe and three were in the US. All of the acquired centers were in the US.

In the fourth quarter of 2005 the company's investment in new stores increased to $604 million, or 19% of the total portfolio, representing 4% of the company's NOI after indirect and leasehold expenses in the same period. As of Dec, 31, 2005, the company had 15 new storage centers under construction or pending construction (10 in the US and five in Europe) for an estimated total cost to completion of $107.9 million.

Same store revenue for the fourth quarter 2005 increased by $8.7 million (or 8.6%) to $109.4 million from $100.8 million, and net operating income (NOI) after indirect and leasehold expenses increased by $7.5 million (or 13.5%) to $63 million from $55.5 million. For the year, Same Store revenue increased 7.8% and combined same store NOI after indirect and leasehold expenses increased by 8.4%.

In the US, the company's same store segment generated a 7.1% increase in revenue and a 7.8% increase in NOI after leasehold and indirect expenses in the fourth quarter. The growth is attributed primarily to a 5.2% increase in average rental rate. For the year, domestic same store revenue and NOI after leasehold and indirect expenses increased 6.4% and 5.0% respectively.

At constant exchange rates, the European same store segment in the fourth quarter of 2005 generated a 14% increase in revenue and a 41.9% increase in NOI after leasehold and indirect expenses. For 2005, annual revenue and NOI after leasehold and indirect expenses grew 12.5% and 26.6%, respectively. Average same store occupancy in the fourth quarter of 2005 increased to 83% from 74%

.