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REDMOND, WA-The week before last, Shurgard Storage Centers Inc. postponed the release of its third quarter earnings pending a review of its auditors’ recommendation to restate earnings from 1998 through the first half of 2001. Reviews now complete, the self-storage REIT said Friday it will, in fact, restate 3-1/2 years’ of financial results, but not just yet.

Shurgard’s management says before issuing any restatement, it will first consult the Securities and Exchange Commission regarding the proposed changes. Charles K. Barbo, Shurgard’s Chairman and CEO says, “The accounting treatment of the development joint ventures is a complex, highly technical matter, and we believe it is prudent to consult with the SEC to assure that our proposed accounting treatment is appropriate.”

In both its written statement and analysts’ call held Friday, Shurgard confirmed that three of the four joint ventures lying at the crux of the issue will be impacted by the revised accounting. Those three JV’s are now fully owned by the Redmond-headquartered company.

While Shurgard says it believes the restatement “will have no material impact on Same Store net operating income, revenues, cash flows, dividends or fair value of assets,” it does believe it will result in “a material adverse impact on the previously reported net income.”

Simultaneously, Shurgard announced that its Same Store (SS) Net Operating Income, after direct and leasehold expense, increased 5.9% over the third quarter of 2000. Same Store revenue for third quarter 2001 was up 4.5% percent over third quarter 2000. The company further reports that direct operating and real estate tax expense for the SS group increased 2.9%, and indirect operating expenses decreased 3.4% during the third quarter compared with the same period last year.

The average of SS collected rental rates rose 4.6%, from $10.97/sf in 3Q00 to $11.47/sf in 3Q01. The average SS occupancy for the third quarter was 88.3%, in 2001 compared to 88.8% 2000.

As for the coming year, Barbo says, “Through calendar year 2002, we expect Same Store growth consistent with our third quarter performance of 5 to 7 percent.” The statement says direct operating and real estate tax expense for the SS group was up 2.9%, with indirect operating expenses.

Going forward, Shurgard expects its rate of FFO growth “will accelerate through 2002 due to operating performance of newly-acquired stores and moderation of expense growth.” The company says FFO is one element of its financial reporting that will be affected by the restatement, but no specifics are being released at this time.

In addressing the nine months ended September 30 2001, Shurgard says SS NOI–after indirect and leasehold expense—increased to $102.6 million, up 9.4% from the $93.8 million recorded in the same period of 2000. Same Store revenue for the nine month year-over-year comparison period increased 7.2%. Same Store direct operating expenses moved up 4.9%, and SS indirect operating expenses dropped 3.0% during the first nine months of 2001—as compared with the same period last year. Average SS rental rates for the first nine months climbed from $10.75 in 2000 to $11.35 in 2001–a 5.6% increase. Average Same Store occupancy also increased from 86% to 87% during the same comparison period.

When Shurgard announced the issue of restatement on the 8th, its stock dipped by 4.9%, or $1.50, from $30.76 to $29.26, and it was downgraded by A.G. Edwards from a Hold to a Sell recommendation—and its shares dipped by. However, by the close of trading on the 16th, the stock was up to $30.68—up $0.31 for the day.

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