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SEATTLE-Shurgard Storage Centers Inc. is reporting a 25% drop in net income for the second quarter of 2003, in part due to increased investment in development assets in the United States and Europe.

Net Income during the second quarter 2003 was $10.5 million, or $0.21 per share, compared to $14.1 million, or $0.29 per share for the second quarter 2002. In addition to the increased development costs, Shurgard cites a non-recurring impairment charge of $1.7 million for a property in Texas as reason for the decrease.

Funds from operations for the second quarter 2003 rose 12.4% to approximately $23.6 million from $21.0 million in the second quarter of 2002. On a diluted per share basis, FFO increased 3.2% from $0.62 for the second quarter 2002 to $0.64 per share in the second quarter 2003. Same-store net operating income after leasehold and indirect expenses was $39.9 million in the second quarter 2003, an increase of 0.4% compared to $39.7 million in the second quarter 2002.

Comparing the first half of 2003 to the first half of 2002: same-store NOI decreased 0.4% to $77.5 million; diluted FFO per share increased 4.8% to $1.31; and net income decreased 10.6% to $24.6 million.

During the quarter Shurgard spent $101.6 million to increase its stake in Shurgard Europe–which saw same-store NOI growth of 8.6% in the second quarter–from 60.7% to 80.6%. It also spent three million shares to acquire 19 locations in Minnesota, opened seven new stores (four in Europe), and had 26 more under construction (15 in Europe). As of June 30, Shurgard operated 591 properties–491 in the United States and 100 in Europe.

Looking ahead, the Company expects FFO for the year to be within the range of $2.60 to $2.68 per share, representing an increase of approximately 3.2% to 7.1% compared with 2002. The numbers assume same-store NOI growth between 0% and 2%. Net income for the year is projected to be within the range of $.96 to $1.06 per share, representing a decrease of between 10.1% and 18.6%.

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