APM are defined by the European Securities and Markets Authority (‘ESMA’) as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified by IFRS, as adopted by the EU.
Same Store and Non-Same Store
The Group’s most important APM, as also apparent from the segment reporting, relates to Same Store and Non-Same Stores. Shurgard classify as “Same Stores” (i) all developed stores that have been in operation for at least three full years, and (ii) all acquired stores that we have owned for at least one full year, each measured as of January 1 of the relevant year. Any stores that are not classified as Same Stores for a given year are presented as “Non-Same Stores”, comprising (i) all developed stores that have been in operation for less than three full years (“New Stores”) and (ii) acquired stores that we have owned for less than one full year (“Acquired Stores”), each measured as of January 1 of the relevant year.
As a result, on a year-to-year basis, the size of our Same Store network changes based on the reclassification of stores from Non-Same Stores to Same Stores following the time periods described in the prior paragraph. Under some circumstances, for purposes of these full-year metrics, this results in significant changes in financial and operational metrics presented on a segmental basis from year to year.
In line with common practice in self-storage and other industries (e.g. retail), Same Store information is a crucial factor to assess the performance of the organic business, while providing at the same time information on the expansion activities of the Group. For this reason, the Chief Operating Decision Maker (“CODM”) reviews the performance of the Group based on this distinction (see also note on Segment Reporting in the Annual Report) and Same Store information represents part of the numeration for senior management, as can be seen in the renumeration report included in the Annual report.
Income from Property (“NOI”)
NOI is calculated as “Property operating revenue” (A) less “Real estate operating expenses” (B) for the relevant period and can be reconciled to the closest line item in the financial statements as follow:
NOI measures the financial performance of our properties. It focusses on property operating revenue (generated through the lease of storage units and related activities, including insurance referrals and the sale of storage products and packaging) less real estate operating expense. As such it is a key performance indicator of the performance of the Group’s core operating activity.
The Group’s CODM periodically receives and reviews NOI when making capital allocation and operating decisions. Further, NOI represents a crucial input in the valuation of the Group’s investment property.
The NOI margin is calculated as Income from property (“NOI”) divided by Property operating revenue for the relevant period and measures the operational performance and efficiencies of our properties as it shows in percentage how much property operating revenue remains after deduction of the real estate operating expense. As with all ratios, it also allows easier comparison within our industry, as it eliminates the need for size or currency adjustments.
Net (financial) debt
Net debt represents our long-term and short-term interest-bearing loans and borrowings, including lease obligations and excluding debt issuance costs, less cash and cash equivalents. This liquidity metric is used to evaluate the Group’s capability of repaying all its debts, were they due immediately.
LTV, which stands for loan-to-value, represents the Groups Net Debt divided by the fair value of investment properties, expressed as a percentage and is a commonly used leverage KPI in the real estate industry. The calculation can be found in Note 36 to the Annual Report. The Group reviews its capital structure based on this metric with the primary objective to ensure that it complies with its debt covenants and to maintain a target loan-to-value ratio below 35%.
Operating profit before property related adjustments
This is a commonly reported KPI by real estate companies. We believe that this subtotal provides improved structure to the profit and loss information and enables investors to better analyse and compare our earnings with those of other companies.
Earnings Before Interest, Depreciation and Amortisation (EBITDA)
EBITDA, which represents reported operating earnings before interest, tax, depreciation and amortisation, excluding (i) valuation gains from investment property and investment property under construction and (ii) losses or gains on disposal of investment property, plant and equipment and assets held for sale.
Constant Exchange Rate (“CER”)
Certain of the above-mentioned non-GAAP measures, such as EBITDA, are also presented at constant exchange rate (CER) vs actual exchange rate (AER), in order to highlight the underlying operating performance vs. the impact of changes in exchange rate on the particular KPI.
In addition to the above, the Group mainly uses alternative performance measures that are issued and defined by EPRA with the aim to align the various accounting and reporting methodologies for the public real estate sector in Europe in order to increase the overall transparency of the sector by providing performance measures that result meaningful information for the readers of the financial statements.
The EPRA KPIs used by Shurgard are based on the EPRA best practice guidelines dates October 2019.