Shurgard Storage Centers rolled out a loss for the second quarter yesterday, due in part to rising expenses, while executives insisted it...

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Shurgard Storage Centers rolled out a loss for the second quarter yesterday, due in part to rising expenses, while executives insisted it is “not for sale” and again rejected a $2.3 billion buyout offer by rival Public Storage.

But Chief Executive Charles Barbo was taken to task by an investor who asked if that statement meant the Seattle-based self-storage company would rebuff all suitors, since the Public Storage offer has essentially put Shurgard in play.

“What is it that you’re telling the world?” asked David O’Connor, president of High Rise Capital Management, a New York money-management firm that owns 2 million Shurgard shares. “If they offered $1,000 per share, the company is not for sale?”

Barbo said Shurgard’s board of directors carefully considered Public Storage’s offer, as it would any approach.

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But the offer of 0.8 Public Storage share for each Shurgard share is too low, he said. It currently values Shurgard stock at $49.28 a share, below yesterday’s closing price of $51.24.

When Public Storage announced its offer July 29, it carried a 14 percent premium to Shurgard’s stock price.

Barbo criticized the offer on several fronts. It comes when Shurgard stock is more cheaply priced relative to Public Storage than ever before, he said. The transaction would reduce dividends for Shurgard shareholders, and it would require them to shoulder all of the tax burden of the transaction.

“Now is not the right time to sell; this is not the right deal,” Barbo said.

But others say the divergence in the two companies’ share prices is proof that Shurgard should be acquired, because it has failed to deliver returns for shareholders.

In the latest quarter, Shurgard posted a loss of $693,000, compared with a $20.8 million profit a year ago. It said $5.2 million in non-cash losses from foreign-currency exchange and derivatives were primarily responsible for the red ink, and that the charge wasn’t likely to be repeated.

But costs also were at issue. Shurgard expenses rose by $15.5 million, to $95.685 million in the quarter. That eclipsed a $15.3 million increase in revenue, to $119.7 million.

Public Storage, based in Glendale, Calif., has said its offer would lower overhead expenses and create scope for further cost savings. A combination would create a company with more than 2,000 properties in the U.S. and Europe, many in fast-growing California and Florida areas.

Analysts asked Shurgard yesterday whether that logic made sense. But Shurgard President David Grant said Shurgard’s own strategy would achieve savings, too.

“What’s clearly not appropriate is to cede [to Public Storage] the … synergies we can achieve on our own,” he said.

Grant acknowledged “a bit of a rocky road” as Shurgard installed a global accounting system, hired staff and made everything compliant with Sarbanes-Oxley corporate-governance regulations.

He said progress on those tasks “gives me the confidence that we will be able to bring these costs down” in coming quarters.

Alwyn Scott: 206-464-3329 or

Shurgard Storage
Dollar figures in thousands, except per share; parentheses denote losses.
June 30 %
2nd QTR 2005 2004 CHG
Profit $(693) $20,807 N/A
Per share (0.08) 0.12 N/A
Revenue 119,734 104,411 +14.7
1st half 2005 2004 CHG
Profit 4,563 20,502 -77.7
Per share (0.03) 0.31 N/A
Revenue 233,598 203,719 +14.7