Public Storage 2003 Annual Report Download - page 19

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9
Issuance of securities in exchange for property: The Company has issued common equity in exchange
for real estate and other investments in the last three years. Future issuances will be dependent upon market
conditions at the time, including the market prices of our equity securities.
Development Joint Venture Financing: The Company has entered into two separate development joint
venture partnerships since 1997 in order to provide development financing.
In November 1999, we formed PSAC Development Partners, L.P., (the Consolidated Development Joint
Venture) with a joint venture partner (PSAC Storage Investors, LLC) whose partners include a third party
institutional investor, owning approximately 35%, and Mr. Hughes, owning approximately 65%, to develop
approximately $100 million of storage facilities. At December 31, 2003, PSAC Development Partners, L.P. had
completed construction on 22 storage facilities with a total cost of approximately $108.6 million. We expect that
this second joint venture partnership will receive no additional capital funding to develop any additional facilities.
PSAC Development Partners, L.P. is funded solely with equity capital consisting of 51% from the
Company and 49% from PSAC Storage Investors, LLC. The term of the Consolidated Development Joint Venture
is 15 years; however, during the sixth year PSAC Storage Investors, LLC has the right to cause an early
termination of PSAC Development Partners, L.P. If PSAC Storage Investors, LLC exercises this right, we then
have the option, but not the obligation, to acquire their interest for an amount that will allow them to receive an
annual return of 10.75%. If the Company does not exercise its option to acquire PSAC Storage Investors, LLCs
interest, PSAC Development Partners, L.P.s assets will be sold to third parties and the proceeds distributed to the
Company and PSAC Storage Investors, LLC in accordance with the partnership agreement. If PSAC Storage
Investors, LLC does not exercise its right to early termination during the sixth year, the partnership will be
liquidated 15 years after its formation with the assets sold to third parties and the proceeds distributed to the
Company and PSAC Storage Investors, LLC in accordance with the partnership agreement.
PSAC Storage Investors, LLC provides Mr. Hughes with a fixed yield of approximately 8.0% per annum
on his preferred non-voting interest (representing an investment of approximately $64.1 million at December 31,
2003). In addition, Mr. Hughes can receive up to 1% of cash flow of the Partnership (estimated to be less than
$50,000 per year) if PSAC Storage Investors, LLC elects an early termination. If PSAC Storage Investors, LLC
does not elect to cause an early termination, Mr. Hughes 1% interest can increase to up to 10%.
Disposition of properties: During 2003, the Company sold certain self-storage facilities, which were
located in non-strategic markets and locations, for an aggregate of approximately $21.0 million. The Company
used the proceeds from these sales as a source of funding for developments and third-party acquisitions. The
Company continually reviews its portfolio for facilities that are not strategically located and determines the proper
method of disposition of these facilities.
See Managements Discussion and Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources.
Investments in Real Estate and Real Estate Entities
Investment Policies and Practices with respect to our investments: Following are our investment
practices and policies which, though we do not anticipate any significant alteration, can be changed by the Board of
Directors without a shareholder vote:
• Our investments primarily consist of direct ownership of self-storage properties (the nature of our self-
storage properties is described in Item 2, Properties), as well as partial interests in entities that own
self-storage properties, which are located in the United States.
• Our investments are acquired both for income and for capital gain.