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14
As a result of our ownership of 49% of the international operations of Shurgard Europe with a book value of
$264.7 million at December 31, 2010, and our loan to Shurgard Europe aggregating $495.2 million at
December 31, 2010, we are exposed to additional risks related to international businesses that may adversely
impact our business and financial results.
We have limited experience in European operations, which may adversely impact our ability to operate
profitably in Europe. In addition, European operations have specific inherent risks, including without limitation the
following:
currency risks, including currency fluctuations, which can impact the fair value of our $264.7 million
book value equity investment in Shurgard Europe, as well as interest payments and the net proceeds to
be received upon repayment of our loan to Shurgard Europe;
unexpected changes in legislative and regulatory requirements,
potentially adverse tax burdens;
burdens of complying with different permitting standards, environmental and labor laws and a wide
variety of foreign laws;
the potential impact of collective bargaining;
obstacles to the repatriation of earnings and cash;
regional, national and local political uncertainty;
economic slowdown and/or downturn in foreign markets;
difficulties in staffing and managing international operations;
reduced protection for intellectual property in some countries;
inability to effectively control less than wholly-owned partnerships and joint ventures; and
the importance of local senior management and the potential negative ramifications of the departure of
key executives.
Based upon current market conditions and recent operating result trends of Shurgard Europe, the following
specific risks apply with respect to our investment in, and loan to, Shurgard Europe:
Joint ventures that Shurgard Europe has a 20% interest in have significant refinancing requirements.
6KXUJDUG (XURSH¶V WZR MRLQW YHQWXUHV FROOHFWLYHO\ KDG DSSUR[LPDWHO\ ¼06 million ($273 million) of
outstanding debt payable to third parties at December 31, 2010. These loans are secured by the joint
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SDUW\2QHRIWKHMRLQWYHQWXUHORDQVWRWDOLQJ¼95 million ($126 million), is due May 2011, with a right to
H[WHQGRQH\HDUDQGWKHRWKHUMRLQWYHQWXUHORDQWRWDOLQJ¼PLOOLRQ million), is due in July 2013.
If 6KXUJDUG(XURSH¶VMRLQWYHQWXUHVZHUHXQDEOHWRUHILQDQFHRURWKHUZLVHUHSD\WKHVHORDQVZKHQGXHLWLV
our expectation that the loans would be repaid with each joint venture partner contributing their pro rata
VKDUH WRZDUGV UHSD\PHQW  6KXUJDUG (XURSH¶V SUR UDWD VKDUH LQ WKH DJJUHJDWH ZRXOG EH DSSUR[LPDWHO\
¼41 million ($55 million), which Shurgard Europe would be required to fund either from available cash on
hand or equity contributions from Public Storage and our joint venture partner. Further, it is also possible
WKDW6KXUJDUG(XURSH¶VMRLQWYHQWXUHSDUWQHUZRXOGEHXQDEOHWRFRQWULEXWHLWVSURUDWDVKDUHWRUHSD\WKH