Public Storage 1997 Annual Report Download - page 30

28
Public Storage, Inc. 1997 Annual Report
Due to the start-up nature of the new business venture, PSPUD generated operating losses which materially impacted the Company’s
earnings in 1997 and is expected to continue to generate losses during 1998. The Company, however, continues to believe that it should
invest in PSPUD, which responds to a promising business opportunity in at least certain markets and complements the Company’s existing
self-storage operations through joint use of a national telephone reservation system and a coordinated media advertising program designed
to increase consumer awareness and rental activity of both traditional self-storage facilities and portable self-storage.
One of the keys to the successful operation of self-storage and portable self-storage businesses has been and will continue to be the
national telephone reservation system. Commencing in early 1996, the Company implemented a national telephone reservation system
designed to provide added customer service. Customers calling either the Company’s toll-free telephone referral system, (800) 44-STORE, or
a self-storage facility are directed to the national reservation system where a representative discusses with the customer space requirements,
price and location preferences and also informs the customer of other products and services provided by the Company and its subsidiaries.
The national telephone reservation system was not fully operational for most of the Company’s facilities until the latter part of the fourth
quarter of 1996. Currently, the national telephone reservation system receives approximately 160,000 calls per month and has approximately
200 representatives. The Company believes that the national telephone reservation system permits effective marketing for both self-storage
and portable self-storage facilities and is primarily responsible for increasing occupancy levels and realized rental rates experienced at the
self-storage facilities during 1997 compared to the same period in the prior year.
The Company will continue to focus its growth strategies on: (i) improving the operating performance of its existing portfolio of
properties, (ii) increasing its ownership of self-storage facilities through acquisitions of facilities owned by affiliates or third party owners,
(iii) development of new self-storage facilities, (iv) expansion and improvement of the operations of PSPUD, and (v) to a limited extent
through its existing ownership interest, will participate in the growth of PS Business Parks, Inc., a publicly traded real estate investment trust
focusing on the ownership and operation of commercial properties.
The Company seeks to increase the operating performance of its existing portfolio of properties by (i) increasing average occupancy rates
and (ii) achieving higher levels of realized monthly rents per occupied square foot. The Company believes that its property management
personnel and systems combined with the national telephone reservation system and marketing programs will enhance the Company’s ability
to meet these goals.
In addition to 533 wholly owned self-storage facilities, the Company also operates, on behalf of approximately 64 ownership entities in
which the Company has a partial equity interest, 540 self-storage facilities under the “Public Storage’’ name. From time to time, some of
these self-storage facilities or interests in them are available for purchase, providing the Company with a source of additional acquisition
opportunities. The Company believes these properties include some of the better located, better constructed self-storage facilities in the
industry. Because these properties are partially owned by the Company, it is provided with reliable operating information prior to acquisition
and these properties are easily integrated into the Company’s portfolio. During 1996 and 1997, the Company acquired 100 and 99 self-storage
facilities from affiliated entities in connection with mergers, respectively, and increased its ownership interest in 54 and 69 self-storage facilities
by acquiring additional interests in affiliated partnerships owning self-storage facilities, respectively. During 1996 and 1997, the Company
acquired 47 and 4 self-storage facilities from third parties, respectively. Similar to 1997, the Company does not expect third party acquisitions
to be significant during fiscal 1998, unless attractive investment opportunities are available.
Since 1995, the Company has developed and opened a total of seven self-storage facilities, one in 1995, four in 1996, and two in 1997.
At December 31, 1997, four self-storage facilities and ten portable self-storage facilities were under construction. Since April 1997, the
Company’s development activity with respect to the self-storage facilities, has been concentrated in a joint venture partnership between the
Company and a major state pension plan. Under the joint venture arrangement, the state pension plan contributes 70% of the equity with
the remaining 30% of the equity being provided by the Company to finance development. There is no debt included in the partnership
and the Company, after a specified period of time, has an option to acquire the state pension plan’s interest in the partnership. Due to the
Company’s non-controlling ownership interest, the joint venture partnership is not consolidated in the Company’s financial statements. The
partnership is expected to develop up to $220 million of properties (approximately 50 facilities) with expected store openings through mid-
1999. During 1997, the joint venture developed and opened seven self-storage facilities (approximately 412,000 square feet) and had 17
facilities under development (approximately 1,169,000 square feet).