Public Storage 1998 Annual Report Download - page 35

Public Storage, Inc. 1998 Annual Report
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The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto.
Forward Looking Statements
When used within this document, the words “expects,” “believes,” “anticipates,” “should,” “estimates,” and similar expressions are intended to
identify “forward-looking statements” within the meaning of that term in Section 27A of the Securities Exchange Act of 1933, as amended, and in
Section 21F of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the
forward-looking statements. Such factors include the impact of competition from new and existing self-storage and commercial facilities which could
impact rents and occupancy levels at the Company’s facilities; the Company’s ability to evaluate, finance, and integrate acquired and developed
properties into the Company’s existing operations; the Company’s ability to effectively compete in the markets that it does business in; the impact
of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Real Estate
Investment Trusts; the acceptance by consumers of the Pickup and Delivery concept; the impact of general economic conditions upon rental rates
and occupancy levels at the Company’s facilities; and the availability of permanent capital at attractive rates.
Overview
The self-storage industry is highly fragmented and is composed predominantly of numerous local and regional operators. Competition in the markets
in which the Company operates is significant and is increasing from additional development of self-storage facilities in many markets which may
negatively impact occupancy levels and rental rates at the Company’s self-storage facilities. However, the Company believes it possesses several
distinguishing characteristics which enable it to compete effectively with other owners and operators.
The Company is the largest owner and operator of self-storage facilities in the United States with ownership interests as of December 31, 1998 in
1,094 self-storage facilities containing approximately 65.3 million net rentable square feet. All of the Company’s facilities are operated under the “Public
Storage” brand name, which the Company believes is the most recognized and established name in the self-storage industry. Located in the major
metropolitan markets of 37 states, the Company’s self-storage facilities are geographically diverse, giving it national recognition and prominence. This
concentration establishes the Company as one of the most significant providers of storage space in each market in which it operates and enables it to
use a variety of promotional activities, such as television and radio advertising as well as targeted discounting and referrals, which are generally not
economically viable for its competitors. In addition, the Company believes that geographic diversity of the portfolio reduces the impact from regional
economic downturns and provides a greater degree of revenue stability.
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 175,000 calls per month and has
approximately 225 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 the past three years.
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) developing new self-storage facilities,
(iv) improving the operations of its portable self-storage operations, and (v) to a limited extent through its existing ownership interest, participating in the
growth of PS Business Parks, Inc. (“PSB”), a publicly traded real estate investment trust focusing on the ownership and operation of commercial properties.
On March 12, 1999, the Company completed a merger transaction with Storage Trust Realty (“Storage Trust”), a publicly traded real estate
investment trust. In connection with the merger, the Company acquired 215 self-storage properties located in 16 states. The Company believes that
the merger will benefit the shareholders of both companies by eliminating duplicative general and administrative expenses and creating economies of
scale and cost efficiencies through greater critical mass. In addition, the Company believes that its national telephone reservation system will present
an opportunity for increased revenues through higher occupancies of the properties acquired.
Management’s Discussion and Analysis of Financial Condition and Results of Operations