Public Storage 2001 Annual Report Download - page 14

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS
December 31, 2001
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P UBLIC S TORAGE ,I NC . 2001 A NNUAL R EPORT
Note 1 — Description of the Business
Public Storage, Inc. (the “Company”) is a California corporation, which was organized in 1980. We are a fully integrated, self-
administered and self-managed real estate investment trust (“REIT”) whose principal business activities include the acquisition,
development, ownership and operation of self-storage facilities which offer storage spaces for lease, usually on a month-to-month
basis, for personal and business use. In addition, to a much lesser extent, we have interests in commercial properties, containing
commercial and industrial rental space, and interests in facilities that lease storage containers.
We invest in real estate facilities by acquiring wholly owned facilities or by acquiring interests in real estate entities which own
facilities. At December 31, 2001, we had direct and indirect equity interests in 1,384 self-storage facilities located in 37 states and
operating under the “Public Storage” name. We also have direct and indirect equity interests in approximately 15.2 million net
rentable square feet of commercial space located in 11 states.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company and 33 controlled entities (the “Consolidated
Entities”). Collectively, the Company and the Consolidated Entities own a total of 1,275 real estate facilities, consisting of 1,270
storage facilities and five commercial properties.
At December 31, 2001, we had equity investments in 11 limited partnerships in which we do not have a controlling interest.
These limited partnerships collectively own 114 self-storage facilities, which are managed by the Company. In addition, we own
approximately 44% of the common equity of PS Business Parks, Inc. (“PSB”), which owns and operates 14.8 million net rentable
square feet of commercial space at December 31, 2001. We do not control these entities, accordingly, our investments in these
limited partnerships and PSB are accounted for using the equity method.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from those estimates.
Income Taxes
For all taxable years subsequent to 1980, the Company qualified and intends to continue to qualify as a REIT, as defined in
Section 856 of the Internal Revenue Code. As a REIT, we are not taxed on that portion of our taxable income which is distributed
to our shareholders provided that we meet certain tests. We believe we have met these tests during 2001, 2000 and 1999;
accordingly, no provision for income taxes has been made in the accompanying financial statements.
Notes Receivable
Notes receivable includes $24,344,000 in mortgage notes receivable that are secured by real estate facilities, and a $35,000,000
loan to PSB. The loan to PSB, which bore interest at the rate of 3.25% per year, was repaid (unaudited) on January 28, 2002.
Financial Instruments
The methods and assumptions used to estimate the fair value of financial instruments is described below. We have estimated the
fair value of our financial instruments using available market information and appropriate valuation methodologies. Considerable
judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair values are not
necessarily indicative of the amounts that could be realized in current market exchanges.
For purposes of financial statement presentation, we consider all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.