Public Storage 2004 Annual Report Download - page 8
Download and view the complete annual report
Please find page 8 of the 2004 Public Storage annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2 -
3 -
4 -
5 -
6 -
7 -
8 -
9 -
10 -
11 -
12 -
13 -
14 -
15 -
16 -
17 -
18 -
19 -
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60
-
61
-
62
-
63
-
64
-
65
-
66
-
67
-
68
-
69
-
70
-
71
-
72
-
73
-
74
-
75
-
76
-
77
-
78
-
79
-
80
-
81
-
82
-
83
-
84
-
85
-
86
-
87
-
88
-
89
-
90
-
91
-
92
-
93
-
94
-
95
-
96
-
97
-
98
-
99
-
100
-
101
-
102
-
103
-
104
-
105
-
106
-
107
-
108
-
109
-
110
-
111
-
112
-
113
-
114
-
115
-
116
-
117
-
118
-
119
-
120
-
121
-
122
-
123
-
124
-
125
-
126
-
127
-
128
-
129
-
130
-
131
-
132
-
133
-
134
-
135
-
136
-
137
-
138
-
139
-
140
-
141
-
142
-
143
-
144
-
145
-
146
-
147
-
148
-
149
-
150
-
151
-
152
-
153
-
154
-
155
-
156
-
157
-
158
-
159
-
160
-
161
-
162
-
163
-
164
-
165
-
166
-
167
-
168
-
169
-
170
-
171
-
172
-
173
-
174
-
175
-
176
-
177
-
178
-
179
-
180
-
181
-
182
-
183
-
184
-
185
-
186
-
187
-
188
 |
 |
results, as 2005 will be a transition year to a stabilized business model that can produce
acceptable returns on invested capital on a consistent basis. We believe in the business and
believe it can be an attractive investment long term.
We expect profitability at the operating unit level in 2005—but we will be investing all of it
in expanded yellow pages and media programs. Over the last two years, we have closed over
30 facilities and extracted over $10 million of capital from this business. We have narrowed
our focus and 2005 will see us concentrate on marketing and execution.
Investment in PS Business Parks
Our investment in PS Business Parks (PSB) produced modest results in 2004. That is
the “rear view mirror.” Unlike self-storage, PSB’s business is much more volatile and
susceptible to economic cycles. The last three years have been the “down cycle” as
customer demand evaporated and landlords were left fighting for modestly viable
customers. Generous concessions, especially in the form of tenant improvements,
have lead to dramatically reduced returns on invested capital. For PSB, the pain has
been much less than most. A good product, minimal “dot com” and “telcom” tenants
and very capable operating personnel helped manage the storm. In 2005, PSB needs
to adapt to a dramatically improved economic environment and we expect to
significantly reduce our capital commitment to customer space. Similar to the self-
storage business, PSB faces an extremely competitive environment to acquire
additional properties. As Warren Buffet says, “When money is cheap - assets are
dear,” and money is cheap right now.
PSB refinanced several preferred stock issues this year, lowering its “permanent” funding costs
to below 8 percent. PSB may have additional opportunities in the coming years to refinance
about $100 million of these preferred equities.
PSB should produce modest earnings improvement but dramatically improved “value
creation” going forward. The winds are shifting in its favor and PSB’s shorter than average
lease duration should enable it to take advantage of improving market fundamentals sooner
than most.