Public Storage 2008 Annual Report Download - page 12

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We measure changes in shareholder value by sustainable improvements in free cash flow per share
and our competitive position, not short-term changes in our share price. These are generally
accomplished by hiring and motivating excellent people, making wise capital allocation decisions,
maintaining financial strength and constant risk management.
In 2008, we achieved the final big goal of our 2006 acquisition of Shurgard, which was to monetize 51%
of our interest in Shurgard Europe on price, terms and structure that realized significant value for the
shareholders. It was a “home run” from the Trustees’ perspective and they awarded management
commensurately.
Conclusion
Last year I ended my letter to you with “...Demand for your product is not directly dictated by the
general economy but by recurring lifestyle changes . .. . ” I was wrong. While our business may well
be recession-resistant, it is certainly not recession-proof. Our customers are susceptible to severe
economic downturns. On average, given our geographic diversity, most “normal” economic
downturns don’t severely impact our results. Generally, at any point in time, some part of the country
is “slow.” Today, the entire country is slow. Like most companies, we haven’t experienced this kind
of economic climate. However, as shareholders, you should probably not lose sleep. Our financial
profile is designed for these kinds of economic headwinds and I think when they pass, we will have
improved our competitive position.
My view on the real estate industry is far more jaundiced. There are two major headwinds facing the real
estate industry—poor operating fundamentals and “closed” capital markets. You couldn’t pick two bigger
Achilles’ heels. Many companies are turning into what Warren Buffett would call “cigar butt” investments,
i.e., they are cheap but there are only one or two puffs remaining. Many real estate companies will need to
be recapitalized. In the meantime, these headwinds will continue to weigh on share prices, including ours.
Ronald L. Havner, Jr.
President and Chief Executive Officer
February 28, 2009