Public Storage 2009 Annual Report Download - page 26

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on cash flows due to the current difficult operating environment, face loan covenant violations or cannot refinance
their existing debt as it comes due. The timing and amount of these opportunities will be at least partially dependent
upon whether the banks and other lenders elect to pursue foreclosure, acceleration, or other remedies which would
force a sale of the properties of these distressed owners, rather than extending existing loans or waiving covenant
violations. It is our belief that opportunities in 2009 have been limited due at least in part to lenders’ desire to
extend these loans rather than foreclose. There can be no assurance that any such opportunities may materialize in
the future.
Development of real estate facilities: We believe that in the long-run, development of new storage
locations and expansion of our existing self-storage facilities represent an important part of our growth strategy.
New locations can be developed to meet customer needs and expand our geographic reach, generally within our
existing markets. In addition, existing facilities can be expanded or enhanced to provide additional amenities such
as climate control, to better capitalize on increased population density in certain facilities’ local market area.
However, in light of current capital market conditions, doubt as to the potential lease-up of new storage space in the
face of reduced demand, and the increased potential in the short-run for attractive acquisitions of existing facilities
described above, we substantially curtailed our development pipeline. Accordingly, in 2009 our investment in the
development of real estate facilities was minimal, and we continue to have nominal development pipeline at
December 31, 2009. Shurgard Europe has similarly reduced its development activities (see “Capitalize on the
Potential for Growth in Europe” below).
Participate in the growth of commercial facilities primarily through our ownership in PS Business
Parks, Inc.: At December 31, 2009, we had a 41% common equity interest in PSB and its operating partnership
which consisted of 5,801,606 shares of common stock and 7,305,355 limited partnership units in the Operating
Partnership. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-
one basis into PSB common stock. At December 31, 2009, PSB owned and operated approximately 19.6 million net
rentable square feet of commercial space located in eight states in the U.S. During 2009 and 2008, the recession in
the U.S. impacted PSB resulting in a decrease in new rental rates over expiring rents, as well as declining occupancy
levels in 2009 and in the last six months of 2008. It is uncertain what impact the current recessionary trends will
have on PSB’s future occupancy levels and rental rents. PSB may continue to experience downward pressure on its
occupancy levels and rental rates. Due to capital market dislocations and other factors, PSB did not acquire any new
commercial space in 2009 and 2008.
Capitalize on the potential for growth in Europe: On March 31, 2008, we entered into the Europe
Transaction with an institutional investor whereby the investor acquired a 51% interest in Shurgard Europe.
Shurgard Europe held substantially all of our operations in Europe. Since March 31, 2008, we own the remaining
49% interest and are the managing member of Shurgard European Holdings LLC, a new joint venture formed to
own Shurgard Europe’s operations.
We believe that Shurgard Europe is the largest owner and operator of self-storage facilities in Western
Europe. At December 31, 2009, Shurgard Europe’s operations comprise 187 facilities with an aggregate of
approximately 10 million net rentable square feet. The portfolio consists of 115 wholly owned facilities and 72
facilities owned by two joint venture partnerships, in which Shurgard Europe has a 20% equity interest.
Shurgard Europe operates in seven markets in Western Europe: the French market (principally Paris), the
Swedish market (principally Stockholm), the United Kingdom market (principally London), the Dutch market, the
Belgian market, the Danish market (principally Copenhagen) and the German market.
In contrast to the U.S., the European self-storage industry is relatively immature. In each of the markets
that Shurgard Europe operates customer awareness of the product is relatively low and ownership of self-storage
facilities remains fragmented. Although many European consumers are not yet aware of the self-storage concept,
they tend to live in more densely populated areas in smaller living spaces (as compared to the U.S.) that, we believe,
should make self-storage an attractive option as product knowledge and availability of additional self-storage
facilities grows. Most Europeans are familiar with the concept of storage only as an ancillary service provided by
moving companies, and more consumer familiarity could result in a significant increase in demand in the long-term.