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Public Storage
2010
Annual
Report

Table of contents

  • Page 1
    Public Storage 2 0 1 0 Annual Report

  • Page 2
    ... E RT I E S (as of December 31, 2010) Number of Properties(1) Net Rentable Square Feet Number of Properties(1) Net Rentable Square Feet 1,528,000 15,424,000 Public Storage ฀ Arizona California Colorado ฀ Florida ฀ Illinois Indiana Kansas ฀ ฀ ฀ Louisiana ฀ ฀ Minnesota Missouri...

  • Page 3
    ...) (1) The significant increase in our revenues, cost of operations, depreciation and amortization, and interest expense in 2007 is due to our acquisition of Shurgard Storage Centers in August 2006, with the operations of the facilities acquired being included in our operations for a full year in...

  • Page 4
    ...year operating fundamentals and acquisition opportunities improved for all our businesses. We continued to "deleverage," with Public Storage, PS Business Parks (PSB) and Shurgard Europe, reducing leverage by $240 million. The $570 million we invested in five million rentable square feet during 2010...

  • Page 5
    ... properties are located in California, three in Illinois, two in Florida and one each in Georgia, Hawaii, New Jersey, Ohio and Louisiana. This was the second highest number of facilities and square footage acquired in any year in the last decade, excluding the Shurgard merger. The 2010 acquisitions...

  • Page 6
    ... square feet, or "REVPAF." REVPAF measures how much revenue is generated per foot we have available for rent. To manage growth in REVPAF, we balance increased pricing with higher customer volumes (occupancy). Also impacting REVPAF are product quality, customer sales and service, local competition...

  • Page 7
    nearly 20,000 more net customers than during the previous year. The higher customer volumes were partially offset by higher repair and maintenance costs. REVPAF (Per sq. ft.) 2010 Europe self-storage Same Store2 Commercial properties Same Store ฀ ฀ Other self-storage propertiesâˆ'Europe2 ...

  • Page 8
    ...and pricing power should improve for PSB, leading to improved Same Store operating results. In addition, the new business parks' 700,000 square feet of vacant space will start to generate earnings as it is leased. Joe Russell, PSB's President and Chief Executive Officer, and his management team have...

  • Page 9
    ... anniversary as a public company in 2010. In 1980, our Company, then called Storage Equities, went public at $15 per share, raising $30 million. We were one of many entities sponsored by the private company, Public Storage, which was founded in 1972. In 1995, we acquired the private company and were...

  • Page 10
    ... by the acquisition of Public Storage in We funded this growth with perpetual preferred stock (the first REIT to issue this security During the last decade (2000-2010), we moved to "industry consolidator," acquiring Storage Trust in 1999 (215 properties, 12.0 million square feet) and Shurgard in...

  • Page 11
    ... values October 2007 peak, according to the Moody's/REAL Commercial Property Price Index. Near record low interest rates are attracting additional real estate buyers with the prospect of cheap financing from a recovering Commercial Mortgage Backed Securities (CMBS) market and could help stabilize...

  • Page 12
    ... Lenkin retired from the Public Storage Board of Trustees after nearly 32 years of service to our Company. Harvey joined Public Storage in 1978, when we operated just 36 self-storage facilities and in 1991 was named President and joined our Board. Harvey was a multi-talented executive and a major...

  • Page 13
    ... the National Association of Real Estate Investment Trusts Equity Index ("NAREIT Equity Index") for the same period (total shareholder return equals price appreciation plus dividends). The stock price performance graph assumes that the value of the investment in the Company's Common Stock and each...

  • Page 14
    ...959 37,540 9,662 (7,572) $ 790,456 Operating earnings Interest and other income excluding Shurgard Europe Depreciation and amortization / includes equity in earnings General and administrative expense Interest expense Equity share of EITF D-42, acquisition costs and real estate disposition gain for...

  • Page 15
    ... Number) 701 Western Avenue, Glendale, California 91201-2349 (Address of principal executive offices) (Zip Code) (818) 244-8080 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Depositary Shares Each Representing...

  • Page 16
    ... the reported closing sale price of the Company's Common Shares on the New York Stock Exchange on June 30, 2010). As of February 24, 2011, there were 170,435,633 outstanding Common Shares, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be filed in...

  • Page 17
    ... in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our tenants; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; difficulties...

  • Page 18
    ... Shurgard Europe, a private company that we believe is the largest owner and operator of self-storage facilities in Western Europe, and in PS Business Parks, Inc., a public company whose business activities primarily include the ownership and operations of commercial properties. At December 31, 2010...

  • Page 19
    ... the toll-free telephone referral system, (800) 44-STORE, or a storage facility, are directed to the national reservation system. A representative discusses with the customer space requirements, price and location preferences and also informs the customer of other products and services provided by...

  • Page 20
    ... between occupancy, rental rates, and promotional discounting and d) controlling operating costs. We believe that our property management personnel and systems, combined with our national telephone reservation system and media advertising programs will continue to enhance our ability to meet these...

  • Page 21
    ... (XURSH¶V operations. We believe that Shurgard Europe is the largest owner and operator of self-storage facilities in Western Europe. At December 31, 2010 6KXUJDUG (XURSH¶V operations comprise 188 facilities with an aggregate of approximately 10 million net rentable square feet. The portfolio...

  • Page 22
    ... joint ventures to facilitate the funding of future developments or acquisitions. Disposition of properties: Disposition of properties to raise capital has not been one of our strategies. Generally, we have disposed of self-storage facilities only because of condemnation proceedings, which compel us...

  • Page 23
    ... that own an aggregate of 19 self-storage facilities with approximately 1 million net rentable square feet of storage space. Collectively these entities are referred tRDVWKH³8QFRQVROLGDWHG(QWLWLHV´ PSB, which files financial statements with the SEC, and Shurgard Europe, have debt and other...

  • Page 24
    ...employees in the U.S. at December 31, 2010 who render services on behalf of the Company, primarily personnel engaged in property operations. Seasonality We experience minor seasonal fluctuations in the occupancy levels of self-storage facilities with occupancies generally higher in the summer months...

  • Page 25
    ... December 31, 2010. Local market conditions play a significant part in how competition will affect us. Competition in the market areas in which many of our properties are located is significant and has affected our occupancy levels, rental rates and operating expenses. Any increase in availability...

  • Page 26
    ... overall business, financial condition or results of operations. There has been an increasing number of claims and litigation against owners and managers of rental properties relating to moisture infiltration, which can result in mold or other property damage. When we receive a complaint concerning...

  • Page 27
    ... in a decline in occupancy and/or rental rates at the acquired facilities or our existing properties. In addition, the integration process generally results in changes to the processes, standards, procedures, practices, policies and compensation arrangements in the facilities acquired, which can...

  • Page 28
    ... partnerships and joint ventures; and the importance of local senior management and the potential negative ramifications of the departure of key executives. Based upon current market conditions and recent operating result trends of Shurgard Europe, the following specific risks apply with respect to...

  • Page 29
    ...be limited due to market conditions. Shurgard Europe owes us ¼73.7 million ($495.2 million at December 31, 2010), and this loan is due in March 2013. If Shurgard Europe is unable to obtain financing to raise funds to repay our loan due to a constrained equity or credit environment or other factors...

  • Page 30
    ... any class or series of preferred or equity shares, in each case, in value or number of shares, whichever is more restrictive, unless an exemption is granted by our board of trustees. These limitations could discourage, delay or prevent a transaction involving a change in control of our company not...

  • Page 31
    ... relating to loss of goods stored by tenants in the self-storage facilities in Canada in which the Hughes Family has ownership interests. We acquired the tenant insurance business on December 31, 2001 through our acquisition of PS Insurance Company, or PSICH. During the years ended December 31, 2010...

  • Page 32
    ... facilitates union activity or federal legislative proposals to otherwise increase operating costs. Our tenant insurance business is subject to governmental regulation which could reduce our profitability or limit our growth. We hold Limited Lines Self Storage Insurance Agent licenses from a number...

  • Page 33
    ITEM 1B. Unresolved Staff Comments Not applicable. 19

  • Page 34
    ..., 2010 Number of Storage Net Rentable Square Feet Facilities (a) (in thousands) United States: California: Southern ...Northern ...Texas ...Florida ...Illinois ...Washington ...Georgia ...North Carolina ...Virginia ...New York ...Colorado ...New Jersey ...Maryland ...Minnesota ...Michigan ...Arizona...

  • Page 35
    ...during business hours. On-site operation is the responsibility of property managers who are supervised by district managers. Some self-storage facilities also include rentable uncovered parking areas for vehicle storage. Storage facility spaces are rented on a month-to-month basis. Rental rates vary...

  • Page 36
    ... 31, 2010 represents approximately 8% of the book value of our total assets. We also directly own 1.6 million net rentable square feet of commercial space, primarily located at our existing self-storage locations, comprised primarily of individual retail locations. This space is managed for us...

  • Page 37
    ... Shares each representing 1/1,000 of an Equity Share, Series A (NYSE:PSAA) (see section c. below), including those of Public Storage, Inc. prior to our reorganization in June 2007 were listed on the New York Stock Exchange beginning February 14, 2000 until their redemption by us in April 2010...

  • Page 38
    ..., the dividends paid on common shares ($2.20 per share), on all the various classes of preferred shares, and on our Equity Shares, Series A were classified as follows: Ordinary Income ...Long-term Capital Gain ...Total ...1st Quarter 100.0000% 0.0000% 100.0000% 2nd Quarter 100.0000% 0.0000% 100.0000...

  • Page 39
    ... capital, investment alternatives, and the trading price of our common shares. e. Preferred and Equity Share Repurchases During April, 2010, we redeemed all 8,377,193 of our outstanding Equity Shares, Series A for an aggregate of $205.4 million in cash (including redemption fees). During June, 2010...

  • Page 40
    ... table presents monthly information related to our repurchases of all of our outstanding Equity Shares, Series A, certain of our Cumulative Preferred Shares and all of our Series J Preferred Partnership Units during the year ended December 31, 2010: Total Number of Shares/Units Repurchased Average...

  • Page 41
    ...244,395) The significant increase in our revenues, cost of operations, depreciation and amortization, and interest expense in 2007 is due to our acquisition of Shurgard Storage Centers in August 2006, with the operations of the facilities acquired being included in our operations for a full year in...

  • Page 42
    .... Qualification as a REIT ± Income Tax Expense: We believe that we have been organized and operated, and we intend to continue to operate, as a qualifying REIT under the Internal Revenue Code and applicable state laws. A REIT generally does not pay corporate level federal income taxes on its REIT...

  • Page 43
    ... of Operations Our principal business activities include the acquisition, development, ownership and operation of selfstorage facilities which offer storage spaces for lease, generally on a month-to-month basis, for personal and business use. We are the largest owner of self-storage facilities...

  • Page 44
    ... issuing our common or preferred securities is dependent upon capital market conditions. Capital markets have improved from the severe stress in late 2008 and early 2009. In October 2010 we issued in aggregate $125 million (face amount) of Series P Cumulative Preferred Shares at a rate of 6.500%. In...

  • Page 45
    ...acquired, newly developed, or recently expanded facilities, and (iii), the Shurgard Europe facilities, which we deconsolidated effective March 31, 2008 in connection with the sale of a 51% interest in 6KXUJDUG(XURSHWRDQLQVWLWXWLRQDOLQYHVWRU WKH³(XURSH7UDQVDFWLRQ´  Self-Storage Operations...

  • Page 46
    ... to the Other Facilities due primarily to the acquisition of 42 facilities during 2010, partially offset by increased amortization of tenant intangible assets at these 42 facilities. Net income with respect to our self-storage operations increased by $12.7 million during the year ended December...

  • Page 47
    ...Other Facilities...Shurgard Europe Facilities ...Total net income from self-storage ...Ancillary operating revenue ...Interest and other income ...Ancillary cost of operations ...Depreciation and amortization, commercial ...General and administrative expense ...Interest expense ...Equity in earnings...

  • Page 48
    ...: Rental income ...Late charges and administrative fees ...Total revenues (a) ... Cost of operations: Property taxes ...Direct property payroll ...Media advertising ...Other advertising and promotion ...Utilities...Repairs and maintenance ...Telephone reservation center...Property insurance ...Other...

  • Page 49
    ...housing sales, and reduced moving activity, in the major markets in which we operate. Occupancy levels dropped abnormally in the fourth quarter of 2008. We immediately reduced rental rates and increased promotional discounts to stimulate move-in activity and regain occupancy. These actions continued...

  • Page 50
    ... Southeast markets, located in North and South Carolina, Georgia, and Florida, as well as the West Coast, which includes Washington, Oregon and California. See Analysis of Regional Trends table that follows. Cost of operations (excluding depreciation and amortization) increased by 0.7% in 2010, as...

  • Page 51
    ... volumes, resulting in less staffing hours, as well as a shift from our California to our Arizona call center, resulting in lower average compensation rates. We expect telephone reservation center cost to grow moderately in 2011. Insurance expense decreased 3.3% in 2010 as compared to 2009 and 14...

  • Page 52
    ...operations: 2010 $ 126,537 2009 $ 127,412 2008 $ 126,372 Property tax expense: 2010... $ 139,483 Media advertising expense: 2010 $ 5,249 2009...annual rent per occupied square foot: 2010 $ 12.46 $ 12.32 $ 2009 $ 12.84 $ 12.51 $ 2008 $ 12.86 $ 12.89 $ Weighted average occupancy levels for the period: 2010...

  • Page 53
    ... operating income: Southern California ...Northern California ...Texas ...Florida ...Illinois ...Washington ...Georgia ...All other states ...Total net operating income ...Weighted average occupancy: Southern California ...Northern California ...Texas ...Florida ...Illinois ...Washington ...Georgia...

  • Page 54
    ...31, 2010 2009 Change 2009 2008 Change (Amounts in thousands, except for weighted average data) Realized annual rent per occupied square foot: Southern California ...Northern California ...Texas ...Florida ...Illinois ...Washington...Georgia ...All other states ...Total realized rent per square foot...

  • Page 55
    ...are located in Chicago, IL., two facilities are located in West Palm Beach, FL., and one facility each is located in Atlanta, GA., Honolulu, HI., New Orleans, LA., Newark, NJ., and Columbus, OH. We expect increases in revenues and expenses in 2011 for these 42 acquired facilities as their operations...

  • Page 56
    ... owners. However, it can take 24 or more months for these newly acquired facilities to reach stabilization, particularly during the challenging operating conditions we currently are experiencing, particularly in California. Upon acquisition of a facility, we generally reduce rates to new incoming...

  • Page 57
    ... 10% of the shares issued. At December 31 2010, PSB owned and operated 21.8 million rentable square feet of commercial space located in eight states. PSB also manages commercial space owned by the Company and affiliated entities pursuant to property management agreements. Equity in earnings from PSB...

  • Page 58
    ... in the average exchange rate of the Euro relative to the U.S. Dollar to 1.326 for the year ended December 31, 2010, as compared to 1.393 for the same period in 2009, (ii) an increase in general and administrative expense, and (iii) additional depreciation expense, offset partially by iv) our pro...

  • Page 59
    ...: Rental income ...Late charges and administrative fees collected ...Total revenues ...Cost of operations (excluding depreciation and amortization expense): Property taxes ...Direct property payroll ...Advertising and promotion ...Utilities ...Repairs and maintenance ...Property insurance ...Other...

  • Page 60
    ... 31, 2010 as compared to the same period in 2009 was primarily caused by higher rental income as a result of an increase in average realized annual rental rates per occupied square foot partially offset by a decrease in average occupancy levels. Shurgard Europe, similar to our Domestic Self-Storage...

  • Page 61
    ... operations: We reinsure policies offered through a non-affiliated insurance company against losses to goods stored by tenants, primarily in our domestic self-storage facilities. The revenues that we record are based upon premiums that we reinsure. Cost of operations primarily includes claims...

  • Page 62
    ... as hurricanes, that occur and affect our properties thereby increasing tenant insurance claims. Commercial operations: We also operate commercial facilities, primarily small storefronts and office space located on or near our existing self-storage facilities that are rented to third parties. We do...

  • Page 63
    ...capital raising and acquisition activities, litigation expenditures, employee severance, sharebased compensation, and incentive compensation for corporate and executive personnel. During the year ended December 31, 2010, we incurred $2.6 million of expenses related to the acquisition of self-storage...

  • Page 64
    ...31, 2010. We believe that our cash, the cash that we expect to receive upon maturity of the marketable securities, and the internally generated net cash provided by our operating activities will continue to be sufficient to enable us to meet our operating expenses, debt service requirements, capital...

  • Page 65
    ... PSB used to re-pay borrowings against their credit facility and repurchase preferred stock. The loan has a six-month term, no prepayment penalties, and bears interest at a rate of three-month LIBOR plus 0.85%. Access to Additional Capital: We have a revolving line of credit for borrowings up to...

  • Page 66
    ... improvements include major repairs or replacements to our facilities, which keep the facilities in good operating condition and maintain their visual appeal to the customer. Capital improvements do not include costs relating to the development or expansion of facilities that add additional net...

  • Page 67
    ...SULFHWKDWZRXOGEHDWWUDFWLYHWR6KXUJDUG(XURSH Redemption of Preferred Securities: As of December 31, 2010, several series of our preferred securities were redeemable at our option upon at least 30 days notice with dividend rates ranging from 6.125% to 7.000% and have an aggregate redemption...

  • Page 68
    ... fixed-rate interest payments on our notes payable based on their contractual terms. See Note 6 to our December 31, 2010 consolidated financial statements for additional information on our notes payable. (2) We lease land, equipment and office space under various operating leases. Certain leases are...

  • Page 69
    ... prior to the dates set forth in Note 8 to our December 31, 2010 consolidated financial statements. Our market-risk sensitive instruments include notes payable, which totaled $568,417,000 at December 31, 2010. We have foreign currency exposures related to our investment in Shurgard Europe, which has...

  • Page 70
    ... Data The financial statements of the Company at December 31, 2010 and December 31, 2009 and for each of the three years in the period ended December 31, 2010 and the report of Ernst & Young LLP, Independent Registered Public Accounting Firm, thereon and the related financial statement schedule, are...

  • Page 71
    ...defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2010 to which this report relates that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting. ITEM 9B. Other Information Not applicable. 57

  • Page 72
    ... audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Public Storage as of December 31, 2010 and 2009, and the related consolidated statements of income, VKDUHKROGHUV¶ HTXLW\ DQG FDVK IORZV IRU HDFK RI...

  • Page 73
    ... of Human Resources for the Infrastructure and Technology global business unit. Steven M. Glick, age 54, became Senior Vice President and Chief Legal Officer of Public Storage on February 23, 2010. From April 2005 until joining Public Storage, Mr. Glick was Senior Vice President and General Counsel...

  • Page 74
    ...,000 shares to any one person requires approval by the Executive Equity Awards Committee, (3) options are granted at fair market value on the date of grant, (4) options have a ten year term and (5) options vest over three years in equal installments, or as indicated by the applicable grant agreement...

  • Page 75
    ... ZLWK UHVSHFW WR IHHV DQG VHUYLFHV SURYLGHG E\ WKH &RPSDQ\¶V independent auditors is hereby incorporated by reference to the material appearing in the Proxy Statement under the FDSWLRQ³5DWLILFDWLRQRI$XGLWRUV²Fees Billed to the Company by Ernst & Young LLP for 2010 and 2009´ 61

  • Page 76
    ... The financial statements schedules listed in the accompanying Index to Financial Statements and Schedules are filed as part of this report. 3. Exhibits See Index to Exhibits contained herein. b. Exhibits: See Index to Exhibits contained herein. c. Financial Statement Schedules Not applicable. 62

  • Page 77
    ... Storage 6.600% Cumulative Preferred Shares, Series C. Filed ZLWKWKH5HJLVWUDQW¶V&XUUHQW5HSRUWRQ)RUP-K dated June 6, 2007 and incorporated by reference herein. Articles Supplementary for Public Storage 6.180% Cumulative Preferred Shares, Series D. Filed ZLWKWKH5HJLVWUDQW¶V&XUUHQW Report...

  • Page 78
    ...8-K dated June 6, 2007 and incorporated by reference herein. Amended Management Agreement between Registrant and Public Storage Commercial Properties *URXS,QFGDWHGDVRI)HEUXDU LOHGZLWK3XEOLF6WRUDJH,QF¶V ³36,´ $QQXDO5HSRUW on Form 10-K for the year ended December 31, 1994 (SEC File...

  • Page 79
    ...3DUWQHUVKLSRI36%XVLQHVV3DUNV/3)LOHGZLWK36%XVLQHVV3DUNV,QF¶V Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 (SEC File No. 00110709) and incorporated herein by reference. Amended and Restated Agreement of Limited Partnership of Storage Trust Properties...

  • Page 80
    ... Annual Report on Form 10-K for the year ended December 31, 2000 filed by Shurgard (SEC File No. 001-11455). Shurgard Storage Centers, Inc. 2004 Long Term Incentive Compensation Plan. Incorporated by reference to Appendix A of Definitive Proxy Statement dated June 7, 2004 filed by Shurgard (SEC File...

  • Page 81
    ... (SEC File No. 333-141448) and incorporated herein by reference. 12 23.1 31.1 31.2 32 101 .INS** 101 .SCH** 101 .CAL** 101 .DEF** 101 .LAB** 101 .PRE** _ * ** Statement Re: Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. Filed herewith. Consent of Ernst & Young LLP...

  • Page 82
    ... References Report of Independent Registered Public Accounting Firm ...Consolidated balance sheets as of December 31, 2010 and 2009 ...For each of the three years in the period ended December 31, 2010: Consolidated statements of income ...Consolidated statements of equity ...Consolidated statements...

  • Page 83
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Trustees and Shareholders Public Storage We have audited the accompanying consolidated balance sheets of Public Storage as of December 31, 2010 and 2009, and the related consolidated statHPHQWVRILQFRPHVKDUHKROGHUV¶HTXLW\...

  • Page 84
    ... receivable from Shurgard Europe ...Other assets ...Total assets ...LIABILITIES AND EQUITY Notes payable...Accrued and ...Equity: 3XEOLF6WRUDJHVKDUHKROGHUV¶HTXLW\ Cumulative Preferred Shares of beneficial interest, $0.01 par value, 100,000,000 shares authorized, 486,390 shares issued (in series...

  • Page 85
    ... on distributions paid ...Preferred shareholders based on repurchases ...Equity Shares, Series A ...Equity Shares, Series A based on redemptions ...Restricted share units ...Common shareholders ...Net income per common share ± basic Continuing operations...Discontinued operations ...Net income per...

  • Page 86
    ... interests ...Distributions to equity holders: Cumulative preferred shares (Note 8) ...Permanent noncontrolling interests in subsidiaries ...Equity Shares, Series A ($2.45 per depositary share) ...Holders of unvested restricted share units...Common shares ($2.80 per share)...Other comprehensive loss...

  • Page 87
    ... shares (10,800,000 shares) (Note 8) ...Repurchase of preferred partnership units (Note 7) ...Redemption of Equity Shares, Series A (8,377.193 shares) (Note 8) ...Issuance of common shares in connection with share-based compensation (847,280 shares) (Note 10) ...Share-based compensation expense...

  • Page 88
    ...(Note 4) ...Proceeds from sales of other real estate investments ...Acquisition of common stock of PS Business Parks ...Proceeds from the disposition of interest in Shurgard Europe (Note 3) ...Deconsolidation of Shurgard Europe (Note 3) ...Investment in Shurgard Europe ...Proceeds from repayments of...

  • Page 89
    ... in real estate entities ...Loan receivable from Shurgard Europe ...Intangible assets, net...Other assets ...Notes payable ...Accrued and other liabilities ...Permanent noncontrolling equity interests in subsidiaries ...Investment in real estate entities disposed in exchange for other asset ...Other...

  • Page 90
    ..., 2010, we had direct and indirect equity interests in 2,048 self-storage facilities (with approximately 129.6 million net rentable square feet) located in 38 states operating under the ³3XEOLF6WRUDJH´ name. In Europe, we own one facility in London, England and we have a 49% interest in Shurgard...

  • Page 91
    ... and maintenance are expensed when incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which generally range from 5 to 25 years. Acquisitions of operating self-storage facilities are accounted for under the...

  • Page 92
    ... UDWHG$E\6WDQGDUGDQG3RRU¶V VKRUW -term commercial paper with remaining maturities of three months or less at the date of acquisition to be cash equivalents. Any such cash and cash equivalents which are restricted from general corporate use due to insurance or other regulations, or based...

  • Page 93
    ... to our business segments is based directly on such acquisitions. Our goodwill balance of $174,634,000 is reported net of accumulated amortization of $85,085,000 as of December 31, 2010 and 2009. Intangible Assets Our tenant intangibles are finite-lived intangible assets representing primarily the...

  • Page 94
    ... identified in our annual evaluation at December 31, 2010. Revenue and Expense Recognition Rental income, which is generally earned pursuant to month-to-month leases for storage space, as well as late charges and administrative fees, are recognized as earned. Promotional discounts are recognized as...

  • Page 95
    ... the other 49%, reflecting our ownership interest in Shurgard Europe, classified as equity in earnings of real estate entities. Loan fees collected from Shurgard Europe are amortized on a straight-line basis as interest income over the applicable term to which the fee applies. We received $24,539...

  • Page 96
    ...RILQFRPH Included in discontinued operations are the historical operations of self-storage facilities that were disposed of in 2009 and 2010 and our truck rental and containerized storage operations which both ceased operations in 2009. In addition to revenues and expenses of these operating units...

  • Page 97
    ... company for Shurgard Europe. We own the remaining 49% interest and are the managing member of Shurgard Holdings. Our net proceeds from the transaction aggregated $609,059,000, comprised of $613,201,000 paid by the institutional investor less $4,142,000 in legal, accounting, and other expenses...

  • Page 98
    ..., we also incurred $2,563,000 in transaction costs related to the acquisitions. These amounts were included in general and administrative expense on our accompanying consolidated statements of income. During 2010, we completed three expansion projects to existing facilities at an aggregate cost of...

  • Page 99
    ...RI36%¶V 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. Based upon the closing price at December 31, 2010 ($55.72 per share...

  • Page 100
    ...,887 46,298 699,464 766,173 Investment in Shurgard Europe At December 31, 2010, we had a 49% equity investment in Shurgard Europe, which owns 116 facilities directly and has a 20% interest in 72 self-storage facilities located in Europe which operate under the ³6KXUJDUG´QDPH As a result of our...

  • Page 101
    ... statements. 2010 For the year ended December 31, Self-storage and ancillary revenues ...Interest and other income ...Self-storage and ancillary cost of operations ...Trademark license fee payable to Public Storage ...Depreciation and amortization ...General and administrative ...Interest expense...

  • Page 102
    ... drawn on the Credit Agreement bear an annual interest rate ranging from the London Interbank 2IIHUHG5DWH ³/,%25´ SOXVWR/,%25SOXVGHSHQGLQJRQRXUFUHGLWUDWLQJV /,%25SOXV at December 31, 2010). In addition, we are required to pay a quarterly facility fee ranging from...

  • Page 103
    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 Substantially all of our debt was acquired in connection with a property or other acquisition, and in such cases an initial premium or discount is established for any difference between the stated note balance and estimated ...

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    ...000 and $16,381,000, respectively. In 2007, we sold an approximately 0.6% common equity interest in Shurgard Europe to various RIILFHUV RI WKH &RPSDQ\ WKH ³36 2IILFHUV´  R ther than our chief executive officer. Gross proceeds were $4,909,000 and we recorded a gain on disposition of $1,194...

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    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 Preferred Partnership Interests At December 31, 2010, we had no preferred partnership interests outstanding. At December 31, 2009, our preferred partnership units outstanding were comprised of 4,000,000 units of our 7.250% ...

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    ...the liquidation value as preferred equity on our consolidated balance sheet with any issuance costs recorded as a reduction to paid-in capital. On April 13, 2010, we issued 5,800,000 depositary shares each representing 1/1,000 of our 6.875% Cumulative Preferred Shares, Series O for gross proceeds of...

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    ... of the three months ended March 31, 2010, 2009 and 2008, June 30, 2009 and 2008, September 30, 2009 and 2008 and December 31, 2009 and 2008, we allocated income and paid quarterly distributions to the holders of the Equity Shares, Series A totaling $5.1 million ($0.6125 per share) based on 8,377...

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    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 2010 Shares Employee stock-based compensation and exercise of stock options (Note 10) ...Repurchases of common shares ...Amount 2009 Shares Amount (Dollar amounts in thousands) 2008 Shares Amount 847,280 847,280 $ $ 41,...

  • Page 109
    ... of this corporation, we have no right to acquire this stock or assets unless the Hughes Family decides to sell and we receive no benefit from the profits and increases in value of the Canadian selfstorage facilities. We reinsure risks relating to loss of goods stored by tenants in the self-storage...

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    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 We recognize compensation expense for stock options based upon their estimated fair value on the GDWHRIJUDQWDPRUWL]HGRYHUWKHDSSOLFDEOHYHVWLQJSHULRG WKH³)DLU9DOXH 0HWKRG´ QHWRIHVWLPDWHVIRUIXWXUH ...

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    ... share unit grant, based upon the market price of our common shares at the date of grant, is amortized over the service period, net of estimates for future forfeitures, as compensation expense. The related employer portion of payroll taxes is expensed as incurred. Cash compensation paid to employees...

  • Page 112
    ... Shurgard Europe, which has a separate management team that, under the direction of Public Storage and the institutional investor which owns a 51% equity interest in Shurgard Europe, makes the financing, capital allocation, and other significant decisions for this operation. The Europe Self-Storage...

  • Page 113
    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 disposition gains, and foreign currency exchange gains and losses that management considers in evaluating our investment in Shurgard Europe. At December 31, 2010, our consolidated balance sheet includes an investment in ...

  • Page 114
    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 For the year ended December 31, 2009 Other Items Not Allocated to Segments Commercial (Amounts in thousands) $ 14,982 14,982 $ 92,615 4,981 97,596 Domestic Self-Storage Revenues: Self-storage facilities ...Ancillary ...

  • Page 115
    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 For the year ended December 31, 2008 Other Items Not Allocated to Segments Commercial (Amounts in thousands) $ 15,326 15,326 $ 88,182 17,659 105,841 Domestic Self-Storage Revenues: Self-storage facilities ...Ancillary ...

  • Page 116
    ...-party insurance company to provide the insurance and are subject to licensing requirements and regulations in several states. Operating Lease Obligations We lease land, equipment and office space under various operating leases. At December 31, 2010, the approximate future minimum rental payments...

  • Page 117
    PUBLIC STORAGE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 14. Supplementary Quarterly Financial Data (unaudited) Three Months Ended June 30, September 30, December 31, 2010 2010 2010 (Amounts in thousands, except per share data) $ 397,759 $ 407,960 $ 422,765 $ 418,238 March 31, ...

  • Page 118
    ... FINANCIAL STATEMENTS December 31, 2010 15. Subsequent Events On January 18, 2011, we acquired five self-storage properties in Nevada for approximately $19.5 million. We incurred approximately $0.2 million in transaction costs related to these acquisitions during the first quarter of 2011...

  • Page 119
    ...: Impact of discontinued operations ...Adjusted net income ...Interest expense ...Total earnings available to cover fixed charges ...Total fixed charges - interest expense (including capitalized interest) ...Cumulative preferred share cash dividends ...Preferred partnership unit cash distributions...

  • Page 120
    ..., Shurgard Storage Centers, Inc. 2000 Long Term Incentive Plan, Shurgard Storage Centers, Inc. 1995 Long Term Incentive Compensation Plan. (3) of our reports dated February 28, 2011, with respect to the consolidated financial statements and related financial statement schedule of Public Storage...

  • Page 121
    ..., whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Ronald L. Havner, Jr. Name: Ronald L. Havner, Jr. Title: Chief Executive Officer & President Date: February 28, 2011 Exhibit 31.1

  • Page 122
    ... information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John Reyes Name: John Reyes Title: Chief Financial Officer Date: February 28, 2011 Exhibit 31.2

  • Page 123
    ... material respects, the financial condition and results of operations of the Company. /s/ Ronald L. Havner, Jr. Name: Ronald L. Havner, Jr. Title: Chief Executive Officer & President Date: February 28, 2011 /s/ John Reyes Name: John Reyes Title: Chief Financial Officer Date: February 28, 2011 This...

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    ...Senior Vice President and Chief Legal Officer Candace N. Krol Senior Vice President, Human Resources Corporate Headquarters 701 Western Avenue Glendale, CA 91201-2349 Investor Relations Additional information contact Clemente Teng Vice President of Investor Services (818) 244-8080 Transfer Agent...

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    Public Storage 701 Western Avenue, Glendale, California 91201-2349 ฀ ฀฀ ฀฀ (SKU 002CSI1489)