Public Storage 2010 Annual Report Download - page 21

7
the overall fragmentation in the self-storage industry. Data on the rental rates and occupancy levels of our existing
facilities, which are often located in proximity to potential acquisition candidates, provide us an advantage in
evaluating the potential of acquisition opportunities. During 2008 and 2009, there were few acquisition
opportunities. We have increased our acquisitions of self-storage facilities in 2010 as more opportunities became
available. During 2010, we acquired 42 facilities (2.7 million net rentable square feet) for approximately
$239.6 million. While there can be no assurance, we believe that additional acquisition opportunities may
materialize in 2011. In January 2011, we acquired five facilities (386,000 net rentable square feet) in Nevada for
approximately $19.5 million. The acquisition of this facility is subject to customary closing conditions, and there
can be no assurance that we will be able to complete this acquisition.
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 GHQVLW\ LQ FHUWDLQ IDFLOLWLHV¶ ORFDO PDUNHW DUHD
However, due to the challenging operating environment, we substantially curtailed our development activities
beginning in 2008. We continue to have a nominal development pipeline at December 31, 2010. Shurgard Europe
KDVVLPLODUO\UHGXFHGLWVGHYHORSPHQWDFWLYLWLHVVHH³&DSLWDOL]HRQWKH3RWHQWLDOIRU*URZWKLQ(XURSH´EHORZ
Participate in the growth of commercial facilities primarily through our ownership in PS Business
Parks, Inc.: At December 31, 2010, we had a 41% 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, 2010, PSB owned and operated approximately 21.8 million net rentable square
feet of commercial space located in eight states in the U.S. During 2008 through 2010, the recession in the U.S.
impacted PSB, resulting in a decrease in rental income IRU36%¶V³VDPHSDUN´IDFLOLWLHV It is uncertain what impact
WKHFXUUHQWUHFHVVLRQDU\WUHQGVZLOOKDYHRQ36%¶VIXWXUHRFFXSDQF\OHYHOVDQGUHQWDOUHQWV. Due to capital market
dislocations and other factors, PSB did not acquire any new commercial space in 2009 and 2008; however, in 2010,
PSB acquired a total of 2.4 million net rentable square feet of commercial space for an aggregate cost of
approximately $301.7 million. On February 9, 2011, we loaned PSB $121 million which 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%.
Capitalize on the potential for growth in Europe: On March 31, 2008, we entered into a 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
PDQDJLQJ PHPEHU RI 6KXUJDUG (XURSHDQ +ROGLQJV //& D MRLQW YHQWXUH IRUPHG WR RZQ 6KXUJDUG (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 consists of 116 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.