Public Storage 2010 Annual Report Download - page 56

42
We believe that our management, promotion, and operating infrastructure will result in these 42 facilities
stabilizing at a higher level of net operating income than was achieved by the previous 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 tenants to stimulate move-ins; once a targeted physical occupancy is
approached, we raise the rates to new and, more gradually, to existing tenants in order to reach stabilized rents per
foot. There can be no assurance that our expectations with respect to these facilities will be achieved.
The Other Facilities are subject to the same occupancy and rate pressures that our Same Store Facilities are
facing, and accordingly the pace at which these facilities reach stabilization, and the ultimate level of cash flows to
be reached upon stabilization, may be negatively impacted by the current economic trends. Nonetheless, we expect
that the Other Facilities will continue to provide earnings growth during 2011.
Equity in earnings of real estate entities
At December 31, 2010, we have equity investments in PSB, Shurgard Europe and five affiliated limited
partnerships. Due to our limited ownership interest and lack control of these entities, we do not consolidate the
accounts of these entities for financial reporting purposes, and account for such investments using the equity
method.
Equity in earnings of real estate entities for the years ended December 31, 2010, 2009 and 2008, consists of
our pro-rata share of the net income of these Unconsolidated Entities based upon our ownership interest for the
period. The following table sets forth the significant components of equity in earnings of real estate entities.
Amounts with respect to PSB, Shurgard Europe, and Other Investments are included in our Commercial segment,
Europe Self-Storage segment, and other items not allocated to segments, respectively, as described in Note 11 to our
December 31, 2010 consolidated financial statements.
Historical summary: Year Ended December 31,
Year Ended December 31,
2010 2009
Change
2009 2008 Change
(Amounts in thousands)
Net operating income (1):
PSB ................................................................ $ 77,019 $ 81,525
$ (4,506)
$ 81,525 $ 89,067 $ (7,542)
Shurgard Europe ............................................ 49,278 46,374
2,904
46,374 38,785 7,589
Other Investments.......................................... 2,704 2,713
(9)
2,713 4,626 (1,913)
129,001 130,612
(1,611)
130,612 132,478 (1,866)
Depreciation:
PSB ................................................................ (32,215) (37,167)
4,952
(37,167) (45,422) 8,255
Shurgard Europe ........................................... (27,993) (24,498)
(3,495)
(24,498) (27,578) 3,080
Other Investments.......................................... (902) (806)
(96)
(806) (1,918) 1,112
(61,110) (62,471)
1,361
(62,471) (74,918) 12,447
Other:(2):
PSB (3) .......................................................... (24,085) (9,250)
(14,835)
(9,250) (29,320) 20,070
Shurgard Europe ............................................ (5,413) (5,607)
194
(5,607) (7,073) 1,466
Other Investments ......................................... (41) (40)
(1)
(40) (776) 736
(29,539) (14,897)
(14,642)
(14,897) (37,169) 22,272
Total equity in earnings of real estate entities:
PSB ................................................................ 20,719 35,108
(14,389)
35,108 14,325 20,783
Shurgard Europe ........................................... 15,872 16,269
(397)
16,269 4,134 12,135
Other Investments ......................................... 1,761 1,867
(106)
1,867 1,932 (65)
Total equity in earnings of real estate entities $ 38,352 $ 53,244
$ (14,892)
$ 53,244 $ 20,391 $ 32,853
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