Public Storage 2010 Annual Report Download - page 57

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(2) ³2WKHU´ UHIOHFWV RXU VKDUH RI JHQHUDO DQG DGPLQLVWUDWLYH H[SHQVH LQWerest expense, interest income, gains on sale of real
estate assets, and other non-property; non-depreciation related operating results of these entities.
(3) Includes our pro rata share of benefit totaling $16.3 million and $1.9 million IURP36%¶VSUHIHUUHG stock and preferred unit
repurchases for the years ended December 31, 2009 and 2008, respectively.
Investment in PSB: At December 31 2010 and 2009, we have a 41% common equity interest in PSB,
comprised of our ownership of 5,801,606 shares of PSB¶VFRPPRQVWRFNDQGOLPLWHGSDUWQHUVKLSXQLWVLQ
36%¶V XQGHUO\LQJ 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. Our ownership interest was reduced during 2009
as PSB sold 3,833,333 shares of its common stock, of which we purchased 383,333 shares or 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 decreased to $20,719,000 in 2010 as compared to $35,108,000 in 2009. This
decrease was primarily the result of recognizing our pro rata share, $16.3 million, of the benefit that PSB recognized
during 2009 DV D UHVXOW RI 36%¶V SUHIHUUHG VWRFN DQG SUHIHUUHG SDUWQHUVKLS XQLW UHSXUFKDVHV  7KLV GHFUHDVH ZDV
partially offset by our pro rata share, $2.1 million, of 36%¶V gain on disposition of a property. Equity in earnings
was also negatively impacted during 2010 compared to 2009 by our pro-rata share, $4.5 million, of reduced property
net operating income due primarily to a 4.1% decline LQ WKH DQQXDOL]HG UHDOL]HG UHQW SHU VTXDUH IRRW IRU 36%¶V
³6DPH3DUN´IDFLOLWLHVIRUDVFRPSDUHGWR
We expect that oXUIXWXUHHTXLW\LQFRPHIURP36%ZLOOEHGHSHQGHQWHQWLUHO\XSRQ36%¶VRSHUDWLQJUHVXOWV
Our investment in PSB provides us with some diversification into another asset type. We have no plans of disposing
RIRXULQYHVWPHQWLQ36%36%¶VILOLQJVDQGVHOHFWHGILQDQFLDOLQIRUPDWLRQFDQEHDFFHVVHGWKURXJKWKH6HFXULWLHV
and Exchange Commission, and on 36%¶V website, www.psbusinessparks.com. See Note 5 to our December 31,
2010 consolidated financial statements for additional financial information on PSB.
Investment in Shurgard Europe: We originally acquired our 100% interest in Shurgard Europe during our
merger with Shurgard, which occurred in August 2006. Our primary objective for merging with Shurgard was to
DFTXLUH6KXUJDUG¶V86GRPHVWLFDVVHWVZKLFKDFFRXQWHGIRUDSSUR[LPDWHO\487 facilities in the U.S. as compared to
160 facilities in Europe at the time of the Shurgard Merger. Subsequent to the Shurgard Merger, management of
Public Storage determined that it was in our best interests to reduce our investment in Shurgard Europe. There were
many reasons for that determination, most relating to the fact that continued growth of Shurgard Europe would
require a significant capital commitment. Movement of capital from Public Storage (in the U.S.) to various
European countries would have exposed Public Storage to currency fluctuation risks and to potential tax burdens
when Public Storage wished to repatriate its capital investment. Accordingly, in March 2008, we sold 51% of our
ownership interest in Shurgard Europe, which helped to limit our capital requirements to continue to grow Shurgard
Europe and to limit our exposure to other risks of owning operations in foreign countries. We do not intend to sell
any of our remaining interest in Shurgard Europe. In the future, we expect Shurgard Europe to function as a stand-
alone entity and to fund its capital requirements primarily with its retained operating cash flow, bank borrowings
and, to the extent available, public or private equity.
As described in Note 3 to our December 31, 2010 consolidated financial statements, due to our March 31,
2008 disposition of a 51% interest in Shurgard Europe, beginning for periods after March 31, 2008 we no longer
consolidate the revenues and expenses of Shurgard Europe on our consolidated statements of income, and our pro-
rata share of the operating results of Shurgard Europe is included in ³HTXLW\ LQ HDUQLQJV RI UHDO HVWDWH HQWLWLHV´
Selected financial data for Shurgard Europe for the years ended December 31, 2010, 2009 and 2008 is included in
Note 5 to our December 31, 2010 consolidated financial statements.
This transaction has resulted in the operations of Shurgard Europe having a less significant impact on our
operating results, as we have a 49% interest and a loan receivable from Shurgard Europe upon which we receive
interest income, rather than the 100% equity interest in Shurgard Europe we held prior to the transaction. Our future