Public Storage 2011 Annual Report Download

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Public Storage
2011
Annual
Report

Table of contents

  • Page 1
    Public Storage 2 0 1 1 Annual Report

  • Page 2
    ... R O P E RT I E S (as of December 31, 2011) Number of Properties(1) Net Rentable Square Feet Number of Properties(1) Net Rentable Square Feet 1,528,000 15,493,000 Public Storage ฀ Arizona California Colorado ฀ Florida ฀ Illinois Indiana Kansas ฀ Louisiana ฀ ฀ Minnesota ฀ Missouri...

  • Page 3
    ... the year ended December 31, 2011 Revenues: Rental income and ancillary operations Interest and other income Expenses: Cost of operations Depreciation and amortization General and administrative Interest expense Income from continuing operations before the following items Equity in earnings of real...

  • Page 4
    ...European self-storage market deteriorated. In Europe we generated modest growth in revenues and net operating income in 2011, but at a declining rate as the year progressed. The outlook for Europe in 2012 is not great. Our commercial property investments, primarily PS Business Parks (PSB), continued...

  • Page 5
    ... and ancillary business income, excluding depreciation, general and administrative and financing costs) reï¬,ects unleveraged returns from capital investments and management's operating skills. When evaluating our net operating income, we focus on our "Same Store" properties (properties that we...

  • Page 6
    ... recently developed/acquired stores. Overall, Shurgard's earnings should increase in 2012 as a result of the joint venture acquisition noted above. Net Operating Income: European Self-Storage (Amounts in millions) 2011 Same Store Acquired/developed properties Total Public Storage's share $ 107 22...

  • Page 7
    ... Europe, which was part of our acquisition of Shurgard Storage in 2006, has provided our shareholders with substantial returns. Revenues and operating earnings have increased demonstrably since our acquisition. Property Operations: European Self-Storage (Amounts in millions) 2011 Revenues Cost...

  • Page 8
    ...2011 PSB's Same Park operations Acquired/developed properties Owned commercial properties Total Public Storage's share $ 169 26 9 $ 204 $ 89 2010 $ 177 10 9 $ 196 $ 86 We see signs of an improved economy in many of PSB's markets, which should provide higher rental activity, more favorable pricing...

  • Page 9
    ...ever anticipate remain outstanding in perpetuity issue price a higher rate than if we were to borrow money. However, we could not borrow money on these terms. ฀ In 1992, we issued our first series of preferred shares: $45 million of Series A with an annual dividend rate of 10%. Today, we have...

  • Page 10
    ... we are able to use this capital either to redeem higher coupon preferred shares or to acquire additional self-storage properties with attractive yields, our relationship with these investors is truly symbiotic. Our investment and operating track record is pretty good. Over the last ten years, we...

  • Page 11
    ...earnings, after preferred dividends, are distributed to owners. Over the long run, this business model should continue to produce good total returns to shareholders. A Special Note At the May 2012 Annual Meeting of Shareholders, Wayne Hughes will retire from the Public Storage Board of Trustees. In...

  • Page 12
    We started 2012 issuing about $900 million of preferred securities at an average coupon rate of 5.8%. John Reyes, our Chief Financial Officer could not have had better timing. These are the lowest rates for any company since 2003 and a record low for the industry. In fact, there have only been fi...

  • 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 Shares and each...

  • Page 14
    ...) earned at each of our owned real estate locations, and our equity share of such amounts with respect to facilities owned by our equity investees (principally PSB and Shurgard Europe). We believe that net operating income provides investors an understanding of the underlying cash ï¬,ows generated...

  • Page 15
    ... Identification 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...

  • Page 16
    ... the Company's Common Shares on the New York Stock Exchange on June 30, 2011). As of February 22, 2012, there were 171,286,803 outstanding Common Shares, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be filed in connection with the Annual Meeting...

  • Page 17
    ... property tax, real estate and zoning; risks associated with downturns 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...

  • Page 18
    ... public accountants. We have also reported quarterly to the SEC on Form 10-Q, which includes unaudited financial statements with such filings. We expect to continue such reporting. On our website, www.publicstorage.com, we make available, free of charge, our Annual Reports on Form 10-K, quarterly...

  • Page 19
    ... properties' pricing and promotional discounting on an automated basis. National Telephone Reservation System : Customers calling either the toll-free telephone referral system, (800) 44-STORE, or a particular storage facility, are directed to our centralized telephone reservation system. The sales...

  • Page 20
    ... reservation system and media advertising programs, will continue to enhance our ability to meet these goals. Acquire properties owned or operated by others in the U.S.: We seek to capitalize on the fragmentation of the self-storage business through acquiring attractively priced, well-located...

  • Page 21
    ...-alone public company traded on the New York Stock Exchange. As of December 31, 2011, it owned and operated approximately 27.2 million net rentable square feet of commercial space, and had an enterprise value of approximately $3.0 billion (based upon the trading price of PSB's common shares combined...

  • Page 22
    ... have issued common stock only in connection with mergers and the acquisition of interests in real estate entities. During periods of favorable market conditions, we have generally been able to raise capital at attractive costs; however, we are dependent upon capital market conditions and there can...

  • Page 23
    ... results of operations of these entities in our financial statements. Facilities Owned by Unconsolidated Real Estate Entities At December 31, 2011, we had ownership interests in entities that we do not control or consolidate, comprised of PSB, Shurgard Europe, and various limited partnerships that...

  • Page 24
    .... Our tenant insurance program reinsures a program that provides insurance to certificate holders against claims for property losses due to specific named perils (earthquakes are not covered by these policies) to goods stored by tenants at our self-storage facilities for individual limits up to...

  • Page 25
    ... in the credit markets; increases in insurance premiums, property tax assessments and other operating and maintenance expenses; transactional costs and liabilities, including transfer taxes; adverse changes in tax, real estate and zoning laws and regulations; and tenant and employment-related claims...

  • Page 26
    ... to our 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 or...

  • Page 27
    ... working capital and capacity under our credit facilities and our retained cash flow from operations to continue to operate our business as usual and meet our current obligations. However, if we were unable to issue preferred shares or borrow at reasonable rates, that could limit the earnings...

  • Page 28
    ... loan from us and Wells Fargo may be limited due to market conditions. If Shurgard Europe's available cash flow significantly declines and it is unable to obtain financing at a reasonable cost of capital due to a constrained equity or credit environment, negative operating trends, or other factors...

  • Page 29
    ...Maryland law may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our shares with the opportunity to realize a premium over the then-prevailing market price of our shares...

  • Page 30
    ...opted not to subject the Company to the statutory limitations of either the business combination provisions or the control share acquisitions provisions of Maryland law, but the Board may change this option as to either statute in the future. If the Board chooses to make them applicable to us, these...

  • Page 31
    ...we continue to reinsure risks 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 each...

  • Page 32
    ... and deficits. Action that may be taken in response to these problems, such as increases in property taxes, changes to sales taxes, DGRSWLRQRIDSURSRVHG³%XVLQHVV1HW5HFHLSWV7D[´RURWKHUJRYHUQPHQWDOHIIRUWVWRUDLVHU evenues could adversely impact our business and results of operations. 18

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

  • Page 34
    ..., 2011 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
    ... with property acquisitions. Although there can be no assurance, we are not aware of any environmental contamination of any of our facilities, which individually or in the aggregate would be material to our overall business, financial condition, or results of operations. ITEM 3. Legal Proceedings...

  • Page 37
    ... Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities a. Market Information of the Registrant's Common Equity: Our Common Shares (NYSE: PSA), including those of Public Storage, Inc. prior to our reorganization in June 2007, have been listed on the New York Stock Exchange...

  • Page 38
    ...Long-term Capital Gain ...Total ... c. Equity Shares The Company is authorized to issue 100,000,000 equity shares. Our declaration of trust provides that the equity shares may be issued from time to time in one or more series and gives the Board of Trustees broad authority to fix the dividend and...

  • Page 39
    ... for an aggregate of $106.2 million in cash (inclusive of accrued dividends). The following table presents monthly information related to our redemption of all of our outstanding Cumulative Preferred Shares, Series I, Series K, Series G and Series H during the year ended December 31, 2011: 25

  • Page 40
    ... - Series K September 1, 2011 - September 30, 2011 Preferred Shares - Series G October 1, 2011 - October 31, 2010 November 1, 2011 - November 30, 2011 Preferred Shares - Series H December 1, 2011 - December 31, 2011 Total Total Number of Shares/Units Repurchased - Average Price Paid per Share/Unit...

  • Page 41
    ...43,944 1,068,080 2007 Revenues: Rental income and ancillary operations ...Interest and other income ...Expenses: Cost of operations ...Depreciation and amortization ...General and administrative ...Interest expense...Income from continuing operations before equity in earnings of unconsolidated real...

  • Page 42
    ...DVGHILQHG in the Internal Revenue Code. As a REIT, we do not incur federal income tax if we distribute 100% of our REIT taxable income (generally, net rents and gains from real property, dividends, and interest) each year, and if we meet certain organizational and operational rules. We believe we...

  • 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
    ...(excluding accrued dividends) to redeem our Series Y Cumulative Preferred Shares. As of February 24, 2012, we are under contract to acquire a portfolio of six self-storage properties, located in California, Florida (two), Massachusetts, New Jersey and Pennsylvania, for an aggregate purchase price of...

  • Page 45
    ...various items such as impairment charges, acquisition due diligence costs, changes in accounting estimates, gains and losses on early redemption of debt (including our equity share from PSB and Shurgard Europe), impairment charges, as well as our equity share of PSB's lease termination fees received...

  • Page 46
    ... to non-real estate assets ...Eliminate - gain on sale of real estate investments ...Eliminate - gain on sale of real estate included in Discontinued Operations ...Eliminate - our share of PSB's gain on sale of real estate ...FFO allocable to our equity holders ...Less: allocations of FFO (to) from...

  • Page 47
    ... occupancy and higher realized rents per occupied square foot, and a 43.3% increase in net operating income with respect to the Non Same Store Facilities, due primarily to the impact of the properties acquired in 2010 and 2011. This was partially offset by a $4.7 million increase in depreciation and...

  • 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
    ...major markets in which we operate. However, trends in occupancy and realized rent per square foot have steadily improved in our Same Store Facilities in 2010 and 2011, and we have had more pricing power, resulting in rental income increases on a year-over-year basis beginning in the third quarter of...

  • Page 50
    ...New York, Virginia and Florida. We expect property tax expense growth of approximately 4.5% in 2012. Direct property payroll expense increased 1.0% in 2011, as compared to 2010, and increased by 2.2% in 2010, as compared to 2009. These increases were due primarily to higher incentives and wage rates...

  • Page 51
    ...cost of operations: 2011 $ 127,425 2010 $ 127,461 2009 $ 128,337 Property tax expense: 2011...271 $ 143,337 $ 144,761 Media advertising expense: 2011 $ 3,998 2010 $ 5,305 ...promotion expense: 2011 $ 5,706 $ 2010 $ 5,049 $ 2009 $ 4,757 $ REVPAF: 2011... annual rent per occupied square foot: 2011 $ ...

  • Page 52
    ... weighted average data) Same Store Facilities Operating Trends by Region Revenues: Southern California (184 facilities) Northern California (168 facilities) Texas (231 facilities)...Florida (184 facilities) ...Illinois (121 facilities) ...Washington (91 facilities) ...Georgia (90 facilities) ...All...

  • Page 53
    ...31, 2011 2010 Change 2010 2009 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 54
    ...,616 5,800 28,330 $ 15,412 54,887 70,299 $ 50,174 50,174 $ 15,412 4,713 20,125 Rental income: Facilities placed into service in 2011 ...Facilities placed into service in 2010 ...Expansion facilities...Total rental income ...Cost of operations before depreciation and amortization expense: Facilities...

  • Page 55
    ...of the facilities are located in California (primarily in Los Angeles and San Francisco), three facilities 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...

  • Page 56
    ... that PSB acquired in 2010 and 2011, (ii) reduced income allocations to PSB's preferred securities, due to redemptions, partially offset by (iii) increased depreciation and interest expense, each as a result of the property acquisitions. See Note 4 to our December 31, 2011 financial statements for...

  • Page 57
    ...foreign currency exchange rates, see below. These items were partially offset by increased interest and general and administrative expenses. See Note 4 to our December 31, 2011 financial statements for selected financial information on Shurgard Europe. Equity in earnings from Shurgard Europe for the...

  • Page 58
    ...: 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 59
    ... In place annual rent per occupied square foot represents annualized contractual rents per occupied square foot without reductions for promotional discounts and excludes late charges and administrative fees. Net operating income increased 0.7% from $105.8 million in 2010 to $106.5 million 2011, and...

  • Page 60
    ... 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 61
    ...51% pro rata share of Shurgard Europe's cost of the Acquired JV Interests for the period from March 2, 2011 until June 15, 2011. Interest and other income from Shurgard Europe increased from $24.8 million in 2009 to $25.1 million in 2010, due primarily to an increase in the interest rate on the loan...

  • Page 62
    ... facilities, certain expenses related to capital raising and acquisition activities, litigation expenditures, employee severance, share-based compensation, and incentive compensation for corporate and executive personnel. The increase in general and administrative expense for 2011 as compared 2010...

  • Page 63
    ... Facilities...Non Same Store 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 of...

  • Page 64
    ...fund our long-term growth strategies and debt obligations with (i) cash at December 31, 2011, (ii) internally generated retained cash flows, (iii) depending upon market conditions, proceeds from the issuance of common or preferred equity securities, and (iv) in the case of acquisitions of facilities...

  • Page 65
    ... acquire a portfolio of six selfstorage properties, located in California, Florida (two), Massachusetts, New Jersey and Pennsylvania, for an aggregate purchase price of $42 million. We expect the pending acquisition of these properties will close in the first quarter of 2012. The pending acquisition...

  • Page 66
    ... to make principal payments on the Wells Fargo Loan, which limits the principal payments that could otherwise be made on our loan. Future prepayments will be dependent upon Shurgard Europe's management's evaluation of uses for the capital available from operations after making principal payments on...

  • Page 67
    ... fixed-rate interest payments on our notes payable based on their contractual terms. See Note 6 to our December 31, 2011 financial statements for additional information on our notes payable. (2) We lease land, equipment and office space under various operating leases. Certain leases are cancelable...

  • Page 68
    ... of credit. ITEM 8. Financial Statements and Supplementary Data The financial statements of the Company at December 31, 2011 and December 31, 2010 and for each of the three years in the period ended December 31, 2011 and the report of Ernst & Young LLP, Independent Registered Public Accounting...

  • Page 69
    ...defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2011 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. 55

  • Page 70
    ... the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2011 and our report dated February 24, 2012 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Los Angeles, California...

  • Page 71
    ... as the company's Chief Executive Officer and a member of the Board of Public Storage since November 2002. Mr. Havner joined Public Storage in 1986 and has held a variety of senior management positions. Mr. Havner has been Chairman of the Board of Public Storage's affiliate, PS Business Parks, Inc...

  • Page 72
    ... Public Storage, Ms. Krol was employed by Parsons Corporation, a global engineering and construction firm, where she served in various management positions, most recently as Vice President of Human Resources for the Infrastructure and Technology global business unit. ITEM 11. Executive Compensation...

  • Page 73
    ...DQG/HJDO3URFHHGLQJV´ ITEM 14. Principal Accountant Fees and Services The information required by this item with respect to fees and services provided by the Company's independent auditors is hereby incorporated by reference to the material appearing in the Proxy Statement under the FDSWLRQ...

  • Page 74
    ... IV ITEM 15. a. 1. Exhibits and Financial Statement Schedules Financial Statements The financial statements listed in the accompanying Index to Financial Statements and Schedules hereof are filed as part of this report. 2. Financial Statement Schedules The financial statements schedules listed in...

  • Page 75
    ...herein. Bylaws of Public Storage, a Maryland real estate investment trust. Filed with the Registrant's Current Report on Form 8-K dated May 11, 2010 and incorporated by reference herein. Articles Supplementary for Public Storage 6.500% Cumulative Preferred Shares, Series W. Filed with the Registrant...

  • Page 76
    ... dated as of November 16, 1995. Filed with PS Partners, Ltd.'s Annual Report on Form 10-K for the year ended December 31, 1996 (SEC File No. 001-11186) and incorporated herein by reference. Agreement of Limited Partnership of PS Business Parks, L.P. Filed with PS Business Parks, Inc.'s Quarterly...

  • Page 77
    10.11* 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 No. 00111455). Public Storage, Inc. 2001 Stock Option and IncenWLYH3ODQ ³3ODQ´ )LOHG...

  • Page 78
    ...PRE** _ * ** (1) Rule 13a - 14(a) Certification. Filed herewith. Rule 13a - 14(a) Certification. Filed herewith. Section 1350 Certifications. Filed herewith. XBRL Instance Document XBRL ...SEC File No. 001-33519 unless otherwise indicated. Denotes management compensatory plan agreement or arrangement...

  • Page 79
    PUBLIC STORAGE INDEX TO FINANCIAL STATEMENTS (Item 15 (a)) Page References Report of Independent Registered Public Accounting Firm ...Balance sheets as of December 31, 2011 and 2010 ...For each of the three years in the period ended December 31, 2011: Statements of income ...Statements of ...

  • Page 80
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 81
    ... 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2012 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Los Angeles, California February 24...

  • Page 82
    PUBLIC STORAGE BALANCE SHEETS December 31, 2011 and 2010 (Amounts in thousands, except share data) December 31, 2011 ASSETS Cash and cash equivalents ...Marketable securities ...Real estate facilities, at cost: Land ...Buildings ...Accumulated depreciation ...Construction in process ...$ 139,008 2,...

  • Page 83
    ..., except per share amounts) 2011 Revenues: Self-storage facilities ...Ancillary operations...Interest and other income...Expenses: Cost of operations: Self-storage facilities...Ancillary operations ...Depreciation and amortization ...General and administrative ...Interest expense ...$ 1,605,680...

  • Page 84
    PUBLIC STORAGE STATEMENTS OF COMPREHENSIVE INCOME For each of the three years in the period ended December 31, 2011 (Amounts in thousands) 2011... ...Based upon repurchases of preferred partnership units ...Comprehensive income allocable to Public Storage Shareholders ...836,459 $ 2010 696...

  • Page 85
    ... shares (10,800,000 shares) (Note 8) ...Redemption 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 86
    ...of common shares in connection with acquisition of noncontrolling interests (477,928 shares) (Note 7) ...Share-based compensation expense, net of cash paid in lieu of common shares (Note 10) ...Adjustments of redeemable noncontrolling interests to liquidation value (Note 7) ...Increase (decrease) in...

  • Page 87
    ...: Principal payments on notes payable ...Repurchases of senior unsecured notes payable ...Net proceeds from the issuance of common shares ...Issuance of cumulative preferred shares ...Redemption of cumulative preferred shares ...Redemption of Equity Shares, Series A ...Acquisition of permanent...

  • Page 88
    ... of real estate...Real estate acquired in exchange for assumption of note payable ...Note payable assumed in connection with acquisition of real estate ...Consolidation of entities previously accounted for under the equity method of accounting (Note 4): Real estate facilities ...Investments...

  • Page 89
    ... include the acquisition, development, ownership and operation of self-storage facilities which offer storage spaces for lease, generally on a month-tomonth basis, for personal and business use. At December 31, 2011, we had direct and indirect equity interests in 2,058 self-storage facilities (with...

  • Page 90
    ... property, dividends, and interest) each year, and if we meet certain organizational and operational rules. We believe we will meet these REIT requirements in 2011, and that we have met them for all other periods presented herein. Accordingly, we have recorded no federal income tax expense related...

  • Page 91
    ... less at the date of acquisition. Cash and cash equivalents which are restricted from general corporate use are included in other assets. Commercial paper with a remaining maturity of more than three months when acquired is included in marketable securities. When at acquisition we have the positive...

  • Page 92
    ...RSHUDWLRQV´RQRXUVWDWHPHQWVRILQFRPH 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 reduce rental income over the...

  • Page 93
    ... dividends declared (or accumulated). When our cumulative preferred shares, preferred partnership units (Note 7), or Equity Shares, Series A are called for redemption, additional income is allocated to (from) the redeemed security to the extent the redemption cost is greater (less) than the related...

  • Page 94
    ...,473) (332,431) 4,033 (578) (2,734,449) 20,340 14,165 (30,978) 3,527 $ 7,562,033 During 2011, we acquired five operating self-storage facilities in Nevada, two in California and one each in New York, Florida, Maryland and Texas (896,000 net rentable square feet) and the leasehold interest in F-14

  • Page 95
    ... for acquired tenants in place. During 2011, we began to consolidate two limited partnerships that we had previously accounted for using the equity method (see Note 4). The two self-storage facilities (143,000 net rentable square feet) owned by these entities, having an aggregate fair market value...

  • Page 96
    ... 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, 2011 ($55.43 per share of PSB common stock), the shares and units we owned had a market value...

  • Page 97
    ... basis. 2011 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 on third...

  • Page 98
    ...DQDJJUHJDWHFRPPRQHTXLW\RZQHUVKLSRI approximately 26% in entities that collectively own 17 self-storage facilities and have no debt. On June 30, 2011, we acquired interests owned by Mr. Hughes (the Company's then Chairman of the Board of Trustees), and his family and entities that are wholly...

  • Page 99
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2011 On February 28, 2011, we provided bridge financing to Shurgard Europe totaling $237.9 million, which it used to acquire its partner's 80% interests in two affiliated joint ventures on March 2, 2011. This loan bore interest at a fixed ...

  • Page 100
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2011 December 31, 2011 Carrying Fair amount Value Unsecured Notes Payable: 5.875% effective and stated note rate, interest only and payable semiannually, matures in March 2013 ...$ 5.7% effective rate, 7.75% stated note rate, interest only ...

  • Page 101
    ... limited partnerships pursuant to mergers described in Note 9. These interests were acquired for an aggregate cost of approximately $175.5 million, consisting of $118.4 million in cash and 477,928 of our common shares with an aggregate fair value of $57.1 million based on the closing trading price...

  • Page 102
    ... carrying amount) for approximately $128.0 million, and we acquired all of the 6.25% Series Z preferred partnership units from a third party for $25.0 million at carrying amount. These transactions resulted in an increase in paid-in capital of approximately $72.0 million during 2009, and an EITF...

  • Page 103
    ... shares (voting as a single class without regard to series) will have the right to elect two additional members to serve on our Board of Trustees until the arrearage has been cured. At December 31, 2011, there were no dividends in arrears. Except under certain conditions relating to the Company...

  • Page 104
    ...holders of our Equity Shares, Series A in the year ended December 31, 2010 in connection with this redemption. Common Shares During 2011, 2010 and 2009, activity with respect to the issuance or repurchase of our common shares was as follows: 2011 Shares Employee stock-based compensation and exercise...

  • Page 105
    ... in the operations 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 self-storage facilities. We reinsure risks relating to loss of goods stored by tenants...

  • Page 106
    ... entity that provides liability and casualty insurance for PS Canada, the Company and certain affiliates of the Company for occurrences prior to April 1, 2004. On August 23, 2011, we completed mergers to acquire all of the units of limited partnership interest and general partnership interests we...

  • Page 107
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2011 Outstanding stock option grants are included on a one-for-one basis in our diluted weighted average shares, to the extent dilutive, after applying the treasury stock method (based upon the average common share price during the period) to...

  • Page 108
    ..., 2012, and an additional 20% will vest on the anniversary date over the next four years assuming continued employment with Public Storage through each respective vesting date. Included in general and administrative expense for 2011 is $11.3 million related to this performance-based restricted share...

  • Page 109
    ... management team that determines the strategic direction for this segment under the direction of our chief operating decision maker and our joint venture partner which owns a 51% equity interest in Shurgard Europe. The European Self-Storage segment presentation includes our equity share of Shurgard...

  • Page 110
    ...December 31, 2011 Domestic Self-Storage Revenues: Self-storage facilities ...Ancillary operations ...Interest and other income ...Expenses: Cost of operations: Self-storage facilities ...Ancillary operations ...Depreciation and amortization ...General and administrative ...Interest expense ...Income...

  • Page 111
    ... STATEMENTS December 31, 2011 For the year ended December 31, 2010 Domestic Self-Storage Revenues: Self-storage facilities ...Ancillary operations ...Interest and other income ...Expenses: Cost of operations: Self-storage facilities ...Ancillary operations ...Depreciation and amortization ...General...

  • Page 112
    ...: Self-storage facilities ...Ancillary operations ...Depreciation and amortization ...General and administrative ...Interest expense ...Income from continuing operations before equity in earnings of unconsolidated real estate entities, foreign currency exchange gain, gain on real estate sales and...

  • Page 113
    .... Our tenant insurance program reinsures a program that provides insurance to certificate holders against claims for property losses due to specific named perils (earthquakes are not covered by these policies) to goods stored by tenants at our self-storage facilities for individual limits up to...

  • Page 114
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2011 party insurance coverage for claims paid exceeding $1.0 million resulting from any one individual event, to a limit of $25.0 million. Effective December 1, 2011, these coverage amounts were changed to $5.0 million and $15.0 million, ...

  • Page 115
    ...a contract to acquire a portfolio of six self-storage properties, located in California, Florida (two), Massachusetts, New Jersey and Pennsylvania, for an aggregate purchase price of $42 million, cash. We expect the pending acquisition of these properties will close in the first quarter of 2012. The...

  • Page 116
    ... 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 ...Allocations...

  • Page 117
    ... financial statement schedule of Public Storage and the effectiveness of internal control over financial reporting of Public Storage, included in this Annual Report (Form 10-K) of Public Storage for the year ended December 31, 2011. /s/ Ernst & Young LLP February 24, 2012 Los Angeles, California

  • Page 118
    ... 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: Chairman, Chief Executive Officer & President Date: February 24, 2012 Exhibit 31.1

  • Page 119
    ... and report financial 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 24, 2012...

  • Page 120
    ...the Annual Report on Form 10-K RI3XEOLF6WRUDJH WKH³&RPSDQ\´ IRUWKH year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the ³5HSRUW´ 5RQDOG/+DYQHU-UDV Chairman, Chief Executive Officer and President of the Company and John Reyes...

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  • Page 123
    ... The Annual Meeting of Shareholders of Public Storage will be held on May 3, 2012 at 11:00 a.m. at the Hilton Glendale, 100 West Glenoaks Boulevard, Glendale, CA. PS Insurance Capri L. Haga President Shurgard Self Storage S.C.A. (Europe) Marc Oursin Chief Executive Officer PS Business Parks, Inc...

  • Page 124
    Public Storage 701 Western Avenue, Glendale, California 91201-2349 ฀ ฀฀ ฀฀ (SKU 002CSN0972)