Public Storage 2011 Annual Report Download - page 9
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Managing for Results
An excerpt from Berkshire Hathaway’s annual report best summarizes our
fundamental approach to driving returns for shareholders:
“A business obtains the best financial results possible by managing both sides of the
balance sheet well. This means obtaining the highest possible return on assets and the
lowest possible costs on liabilities.”
Our primary “liability” is preferred stock, which provides leverage to our capital
structure. Since we issued our first series of perpetual preferred stock 20 years ago,
it seems appropriate to reflect on its benefits and detriments.
First, a quick refresher on the attributes of our perpetual preferred shares:
customary for a loan.
have the same tax effect as if they were interest.
preferred dividends (a position we don’t 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 $3.3 billion of outstanding preferred
shares. We have benefited tremendously from the asymmetrical f our maturity o