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Public Storage
®
2012
Annual
Report

Table of contents

  • Page 1
    ® Public Storage 2 0 1 2 Annual Report

  • Page 2
    ...(cont.) 27 237 7 78 91 15 2,078 Shurgard Europe Belgium Denmark France Germany Netherlands Sweden United Kingdom Self-storage totals Arizona California Florida Maryland Oregon Texas Virginia Washington Grand Totals 21 10 56 11 40 30 21 189 2,267 4 48 3 6 3 18 17 3 102 2,369 PS Business Parks, Inc.

  • Page 3
    ..., except per share data) Operating Revenue Operating Expenses: Cost of operations Depreciation and amortization General and administrative Asset impairment charges Operating income Interest and other income Interest expense Equity in earnings of unconsolidated real estate entities Foreign currency...

  • Page 4
    ...great recession" or serious capital market dislocation. Why do we use free cash flow on a per share basis? What owners should care about is how much each share they own is increasing in value, not the size of the domain being managed. Frequently, in corporate America, management teams focus on total...

  • Page 5
    .... Going forward, we expect increases in dividends to more closely approximate growth in free cash flow. Our dividend policy remains the same as it has been for the last 20 plus years. We will only distribute the earnings required to protect our tax status as a Real Estate Investment Trust. (1) See...

  • Page 6
    ..., except per share amounts) 2012 U.S. self-storage operations European self-storage operations Commercial properties Ancillary operations Total $ 1,201 61 105 87 $ 1,454 2011 $ 1,099 61 89 78 $ 1,327 2010 $ 1,015 43 85 69 $ 1,212 Free cash ï¬,ow per share Dividends per share $ 6.41 $ 4.40...

  • Page 7
    ... expansion of our development/redevelopment program should accelerate this important source of growth. All our major markets performed well. Same Store net operating income increased 8% and property occupancies averaged a record 91.8%. The 2012 self-storage operating environment was unparalleled...

  • Page 8
    ...-Storage (Amounts in millions) 2012 Same Store Acquired/developed properties Total Public Storage's share Total assets (before depreciation reserves) $ $ $ 110 15 125 61 2011 $ 108 13 $ 121 $ 61 $ $ $ 2010 106 10 116 43 $ 1,643 $ 1,596 $ 1,618 Shurgard Europe continues to dedicate its free...

  • Page 9
    ... in commercial properties consists of our wholly owned commercial properties that are generally contiguous to our self-storage properties and our 41% equity interest in PS Business Parks, Inc. (PSB). We own approximately two million square feet directly and another 12 million square feet indirectly...

  • Page 10
    ... change in realized rental rates turned positive in the fourth quarter of 2012. Net Operating Income: Commercial Properties (Amounts in millions) 2012 PSB's Same Park operations Acquired/developed properties Owned commercial properties Total Public Storage's share Total assets (before depreciation...

  • Page 11
    ... Operations Our ancillary businesses provide the "icing on the cake" for our self-storage business. With minimal capital investment, we sell merchandise and make available tenant insurance to customers of our self-storage business and manage third party facilities. We use the personnel, properties...

  • Page 12
    ... returns for owners. By the early 90's, we re-focused on our business model, deleveraged, principally through the issuance of preferred securities, and simplified our corporate structure. This process culminated in 1995 when Public Storage, the private company, became public through a reverse...

  • Page 13
    ... 100 $ 1,665 The Public Storage organization had a year-end enterprise value of about $32 billion. The Company's equity market capitalization was just under $25 billion, making it the second largest public real estate company in the world (on a rentable square foot basis, we are number three, with...

  • Page 14
    .... Public Storage is the Coca-Cola of the real estate business. Capital Deployment During 2012, we acquired 24 properties with 1.9 million net rentable square feet for approximately $226 million. The properties are located in California, Florida, New Jersey, New York, Georgia, Hawaii, Arizona...

  • Page 15
    ... our competitive position. At year-end, we had approximately $160 million of properties under development or redevelopment. Conclusion In 2012, Moody's, the rating agency, upgraded Public Storage's credit rating to "A2" with a stable outlook, making Public Storage the highest-rated real estate 13

  • Page 16
    ...of the 5,500 people that are part of the Public Storage organization. In 2012, we continued to build upon our competitive advantages and increase our intrinsic value per share. We expect to do the same in 2013. Ronald L. Havner, Jr. Chairman of the Board, Chief Executive Officer and President March...

  • Page 17
    ... 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 18
    ... currency exchange, real estate disposition and debt retirement, discontinued operations, and asset impairment charges, net Our equity share of PSB's and Shurgard Europe's depreciation, interest and other income, disposition gains, general and administrative expense, interest expense and preferred...

  • Page 19
    ... 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 20
    ... price of the Company's Common Shares on the New York Stock Exchange on June 30, 2012). As of February 22, 2013, there were 171,728,085 outstanding Common Shares, $.10 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be filed in connection with the Annual...

  • Page 21
    ... or breaches of our data security; risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities; risks related to the concentration of approximately 20% of our facilities in California...

  • Page 22
    ...spaces for lease, generally on a month-to-month basis, for personal and business use. We are the largest owner and operator of self-storage facilities in the United States ("U.S."). We have direct and indirect equity interests in 2,078 self-storage facilities (132 million net rentable square feet of...

  • Page 23
    ... in phone selling skills. Customers reach our call center by calling i) our advertised toll-free telephone referral number, (800) 44-STORE, ii) an individual storage location's telephone number advertised on each sign of our storage facilities, or iii) telephone numbers provided on our website. We...

  • Page 24
    ... into customers. Economies of scale: We are the largest provider of self-storage space in the U.S. As of December 31, 2012, we operated 2,078 self-storage facilities in which we had an interest with over one million self-storage spaces rented. These facilities are generally located in major markets...

  • Page 25
    ... in PS Business Parks, Inc.: Our investment in PSB provides us diversification into another asset type, and we have no plans of disposing of our investment in PSB. During 2010 and 2011, the challenging economic trends in commercial real estate resulted in year over year decreases in rental income...

  • Page 26
    ... capital to fund our ongoing operations or meet our obligations. However, in order to grow our asset base, access to capital is important. Issuance of preferred and common securities: When seeking capital, we generally select the lowest-cost form of permanent capital which is dependent on market...

  • Page 27
    ... an aggregate of 14 self-storage facilities with approximately 0.8 million net rentable square feet of storage space. These entities are referred to collectively as the "Unconsolidated Real Estate Entities." PSB, which files financial statements with the SEC, and Shurgard Europe, have debt and other...

  • Page 28
    ... in part from increased moving activity during the summer months. Insurance We have historically carried customary property, earthquake, general liability, medical insurance provided to our employees, and workers compensation coverage through internationally recognized insurance carriers, subject to...

  • Page 29
    ... 31, 2012. Competition in the local market areas in which many of our properties are located is significant and has affected our occupancy levels, rental rates and operating expenses. If development of self-storage facilities by other operators were to increase, due to increases in availability...

  • Page 30
    ... in employment and population levels, household and disposable income, and other general economic factors that lead to a reduction in demand for rental space in each of the markets in which we operate our properties. Our ability to issue preferred shares or access other sources of capital, such...

  • Page 31
    ... in Shurgard Europe: Laws in Europe and the U.S. may create, impede or increase the cost to Public Storage of, repatriation of funds we have invested in Shurgard Europe or our share of Shurgard Europe's earnings. Risks of collective bargaining and intellectual property: Collective bargaining...

  • Page 32
    ... may impose limitations that may make it more difficult for a third party to negotiate or effect a business combination transaction or control share acquisition with Public Storage. Currently, the Board has opted not to subject the Company to these provisions of Maryland law, but it could choose to...

  • Page 33
    ... in the Canadian Self-Storage Facilities, we may have to share the use of the "Public Storage" name in Canada with the Hughes Family, unless we are able to terminate the license agreement. Through our subsidiaries, we reinsure risks relating to loss of goods stored by tenants in the Canadian...

  • Page 34
    ... marketability of our real estate facilities. Our tenant insurance business is subject to governmental regulation which could reduce our profitability or limit our growth. We hold Limited Lines Self-Service Storage Insurance Agent licenses from a number of individual state Departments of Insurance...

  • Page 35
    ITEM 1B. None. Unresolved Staff Comments 17

  • Page 36
    ..., 2012 Number of Storage Net Rentable Square Feet Facilities (a) (in thousands) U.S.: California: Southern ...Northern ...Texas ...Florida ...Illinois ...Georgia ...Washington ...North Carolina ...Virginia ...New York ...Colorado ...New Jersey ...Maryland ...Minnesota ...Michigan ...Arizona ...South...

  • Page 37
    ... access on an unrestricted basis 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 spaces are rented on a month-to-month...

  • Page 38
    rentable square feet of commercial space managed primarily by PSB, primarily representing individual retail locations at our existing self-storage locations. The commercial properties owned by PSB consist primarily of flex, multi-tenant office and industrial space. Flex space is defined as buildings...

  • Page 39
    ... Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities a. Market Information of the Registrant's Common Equity: Our Common Shares (NYSE: PSA) have been listed on the New York Stock Exchange since October 19, 1984. The following table sets forth the high and low sales prices...

  • Page 40
    ... various classes of preferred shares were classified as follows: 1st Quarter 99.9406% 0.0594% 100.0000% 2nd Quarter 100.0000% 0.0000% 100.0000% 3rd Quarter 100.0000% 0.0000% 100.0000% 4th Quarter 96.6553% 3.3447% 100.0000% Ordinary Income ...Long-term Capital Gain ...Total ... c. Equity Shares We...

  • Page 41
    ...- October 31, 2012 Preferred Shares - Series F Preferred Shares - Series X November 1, 2012 - November 30, 2012 December 1, 2012 - December 31, 2012 Preferred Shares - Series Z Preferred Shares - Series A Preferred Shares - Series D Total Total Number of Shares Repurchased - Average Price Paid per...

  • Page 42
    ... $1,076,971 $340,018 $(984,076) The 2009 decreases in our revenues, cost of operations, and depreciation and amortization, and our increase in equity in earnings of unconsolidated real estate entities, are due primarily to our disposition of a 51% interest in Shurgard Europe on March 31, 2008. 24

  • Page 43
    ...uncertain. Income Tax Expense: We have elected to be treated as a real estate investment trust ("REIT"), as defined in the Internal Revenue Code. As a REIT, we do not incur federal income tax on our REIT taxable income (generally, net rents and gains from real property, dividends, and interest) that...

  • Page 44
    ... for self-storage activities in certain municipalities, it is uncertain as to how much additional development we will undertake in the future. We also have equity investments in Shurgard Europe, interests in commercial operations primarily through our investment in PS Business Parks, Inc. ("PSB...

  • Page 45
    ... Europe, due primarily to Shurgard Europe's acquisition of its joint venture partner's interests on March 2, 2011 and (iv) reduced income allocations to our Equity Shares, Series A. Funds from Operations Funds from Operations ("FFO") is a term defined by the National Association of Real Estate...

  • Page 46
    ..., and ii) the aggregate net impact of impairment charges with respect to non-real estate assets, contingency accruals, our equity share of PSB's lease termination benefits, and costs associated with the acquisition of real estate facilities, representing an aggregate net reduction in FFO per...

  • Page 47
    Real Estate Operations Self-Storage Operations: Our self-storage operations represent 93% of our revenues for the year ended December 31, 2012. Our self-storage operations are analyzed in two groups: (i) the Same Store Facilities, representing the facilities that we have owned and operated on a ...

  • Page 48
    ...: Rental income ...Late charges and administrative fees ...Total revenues (a) ...Cost of operations: Property taxes ...On-site property manager payroll ...Repairs and maintenance ...Utilities ...Media advertising ...Other advertising and selling expense...Other direct property costs ...Supervisory...

  • Page 49
    ... discounts, and excludes late charges and administrative fees. Analysis of Revenue Revenues generated by our Same Store Facilities increased by 4.9% in 2012 as compared to 2011 due primarily to increased average rental rates charged to our tenants. This increase was due primarily to annual rent...

  • Page 50
    ... flat in 2013. Other direct property costs include administrative expenses incurred at the self-storage facilities, such as property insurance, business license costs, bank charges related to processing the properties' cash receipts, and the cost of operating each property's rental office including...

  • Page 51
    .... We expect growth in supervisory payroll in excess of inflation, due to higher wage rates, incentives and increased headcount. Allocated overhead represents administrative expenses for shared general corporate functions, which are allocated to self-storage property operations to the extent their...

  • Page 52
    ... revenues ...Net operating income: Los Angeles ...San Francisco ...New York...Chicago ...Washington DC...Seattle-Tacoma ...Miami ...Dallas-Ft. Worth ...Houston ...Atlanta...Philadelphia ...Denver...Minneapolis-St. Paul ...Portland ...Orlando-Daytona...All other markets...Total net operating income...

  • Page 53
    ... annual rent per occupied square foot: Los Angeles ...$ San Francisco ...New York...Chicago ...Washington DC...Seattle-Tacoma ...Miami...Dallas-Ft. Worth ...Houston ...Atlanta ...Philadelphia ...Denver ...Minneapolis-St. Paul ...Portland ...Orlando-Daytona ...All other markets ...Total realized rent...

  • Page 54
    ...4.3% 3.9% 4.7% 4.2% REVPAF: Los Angeles ...San Francisco ...New York ...Chicago ...Washington DC ...Seattle-Tacoma ...Miami ...Dallas-Ft. Worth ...Houston...Atlanta ...Philadelphia ...Denver ...Minneapolis-St. Paul...Portland...Orlando-Daytona ...All other markets ...Total REVPAF ... $ $ $ $ We...

  • Page 55
    ...rent per occupied square foot: Facilities placed into service in 2012 ...Facilities placed into service in 2011 ...Other facilities ...$ Number of Facilities: Facilities placed into service in 2012 ...Facilities placed into service in 2011 ...Other facilities ...27 14 83 124 Net rentable square feet...

  • Page 56
    ... earnings of the 2012 acquisitions are reflected in our operations for a longer period in 2013 as compared to 2012. Equity in earnings of unconsolidated real estate entities At December 31, 2012, we have equity investments in PSB, Shurgard Europe and various limited partnerships. We account for such...

  • Page 57
    ..., partially offset by (iii) increased depreciation and interest expense, as a result of 2010 and 2011 property acquisitions. Our investment in PSB, which we plan on holding for the long-term, provides us with some diversification. Investment in Shurgard Europe: Equity in earnings of Shurgard Europe...

  • Page 58
    ...rata share of the operating results for these facilities, based upon the actual exchange rates for each period, is included in "equity in earnings of unconsolidated real estate entities" on our statements of income. In Note 4 to our December 31, 2012 financial statements, we disclose Shurgard Europe...

  • Page 59
    ... rental rates. Realized annual rent takes into consideration promotional discounts, which reduce rental income. (f) Realized annual rent per available foot or "REVPAF" is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet...

  • Page 60
    ... expenses. Based upon current operating trends and metrics, we expect Shurgard Europe's Same Store Facilities to experience a year over year reduction in revenues at least during the first quarter of 2013. See "Liquidity and Capital Resources - Shurgard Europe" for additional information on Shurgard...

  • Page 61
    ... insurance policies, and approximately flat premium rates, in 2013 as compared to the growth experienced in 2012. Commercial operations: We also operate commercial facilities, primarily the leasing of small retail storefronts and office space located on or near our existing self-storage facilities...

  • Page 62
    ... compensation. Costs of senior executives represents the cash compensation paid to our chief executive officer and chief financial officer, and has increased due to an increase in incentive compensation paid in 2012 as compared to 2011. Development and acquisition overhead represents the internal...

  • Page 63
    ... to general corporate legal matters and risk management, and varies based upon the level of litigation. Public company costs represent the incremental costs of operating as a publicly-traded company, such as internal and external investor relations expenses, stock listing and transfer agent fees...

  • Page 64
    ... from self-storage ...Ancillary operating revenue ...Ancillary cost of operations...Commercial depreciation and amortization ...General and administrative expense ...Asset impairment charges...Interest and other income ...Interest expense ...Equity in earnings of unconsolidated real estate entities...

  • Page 65
    ... to make both scheduled and optional principal payments on debt and for reinvestment. For the Year Ended December 31, 2012 2011 2010 (Amount in thousands) Net cash provided by operating activities (a) ...$ 1,285,659 $ 1,203,452 $ 1,093,221 Capital improvements to real estate facilities ...Remaining...

  • Page 66
    .... The net proceeds from these issuances were generally used to fund the redemptions of higher rate preferred securities and thus lower our cost of capital with respect to our overall outstanding preferred securities. During 2013, due to the favorable market conditions, we expect to continue to issue...

  • Page 67
    ... periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code. As a REIT, we do not incur federal income tax on our REIT taxable income (generally, net rents and gains from real property, dividends, and interest) that is fully distributed each year (for...

  • Page 68
    ... which were repaid in January 2013. See Note 6 to our December 31, 2012 financial statements for additional information on our line of credit. (3) We lease land, equipment and office space under various operating leases. Certain leases are cancelable; however, significant penalties would be incurred...

  • Page 69
    ... option. Our debt is our only market-risk sensitive portion of our capital structure, which totals $468.8 million and represents 5.8% of the book value of our equity at December 31, 2012. We have foreign currency exposures related to our investment in Shurgard Europe, which has a book value of $411...

  • Page 70
    ..., our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2012, at a reasonable assurance level. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing...

  • Page 71
    ...criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Public Storage as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, shareholders...

  • Page 72
    ...Group, in February 2005, with responsibility for the real estate activities of Public Storage, including property acquisitions, developments, repackagings, and capital improvements. Steven M. Glick, age 56, became Senior Vice President and Chief Legal Officer of Public Storage in February 2010. From...

  • Page 73
    ... "Corporate Governance and Board Matters--Compensation Committee Interlocks and Insider Participation," and "Report of the Compensation Committee" in the 2013 Proxy Statement and is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 74
    ITEM 14. Principal Accountant Fees and Services The information required by this item will be included under the caption titled "Ratification of Auditors-Fees Billed to the Company by Ernst & Young LLP for 2012 and 2011" in the 2013 Proxy Statement and is incorporated herein by reference. 56

  • Page 75
    ... 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 the accompanying...

  • Page 76
    ... incorporated by reference herein. Amended Management Agreement between Registrant and Public Storage Commercial Properties Group, Inc. dated as of February 21, 1995. Filed with Public Storage Inc.'s ("PSI") Annual Report on Form 10-K for the year ended December 31, 1994 (SEC File No. 001-0839) and...

  • Page 77
    .... Public Storage 2007 Equity and Performance-Based Incentive Compensation Plan. Filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-8 (SEC File No. 333-144907) and incorporated herein by reference. Form of 2007 Plan Restricted Stock Unit Agreement. Filed with Registrant's Quarterly...

  • Page 78
    ... Form of Trustee Stock Option Agreement. Filed as Exhibit 10.31 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2010 and incorporated herein by reference. Statement Re: Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. Filed herewith. Consent...

  • 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, 2012 and 2011 ...For the years ended December 31, 2012, 2011 and 2010: Statements of income ...Statements of comprehensive income ...

  • Page 80
    ...forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Public Storage's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by...

  • Page 81
    ... real estate entity ...Other assets ...Total assets ...LIABILITIES AND EQUITY Borrowings on bank credit facility ...Notes payable ...Accrued and other liabilities ...Total liabilities...Redeemable noncontrolling interests ...Commitments and contingencies (Note 13) Equity: Public Storage...

  • Page 82
    PUBLIC STORAGE STATEMENTS OF INCOME (Amounts in thousands, except per share amounts) 2012 Revenues: Self-storage facilities ...Ancillary operations...Expenses: Self-storage cost of operations ...Ancillary cost of operations ...Depreciation and amortization ...General and administrative ...Asset ...

  • Page 83
    PUBLIC STORAGE STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) For the Years Ended December 31, 2011 2010 2012 Net income ...$ Other comprehensive (loss) income: Aggregate foreign currency exchange gain (loss)...Adjust for foreign currency exchange (gain) loss included in net income ......

  • Page 84
    ... 10,800,000 preferred 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, net...

  • Page 85
    ...149,481 shares) (Note 8) ...Share-based compensation expense, net of cash paid in lieu of common shares (Note 10) ...Acquisition of redeemable noncontrolling interests (Note 7)...Increase (decrease) in permanent noncontrolling interests in connection with: Consolidation of partially-owned entities...

  • Page 86
    ... real estate entities ...Maturities (purchases) of marketable securities ...Other ...Net cash used in investing activities ...Cash flows from financing activities: Borrowings on bank credit facility ...Principal payments on notes payable ...Issuance of common shares ...Issuance of preferred shares...

  • Page 87
    PUBLIC STORAGE STATEMENTS OF CASH FLOWS (Amounts in thousands) (Continued) For the Years Ended December 31, 2012 2011 2010 Supplemental schedule of non-cash investing and financing activities: Foreign currency translation adjustment: Real estate facilities, net of accumulated depreciation ......

  • Page 88
    ... for lease, generally on a month-tomonth basis, for personal and business use. At December 31, 2012, we had direct and indirect equity interests in 2,078 self-storage facilities (with approximately 132 million net rentable square feet) located in 38 states in the United States ("U.S.") operating...

  • Page 89
    ... treated as a real estate investment trust ("REIT"), as defined 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...

  • Page 90
    ... inputs such as market prices of land, capitalization rates for real estate facilities, earnings multiples, projected levels of earnings, costs of construction, functional depreciation, and estimated market interest rates for debt securities with a similar time to maturity and credit quality, which...

  • Page 91
    ... of Asset Impairment No impairment of goodwill or the Shurgard trade name was identified in our annual evaluation of goodwill by reporting unit at December 31, 2012. We evaluate our real estate and property related intangibles for impairment on a quarterly basis. If any indicators of impairment are...

  • Page 92
    ...or other businesses that were either disposed during the three years ended December 31, 2012 or for which we plan to dispose within the next year. In addition, discontinued operations include $12.1 million, $2.7 million and $7.8 million in gains on disposition of real estate facilities in 2012, 2011...

  • Page 93
    ...2012, we acquired 24 operating self-storage facilities from third parties (1,908,000 net rentable square feet of storage space and additional space that we intend to convert to 220,000 net rentable square feet of storage space) for $226.0 million in cash, with $216.9 million allocated to real estate...

  • Page 94
    ... $0.2 million was included in gain on real estate sales and debt retirement in our statement of income for the year ended December 31, 2012. During 2011, we acquired eleven operating self-storage facilities from third parties (896,000 net rentable square feet) and the leasehold interest in the land...

  • Page 95
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 PSB...Shurgard Europe...Other Investments ...Total ... Investments in Unconsolidated Real Estate Entities at December 31, 2012 2011 $ 316,078 $ 328,508 411,107 375,467 8,138 10,652 $ 735,323 $ 714,627 Equity in Earnings of ...

  • Page 96
    ... located in Europe and operated by Shurgard Europe under the "Shurgard" name. We and our joint venture partner provided the funding for this acquisition (see Note 5). Changes in foreign currency exchange rates caused our investment in Shurgard Europe to increase approximately $21.6 million in 2012...

  • Page 97
    ...Self-storage and ancillary cost of operations ...Trademark license fee payable to Public Storage ...Depreciation and amortization ...General and administrative ...Interest expense on third party debt ...Interest expense on debt due to Public Storage ...Gain on disposition of real estate, real estate...

  • Page 98
    ... 51% pro rata share of Shurgard Europe's cost to acquire the interests. 6. Line of Credit and Notes Payable We have a $300 million revolving line of credit (the "Credit Facility") that expires on March 21, 2017. Amounts drawn on the Credit Facility bear annual interest at rates ranging from LIBOR...

  • Page 99
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 February 22, 2013. We had undrawn standby letters of credit, which reduce our borrowing capacity, totaling $15.3 million at December 31, 2012 ($18.4 million at December 31, 2011). The carrying amounts of our notes payable at December 31,...

  • Page 100
    ...1,003 5,048 335,828 5.5% 2013 ...2014 ...2015 ...2016 ...2017 ...Thereafter ...Weighted average effective rate $ $ Cash paid for interest totaled $21.7 million, $27.6 million and $35.3 million for 2012, 2011 and 2010, respectively. Interest capitalized as real estate totaled $0.4 million in each...

  • Page 101
    ... with respect to the application of EITF D-42. 8. Shareholders' Equity Preferred Shares At December 31, 2012 and 2011, we had the following series of Cumulative Preferred Shares ("Preferred Shares") outstanding: At December 31, 2012 Earliest Redemption Date Dividend Rate 6.500% 6.450% 6.850% 6.250...

  • Page 102
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 Except under certain conditions relating to the Company's qualification as a REIT, the Preferred Shares are not redeemable prior to the dates indicated on the table above. On or after the respective dates, each of the series of ...

  • Page 103
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 Common Shares During 2012, 2011 and 2010, activity with respect to the issuance or repurchase of our common shares was as follows: 2012 Shares Employee stock-based compensation and exercise of stock options (Note 10) ...Issuance of ...

  • Page 104
    ... common shares outstanding at December 31, 2012. The Hughes Family has ownership interests in, and operates, approximately 53 self-storage facilities in Canada ("PS Canada") using the "Public Storage" brand name pursuant to a non-exclusive, royalty-free trademark license agreement with the Company...

  • Page 105
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 Stock Options Stock option exercise prices are equal to the closing trading price of our common shares on the date they are legally granted. Stock options vest over a three to five-year period, and generally expire ten years after the ...

  • Page 106
    ... is determined based upon the applicable closing trading price of our common shares. The fair value of our RSUs outstanding at December 31, 2012 was approximately $93.2 million. Remaining compensation expense related to RSUs outstanding at December 31, 2012 totals approximately $41.1 million (which...

  • Page 107
    ... Real Estate Entities), interest expense, general and administrative expense and gains and losses on the early repayment of debt are not allocable to any of our reportable segments. Our chief operating decision maker does not consider the book value of assets in making resource allocation...

  • Page 108
    ... ...Ancillary operations ...Expenses: Self-storage cost of operations...Ancillary cost of operations ...Depreciation and amortization ...General and administrative ...Operating income ...Interest and other income ...Interest expense...Equity in earnings of unconsolidated real estate entities...

  • Page 109
    ... operations ...Expenses: Self-storage cost of operations...Ancillary cost of operations ...Depreciation and amortization ...General and administrative ...Asset impairment charges ...Operating income ...Interest and other income ...Interest expense...Equity in earnings of unconsolidated real estate...

  • Page 110
    ... operations ...Expenses: Self-storage cost of operations...Ancillary cost of operations ...Depreciation and amortization ...General and administrative ...Asset impairment charges ...Operating income ...Interest and other income ...Interest expense...Equity in earnings of unconsolidated real estate...

  • Page 111
    ... carried customary property, earthquake, general liability, medical insurance provided to our employees, and workers compensation coverage through internationally recognized insurance carriers, subject to customary levels of deductibles. The aggregate limits on these policies of approximately...

  • Page 112
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 14. Supplementary Quarterly Financial Data (unaudited) Three Months Ended June 30, September 30, December 31, 2012 2012 2012 (Amounts in thousands, except per share data) $ 451,939 $ 472,931 $ 465,451 March 31, 2012 Self-storage and ...

  • Page 113
    PUBLIC STORAGE NOTES TO FINANCIAL STATEMENTS December 31, 2012 15. Subsequent Events On January 16, 2013, we issued 20.0 million depositary shares each representing 1/1,000 of our 5.20% Preferred Shares, Series W for gross proceeds of $500.0 million, and we incurred $16.0 million in issuance costs....

  • Page 114
    PUBLIC STORAGE EXHIBIT 12 - STATEMENT ...$ 2012 2008 Income from continuing operations ...Less: Income allocated to noncontrolling interests which do not have fixed charges ...Equity in...expense (including capitalized interest) ...Cumulative preferred share cash dividends ...Preferred partnership unit...

  • Page 115
    ...financial statements and 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, 2012. /s/ Ernst & Young LLP February 25, 2013 Los Angeles, California

  • Page 116
    ... 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 25, 2013 Exhibit 31.1

  • Page 117
    ... 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 25, 2013...

  • Page 118
    ... In connection with the Annual Report on Form 10-K of Public Storage (the "Company") for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Ronald L. Havner, Jr., as Chairman, Chief Executive Officer and President of the...

  • Page 119
    ...Angeles, CA PS Insurance Capri L. Haga President Annual Meeting of Shareholders The Annual Meeting of Shareholders of Public Storage will be held on May 9, 2013 at 11:00 a.m. at the Hilton Glendale, 100 West Glenoaks Boulevard, Glendale, CA. Shurgard Self Storage S.C.A. (Europe) Marc Oursin Chief...

  • Page 120
    ® Public Storage 701 Western Avenue, Glendale, California 91201-2349 ฀ ฀฀ ฀฀ (SKU 002CSN8144)