Public Storage 2012 Annual Report Download - page 29

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ITEM 1A. Risk Factors
In addition to the other information in our Annual Report on Form 10-K, you should consider the risks
described below that we believe may be material to investors in evaluating the Company. This section contains
forward-looking statements, and in considering these statements, you should refer to the qualifications and
limitations on our forward-looking statements that are described in Forward Looking Statements at the beginning
of Item 1.
We have significant exposure to real estate risk.
Since our business consists primarily of acquiring and operating real estate, we are subject to the risks
related to the ownership and operation of real estate that can adversely impact our business and financial condition.
These risks include the following:
Natural disasters or terrorist attacks could cause damage to our facilities, resulting in increased costs and
reduced revenues. Natural disasters, such as earthquakes, hurricanes and floods, or terrorist attacks could cause
significant damage and require significant repair costs, and make facilities temporarily uninhabitable, reducing our
revenues. Damage and business interruption losses could exceed the aggregate limits of our insurance coverage. In
addition, because we self-insure a portion of our risks, losses below a certain level may not be covered by insurance.
See Note 13 to our December 31, 2012 financial statements for a description of the risks of losses that are not
covered by third-party insurance contracts. We may not have sufficient insurance coverage for losses caused by a
terrorist attack, or such insurance may not be maintained, available or cost-effective. In addition, significant natural
disasters, terrorist attacks, threats of future terrorist attacks, or resulting wider armed conflicts could have negative
impacts on the U.S. economy, reducing storage demand and impairing our operating results.
Operating costs could increase. We could be subject to increases in insurance premiums, increased or new
property tax assessments or other taxes, repair and maintenance costs, payroll, utility costs, workers compensation,
and other operating expenses due to various factors such as inflation, labor shortages, commodity and energy price
increases.
The acquisition of existing properties is subject to risks that may adversely affect our growth and financial
results. We have acquired material amounts of self-storage facilities from third parties in the past, and we expect to
continue to do so in the future. We face significant competition for suitable acquisition properties from other real
estate investors. As a result, we may be unable to acquire additional properties we desire or the purchase price for
desirable properties may be significantly increased. Failures or unexpected circumstances in integrating newly
acquired properties into our operations or circumstances we did not detect during due diligence, such as
environmental matters, needed repairs or deferred maintenance, or the effects of increased property tax following
reassessment of a newly-acquired property, as well as the general risks of real estate investment, could jeopardize
realization of the anticipated earnings from an acquisition.
Development of self-storage facilities can subject us to risks. At December 31, 2012, we have a pipeline of
development projects totaling $169 million (subject to contingencies), and we expect to continue to seek additional
development projects. There are significant risks involved in developing self-storage facilities, such as delays or
cost increases due to changes in or failure to meet government or regulatory requirements, weather issues,
unforeseen site conditions, or personnel problems. Self-storage space is generally not pre-leased, and rent-up of
newly developed space can be delayed or ongoing cash flow yields can be reduced due to competition, reductions in
storage demand, or other factors.
There is significant competition among self-storage facilities and from other storage alternatives. Most of
our properties are self-storage facilities, which generated most of our revenue for the year ended December 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 of funds for investment or other reasons, competition with
our facilities could intensify.