Public Storage 2012 Annual Report Download - page 44

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Recording the fair value of acquired real estate facilities: In recording the acquisition of real estate
facilities, we estimate the fair value of the land, buildings and intangible assets acquired. Such estimates are based
upon many assumptions and judgments, including expected rates of return, land and building replacement costs, as
well as future cash flows from the property and the existing tenant base. Others could come to materially different
conclusions as to the estimated fair values, which would result in different depreciation and amortization expense,
gains and losses on sale of real estate assets, and real estate and intangible assets.
Overview of Management’s Discussion and Analysis of Operations
Our domestic self-storage facilities generated 93% of our revenues for the year ended December 31, 2012,
and also generated most of our net income and cash flow from operations. A large portion of management time is
devoted to maximizing cash flows from our existing self-storage facilities, as well as seeking to acquire and develop
additional investments in self-storage facilities.
Most of our facilities compete with other well-managed and well-located competitors, and we are subject to
general economic conditions, particularly those that affect the spending habits of consumers and moving trends.
We believe that our centralized information networks, national telephone and online reservation system, the brand
name “Public Storage,” and our economies of scale enable us to effectively meet such challenges.
In 2010, 2011, and 2012, we acquired an aggregate of 77 self-storage facilities from third parties for
approximately $546 million, we acquired noncontrolling interests in subsidiaries owning self-storage facilities for
approximately $197 million, and we invested $117 million in Shurgard Europe which it used to acquire interests in
self-storage facilities. We will continue to seek to acquire additional self-storage facilities from third parties in
2013. There is significant competition to acquire existing facilities and there can be no assurance that we will be
able to acquire additional facilities.
Over the past three years our development activities have been minimal. We have recently expanded our
development efforts due in part to the significant increase in prices being paid for existing facilities, in many cases
well above the cost of developing new facilities. At December 31, 2012, we had a development pipeline of projects
to expand existing self-storage facilities and develop new self-storage facilities, which will add approximately
1.3 million net rentable square feet of self-storage space. The aggregate cost of these projects is estimated at
$169 million, of which $36 million had been incurred at December 31, 2012, and the remaining costs will be
incurred principally in 2013. Some of these projects are subject to significant contingencies such as entitlement
approval. We expect to continue to seek additional development projects and have hired additional personnel;
however, due to the difficulty in finding projects that meet our risk-adjusted yield expectations, as well as the
difficulty in obtaining building permits 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”), and ancillary operations such as tenant reinsurance and sales of
merchandise. We have no current plans to change our equity investments in Shurgard Europe or PSB; however, it is
possible that we may make additional investments in these entities in the future.
We believe that we are not dependent upon raising capital to fund our ongoing operations or meet our
obligations. However, access to capital is important to growing our asset base. During the years ended
December 31, 2012 and 2011, we issued approximately $1.7 billion and $863 million, respectively, of preferred
securities. During December 2012, we raised $101 million from the sale of our common shares owned by a wholly-
owned subsidiary. We have no current plans to issue additional common shares. On January 16, 2013, we issued
another $500 million of preferred securities.
At December 31, 2012, cash and cash equivalents totaled $17.2 million and we had $133.0 million in
borrowings on our line of credit. On January 16, 2013, we raised $485 million in net proceeds from the issuance of
our 5.2% Series W Preferred Shares and repaid the outstanding borrowings on our line of credit. We have
$255 million in scheduled principal repayments in 2013, including $186 million for our senior notes which mature