Public Storage 2012 Annual Report Download - page 8

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6
European Self-Storage
The European self-storage market differs from the U.S. market. Most of Western
Europe has remained in a recession for the past three years. Shurgard Europe,
our 49% owned European self-storage business, has been fortunate to generate
modest growth in net operating income for the past several years. In 2012, its modest
net operating income growth resulted primarily from reduced operating
expenses. Going into 2013, the occupancy of its European Same Store
properties was 80.9%, 2.7% below last year. Rising unemployment, a weak
housing market and an increasing tax burden will likely preclude positive
Same Store growth in 2013.
Net Operating Income: European Self-Storage
(Amounts in millions)
2012 2011 2010
Same Store $ 110 $ 108 $ 106
Acquired/developed properties 15 13 10
Total $ 125 $ 121 $ 116
Public Storage’s share $ 61 $ 61 $ 43
Total assets (before depreciation reserves) $ 1,643 $ 1,596 $ 1,618
Shurgard Europe continues to dedicate its free cash flow to reducing debt, primarily
the Wells Fargo term loan, as it seeks alternative long-term financing. Unlike the
U.S. banking system, many European banks still suffer from indigestion associated
with soured commercial real estate loans. When combined with an absence of
CMBS financing and a highly concentrated banking system (few but very large
banks), financing for all but the most credit worthy real estate companies is scarce.
Accordingly, Shurgard Europe either needs to become very credit worthy or limit its