Public Storage 2013 Annual Report Download - page 22

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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, 2013 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, 2013, we have a
pipeline of development projects totaling $196 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, 2013. 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.