Public Storage 2013 Annual Report Download - page 24

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interpret and can vary in each country or locality, and are subject to unexpected changes in
their form and application due to regional, national, or local political uncertainty and other
factors. Such changes, or Shurgard’s failure to comply with these laws, could subject it to
penalties or other sanctions, adverse changes in business processes, as well as potentially
adverse income tax, property tax, or other tax burdens.
x Impediments to capital repatriation could negatively impact the realization of our investment
in Shurgard Europe: Laws in Europe and the U.S. may create, impede or increase our cost to
repatriate capital or earnings from Shurgard Europe.
x Risks of collective bargaining and intellectual property: Collective bargaining, which is
prevalent in certain areas in Europe, could negatively impact Shurgard Europe’s labor costs or
operations.
x Potential operating and individual country risks: Economic slowdowns or extraordinary
political or social change in the countries in which it operates have posed, and could continue
to pose, challenges or result in future reductions of Shurgard Europe’s operating cash flows.
x Impediments of Shurgard Europe’s joint venture structure: Shurgard Europe’s significant
decisions, involving activities such as borrowing money, capital contributions, raising capital
from third parties, as well as selling or acquiring significant assets, require the consent of our
joint venture partner. As a result, Shurgard Europe may be precluded from taking advantage of
opportunities that we would find attractive. In addition, we could be unable to separately
pursue such opportunities due to certain market exclusivity provisions of the Shurgard Europe
joint venture agreement, and our 49% equity investment may not be easily sold or readily
accepted as collateral by potential lenders to Public Storage due to the joint venture structure.
x Risks related to Shurgard Europe’s Debt: Shurgard Europe has a term loan from a bank (the
“Bank Loan”) with a balance of approximately €107.5 million ($148.0 million) at
December 31, 2013 maturing in November 2014 and a loan due to us (the “Shareholder Loan”)
totaling €311.0 million ($428.1 million) at December 31, 2013. On January 28, 2014, our joint
venture partner in Shurgard Europe acquired 51% of the Shareholder Loan at face value, using
the proceeds from a bank loan (the “JV Partner Loan”), and the maturity date of the
Shareholder Loan was extended to April 2019. The JV Partner Loan matures in two years and
is collateralized with our joint venture partner’s interests in the Shareholder Loan and their
interest in Shurgard Europe. Shurgard Europe will seek to refinance the Bank Loan. If
Shurgard Europe is not able to refinance its debt due to a constrained credit market, negative
operating trends or other reasons, our equity investment in Shurgard Europe could be
negatively impacted.
The Hughes Family could control us and take actions adverse to other shareholders.
At December 31, 2013, B. Wayne Hughes, our former Chairman, and his family, which includes
two members of the board of trustees (the “Hughes Family”) owned approximately 15.8% of our aggregate
outstanding common shares. Our declaration of trust permits the Hughes Family to own up to 35.66% of
our outstanding common shares while it generally restricts the ownership by other persons and entities to
3% of our outstanding common shares. Consequently, the Hughes Family may significantly influence
matters submitted to a vote of our shareholders, including electing trustees, amending our organizational
documents, dissolving and approving other extraordinary transactions, such as a takeover attempt, resulting
in an outcome that may not be favorable to other shareholders.
Takeover attempts or changes in control could be thwarted, even if beneficial to shareholders.