Public Storage 2014 Annual Report Download - page 22

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Acquire properties owned or operated by others in the U.S.: We seek to capitalize on the
fragmentation of the self-storage business through acquiring attractively priced, well-located existing self-
storage facilities. We believe our presence in and knowledge of substantially all of the major markets in
the U.S. enhances our ability to identify attractive acquisition opportunities. Data on the rental rates and
occupancy levels of our existing facilities provides us an advantage in evaluating the potential of
acquisition opportunities. Self-storage owners decide whether to market their facilities for sale based upon
many factors, including potential reinvestment returns, expectations of future growth, estimated value, the
cost of debt financing, as well as personal considerations. Our aggressiveness in competing for particular
marketed facilities depends upon many factors including our opinion as to the potential for future growth,
the quality of construction and location, the cash flow we expect from the facility when operated on our
platform, how well the facility fits into our current geographic footprint, as well as our yield expectations.
During 2014, 2013 and 2012, we acquired 44, 121 and 24 facilities, respectively, from third parties for
approximately $431 million, $1.2 billion and $226 million, respectively, primarily through large portfolio
acquisitions. We will continue to seek to acquire properties in 2015; however, there is significant
competition to acquire existing facilities and there can be no assurance as to the level of facilities we may
acquire.
Develop new self-storage facilities and expansion of existing facilities: The development of new
self-storage locations and the expansion of existing facilities has been an important source of growth.
Since the beginning of 2013, we have 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, 2014, we had a development pipeline to develop new self-storage facilities and,
to a lesser extent, expand existing self-storage facilities, which will add approximately 3.5 million net
rentable square feet of self-storage space. The aggregate cost of these projects is estimated at $411 million,
of which $105 million had been incurred at December 31, 2014, and the remaining costs will be incurred
primarily in 2015. Some of these projects are subject to significant contingencies such as entitlement
approval. We expect to continue to seek additional development projects; however, the level of future
development may be limited due to various constraints such as difficulty in finding projects that meet our
risk-adjusted yield expectations and challenges in obtaining building permits for self-storage activities in
certain municipalities.
Participate in the growth of commercial facilities primarily through our ownership in PS
Business Parks, Inc.: Our investment in PSB provides diversification into another asset type. PSB is a
stand-alone public company traded on the NYSE. During 2013, we increased our investment in PSB by
acquiring 1,356,748 shares of PSB common stock in open-market transactions and directly from PSB, for
an aggregate cost of $105.0 million. As of December 31, 2014, we have a 42% equity interest in PSB.
PSB seeks to grow its asset base in favorable markets as well as increase the cash flows from its
existing portfolio. From 2010 through 2014, PSB has acquired an aggregate total of 11.3 million rentable
square feet in key markets for an aggregate purchase price of approximately $1.1 billion. In 2014, PSB
disposed of certain nonstrategic assets with an aggregate of 1.9 million rentable square feet in Arizona and
Oregon, receiving net proceeds aggregating $212.2 million. As of December 31, 2014, PSB owned and
operated approximately 28.6 million net rentable square feet of commercial space, and had an enterprise
value of approximately $4.0 billion (based upon the trading price of PSB’s common stock combined with
the liquidation value of its debt and preferred stock as of December 31, 2014).
Participate in the growth of European self-storage through ownership in Shurgard Europe:
We believe Shurgard Europe is the largest self-storage company in Western Europe. It owns and operates
192 facilities with approximately ten million net rentable square feet in: France (principally Paris), Sweden
(principally Stockholm), the United Kingdom (principally London), the Netherlands, Denmark (principally
Copenhagen), Belgium and Germany. We own 49% of Shurgard Europe, with the other 51% owned by a
large U.S. institutional investor.
Customer awareness and availability of self-storage is significantly lower in Europe than in the
U.S. However, with more awareness and product supply, we believe there is potential for increased
demand for storage space in Europe. In the long run, we believe Shurgard Europe could capitalize on