10-KPeriod: FY2009

Public Storage Annual Report, Year Ended Dec 31, 2009

Filed March 1, 2010For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) in its 2010 10-K filing for the fiscal year ending December 31, 2009, presented a company navigating the challenges of the 2008-2009 economic recession. While the company maintained its position as the largest owner and operator of self-storage facilities in the U.S. and held a significant interest in European operations (Shurgard Europe), the report highlighted pressures on occupancy and rental rates due to softened demand. In response, PSA had suspended development activities and focused on operational efficiencies and opportunistic acquisitions of distressed properties. The company's financial performance in 2009 saw a decrease in net income compared to 2008, largely influenced by a significant gain from the disposition of an interest in Shurgard Europe in the prior year. Despite these economic headwinds, PSA continued its commitment to shareholder distributions, reflecting its REIT structure. The report also detailed the company's diversified portfolio, including its investment in commercial properties through PS Business Parks, Inc., and emphasized its strong balance sheet and liquidity position with substantial cash reserves.

Financial Highlights

32 data points
Beta

Revenue

$1.62B

Net Income

$834.62M

51.4% Net Margin

EPS (Diluted)

$3.47

Total Assets

$9.81B

Cash & Equivalents

$763.79M

Free Cash Flow

$1.11B

Financial Statements
Beta
Revenue$1.62B
Interest Expense$29.92M
Net Income$834.62M
EPS (Basic)$3.48
EPS (Diluted)$3.47
Shares Outstanding (Basic)168.36M
Shares Outstanding (Diluted)168.77M

Key Highlights

  • 1The company is the largest owner and operator of self-storage facilities in the U.S., with operations spanning 38 states and encompassing 2,010 facilities and 127 million net rentable square feet.
  • 2Public Storage has a 49% equity interest in Shurgard Europe, which operates 187 self-storage facilities across seven European countries, making it a significant international player.
  • 3The company's business is diversified to include a 41% ownership in PS Business Parks, Inc., which operates commercial properties, adding another layer of investment beyond self-storage.
  • 4In response to the economic downturn, Public Storage suspended development activities in both the U.S. and Europe to preserve capital and manage risk, shifting focus to acquisitions of existing facilities.
  • 5The company reported a decrease in net income for 2009 compared to 2008, primarily due to a large gain from the sale of a stake in Shurgard Europe in 2008.
  • 6Despite economic pressures, Public Storage maintained its policy of paying quarterly distributions to shareholders, a key feature of its REIT structure.
  • 7PSA's balance sheet remained strong, with $763.8 million in cash and cash equivalents as of December 31, 2009, providing financial flexibility amidst challenging capital markets.

Frequently Asked Questions

The recessionary trends and elevated unemployment rates negatively impacted Public Storage's business. This resulted in softened demand for self-storage space, leading to pressure on occupancies and rental rates. In response, the company reduced rental rates, increased promotional discounts, and ramped up marketing activities. Development activities were also suspended to preserve capital and manage risk.

In the short term, Public Storage's strategy shifted to focus on improving the operating performance of existing properties, potentially acquiring distressed assets at attractive prices, and taking advantage of capital market dislocations through repurchasing its own securities. Development activities were curtailed, and the company increased its yield requirements for acquisitions of existing facilities.

Public Storage holds a 49% equity interest in Shurgard Europe, which is a major owner and operator of self-storage facilities in Europe. While this international presence offers growth potential in a less mature market, it also exposes the company to currency risks, regulatory differences, and specific economic downturns in European markets. The company had previously reduced its stake from 100% to 49% in 2008.

Public Storage maintained a conservative financial profile with a low debt-to-total-capitalization ratio (5.7% at year-end 2009). The company primarily finances its growth with permanent equity capital, including retained cash flow and equity issuances. While preferred securities were a significant source of capital, the company also held substantial cash reserves ($763.8 million at year-end 2009) to fund operations and potential acquisitions, and had a $300 million revolving line of credit.