10-KPeriod: FY2010

Public Storage Annual Report, Year Ended Dec 31, 2010

Filed March 1, 2011For 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 demonstrates resilience and strategic positioning, particularly in light of the preceding recessionary period. The company, the largest owner and operator of self-storage facilities in the U.S., navigated economic headwinds that impacted demand and rental rates. However, the filing highlights stabilization and early signs of improvement in operating metrics by the second half of 2010, with "Same Store" facility revenues holding steady year-over-year after a prior decline. The report details PSA's diversified portfolio, including domestic and European self-storage segments, as well as a significant investment in commercial properties through PS Business Parks, Inc. The company emphasizes its strong brand recognition, economies of scale, and centralized operating systems as key competitive advantages. While strategic growth through acquisitions, development, and international expansion (Shurgard Europe) is outlined, the company acknowledges the impact of capital market conditions on its financing strategies, noting a preference for permanent capital sources like retained cash flow and preferred securities. Risks discussed include those inherent to real estate ownership, competition, environmental liabilities, and global economic uncertainty. Notably, the company's financial health appears robust, with a low debt-to-assets ratio and strong liquidity. Despite challenges, PSA's focus on operational improvements, strategic acquisitions, and leveraging its market leadership positions it for continued operation and potential growth.

Financial Highlights

32 data points
Beta

Revenue

$1.61B

Net Income

$672.04M

41.6% Net Margin

EPS (Diluted)

$2.35

Total Assets

$9.50B

Cash & Equivalents

$456.25M

Free Cash Flow

$1.09B

Financial Statements
Beta
Revenue$1.61B
Operating Income$692.65M
Interest Expense$30.23M
Net Income$672.04M
EPS (Basic)$2.36
EPS (Diluted)$2.35
Shares Outstanding (Basic)168.88M
Shares Outstanding (Diluted)169.77M

Key Highlights

  • 1Public Storage (PSA) is the largest owner and operator of self-storage facilities in the U.S., with a significant presence also in Western Europe through its investment in Shurgard Europe.
  • 2The company experienced stabilization in its "Same Store" facility revenues in 2010 after a downturn in 2009, indicating recovery from the prior recessionary period.
  • 3PSA maintains strong competitive advantages through brand recognition, economies of scale, and centralized information and reservation systems.
  • 4The company's growth strategy includes improving existing facilities, strategic acquisitions, development, and investments in commercial real estate (PS Business Parks) and European self-storage.
  • 5Financing strategy relies on permanent capital, primarily retained cash flow and preferred securities, to fund growth and manage operations.
  • 6The filing highlights various risks, including economic downturns, competition, environmental concerns, and challenges in international operations, but also demonstrates a strong financial position with a low debt ratio.
  • 7PSA is committed to maintaining its REIT status, which necessitates distributing a significant portion of its taxable income as dividends, a practice it has upheld since 1981.

Frequently Asked Questions

The recession from 2008-2010 negatively affected Public Storage's self-storage business, leading to softened demand, pressure on rental rates, and reduced rental income. However, the filing indicates that operating metrics began to stabilize in late 2009 and improve in the second half of 2010. "Same Store" facility revenues were flat year-over-year in 2010, suggesting a turnaround and recovery from the economic downturn.

Public Storage operates through three main reportable segments: 1) Domestic Self-Storage (largest segment, 2,048 facilities in 38 states), 2) Europe Self-Storage (49% interest in Shurgard Europe with 188 facilities in seven Western European countries), and 3) Commercial (equity interests in commercial properties, primarily through a 41% stake in PS Business Parks, Inc.). This diversification helps mitigate localized economic impacts.

Key risks include general real estate ownership risks (demand, environmental issues, property taxes, natural disasters), economic downturns affecting tenant health, competition from other storage facilities and alternatives, difficulties in integrating acquisitions, risks associated with international operations (currency fluctuations, regulatory differences), potential failure to maintain REIT status, and cybersecurity threats. The company also faces risks related to its investment in Shurgard Europe, particularly regarding refinancing and market conditions in Europe.

Public Storage primarily finances its growth and operations through permanent capital, which includes internally generated cash flow, proceeds from issuing preferred securities, and, to a lesser extent, common equity. The company strategically uses preferred securities as a form of leverage due to their benefits within the REIT structure, such as not requiring mandatory redemption and helping meet REIT distribution requirements. They maintain a low level of debt relative to assets.