PUBLIC STORAGE

INDEX


PART I	FINANCIAL INFORMATION	Pages

Item 1.	Financial Statements (Unaudited)

	Balance Sheets at June 30, ~~2018~~2019 and December 31, ~~2017~~	1
2018		1

	Statements of Income for the Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~	2
2018		2

	Statements of Comprehensive Income for the Three and Six Months Ended ‎June 30, ~~2018~~2019 and ~~2017~~	3
2018		3
	~~Statement~~
	Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018	4
		4-7

	Statements of Cash Flows for the Six Months Ended June 30, ~~2018~~2019 and ~~2017~~	~~5-6~~
2018		8-9

	Condensed Notes to Financial Statements	~~7-27~~
		10-30
~~Item 2.~~
Item 2.	Management’s Discussion and Analysis of ‎Financial Condition and Results of Operations	~~28-54~~
		31-60
~~Item 3.~~
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
		61
~~Item 4.~~	~~Controls and Procedures~~	~~54-55~~

~~PART II~~Item 4.	Controls and Procedures	61

PART II	OTHER INFORMATION (Items 3, 4 and 5 are not applicable)

Item 1.	Legal Proceedings	56
		62
~~Item 1A.~~	~~Risk Factors~~	56

Item 2.1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
		62
~~Item 6.~~	~~Exhibits~~	57
Item 6.	Exhibits	62

PUBLIC STORAGE

BALANCE SHEETS

(Amounts in thousands, except share data)


	June 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
ASSETS		(Unaudited)				(Unaudited)

Cash and equivalents	$	338,419	$	433,376	$	360,331	$	361,218
Real estate facilities, at cost:
Land		3,993,027		3,947,123		4,116,718		4,047,982
Buildings		10,951,605		10,718,866		11,665,027		11,248,862
		14,944,632		14,665,989		15,781,745		15,296,844
Accumulated depreciation		(5,923,687)		(5,700,331)		(6,375,132)		(6,140,072)
		9,020,945		8,965,658		9,406,613		9,156,772
Construction in process		234,044		264,441		191,874		285,339
		9,254,989		9,230,099		9,598,487		9,442,111

Investments in unconsolidated real estate entities		762,247		724,173		778,523		783,988
Goodwill and other intangible assets, net		207,390		214,957		210,178		209,856
Other assets		129,917		130,287		165,772		131,097
Total assets	$	10,692,962	$	10,732,892	$	11,113,291	$	10,928,270


LIABILITIES AND EQUITY

Notes payable	$	1,420,834	$	1,431,322	$	1,908,110	$	1,412,283
Accrued and other liabilities		351,336		337,201		410,671		371,259
Total liabilities		1,772,170		1,768,523		2,318,781		1,783,542

Commitments and contingencies (Note 12)

Equity:
Public Storage shareholders’ equity:
Preferred Shares, $0.01 par value, 100,000,000 shares authorized,
161,000 shares issued (in series) and outstanding, (161,000 at
December 31, 2017), at liquidation preference		4,025,000		4,025,000
149,500 shares issued (in series) and outstanding, (161,000 at
December 31, 2018), at liquidation preference						3,737,500		4,025,000
Common Shares, $0.10 par value, 650,000,000 shares authorized,
173,937,035 shares issued and outstanding (173,853,370 shares at
December 31, 2017)		17,394		17,385
174,294,523 shares issued and outstanding (174,130,881 shares at
December 31, 2018)						17,429		17,413
Paid-in capital		5,673,078		5,648,399		5,729,945		5,718,485
Accumulated deficit		(735,065)		(675,711)		(648,391)		(577,360)
Accumulated other comprehensive loss		(84,601)		(75,064)		(67,549)		(64,060)
Total Public Storage shareholders’ equity		8,895,806		8,940,009		8,768,934		9,119,478
Noncontrolling interests		24,986		24,360		25,576		25,250
Total equity		8,920,792		8,964,369		8,794,510		9,144,728
Total liabilities and equity	$	10,692,962	$	10,732,892	$	11,113,291	$	10,928,270

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018			2017		2018		2017		2019		2018		2019		2018

Revenues:
Self-storage facilities	$	645,206		$	624,199	$	1,276,743	$	1,231,977	$	669,339	$	645,206	$	1,319,747	$	1,276,743
Ancillary operations		40,322			40,113		78,709		77,882		41,611		40,322		80,241		78,709
		685,528			664,312		1,355,452		1,309,859		710,950		685,528		1,399,988		1,355,452

Expenses:
Self-storage cost of operations		179,876			171,195		362,063		343,173		196,083		179,876		389,739		362,063
Ancillary cost of operations		11,101			11,383		21,741		22,307		11,653		11,101		22,198		21,741
Depreciation and amortization		119,777			110,177		237,756		221,106		126,859		119,777		248,800		237,756
General and administrative		31,329			14,992		62,849		40,020		15,264		31,329		34,767		62,849
Interest expense											12,254		8,388		20,397		16,495
		342,083			307,747		684,409		626,606		362,113		350,471		715,901		700,904

Operating income		343,445			356,565		671,043		683,253
Interest and other income		6,328			4,155		11,872		8,153		8,582		6,328		15,547		11,872
Interest expense		(8,388)			(1,116)		(16,495)		(2,164)
Equity in earnings of unconsolidated real estate entities		41,963			20,068		72,758		40,017		18,914		41,963		36,586		72,758
Foreign currency exchange gain (loss)		21,944			(25,440)		10,126		(31,006)
Foreign currency exchange (loss) gain											(5,218)		21,944		2,573		10,126
Gain on sale of real estate		-			975		424		975		341		-		341		424
Net income		405,292			355,207		749,728		699,228		371,456		405,292		739,134		749,728
Allocation to noncontrolling interests		(1,490)			(1,505)		(2,929)		(3,084)		(1,400)		(1,490)		(2,557)		(2,929)
Net income allocable to Public Storage shareholders		403,802			353,702		746,799		696,144		370,056		403,802		736,577		746,799
Allocation of net income to:
Preferred shareholders - distributions		(54,077)			(61,281)		(108,158)		(121,402)		(53,525)		(54,077)		(108,537)		(108,158)
Preferred shareholders - redemptions (Note 8)		-			(14,638)		-		(14,638)		(8,861)		-		(17,394)		-
Restricted share units		(1,425)			(1,102)		(2,522)		(2,292)		(1,259)		(1,425)		(2,492)		(2,522)
Net income allocable to common shareholders	$	348,300	��	$	276,681	$	636,119	$	557,812	$	306,411	$	348,300	$	608,154	$	636,119
Net income per common share:
Basic	$	2.00		$	1.59	$	3.66	$	3.22	$	1.76	$	2.00	$	3.49	$	3.66
Diluted	$	2.00		$	1.59	$	3.65	$	3.20	$	1.76	$	2.00	$	3.49	$	3.65

Basic weighted average common shares outstanding		173,932			173,602		173,912		173,483		174,253		173,932		174,215		173,912
Diluted weighted average common shares outstanding		174,224			174,075		174,186		174,072		174,542		174,224		174,459		174,186

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018

Net income	$	405,292	$	355,207	$	749,728	$	699,228	$	371,456	$	405,292	$	739,134	$	749,728
Other comprehensive income (loss):
Aggregate foreign currency exchange gain (loss)		8,194		(15,358)		589		(18,043)
Aggregate foreign currency exchange (loss) gain									Aggregate foreign currency exchange (loss) gain	(6,796)		8,194		(916)		589
Adjust for aggregate foreign currency exchange	Adjust for aggregate foreign currency exchange								Adjust for aggregate foreign currency exchange
(gain) loss included in net income		(21,944)		25,440		(10,126)		31,006
Other comprehensive income (loss):		(13,750)		10,082		(9,537)		12,963
loss (gain) included in net income										5,218		(21,944)		(2,573)		(10,126)
Other comprehensive loss										(1,578)		(13,750)		(3,489)		(9,537)
Total comprehensive income		391,542		365,289		740,191		712,191		369,878		391,542		735,645		740,191
Allocation to noncontrolling interests		(1,490)		(1,505)		(2,929)		(3,084)		(1,400)		(1,490)		(2,557)		(2,929)
Comprehensive income allocable to
Public Storage shareholders	$	390,052	$	363,784	$	737,262	$	709,107	$	368,478	$	390,052	$	733,088	$	737,262

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2019

(Amounts in thousands, except share and per share amounts)

(Unaudited)



									Accumulated		Total														Accumulated		Total
	Cumulative								Other		Public Storage						Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total		Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity		Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity
Balances at December 31, 2017	$	4,025,000	$	17,385	$	5,648,399	$	(675,711)	$	(75,064)	$	8,940,009	$	24,360	$	8,964,369

Balances at March 31, 2019																	$	4,025,000	$	17,422	$	5,708,699	$	(615,329)	$	(65,971)	$	9,069,821	$	24,800	$	9,094,621
Redemption of 11,500 preferred shares (Note 8)																		(287,500)		-		-		-		-		(287,500)		-		(287,500)
Issuance of common shares in connection with
share-based compensation (83,665 shares) (Note 10)		-		9		1,690		-		-		1,699		-		1,699
share-based compensation (79,231 shares)																		-		7		15,790		-		-		15,797		-		15,797
Share-based compensation expense, net of cash
paid in lieu of common shares (Note 10)		-		-		22,989		-		-		22,989		-		22,989
paid in lieu of common shares																		-		-		5,456		-		-		5,456		-		5,456
Contributions by noncontrolling interests		-		-		-		-		-		-		752		752		-		-		-		-		-		-		1,106		1,106
Net income		-		-		-		749,728		-		749,728		-		749,728		-		-		-		371,456		-		371,456		-		371,456
Net income allocated to noncontrolling interests		-		-		-		(2,929)		-		(2,929)		2,929		-		-		-		-		(1,400)		-		(1,400)		1,400		-
Distributions to equity holders:
Preferred shares (Note 8)		-		-		-		(108,158)		-		(108,158)		-		(108,158)		-		-		-		(53,525)		-		(53,525)		-		(53,525)
Noncontrolling interests		-		-		-		-		-		-		(3,055)		(3,055)		-		-		-		-		-		-		(1,730)		(1,730)
Common shares and restricted share units
($4.00 per share)		-		-		-		(697,995)		-		(697,995)		-		(697,995)
($2.00 per share)																		-		-		-		(349,593)		-		(349,593)		-		(349,593)
Other comprehensive loss (Note 2)		-		-		-		-		(9,537)		(9,537)		-		(9,537)		-		-		-		-		(1,578)		(1,578)		-		(1,578)
Balances at June 30, 2018	$	4,025,000	$	17,394	$	5,673,078	$	(735,065)	$	(84,601)	$	8,895,806	$	24,986	$	8,920,792
Balances at June 30, 2019																	$	3,737,500	$	17,429	$	5,729,945	$	(648,391)	$	(67,549)	$	8,768,934	$	25,576	$	8,794,510

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2018

(Amounts in thousands, except share and per share amounts)

(Unaudited)



									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity

Balances at March 31, 2018	$	4,025,000	$	17,393	$	5,655,267	$	(735,806)	$	(70,851)	$	8,891,003	$	24,787	$	8,915,790
Issuance of common shares in connection with
share-based compensation (9,276 shares)		-		1		731		-		-		732		-		732
Share-based compensation expense, net of cash
paid in lieu of common shares		-		-		17,080		-		-		17,080		-		17,080
Contributions by noncontrolling interests		-		-		-		-		-		-		49		49
Net income		-		-		-		405,292		-		405,292		-		405,292
Net income allocated to noncontrolling interests		-		-		-		(1,490)		-		(1,490)		1,490		-
Distributions to equity holders:
Preferred shares (Note 8)		-		-		-		(54,077)		-		(54,077)		-		(54,077)
Noncontrolling interests		-		-		-		-		-		-		(1,340)		(1,340)
Common shares and restricted share units
($2.00 per share)		-		-		-		(348,984)		-		(348,984)		-		(348,984)
Other comprehensive loss (Note 2)		-		-		-		-		(13,750)		(13,750)		-		(13,750)
Balances at June 30, 2018	$	4,025,000	$	17,394	$	5,673,078	$	(735,065)	$	(84,601)	$	8,895,806	$	24,986	$	8,920,792

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Six Months Ended June 30, 2019

(Amounts in thousands, except share and per share amounts)

(Unaudited)



									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity
Balances at December 31, 2018	$	4,025,000	$	17,413	$	5,718,485	$	(577,360)	$	(64,060)	$	9,119,478	$	25,250	$	9,144,728
Issuance of 11,400 preferred shares (Note 8)		285,000		-		(8,277)		-		-		276,723		-		276,723
Redemption of 22,900 preferred shares (Note 8)		(572,500)		-		-		-		-		(572,500)		-		(572,500)
Issuance of common shares in connection with
share-based compensation (163,642 shares) (Note 10)		-		16		17,374		-		-		17,390		-		17,390
Share-based compensation expense, net of cash
paid in lieu of common shares (Note 10)		-		-		2,363		-		-		2,363		-		2,363
Contributions by noncontrolling interests		-		-		-		-		-		-		1,302		1,302
Net income		-		-		-		739,134		-		739,134		-		739,134
Net income allocated to noncontrolling interests		-		-		-		(2,557)		-		(2,557)		2,557		-
Distributions to equity holders:
Preferred shares (Note 8)		-		-		-		(108,537)		-		(108,537)		-		(108,537)
Noncontrolling interests		-		-		-		-		-		-		(3,533)		(3,533)
Common shares and restricted share units
($4.00 per share)		-		-		-		(699,071)		-		(699,071)		-		(699,071)
Other comprehensive loss (Note 2)		-		-		-		-		(3,489)		(3,489)		-		(3,489)
Balances at June 30, 2019	$	3,737,500	$	17,429	$	5,729,945	$	(648,391)	$	(67,549)	$	8,768,934	$	25,576	$	8,794,510

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Six Months Ended June 30, 2018

(Amounts in thousands, except share and per share amounts)

(Unaudited)



									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity

Balances at December 31, 2017	$	4,025,000	$	17,385	$	5,648,399	$	(675,711)	$	(75,064)	$	8,940,009	$	24,360	$	8,964,369
Issuance of common shares in connection with
share-based compensation (83,665 shares)		-		9		1,690		-		-		1,699		-		1,699
Share-based compensation expense, net of cash
paid in lieu of common shares		-		-		22,989		-		-		22,989		-		22,989
Contributions by noncontrolling interests		-		-		-		-		-		-		752		752
Net income		-		-		-		749,728		-		749,728		-		749,728
Net income allocated to noncontrolling interests		-		-		-		(2,929)		-		(2,929)		2,929		-
Distributions to equity holders:
Preferred shares (Note 8)		-		-		-		(108,158)		-		(108,158)		-		(108,158)
Noncontrolling interests		-		-		-		-		-		-		(3,055)		(3,055)
Common shares and restricted share units
($4.00 per share)		-		-		-		(697,995)		-		(697,995)		-		(697,995)
Other comprehensive loss (Note 2)		-		-		-		-		(9,537)		(9,537)		-		(9,537)
Balances at June 30, 2018	$	4,025,000	$	17,394	$	5,673,078	$	(735,065)	$	(84,601)	$	8,895,806	$	24,986	$	8,920,792

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Six Months Ended June 30,
	2019		2018
Cash flows from operating activities:
Net income	$	739,134	$	749,728
Adjustments to reconcile net income to net cash flows
from operating activities:
Gain on real estate investment sales		(341)		(424)
Depreciation and amortization		248,800		237,756
Equity in earnings of unconsolidated real estate entities		(36,586)		(72,758)
Distributions from retained earnings of unconsolidated
real estate entities		38,562		25,288
Foreign currency exchange gain		(2,573)		(10,126)
Share-based compensation expense		12,374		33,231
Other		15,824		16,577
Total adjustments		276,060		229,544
Net cash flows from operating activities		1,015,194		979,272
Cash flows from investing activities:
Payments for capital expenditures to maintain real estate facilities for:
Costs incurred during the period		(61,630)		(44,189)
Costs incurred in previous periods		(9,391)		(12,728)
Payments for development and expansion of real estate facilities for:
Costs incurred during the period		(75,751)		(121,188)
Costs incurred in previous periods		(70,624)		(45,939)
Acquisition of real estate facilities and intangible assets		(196,185)		(33,930)
Proceeds from sale of real estate investments		438		1,947
Net cash flows used in investing activities		(413,143)		(256,027)
Cash flows from financing activities:
Repayments on notes payable		(948)		(882)
Issuance of notes payable, net of issuance costs		496,900		-
Issuance of preferred shares		276,723		-
Issuance of common shares		17,390		1,699
Redemption of preferred shares		(572,500)		-
Cash paid upon vesting of restricted share units		(10,011)		(10,242)
Contributions by noncontrolling interests		1,302		752
Distributions paid to Public Storage shareholders		(807,608)		(806,153)
Distributions paid to noncontrolling interests		(3,533)		(3,055)
Net cash flows used in financing activities		(602,285)		(817,881)
Net cash flows from operating, investing, and financing activities		(234)		(94,636)
Net effect of foreign exchange translation		46		13
Decrease in cash and equivalents, including restricted cash	$	(188)	$	(94,623)

‎

Six Months Ended June 30,

2018

2017
Cash flows from operating activities:

Net income
$
749,728

$
699,228
Adjustments to reconcile net income to net cash flows

from operating activities:

Gain on real estate investment sales

(424)

(975)
Depreciation and amortization

237,756

221,106
Equity in earnings of unconsolidated real estate entities

(72,758)

(40,017)
Distributions from retained earnings of unconsolidated

real estate entities

25,288

26,525
Foreign currency exchange (gain) loss

(10,126)

31,006
Share-based compensation expense

34,188

13,162
Other

14,258

15,292
Total adjustments

228,182

266,099
Net cash flows from operating activities

977,910

965,327
Cash flows from investing activities:

Capital expenditures to maintain real estate facilities

(56,642)

(52,095)
Construction in process

(166,040)

(164,544)
Acquisition of real estate facilities and intangible assets
(33,930)

(34,407)
Proceeds from sale of real estate investments

1,947

5,596
Net cash flows from investing activities

(254,665)

(245,450)
Cash flows from financing activities:

Repayments on notes payable

(882)

(841)
Issuance of preferred shares

-

271,057
Issuance of common shares

1,699

31,902
Cash paid upon vesting of restricted share units

(10,242)

(11,764)
Acquisition of noncontrolling interests

-

(14,425)
Contributions by noncontrolling interests

752

584
Distributions paid to Public Storage shareholders

(806,153)

(817,987)
Distributions paid to noncontrolling interests

(3,055)

(3,749)
Net cash flows from financing activities

(817,881)

(545,223)
Net cash flows from operating, investing, and financing activities

(94,636)

174,654
Net effect of foreign exchange translation

13

(104)
(Decrease) increase in cash, equivalents, and restricted cash
$
(94,623)

$
174,550

Cash, equivalents, and restricted cash at beginning of the period:

Cash and equivalents
$
433,376

$
183,688
Restricted cash included in other assets

22,677

28,885

$
456,053

$
212,573

Cash, equivalents, and restricted cash at end of the period:

Cash and equivalents
$
338,419

$
358,266
Restricted cash included in other assets

23,011

28,857

$
361,430

$
387,123

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	Six Months Ended June 30,
	2019		2018

Cash and equivalents, including restricted cash at beginning of the period:
Cash and equivalents	$	361,218	$	433,376
Restricted cash included in other assets		22,801		22,677
	$	384,019	$	456,053

Cash and equivalents, including restricted cash at end of the period:
Cash and equivalents	$	360,331	$	338,419
Restricted cash included in other assets		23,500		23,011
	$	383,831	$	361,430

Supplemental schedule of non-cash investing and
financing activities:

Costs incurred during the period remaining unpaid at period end for:
Capital expenditures to maintain real estate facilities	$	(10,929)	$	(9,038)
Construction or expansion of real estate facilities		(53,955)		(43,158)
Accrued and other liabilities		64,884		52,196

Real estate acquired in exchange for assumption of notes payable		(1,817)		-
Notes payable assumed in connection with acquisition of real estate		1,817		-

Other disclosures:

Foreign currency translation adjustment:
Real estate facilities, net of accumulated depreciation		-		149
Investments in unconsolidated real estate entities		3,489		9,396
Notes payable		(2,527)		(10,121)
Accumulated other comprehensive (loss) gain		(916)		589

Six Months Ended June 30,

2018

2017
Supplemental schedule of non-cash investing and

financing activities:

Foreign currency translation adjustment:

Real estate facilities, net of accumulated depreciation
$
149

$
(374)
Investments in unconsolidated real estate entities

9,396

(12,569)
Notes payable

(10,121)

30,882
Accumulated other comprehensive loss

589

(18,043)

Preferred shares called for redemption and reclassified to liabilities

-

460,000
Preferred shares called for redemption and reclassified from equity

-

(460,000)

Accrued development costs and capital expenditures:

Capital expenditures to maintain real estate facilities

3,415

(1,445)
Construction in process

1,694

(2,336)
Accrued and other liabilities

(5,109)

3,781

See accompanying notes.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)

1.Description of the Business

Public Storage (referred to herein as “the Company,” “we,” “us,” or “our”), a Maryland real estate investment trust (“REIT”), was organized in 1980. Our principal business activities include the ownership and operation of self-storage facilities which offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities such as merchandise sales and tenant reinsurance to the tenants at our self-storage facilities, as well as the acquisition and development of additional self-storage space.

At June 30, ~~2018,~~2019, we have direct and indirect equity interests in ~~2,402~~2,456 self-storage facilities (with approximately ~~160~~166 million net rentable square feet) located in 38 states in the United States (“U.S.”) operating under the “Public Storage” ~~name.~~ name, and 0.9 million net rentable square feet of commercial and retail space.

We ~~also~~ own ~~one self-storage facility~~31.3 million common shares (an approximate 35% interest) of Shurgard Self Storage SA (“Shurgard”, referred to in ~~London, England and we have~~previous filings as “Shurgard Europe”), a ~~49% interest in Shurgard Europe,~~public company traded on Euronext Brussels under the “SHUR” symbol, which owns ~~227~~231 self-storage facilities (with approximately 1213 million net rentable square feet) located in seven Western European countries, all operating under the “Shurgard” name. We also ~~have direct and indirect~~own an aggregate approximate 42% common equity ~~interests~~interest in ~~approximately 29~~PS Business Parks, Inc. (“PSB”), a REIT traded on the New York Stock Exchange under the “PSB” symbol, which owns 28 million aggregate net rentable square feet of commercial properties, primarily multi-tenant industrial, flex, and office space, located in seven states in the U.S. primarily owned and operated by PS Business Parks, Inc. (“PSB”) under the “PS Business Parks” name. At June 30, 2018, we have an approximate 42% common equity interest in PSB.six states.

Disclosures of the number and square footage of facilities, as well as the number and coverage of tenant reinsurance policies (Note 12) are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (U.S.).

2.Summary of Significant Accounting Policies

Basis of Presentation

We have prepared the accompanying interim financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Accounting Standards Codification of the Financial Accounting Standards Board (“FASB”), and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, the interim financial statements presented herein reflect all adjustments, of a normal recurring nature, that are necessary to fairly present the interim financial statements. Because they do not include all of the disclosures required by GAAP for complete annual financial statements, these interim financial statements should be read together with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Certain amounts previously reported in our June 30, 2018 financial statements have been reclassified to conform to the June 30, 2019 presentation, including separate presentation on our Statements of Cash Flows of our cash payments for real estate investments between cash paid for amounts incurred during the current period and amounts incurred during previous periods.

Consolidation and Equity Method of Accounting

We consider entities to be Variable Interest Entities (“VIEs”) when they have insufficient equity to finance their activities without additional subordinated financial support provided by other parties, or the equity holders as a group do not have a controlling financial interest. We consolidate VIEs when we have (i) the power to direct the activities most significantly impacting economic performance, and (ii) either the obligation to absorb losses or the right to receive benefits from the VIE. We have no involvement with any material VIEs. We

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

consolidate all other entities when we control them through voting shares or contractual rights. The entities we consolidate, for the period in which the reference applies, are referred to collectively as the “Subsidiaries,” and we eliminate intercompany transactions and balances.

We account for our investments in entities that we do not consolidate but have significant influence over using the equity method of accounting. These entities, for the periods in which the reference applies, are referred to collectively as the “Unconsolidated Real Estate ~~Entities”,~~Entities,” eliminating intra-entity profits and losses and amortizing any differences between the cost of our investment and the underlying equity in net assets against

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

equity in earnings as if the Unconsolidated Real Estate Entity were a consolidated subsidiary. Equity in earnings of unconsolidated real estate entities represents our pro-rata share of the earnings of the Unconsolidated Real Estate Entities.

When we begin consolidating an entity, we reflect our preexisting equity interest at book value. All changes in consolidation status are reflected prospectively.

Collectively, at June 30, ~~2018,~~2019, the Company and the Subsidiaries own ~~2,402~~2,456 self-storage facilities ~~in the U.S., one self-storage facility in London, England~~ and three commercial facilities in the U.S. At June 30, ~~2018,~~2019, the Unconsolidated Real Estate Entities are comprised of PSB and ~~Shurgard Europe.~~Shurgard.

Use of Estimates

The financial statements and accompanying notes reflect our estimates and assumptions. Actual results could differ from those estimates and assumptions.

Income Taxes

We have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we do not incur federal income tax if we distribute 100% of our REIT taxable income each year, and if we meet certain organizational and operational rules. We believe we have met these REIT requirements for all periods presented herein. Accordingly, we have recorded no federal income tax expense related to our REIT taxable income.

Our merchandise and tenant reinsurance operations are subject to corporate income tax and such taxes are included in ancillary cost of operations. We also incur income and other taxes in certain states, which are included in general and administrative expense.

We recognize tax benefits of uncertain income tax positions that are subject to audit only if we believe it is more likely than not that the position would ultimately be sustained assuming the relevant taxing authorities had full knowledge of the relevant facts and circumstances of our positions. As of June 30, ~~2018,~~2019, we had no tax benefits that were not recognized.

Real Estate Facilities

Real estate facilities are recorded at cost. We capitalize all costs incurred to acquire, develop, construct, renovate and improve facilities, including interest and property taxes incurred during the construction period. We allocate the net acquisition cost of acquired real estate facilities to the underlying land, buildings, and identified intangible assets based upon their respective individual estimated fair values.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

Costs associated with dispositions of real estate, as well as repairs and maintenance costs, are expensed as incurred. We depreciate buildings and improvements on a straight-line basis over estimated useful lives ranging generally between 5 to 25 years.

When we sell a full or partial interest in a real estate facility without retaining a controlling interest following sale, we recognize a gain or loss on sale as if 100% of the property was sold at fair value. If we retain a controlling interest following the sale, we record a noncontrolling interest for the book value of the partial interest sold, and recognize additional paid-in capital for the difference between the consideration received and the partial interest at book value.

Other Assets

Other assets primarily consist of rents receivable from our tenants, prepaid expenses, restricted cash and ~~restricted cash.~~right-to-use assets. See “Recent Accounting Pronouncements and Guidance” below.

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

Accrued and Other Liabilities

Accrued and other liabilities consist primarily of rents prepaid by our tenants, trade payables, property tax accruals, accrued payroll, accrued tenant reinsurance losses, lease liabilities, and contingent loss accruals when probable and estimable. See “Recent Accounting Pronouncements and Guidance” below. We believe the fair value of our accrued and other liabilities approximates book value, due primarily to the short period until repayment. We disclose the nature of significant unaccrued losses that are reasonably possible of occurring and, if estimable, a range of exposure.

Cash Equivalents, Restricted Cash, Marketable Securities and Other Financial Instruments

Cash equivalents represent highly liquid financial instruments such as money market funds with daily liquidity or short-term commercial paper or treasury securities maturing within three months of acquisition. Cash and equivalents which are restricted from general corporate use are included in other assets. We believe that the book value of all such financial instruments for all periods presented approximates fair value, due to the short period to maturity.

Fair Value

As used herein, the term “fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Our estimates of fair value involve considerable judgment and are not necessarily indicative of the amounts that could be realized in current market exchanges.

We estimate the fair value of our cash and equivalents, marketable securities, other assets, debt, and other liabilities by discounting the related future cash flows at a rate based upon quoted interest rates for securities that have similar characteristics such as credit quality and time to maturity. Such quoted interest rates are referred to generally as “Level 2” inputs.

We use significant judgment to estimate fair values of investments in real estate, goodwill, and other intangible assets. In estimating their values, we consider significant unobservable inputs such as market prices of land, market capitalization rates, expected returns, earnings multiples, projected levels of earnings, costs of construction, and functional depreciation. These inputs are referred to generally as “Level 3” inputs.

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

Currency and Credit Risk

Financial instruments that are exposed to credit risk consist primarily of cash and equivalents, certain portions of other assets including rents receivable from our tenants and restricted cash. Cash equivalents we invest in are either money market funds with a rating of at least AAA by Standard & Poor’s, commercial paper that is rated A1 by Standard & Poor’s or deposits with highly rated commercial banks.

At June 30, ~~2018,~~2019, due primarily to our investment in Shurgard ~~Europe~~ (Note 4) and our notes payable denominated in Euros (Note 6), our operating results and financial position are affected by fluctuations in currency exchange rates between the Euro, and to a lesser extent, other European currencies, against the U.S. Dollar.

Goodwill and Other Intangible Assets

Intangible assets are comprised of goodwill, the “Shurgard” trade name, acquired customers in place, and leasehold interests in land.

Goodwill totaled $174.6 million at June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. The “Shurgard” trade name, which is used by Shurgard ~~Europe~~ pursuant to a fee-based licensing agreement, has a book value of $18.8 million at June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Goodwill and the “Shurgard” trade name have indefinite lives and are not amortized.

Acquired customers in place and leasehold interests in land are finite-lived assets and are amortized relative to the benefit of the customers in place or the benefit to land lease expense to each period. At June 30,

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

~~2018,~~2019, these intangibles had a net book value of ~~$14.0~~$16.8 million ($~~21.5~~16.5 million at December 31, ~~2017)~~2018). Accumulated amortization totaled ~~$33.1~~$29.2 million at June 30, ~~2018~~2019 ($~~31.0~~28.9 million at December 31, ~~2017)~~2018), and amortization expense of ~~$8.8~~$8.4 million and ~~$8.0~~$8.8 million was recorded in the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The estimated future amortization expense for our finite-lived intangible assets at June 30, ~~2018~~2019 is approximately ~~$4.8~~$6.7 million in the remainder of ~~2018, $3.7~~2019, $5.0 million in ~~2019~~2020 and ~~$5.5~~$5.1 million thereafter. During the six months ended June 30, ~~2018,~~2019, intangibles increased ~~$1.3~~$8.7 million in connection with the acquisition of self-storage facilities (Note 3).

Evaluation of Asset Impairment

We evaluate our real estate and finite-lived intangible assets for impairment each quarter. If there are indicators of impairment and we determine that the asset is not recoverable from future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal.

We evaluate our investments in unconsolidated real estate entities for impairment on a quarterly basis. We record an impairment charge to the extent the carrying amount exceeds estimated fair value, when we believe any such shortfall is other than temporary.

We evaluate goodwill for impairment annually and whenever relevant events, circumstances and other related factors indicate that fair value of the related reporting unit may be less than the carrying amount. If we determine that the fair value of the reporting unit exceeds the aggregate carrying amount, no impairment charge is recorded. Otherwise, we record an impairment charge to the extent the carrying amount of the goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

We evaluate other indefinite-lived intangible assets, such as the “Shurgard” trade name for impairment at least annually and whenever relevant events, circumstances and other related factors indicate that the fair value is less than the carrying amount. When we conclude that it is likely that the asset is not impaired, we do not record an impairment charge and no further analysis is performed. Otherwise, we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value.

No impairments were recorded in any of our evaluations for any period presented herein.

~~Casualty Loss~~

We record casualty losses for a) the book value of assets destroyed and b) incremental repair, clean-up, and other costs associated with the casualty. Insurance proceeds are recorded as a reduction in casualty loss when all uncertainties of collection are satisfied.

Revenue and Expense Recognition

Revenues from self-storage facilities, which are primarily composed of rental income earned pursuant to month-to-month leases, as well as associated late charges and administrative fees, are recognized as earned. Promotional discounts reduce rental income over the promotional period, which is generally one month. Ancillary revenues and interest and other income are recognized when earned.

We accrue for property tax expense based upon actual amounts billed and, in some circumstances, estimates when bills or assessments have not been received from the taxing authorities. If these estimates are

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

incorrect, the timing and amount of expense recognition could be incorrect. Cost of operations (including advertising expenditures), general and administrative expense, and interest expense are expensed as incurred.

Foreign Currency Exchange Translation

The local currency (primarily the Euro) is the functional currency for our interests in foreign operations. The related balance sheet amounts are translated into U.S. Dollars at the exchange rates at the respective financial statement date, while amounts on our statements of income are translated at the average exchange rates during the respective period. When financial instruments denominated in a currency other than the U.S. Dollar are expected to be settled in cash in the foreseeable future, the impact of changes in the U.S. Dollar equivalent are reflected in current earnings. The Euro was translated at exchange rates of approximately ~~1.168~~1.137 U.S. Dollars per Euro at June 30, ~~2018 (1.198~~2019 (1.144 at December 31, ~~2017)~~2018), and average exchange rates of ~~1.192~~1.124 and ~~1.099~~1.192 for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and average exchange rates of ~~1.210~~1.130 and ~~1.082~~1.210 for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Cumulative translation adjustments, to the extent not included in cumulative net income, are included in equity as a component of accumulated other comprehensive income (loss).

Comprehensive Income

Total comprehensive income represents net income, adjusted for changes in other comprehensive income (loss) for the applicable period. The aggregate foreign currency exchange gains and losses reflected on our statements of comprehensive income are comprised primarily of foreign currency exchange gains and losses on our investment in Shurgard ~~Europe~~ and our unsecured notes denominated in Euros.

Recent Accounting Pronouncements and Guidance

~~In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ ~~which requires revenue to be based upon the consideration expected from customers for promised goods or services. In February 2017, the FASB issued ASU 2017-05,~~ ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,~~ which provides guidance with respect to the sale of real estate facilities. The new standards permit either the retrospective or cumulative effects transition method. We adopted the new standards effective January 1, 2018 utilizing the modified retrospective transition method applied to open contracts. The new standards did not have a material impact on our results of operations or financial condition, primarily because most of our revenue is from rental revenue from self-storage facilities, and included in self-storage facilities revenue on our statements of income, which the new standards do not address, and because we do not provide any material products and services to our customers or sell material amounts of our real estate facilities. The remainder of our revenues are composed of elements that are either covered by the new standards but not impacted, or are not covered by the new standards.

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified-retrospective approach to adoption and became effective for interim and annual periods beginning on January 1, ~~2019, requires~~2019. In July 2018, the FASB further amended this standard to allow for a ~~modified retrospective~~new transition ~~approach for all leases existing at, or entered into after,~~method that offers the option to use the effective date as the date of initial application ~~with an option to use certain transition relief~~and not adjust the comparative-period financial information. We adopted the new standard effective January 1, 2019, ~~with~~using the new transition method, recording a ~~cumulative effect through December 31, 2018 recorded through retained earnings.~~ total of $38.7 million in right of use assets, reflected in other assets, and substantially the same amount in lease liabilities, reflected in

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

accrued and other liabilities, for leases where we are the lessee (principally ground leases and office leases). The ~~Company is currently assessing~~lease liabilities are recognized based on the ~~impact~~present value of the ~~guidance~~remaining lease payments for each operating lease using each respective remaining lease term and a corresponding estimated incremental borrowing rate. We estimated the incremental borrowing rate primarily by reference to average yield spread on debt issuances by companies of a similar credit rating as us, and the treasury yields as of January 1, 2019. We had no material amount of leases covered by the standard where we are the lessor (principally our ~~financial statements. However, we do not believe this standard will have a material impact on our results of operations or financial condition,~~storage leases) because substantially all of ~~our~~such leases are month to month. For leases where we are the lessee or the lessor, we applied (i) the package of practical expedients to not reassess prior conclusions related to contracts that are or that contain leases, lease ~~revenues are derived from month-to-month self-storage leases,~~classification and ~~we do not have material amounts of~~initial direct costs, (ii) the hindsight practical expedient to determine the lease ~~expense.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Stock Compensation: Scope of Modification Accounting,~~ ~~to increase clarity~~term and ~~consistency of practice and reduce cost and complexity when modifying the terms of share-~~

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

~~based awards. We prospectively adopted this guidance effective January 1, 2018, with no material impact on our financial statements.~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230) - Restricted Cash, which primarily requires the statement of cash flows to explain not only the change~~ in ~~cash and equivalents, but also the change in restricted cash. The standard is effective on January 1, 2018, with early adoption permitted and requires the use~~assessing impairment of the ~~retrospective transition method.~~ ~~The Company early adopted~~right of use assets, and (iii) the easement practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under this new standard. In addition, for leases where we are the lessee, we also elected to (a) not apply the new ~~guidance during the fourth quarter~~standard to our leases with an original term of ~~2017~~12 months or less, and ~~accordingly, net cash flows from investing activities decreased by $28,000 for the six months ended June 30, 2017 as compared to the current presentation on the statement of cash flows.~~(b) not separate lease and associated non-lease components.

Net Income per Common Share

Net income is allocated to (i) noncontrolling interests based upon their share of the net income of the Subsidiaries, (ii) preferred shareholders, to the extent redemption cost exceeds the related original net issuance proceeds (an “EITF D-42 allocation”), and (iii) the remaining net income is allocated to each of our equity securities based upon the dividends declared or accumulated during the period, combined with participation rights in undistributed earnings.

Basic and diluted net income per common share are each calculated based upon net income allocable to common shareholders presented on the face of our income statement, divided by (i) in the case of basic net income per common share, weighted average common shares, and (ii) in the case of diluted income per share, weighted average common shares adjusted for the impact, if dilutive, of stock options outstanding (Note 10). The following table reconciles from basic to diluted common shares outstanding (amounts in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Weighted average common shares and equivalents

outstanding:

Basic weighted average common

shares outstanding

173,932

173,602

173,912

173,483

Net effect of dilutive stock options -

based on treasury stock method

292

473

274

589

Diluted weighted average common

shares outstanding

174,224

174,075

174,186

174,072


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018

Weighted average common shares and equivalents
outstanding:
Basic weighted average common
shares outstanding		174,253		173,932		174,215		173,912
Net effect of dilutive stock options -
based on treasury stock method		289		292		244		274
Diluted weighted average common
shares outstanding		174,542		174,224		174,459		174,186

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

3.Real Estate Facilities

Activity in real estate facilities during the six months ended June 30, ~~2018~~2019 is as follows:

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~



	Six Months Ended
	June 30, ~~2018~~2019
	(Amounts in thousands)
Operating facilities, at cost:
Beginning balance	$	~~14,665,989~~ 15,296,844
~~Capital~~Costs incurred for capital expenditures to maintain real estate facilities	~~53,227~~	72,559
Acquisitions		~~32,679~~ 189,273
Dispositions		~~(1,603)~~ (102)
Developed or ~~redeveloped~~expanded facilities opened for operation	~~194,743~~
~~Impact of foreign exchange rate changes~~		~~(403)~~
~~Ending balance~~		~~14,944,632~~
~~Accumulated depreciation:~~		223,171
~~Beginning~~Ending balance		~~(5,700,331)~~
~~Depreciation expense~~		~~(223,690)~~
~~Dispositions~~		80
~~Impact of foreign exchange rate changes~~		~~254~~
~~Ending balance~~		~~(5,923,687)~~
~~Construction in process:~~		15,781,745
~~Beginning balance~~Accumulated depreciation:		~~264,441~~
~~Current development~~Beginning balance		~~164,346~~ (6,140,072)
Depreciation expense		(235,065)
Dispositions		5
Ending balance		(6,375,132)
Construction in process:
Beginning balance		285,339
Costs incurred for development and expansion of real estate facilities		129,706
Developed or ~~redeveloped~~expanded facilities opened for operation	~~(194,743)~~	(223,171)
Ending balance		~~234,044~~ 191,874
Total real estate facilities at June 30, ~~2018~~2019	$	~~9,254,989~~ 9,598,487

During the six months ended June 30, ~~2018,~~2019, we acquired ~~five~~22 self-storage facilities ~~(356,000~~(1,428,000 net rentable square feet), for a total cost of ~~$33.9~~$198.0 million, consisting of $196.2 million in cash and the assumption of ~~which $1.3~~$1.8 million in mortgage notes. Approximately $8.7 million of the total cost was allocated to intangible assets. We completed development and redevelopment activities costing ~~$194.7~~$223.2 million during the six months ended June 30, ~~2018,~~2019, adding ~~1.7~~2.7 million net rentable square feet of self-storage space. Construction in process at June 30, ~~2018~~2019 consists of projects to develop new self-storage facilities and ~~redevelop~~expand existing self-storage ~~facilities, which will build~~ ~~6.1 million net rentable square feet of storage space at an aggregate estimated cost of approximately $679.2 million.~~ facilities.

During the six months ended June 30, ~~2018,~~2019, we ~~sold portions~~paid a total of $146.4 million with respect to the development and expansion of real estate facilities, ~~in connection with eminent domain proceedings for $2.0~~including $70.6 million to repay amounts accrued at December 31, 2018 ($167.1 million during the six months ended June 30, 2018, including $45.9 million to repay amounts accrued at December 31, 2017). Of the $129.7 million in ~~cash proceeds and recorded~~costs incurred during the six months ended June 30, 2019, $54.0 million remains unpaid at June 30, 2019.

During the six months ended June 30, 2019, we paid a ~~related gain on sale~~total of $71.0 million with respect to capital expenditures to maintain real estate ~~of approximately $0.4 million.~~facilities, including $9.4 million to repay amounts accrued at December 31, 2018 ($56.9 million during the six months ended June 30, 2018, including $12.7 million to repay amounts accrued at December 31, 2017). Of the $72.6 million in costs incurred during the six months ended June 30, 2019, $10.9 million remains unpaid at June 30, 2019.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

4.Investments in Unconsolidated Real Estate Entities

The following table sets forth our investments in, and equity in earnings of, the Unconsolidated Real Estate Entities (amounts in thousands):


	Investments in Unconsolidated Real Estate Entities at
	June 30, 2019		December 31, 2018

PSB	$	432,743	$	434,533
Shurgard		345,780		349,455
Total	$	778,523	$	783,988


	Equity in Earnings of Unconsolidated Real Estate Entities for the
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018

PSB	$	14,864	$	36,612	$	28,584	$	60,443
Shurgard		4,050		5,351		8,002		12,315
Total	$	18,914	$	41,963	$	36,586	$	72,758

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

During the six months ended June 30, 2018 and 2017, we received cash distributions from our investments in the Unconsolidated Real Estate Entities totaling $25.3 million and $26.5 million, respectively. At June 30, 2018, the cost of our investment in the Unconsolidated Real Estate Entities exceeds our pro rata share of the underlying equity by approximately $66.3 million ($67.3 million at December 31, 2017). This differential is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities based upon allocations to the underlying net assets. Such amortization was approximately $0.9 million and $0.7 million during the six months ended June 30, 2018 and 2017, respectively.

~~PSB is a REIT traded on the New York Stock Exchange. We have an approximate 42% common equity interest in PSB as of June 30, 2018 and December 31, 2017, comprised of our ownership of~~Throughout all periods presented, we owned 7,158,354 shares of PSB’s common stock and 7,305,355 limited partnership units ~~(“LP Units”)~~ in an operating partnership controlled by ~~PSB.~~PSB, representing an aggregate approximately 42% common equity interest. The ~~LP Units~~limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

Based upon the closing price at June 30, ~~2018~~2019 ($~~128.50~~168.53 per share of PSB common stock), the shares and units we owned had a market value of approximately ~~$1.9~~$2.4 billion.

Our equity in earnings of PSB is comprised of our equity interest in PSB’s earnings, less amortization of the PSB Basis Differential (defined below).

During the six months ended June 30, 2019 and 2018, we received cash distributions from PSB totaling $30.4 million and $24.6 million, respectively.

At June 30, ~~2018, the adjusted tax basis of~~2019, our pro-rata investment in ~~PSB approximates book value.~~PSB’s real estate assets included in investment in real estate entities exceeds our pro-rata share of the underlying amounts on PSB’s balance sheet by approximately $31.9 million ($32.3 million at December 31, 2018). This differential (the “PSB Basis Differential”) is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such amortization totaled approximately $0.4 million and $0.9 million during the six months ended June 30, 2019 and 2018, respectively.

~~The following table sets forth~~PSB’s filings and selected financial information can be accessed through the SEC, and on PSB’s website, www.psbusinessparks.com. Information on this website is not incorporated by reference herein and is not a part of ~~PSB. The amounts represent all of PSB’s balances and not our pro-rata share.~~this Quarterly Report on Form 10-Q.

1417

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)

2018

2017

(Amounts in thousands)
For the six months ended June 30,

Revenues
$
205,583

$
199,861
Costs of operations

(64,256)

(61,283)
Depreciation and amortization

(48,298)

(46,706)
General and administrative

(4,674)

(5,274)
Other items

1,065

(464)
Gains on sale of real estate

85,283

5,074
Net income before allocation to preferred shareholders

174,703

91,208
and restricted share unitholders

Allocations to preferred shareholders and

restricted share unitholders

(27,315)

(26,327)
Net income allocated to common shareholders

and LP Unitholders
$
147,388

$
64,881

June 30,

December 31,

2018

2017

(Amounts in thousands)

Total assets (primarily real estate)
$
2,072,315

$
2,100,159
Debt

10,000

-
Preferred stock called for redemption

-

130,000
Other liabilities

81,296

80,223
Equity:

Preferred stock

959,750

959,750
Common equity and LP units

1,021,269

930,186

Investment in Shurgard ~~Europe~~

~~For~~Throughout all periods presented, we effectively owned, directly and indirectly 31,268,459 Shurgard common shares, representing, prior to October 15, 2018, an approximate 49% equity interest in Shurgard. On October 15, 2018, Shurgard completed an initial global offering (the “Offering”), issuing 25.0 million of its common shares to third parties at a price of €23 per share, reducing our ownership interest to approximately 35%. Following the Offering, Shurgard’s shares trade on Euronext Brussels under the “SHUR” symbol.

Based upon the closing price at June 30, 2019 (€31.80 per share of SHUR common stock, at 1.137 exchange rate of US Dollars to the Euro), the shares we owned had a ~~49% equity investment in Shurgard Europe and our joint venture partner owns the remaining 51% interest.~~ market value of approximately $1.1 billion.

Our equity in earnings of Shurgard ~~Europe~~ is comprised of our ~~49%~~equity share of ~~Shurgard Europe’s~~Shurgard’s net income, ~~and 49%~~plus our equity share of the trademark license fees that Shurgard ~~Europe~~ pays to us for the use of the “Shurgard” trademark. The remaining ~~51% of the~~ license fees we receive from Shurgard are classified as interest and other income on our income statement.

Shurgard paid dividends to its public shareholders during the six months ended June 30, 2019 of €0.22 per share. The aggregate dividends we received totaling $7.7 million in the six months ended June 30, 2019, combined with our equity share of trademark license fees collected from Shurgard, totaling $0.5 million and $0.7 million in the six months ended June 30, 2019 and 2018, are reflected as “distributions from retained earnings of unconsolidated real estate entities” on our statements of cash flows.

Changes in foreign currency exchange rates decreased our investment in Shurgard ~~Europe~~ by approximately ~~$9.4~~$3.5 million and ~~increased it by $12.6~~$9.4 million in the six months ended June 30, 2019 and 2018, respectively.

Shurgard’s public filings and ~~2017, respectively.~~ publicly reported information can be obtained on its website, https://corporate.shurgard.eu and on the website of the Luxembourg Stock Exchange, http://www.bourse.lu. Information on these websites is not incorporated by reference herein and is not a part of this Quarterly Report on Form 10-Q.

The following table sets forth selected consolidated financial information of Shurgard Europe based upon all of Shurgard Europe’s balances for all periods, rather than our pro rata share. Such amounts are based upon our historical acquired book basis.

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

2018

2017

(Amounts in thousands)
For the six months ended June 30,

Self-storage and ancillary revenues
$
142,665

$
124,886
Self-storage and ancillary cost of operations

(53,186)

(46,539)
Depreciation and amortization

(37,114)

(29,578)
General and administrative

(5,488)

(6,376)
Interest expense on third party debt

(11,209)

(10,099)
Trademark license fee payable to Public Storage

(1,427)

(1,249)
Income tax expense

(11,873)

(7,092)
Gain on real estate investment sale

1,225

-
Foreign exchange gain (loss)

113

(220)

Net income
$
23,706

$
23,733
Average exchange rates of Euro to the U.S. Dollar

1.210

1.082

June 30,

December 31,

2018

2017

(Amounts in thousands)

Total assets (primarily self-storage facilities)
$
1,412,300

$
1,416,477
Total debt to third parties

708,411

726,617
Other liabilities

153,854

143,638
Equity

550,035

546,222

Exchange rate of Euro to U.S. Dollar

1.168

1.198

5.Credit Facility

We have a revolving credit agreement (the “Credit Facility”) with a $500 million borrowing limit, which ~~expires~~was amended on April 19, 2019 to (i) extend the maturity date from March 31, ~~2020.~~2020 to April 19, 2024, (ii) decrease the current effective borrowing spread over LIBOR from 0.850% to 0.70%, and (iii) decrease the current effective facility fee from 0.080% to 0.070%. All other terms remained substantially the same. Amounts drawn on the Credit Facility bear annual interest at rates ranging from LIBOR plus ~~0.850%~~0.70% to LIBOR plus ~~1.450%~~1.350% depending upon the ratio of our Total Indebtedness to Gross Asset Value (as defined in the Credit Facility) (LIBOR plus ~~0.850%~~0.70% at June 30, ~~2018)~~2019). We are also required to pay a quarterly facility fee ranging from ~~0.080%~~0.070% per annum to 0.250% per annum depending upon the ratio of our Total Indebtedness to our Gross Asset Value ~~(0.080%~~(0.070% per annum at June 30, ~~2018)~~2019). At June 30, ~~2018~~2019 and ~~August 1, 2018,~~July 30, 2019, we had no outstanding borrowings under this Credit Facility. We had undrawn standby letters of credit, which reduce our borrowing capacity, totaling ~~$16.1~~$15.9 million at June 30, ~~2018 and~~2019 ($16.2 million at December 31, ~~2017.~~2018). The Credit Facility has various customary restrictive covenants, all of which we were in compliance with at June 30, ~~2018.~~2019.

6.Notes Payable

Our notes payable at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are set forth in the ~~table~~tables below:

‎

1618

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)



			Amounts at June 30, 2019
	Coupon	Effective				Unamortized		Book		Fair
	Rate	Rate		Principal	Costs			Value		Value
			($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022	2.370%	2.483%	$	500,000	$	(1,683)	$	498,317	$	502,766
Notes due September 15, 2027	3.094%	3.218%		500,000		(4,340)		495,660		509,595
Notes due May 1, 2029	3.385%	3.459%		500,000		(3,031)		496,969		521,481
				1,500,000		(9,054)		1,490,946		1,533,842

Euro Denominated Unsecured Debt
Notes due April 12, 2024	1.540%	1.540%		113,712		-		113,712		118,086
Notes due November 3, 2025	2.175%	2.175%		275,192		-		275,192		297,656
				388,904		-		388,904		415,742
Mortgage Debt, secured by 27
real estate facilities with a net
book value of $109.5 million	4.051%	4.015%		28,260		-		28,260		29,013

			$	1,917,164	$	(9,054)	$	1,908,110	$	1,978,597


	Amounts at
	December 31, 2018
		Book		Fair
		Value		Value
	($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022	$	498,053	$	482,017
Notes due September 15, 2027		495,396		469,055
Notes due May 1, 2029		-		-
		993,449		951,072

Euro Denominated Unsecured Debt
Notes due April 12, 2024		114,449		115,964
Notes due November 3, 2025		276,982		286,078
		391,431		402,042

Mortgage Debt		27,403		27,613

	$	1,412,283	$	1,380,727

Amounts at June 30, 2018

Coupon
Effective

Unamortized

Book

Fair

Book Value at

Rate
Rate

Principal

Costs

Value

Value

December 31, 2017

($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt

Notes due September 2022
2.370%
2.483%

$
500,000

$
(2,211)

$
497,789

$
479,952

$
497,525
Notes due September 2027
3.094%
3.218%

500,000

(4,868)

495,132

470,908

494,868

1,000,000

(7,079)

992,921

950,860

992,393

Euro Denominated Unsecured Debt

Notes due April 2024
1.540%
1.540%

116,836

-

116,836

120,040

119,795
Notes due November 2025
2.175%
2.175%

282,759

-

282,759

297,490

289,921

399,595

-

399,595

417,530

409,716
Mortgage Debt, secured by 30 real estate

facilities with a net book value

of $115.5 million
4.031%
3.980%

28,318

-

28,318

29,144

29,213

$
1,427,913

$
(7,079)

$
1,420,834

$
1,397,534

$
1,431,322

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

U.S. Dollar Denominated Unsecured Debt

On September 18, 2017, we issued, in a public offering, two tranches each totaling $500.0 million of U.S. Dollar denominated unsecured ~~notes (the “U.S. Dollar Notes”).~~notes. In connection with the offering, we incurred a total of $7.9 million in costs, which is reflected as a reduction in the principal amount and amortized, using the effective interest method, over the term of each respective note. Interest on ~~the U.S. Dollar Notes~~such notes is payable semi-annually on March 15 and September 15 of each year, commencing March 15, 2018.

On April 12, 2019, we completed a public offering of $500 million in aggregate principal amount of senior notes bearing interest at an annual rate of 3.385% maturing on May 1, 2029. In connection with the offering, we incurred a total of $3.1 million in costs. The notes issued on April 12, 2019 and on September 18, 2017 are referred to hereinafter as the “U.S. Dollar Notes.”

The U.S. Dollar Notes have various financial covenants, all of which we were in compliance with at June 30, ~~2018.~~2019. Included in these covenants are a)(a) a maximum Debt to Total Assets of 65% ~~(4.4%~~(approximately 6% at June 30, ~~2018)~~2019) and b)(b) a minimum ratio of Adjusted EBITDA to Interest Expense of 1.5x ~~(74.7x~~(approximately 62x for the twelve months ended June 30, ~~2018)~~2019) as well as covenants limiting the amount we can encumber our properties with mortgage debt.

Euro Denominated Unsecured Debt

Our euro denominated unsecured notes (the “Euro Notes”) are payable to institutional investors. The Euro Notes consist of two tranches, (i) €242.0 million issued on November 3, 2015 for $264.3 million in net proceeds upon converting the Euros to U.S. Dollars and (ii) €100.0 million issued on April 12, 2016 for $113.6 million in net proceeds upon converting the Euros to U.S. Dollars. Interest is payable semi-annually. The Euro Notes have various customary financial covenants, all of which we were in compliance with at June 30, ~~2018.~~ 2019.

We reflect changes in the U.S. Dollar equivalent of the amount payable, as a result of changes in foreign exchange rates as “foreign currency exchange ~~gain~~ (loss)” gain” on our income statement ~~(gains~~(losses of ~~$21.9~~$5.2 million and ~~$10.1~~gains of $2.6 million for the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to ~~losses~~gains of ~~$25.4~~$21.9 million and ~~$31.0~~$10.1 million for the same periods in ~~2017, respectively)~~2018).

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

Mortgage Debt

Our non-recourse mortgage debt was assumed in connection with property acquisitions, and recorded at fair value with any premium or discount to the stated note balance amortized using the effective interest method.

During the six months ended June 30, 2019, we assumed a mortgage note with a contractual value of $1.8 million and an interest rate of 3.9%, which approximated market rate, in connection with the acquisition of a real estate facility.

At June 30, ~~2018,~~2019, the related contractual interest rates are fixed, ranging between ~~2.9%~~3.2% and 7.1%, and mature between ~~November 2018~~January 1, 2022 and ~~September 2028.~~July 1, 2030.

At June 30, ~~2018,~~2019, approximate principal maturities of our Notes Payable are as follows (amounts in thousands):

Unsecured

Mortgage

Debt

Debt

Total

Remainder of 2018
$
-

$
10,361

$
10,361
2019

-

1,505

1,505
2020

-

1,585

1,585
2021

-

1,503

1,503
2022

500,000

2,071

502,071
Thereafter

899,595

11,293

910,888

$
1,399,595

$
28,318

$
1,427,913
Weighted average effective rate

2.6%

4.0%

2.6%

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)


	Unsecured		Mortgage
	Debt		Debt		Total


Remainder of 2019	$	-	$	971	$	971
2020		-		2,015		2,015
2021		-		1,883		1,883
2022		500,000		2,584		502,584
2023		-		19,226		19,226
Thereafter		1,388,904		1,581		1,390,485
	$	1,888,904	$	28,260	$	1,917,164
Weighted average effective rate		2.8%		4.0%		2.9%

Cash paid for interest totaled ~~$18.3~~$21.8 million and ~~$4.3~~$18.3 million for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Interest capitalized as real estate totaled ~~$2.3~~$2.0 million and ~~$2.1~~$2.3 million for the six months ended June 30, 2019 and 2018, ~~and 2017,~~ respectively.

7.Noncontrolling Interests

At June 30, ~~2018,~~2019, the noncontrolling interests represent (i) third-party equity interests in subsidiaries owning 1419 operating self-storage facilities and ~~six~~five self-storage facilities that are under construction and (ii) 231,978 partnership units held by third-parties in a subsidiary that are convertible on a one-for-one basis (subject to certain limitations) into common shares of the Company at the option of the unitholder (collectively, the “Noncontrolling Interests”). At June 30, ~~2018,~~2019, the Noncontrolling Interests cannot require us to redeem their interests, other than pursuant to a liquidation of the subsidiary. During the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, we allocated a total of ~~$2.9~~$2.6 million and ~~$3.1~~$2.9 million, respectively, of income to these interests; and we paid ~~$3.1~~$3.5 million and ~~$3.7~~$3.1 million, respectively, in distributions to these interests.

During the six months ended June 30, ~~2017, we acquired Noncontrolling Interests for $14.4 million (none for the six months ended June 30, 2018), in cash, of which $7.7 million was allocated to Paid-in capital~~2019 and ~~$6.7 million as a reduction to Noncontrolling Interests. During the six months ended June 30,~~ 2018, ~~and 2017,~~ Noncontrolling Interests contributed ~~$0.8~~$1.3 million and ~~$0.6~~$0.8 million, respectively, to our subsidiaries.

8.Shareholders’ Equity

Preferred Shares

At June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had the following series of Cumulative Preferred Shares (“Preferred Shares”) outstanding:

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)

At June 30, 2018

At December 31, 2017

Series

Earliest Redemption Date

Dividend Rate

Shares Outstanding

Liquidation Preference

Shares Outstanding

Liquidation Preference

(Dollar amounts in thousands)

Series U

6/15/2017

5.625%

11,500

$
287,500

11,500

$
287,500

Series V

9/20/2017

5.375%

19,800

495,000

19,800

495,000

Series W

1/16/2018

5.200%

20,000

500,000

20,000

500,000

Series X

3/13/2018

5.200%

9,000

225,000

9,000

225,000

Series Y

3/17/2019

6.375%

11,400

285,000

11,400

285,000

Series Z

6/4/2019

6.000%

11,500

287,500

11,500

287,500

Series A

12/2/2019

5.875%

7,600

190,000

7,600

190,000

Series B

1/20/2021

5.400%

12,000

300,000

12,000

300,000

Series C

5/17/2021

5.125%

8,000

200,000

8,000

200,000

Series D

7/20/2021

4.950%

13,000

325,000

13,000

325,000

Series E

10/14/2021

4.900%

14,000

350,000

14,000

350,000

Series F

6/2/2022

5.150%

11,200

280,000

11,200

280,000

Series G

8/9/2022

5.050%

12,000

300,000

12,000

300,000

Total Preferred Shares

161,000

$
4,025,000

161,000

$
4,025,000


			At June 30, 2019			At December 31, 2018
Series	Earliest Redemption Date	Dividend Rate	Shares Outstanding	Liquidation Preference		Shares Outstanding	Liquidation Preference

			(Dollar amounts in thousands)
Series U	6/15/2017	5.625%	11,500	$	287,500	11,500	$	287,500
Series V	9/20/2017	5.375%	19,800		495,000	19,800		495,000
Series W	1/16/2018	5.200%	20,000		500,000	20,000		500,000
Series X	3/13/2018	5.200%	9,000		225,000	9,000		225,000
Series Y	3/17/2019	6.375%	-		-	11,400		285,000
Series Z	6/4/2019	6.000%	-		-	11,500		287,500
Series A	12/2/2019	5.875%	7,600		190,000	7,600		190,000
Series B	1/20/2021	5.400%	12,000		300,000	12,000		300,000
Series C	5/17/2021	5.125%	8,000		200,000	8,000		200,000
Series D	7/20/2021	4.950%	13,000		325,000	13,000		325,000
Series E	10/14/2021	4.900%	14,000		350,000	14,000		350,000
Series F	6/2/2022	5.150%	11,200		280,000	11,200		280,000
Series G	8/9/2022	5.050%	12,000		300,000	12,000		300,000
Series H	3/11/2024	5.600%	11,400		285,000	-		-
Total Preferred Shares			149,500	$	3,737,500	161,000	$	4,025,000

The holders of our Preferred Shares have general preference rights with respect to liquidation, quarterly distributions and any accumulated unpaid distributions. Except under certain conditions and as noted below, holders of the Preferred Shares will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of all outstanding series of preferred shares (voting as a single class without regard to series) will have the right to elect two additional members to serve on our board of trustees (our “Board”) until the arrearage has been cured. At June 30, ~~2018,~~2019, there were no dividends in arrears.

Except under certain conditions relating to the Company’s qualification as a REIT, the Preferred Shares are not redeemable prior to the dates indicated on the table above. On or after the respective dates, each of the series of Preferred Shares is redeemable at our option, in whole or in part, at $25.00 per depositary share, plus accrued and unpaid dividends. Holders of the Preferred Shares cannot require us to redeem such shares.

Upon issuance of our Preferred Shares, we classify the liquidation value as preferred equity on our balance sheet with any issuance costs recorded as a reduction to Paid-in capital.

On ~~June 2, 2017,~~March 11, 2019, we issued ~~11.2~~11.4 million depositary shares, each representing ~~1/1,000~~0.001 of a share of our ~~5.150%~~5.600% Series FH Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of ~~$280.0~~$285.0 million in gross proceeds, and we incurred ~~$8.9~~$8.3 million in issuance costs.

~~In June 2017, we called for redemption of, and on July 26, 2017,~~On March 28, 2019, we redeemed our ~~5.900%~~6.375% Series SY Preferred Shares, at par. ~~The liquidation value (at par)~~We recorded an $8.5 million allocation of ~~$460.0 million was reclassified as a liability at~~income from our common shareholders to the holders of our Preferred Shares in the six months ended June 30, ~~2017.~~2019 in connection with this redemption.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

On June 27, 2019, we redeemed our 6.000% Series Z Preferred Shares, at par. We recorded ~~a $14.6~~an $8.9 million allocation of income from our common shareholders to the holders of our Preferred Shares in the three and six months ended June 30, ~~2017~~2019 in connection with this redemption.

Dividends

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

~~Dividends~~

Common share dividends, including amounts paid to our restricted share unitholders, totaled ~~$349.0~~$349.6 million ($2.00 per share) and ~~$348.4~~$349.0 million ($2.00 per share) for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$698.0~~$699.1 million ($4.00 per share) and ~~$696.6~~$698.0 million ($4.00 per share) for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Preferred share dividends totaled ~~$54.1~~$53.5 million and ~~$61.3~~$54.1 million for the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$108.2~~$108.5 million and ~~$121.4~~$108.2 million for the six months ended June 30, 2019 and 2018, ~~and 2017,~~ respectively.

9.Related Party Transactions

B. Wayne Hughes, our former Chairman and his family, including his daughter Tamara Hughes Gustavson and his son B. Wayne Hughes, Jr., who are both members of our Board, collectively own approximately ~~14.3%~~14.5% of our common shares outstanding at June 30, ~~2018.~~2019.

At June 30, ~~2018,~~2019, B. Wayne Hughes and Tamara Hughes Gustavson together owned and controlled 5862 self-storage facilities in Canada. These facilities operate under the “Public Storage” tradename, which we license to the owners of these facilities for use in Canada on a royalty-free, non-exclusive basis. We have no ownership interest in these facilities and we do not own or operate any facilities in Canada. If we chose to acquire or develop our own facilities in Canada, we would have to share the use of the “Public Storage” name in ~~Canada with the facilities’ owners.~~Canada. We have a right of first refusal, subject to limitations, to acquire the stock or assets of the corporation engaged in the operation of these facilities if their owners agree to sell them. Our subsidiaries reinsure risks relating to loss of goods stored by customers in these facilities, and have received approximately ~~$625,000~~$696,000 and ~~$481,000~~$625,000 for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Our right to continue receiving these premiums may be qualified.

10.Share-Based Compensation

Under various share-based compensation plans and under terms established by our Board or a committee thereof, we grant non-qualified options to purchase the Company’s common shares, as well as restricted share units (“RSUs”), to trustees, officers, and key employees.

Stock options and RSUs are considered “granted” and “outstanding” as the terms are used herein, when (i) the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, (iii) the recipient is affected by changes in the market price of our stock, and (iv) it is probable that any performance conditions will be met.

We amortize the grant-date fair value of awards as compensation expense over the service period, which begins on the grant date and ends generally on the vesting date. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award is amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method).

In amortizing share-based compensation expense, we do not estimate future forfeitures in advance. Instead, we reverse previously amortized share-based compensation expense with respect to grants that are forfeited in the period the employee terminates employment.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

In February 2018, we announced that our Chief Executive Officer ~~(“CEO”)~~ and Chief Financial Officer ~~(“CFO”) are~~at the time were retiring from their executive roles at the end of 2018 and ~~will~~would then serve only as Trustees of the Company. Pursuant to our share-based compensation plans, their unvested grants will continue to vest over the

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

original vesting periods during their service as ~~long as they remain~~ Trustees. For financial reporting, the end of the service periods for previous stock option and RSU grants for these executives ~~have~~ changed from (i) the ~~grants’~~various vesting ~~periods~~dates to (ii) ~~the end of~~December 31, 2018 when they ~~will retire.~~retired. Accordingly, all remaining share-based compensation expense for these two executives ~~will now be~~was amortized byin the ~~end of~~year ended December 31, 2018.

See also “net income per common share” in Note 2 for further discussion regarding the impact of RSUs and stock options on our net income per common share and income allocated to common shareholders.

Stock Options

Stock options vest ~~ratably~~ over ~~a three~~3 to ~~five-year period,~~5years, expire ten years after the grant date, and the exercise price is equal to the closing trading price of our common shares on the grant date. Employees cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our stock options.

Outstanding stock option grants are included on a one-for-one basis in our diluted weighted average shares, to the extent dilutive, after applying the treasury stock method (based upon the average common share price during the period) to assumed exercise proceeds and measured but unrecognized compensation.

For the three and six months ended June 30, ~~2018,~~2019, we recorded ~~$3.5~~$1.4 million and ~~$7.0~~$2.2 million, respectively, in compensation expense related to stock options, as compared to ~~$1.0~~$3.5 million and ~~$2.8~~$7.0 million for the same periods in ~~2017.~~2018. Amounts for the three and six months ended June 30, 2018 include $1.8 million and $3.6 million ~~respectively,~~ in connection with the acceleration of amortization ofon grants ~~to our CEO and CFO noted~~as discussed above. ~~Amounts for the three and six months ended June 30, 2017 reflect a reduction in compensation expense of $0.8 million related to stock options forfeited during the periods.~~

During the six months ended June 30, ~~2018, 200,000~~2019, 105,000 stock options were granted, ~~18,778~~106,755 options were exercised and ~~8,000~~10,000 options were forfeited. A total of ~~2,582,139~~2,409,167 stock options were outstanding at June 30, ~~2018 (2,408,917~~2019 (2,420,922 at December 31, ~~2017)~~2018) and have an average exercise price of ~~$192.93.~~$203.78.

Restricted Share Units

RSUs generally vest ~~ratably~~ over ~~a five~~5 to ~~eight-year period~~8years from the grant date. The grantee receives dividends for each outstanding RSU equal to the per-share dividends received by our common shareholders. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives common shares equal to the number of vested RSUs, less common shares withheld in exchange for tax deposits made by the Company to satisfy the grantee’s statutory tax liabilities arising from the vesting.

The fair value of our RSUs is determined based upon the applicable closing trading price of our common shares.

During the six months ended June 30, ~~2018, 71,595~~2019, 50,775 RSUs were granted, ~~35,242~~29,892 RSUs were forfeited and ~~113,885~~97,556 RSUs vested. This vesting resulted in the issuance of ~~64,887~~56,887 common shares. In addition, tax deposits totaling ~~$10.3~~$10.0 million ($~~11.8~~10.3 million for the same period in ~~2017)~~2018) were made on behalf of employees in exchange for ~~48,998~~40,669 common shares withheld upon vesting. A total of ~~721,597~~641,023 RSUs were outstanding at June 30, ~~2018 (799,129~~2019 (717,696 at December 31, ~~2017)~~2018).

A total of ~~$13.8~~$4.3 million and ~~$27.2~~$11.1 million in RSU expense was recorded for the three and six months ended June 30, ~~2018,~~2019, respectively, which includes approximately $0.1 million and ~~$1.0~~$1.1 million in employer taxes

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

incurred upon vesting, as compared to ~~$3.3~~$13.8 million and ~~$10.4~~$27.2 million for the same periods in ~~2017,~~2018, which includes

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

approximately $0.1 million and ~~$0.6~~$1.0 million ~~respectively,~~ in employer taxes incurred upon vesting. Amounts for the three and six months ended June 30, 2018 include $6.0 million and $12.1 million, respectively, in connection with the acceleration of amortization on grants to our CEO and CFO as discussed above. ~~Amounts for the three and six months ended June 30, 2017 reflect a reduction in compensation expense of $4.6 million related RSUs forfeited during the period.~~

11.Segment Information

Our reportable segments reflect the significant components of our operations where discrete financial information is evaluated separately by our chief operating decision maker (“CODM”). We organize our segments based primarily upon the nature of the underlying products and services, as well as the drivers of profitability growth. The net income for each reportable segment included in the tables below are in conformity with GAAP and our significant accounting policies as denoted in Note 2. The amounts not attributable to reportable segments are aggregated under “other items not allocated to segments.”

Following is a description of and basis for presentation for each of our reportable segments.

Self-Storage Operations

The Self-Storage Operations segment reflects the rental operations from all self-storage facilities we own. Our CODM reviews the net operating income (“NOI”) of this segment, which represents the related revenues less cost of operations (prior to depreciation expense), in assessing performance and making resource allocation decisions. The presentation in the tables below sets forth the NOI of this segment, as well as the depreciation expense for this segment, which while reviewed by our CODM and included in net income, is not considered by the CODM in assessing performance and decision making. For all periods presented, substantially all of our real estate facilities, goodwill and other intangible assets, other assets, and accrued and other liabilities are associated with the Self-Storage Operations segment.

Ancillary Operations

The Ancillary Operations segment reflects the sale of merchandise and reinsurance of policies against losses to goods stored by our self-storage tenants, activities which are incidental to our primary self-storage rental activities. Our CODM reviews the NOI of these operations in assessing performance and making resource allocation decisions.

Investment in PSB

This segment represents our 42% equity interest in PSB, a publicly-traded REIT that owns, operates, acquires and develops commercial properties, primarily multi-tenant flex, office, and industrial space. PSB has a separate management team that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in PSB, the CODM reviews PSB’s net income, which is detailed in PSB’s periodic filings with the ~~SEC, and is included in Note 4.~~SEC. The segment presentation in the tables below includes our equity earnings from PSB.

Investment in Shurgard ~~Europe~~

This segment represents our ~~49%~~ equity interest in Shurgard, ~~Europe,~~a publicly held company which owns and operates self-storage facilities located in seven countries in Western Europe. Shurgard ~~Europe~~ has a separate management team ~~reporting to our CODM~~ and ~~our joint venture partner.~~board of trustees that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in Shurgard, ~~Europe,~~ the CODM reviews ~~Shurgard Europe’s~~Shurgard’s net ~~income, which is detailed in~~

~~PUBLIC STORAGE~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~June 30, 2018~~

~~(Unaudited)~~

~~Note 4.~~income. The segment presentation below includes our equity earnings from ~~Shurgard Europe.~~Shurgard.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

Presentation of Segment Information

The following tables reconcile NOI (as applicable) and net income of each segment to our consolidated net income (amounts in thousands):


Three months ended June 30, 2018
Three months ended June 30, 2019													Three months ended June 30, 2019

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total		Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)												(Amounts in thousands)
Revenues:
Self-storage operations	$	645,206	$	-	$	-	$	-	$	-	$	645,206	$	669,339	$	-	$	-	$	-	$	-	$	669,339
Ancillary operations		-		40,322		-		-		-		40,322		-		41,611		-		-		-		41,611
		645,206		40,322		-		-		-		685,528		669,339		41,611		-		-		-		710,950

Cost of operations:
Self-storage operations		179,876		-		-		-		-		179,876		196,083		-		-		-		-		196,083
Ancillary operations		-		11,101		-		-		-		11,101		-		11,653		-		-		-		11,653
		179,876		11,101		-		-		-		190,977		196,083		11,653		-		-		-		207,736

Net operating income:
Self-storage operations		465,330		-		-		-		-		465,330		473,256		-		-		-		-		473,256
Ancillary operations		-		29,221		-		-		-		29,221		-		29,958		-		-		-		29,958
		465,330		29,221		-		-		-		494,551		473,256		29,958		-		-		-		503,214

Other components of net income (loss):	Other components of net income (loss):												Other components of net income (loss):
Depreciation and amortization		(119,777)		-		-		-		-		(119,777)		(126,859)		-		-		-		-		(126,859)
General and administrative		-		-		-		-		(31,329)		(31,329)		-		-		-		-		(15,264)		(15,264)
Interest and other income		-		-		-		-		6,328		6,328		-		-		-		-		8,582		8,582
Interest expense		-		-		-		-		(8,388)		(8,388)		-		-		-		-		(12,254)		(12,254)
Equity in earnings of
unconsolidated real estate entities		-		-		36,612		5,351		-		41,963		-		-		14,864		4,050		-		18,914
Foreign currency exchange gain		-		-		-		-		21,944		21,944
Foreign currency exchange loss														-		-		-		-		(5,218)		(5,218)
Gain on sale of real estate														-		-		-		-		341		341
Net income (loss)	$	345,553	$	29,221	$	36,612	$	5,351	$	(11,445)	$	405,292	$	346,397	$	29,958	$	14,864	$	4,050	$	(23,813)	$	371,456

‎

2326

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)


Three months ended June 30, 2018

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	645,206	$	-	$	-	$	-	$	-	$	645,206
Ancillary operations		-		40,322		-		-		-		40,322
		645,206		40,322		-		-		-		685,528

Cost of operations:
Self-storage operations		179,876		-		-		-		-		179,876
Ancillary operations		-		11,101		-		-		-		11,101
		179,876		11,101		-		-		-		190,977

Net operating income:
Self-storage operations		465,330		-		-		-		-		465,330
Ancillary operations		-		29,221		-		-		-		29,221
		465,330		29,221		-		-		-		494,551

Other components of net income (loss):
Depreciation and amortization		(119,777)		-		-		-		-		(119,777)
General and administrative		-		-		-		-		(31,329)		(31,329)
Interest and other income		-		-		-		-		6,328		6,328
Interest expense		-		-		-		-		(8,388)		(8,388)
Equity in earnings of
unconsolidated real estate entities		-		-		36,612		5,351		-		41,963
Foreign currency exchange gain		-		-		-		-		21,944		21,944
Net income (loss)	$	345,553	$	29,221	$	36,612	$	5,351	$	(11,445)	$	405,292

Three months ended June 30, 2017

Self-Storage Operations

Ancillary Operations

Investment in PSB

Investment in Shurgard Europe

Other Items Not Allocated to Segments

Total

(Amounts in thousands)
Revenues:

Self-storage operations
$
624,199

$
-

$
-

$
-

$
-

$
624,199
Ancillary operations

-

40,113

-

-

-

40,113

624,199

40,113

-

-

-

664,312

Cost of operations:

Self-storage operations

171,195

-

-

-

-

171,195
Ancillary operations

-

11,383

-

-

-

11,383

171,195

11,383

-

-

-

182,578

Net operating income:

Self-storage operations

453,004

-

-

-

-

453,004
Ancillary operations

-

28,730

-

-

-

28,730

453,004

28,730

-

-

-

481,734

Other components of net income (loss):

Depreciation and amortization

(110,177)

-

-

-

-

(110,177)
General and administrative

-

-

-

-

(14,992)

(14,992)
Interest and other income

-

-

-

-

4,155

4,155
Interest expense

-

-

-

-

(1,116)

(1,116)
Equity in earnings of

unconsolidated real estate entities
-

-

12,733

6,650

685

20,068
Foreign currency exchange loss

-

-

-

-

(25,440)

(25,440)
Gain on sale of real estate

-

-

-

-

975

975
Net income (loss)
$
342,827

$
28,730

$
12,733

$
6,650

$
(35,733)

$
355,207

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)


Six months ended June 30, 2019

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard		Other Items Not Allocated to Segments		Total

	(Amounts in thousands)
Revenues:
Self-storage operations	$	1,319,747	$	-	$	-	$	-	$	-	$	1,319,747
Ancillary operations		-		80,241		-		-		-		80,241
		1,319,747		80,241		-		-		-		1,399,988

Cost of operations:
Self-storage operations		389,739		-		-		-		-		389,739
Ancillary operations		-		22,198		-		-		-		22,198
		389,739		22,198		-		-		-		411,937

Net operating income:
Self-storage operations		930,008		-		-		-		-		930,008
Ancillary operations		-		58,043		-		-		-		58,043
		930,008		58,043		-		-		-		988,051

Other components of net income (loss):
Depreciation and amortization		(248,800)		-		-		-		-		(248,800)
General and administrative		-		-		-		-		(34,767)		(34,767)
Interest and other income		-		-		-		-		15,547		15,547
Interest expense		-		-		-		-		(20,397)		(20,397)
Equity in earnings of
unconsolidated real estate entities		-		-		28,584		8,002		-		36,586
Foreign currency exchange gain		-		-		-		-		2,573		2,573
Gain on sale of real estate		-		-		-		-		341		341
Net income (loss)	$	681,208	$	58,043	$	28,584	$	8,002	$	(36,703)	$	739,134

‎

Six months ended June 30, 2018

Self-Storage Operations

Ancillary Operations

Investment in PSB

Investment in Shurgard Europe

Other Items Not Allocated to Segments

Total

(Amounts in thousands)
Revenues:

Self-storage operations
$
1,276,743

$
-

$
-

$
-

$
-

$
1,276,743
Ancillary operations

-

78,709

-

-

-

78,709

1,276,743

78,709

-

-

-

1,355,452

Cost of operations:

Self-storage operations

362,063

-

-

-

-

362,063
Ancillary operations

-

21,741

-

-

-

21,741

362,063

21,741

-

-

-

383,804

Net operating income:

Self-storage operations

914,680

-

-

-

-

914,680
Ancillary operations

-

56,968

-

-

-

56,968

914,680

56,968

-

-

-

971,648

Other components of net income (loss):

Depreciation and amortization

(237,756)

-

-

-

-

(237,756)
General and administrative

-

-

-

-

(62,849)

(62,849)
Interest and other income

-

-

-

-

11,872

11,872
Interest expense

-

-

-

-

(16,495)

(16,495)
Equity in earnings of

unconsolidated real estate entities
-

-

60,443

12,315

-

72,758
Foreign currency exchange gain

-

-

-

-

10,126

10,126
Gain on sale of real estate

-

-

-

-

424

424
Net income (loss)
$
676,924

$
56,968

$
60,443

$
12,315

$
(56,922)

$
749,728

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)


Six months ended June 30, 2018

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard		Other Items Not Allocated to Segments		Total

	(Amounts in thousands)
Revenues:
Self-storage operations	$	1,276,743	$	-	$	-	$	-	$	-	$	1,276,743
Ancillary operations		-		78,709		-		-		-		78,709
		1,276,743		78,709		-		-		-		1,355,452

Cost of operations:
Self-storage operations		362,063		-		-		-		-		362,063
Ancillary operations		-		21,741		-		-		-		21,741
		362,063		21,741		-		-		-		383,804

Net operating income:
Self-storage operations		914,680		-		-		-		-		914,680
Ancillary operations		-		56,968		-		-		-		56,968
		914,680		56,968		-		-		-		971,648

Other components of net income (loss):
Depreciation and amortization		(237,756)		-		-		-		-		(237,756)
General and administrative		-		-		-		-		(62,849)		(62,849)
Interest and other income		-		-		-		-		11,872		11,872
Interest expense		-		-		-		-		(16,495)		(16,495)
Equity in earnings of
unconsolidated real estate entities		-		-		60,443		12,315		-		72,758
Foreign currency exchange gain		-		-		-		-		10,126		10,126
Gain on sale of real estate		-		-		-		-		424		424
Net income (loss)	$	676,924	$	56,968	$	60,443	$	12,315	$	(56,922)	$	749,728

‎

Six months ended June 30, 2017

Self-Storage Operations

Ancillary Operations

Investment in PSB

Investment in Shurgard Europe

Other Items Not Allocated to Segments

Total

(Amounts in thousands)
Revenues:

Self-storage operations
$
1,231,977

$
-

$
-

$
-

$
-

$
1,231,977
Ancillary operations

-

77,882

-

-

-

77,882

1,231,977

77,882

-

-

-

1,309,859

Cost of operations:

Self-storage operations

343,173

-

-

-

-

343,173
Ancillary operations

-

22,307

-

-

-

22,307

343,173

22,307

-

-

-

365,480

Net operating income:

Self-storage operations

888,804

-

-

-

-

888,804
Ancillary operations

-

55,575

-

-

-

55,575

888,804

55,575

-

-

-

944,379

Other components of net income (loss):

Depreciation and amortization

(221,106)

-

-

-

-

(221,106)
General and administrative

-

-

-

-

(40,020)

(40,020)
Interest and other income

-

-

-

-

8,153

8,153
Interest expense

-

-

-

-

(2,164)

(2,164)
Equity in earnings of

unconsolidated real estate entities
-

-

26,433

12,241

1,343

40,017
Foreign currency exchange loss

-

-

-

-

(31,006)

(31,006)
Gain on sale of real estate

-

-

-

-

975

975
Net income (loss)
$
667,698

$
55,575

$
26,433

$
12,241

$
(62,719)

$
699,228

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(Unaudited)

12.Commitments and Contingencies

Contingent Losses

We are a party to various legal proceedings and subject to various claims and complaints; however, we believe that the likelihood of these contingencies resulting in a material loss to the Company, either individually or in the aggregate, is remote.

Insurance and Loss Exposure

We ~~have historically carried~~carry property, earthquake, general liability, employee medical insurance and workers compensation coverage through internationally recognized insurance carriers, subject to deductibles. Our deductible for general liability is $2.0 million per occurrence. Our annual ~~deductibles~~deductible for property ~~losses are~~loss is $25.0 million ~~for first occurrence with an aggregate of~~per occurrence. This deductible decreases to $5.0 million once we reach $35.0 million in aggregate losses for ~~multiple~~ occurrences ~~and~~that exceed $5.0 ~~million per occurrence thereafter.~~million. Insurance carriers’ aggregate limits on these policies of $75.0 million for property losses and $102.0 million for general liability losses are higher than estimates of maximum probable losses that could occur from individual catastrophic events determined in recent engineering and actuarial studies; however, in case of multiple catastrophic events, these limits could be exceeded.

We reinsure a program that provides insurance to our customers from an independent third-party insurer. This program covers customer claims for losses to goods stored at our facilities as a result of specific named perils (earthquakes are not covered by this program), up to a maximum limit of $5,000 per storage unit. We reinsure all risks in this program, but purchase insurance to cover this exposure for a limit of $15.0 million for losses in excess of $5.0 million per occurrence. We are subject to licensing requirements and regulations in several states. Customers participate in the program at their option. At June 30, ~~2018,~~2019, there were approximately ~~942,000~~970,000 certificates held by our self-storage customers, representing aggregate coverage of approximately ~~$2.9~~$3.1 billion.

Construction Commitments

We have construction commitments representing future expected payments for construction under contract totaling ~~$162.4~~$87.1 million at June 30, ~~2018.~~2019. We expect to pay approximately ~~$134.6~~$45.2 million in the remainder of ~~2018~~2019 and ~~$27.8~~$41.9 million in ~~2019~~2020 for these construction commitments.

13.Subsequent Events

Subsequent to June 30, ~~2018,~~2019, we acquired or were under contract to acquire (subject to customary closing conditions) 14ten self-storage facilities with ~~842,000~~815,000 net rentable square feet, for ~~$95.2~~$86.5 million. ~~On July 13, 2018, we received a cash distribution from Shurgard Europe totaling $145.4 million.~~

2730

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this document, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “expects,” “believes,” “anticipates,” “should,” “estimates” and similar expressions.

These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Factors and risks that may impact future results and performance include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on ~~March 1, 2018~~February 27, 2019 and in our other filings with the SEC including:

general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning;

risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers;

the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives;

difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage acquired and developed properties;

risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws, and local and global economic uncertainty that could adversely affect our earnings and cash flows;

risks related to our participation in joint ventures;

the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental, taxes, our tenant reinsurance business and labor, and risks related to the impact of new laws and regulations;

risks of increased tax expense associated either with a possible failure by us to qualify as a real estate investment trust (“REIT”), or with challenges to the determination of taxable income for our taxable REIT subsidiaries;

risks due to a potential November 2020 statewide ballot initiative (or other equivalent actions) that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California;

changes in United States (“U.S.”) federal or state tax laws related to the taxation of REITs and other corporations;

security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships;

general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning;

~~risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers;~~

~~the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives;~~

~~difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage acquired and developed properties;~~

risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws, and local and global economic uncertainty that could adversely affect our earnings and cash flows;

~~risks related to our participation in joint ventures;~~

the impact of the regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental, taxes, our tenant reinsurance business and labor, and risks related to the impact of new laws and regulations;

risks of increased tax expense associated either with a possible failure by us to qualify as a real estate investment trust (“REIT”), or with challenges to the determination of taxable income for our taxable REIT subsidiaries;

~~changes in United States (“U.S.”) federal or state tax laws related to the taxation of REITs and other corporations;~~

~~security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships;~~

~~risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities;~~

~~difficulties in raising capital at a reasonable cost;~~

~~delays in the development process;~~

~~ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and~~

~~economic uncertainty due to the impact of war or terrorism.~~

risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities;

difficulties in raising capital at a reasonable cost;

delays and cost overruns on our development projects;

ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and

economic uncertainty due to the impact of war or terrorism.

These forward looking statements speak only as of the date of this report or as of the dates indicated in the statements. All of our forward-looking statements, including those in this report, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of these forward looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this report, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.

Critical Accounting Policies

Our MD&A discusses our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and are affected by our judgments, assumptions and estimates. The notes to our June 30, ~~2018~~2019 financial statements, primarily Note 2, summarize our significant accounting policies.

We believe the following are our critical accounting policies, because they have a material impact on the portrayal of our financial condition and results, and they require us to make judgments and estimates about matters that are inherently uncertain.

Income Tax Expense: We have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we do not incur federal income tax on our REIT taxable income that is fully distributed each year (for this purpose, certain distributions paid in a subsequent year may be considered), and if we meet certain organizational and operational rules. We believe we have met these REIT requirements for all periods presented herein. Accordingly, we have recorded no federal income tax expense related to our REIT taxable income.

Our evaluation that we have met the REIT requirements could be incorrect, because compliance with the tax rules requires factual determinations, and circumstances we have not identified could result in noncompliance with the tax requirements in current or prior years. For any taxable year that we fail to qualify as a REIT and for which applicable statutory relief provisions did not apply, we would be taxed at the regular corporate rates on all of our taxable income for at least that year and the ensuing four years, we could be subject to penalties and interest, and our net income would be materially different from the amounts estimated in our financial statements.

In addition, certain of our consolidated corporate subsidiaries have elected to be treated as “taxable REIT subsidiaries” for federal income tax purposes, which are taxable as regular corporations and subject to certain limitations on intercompany transactions. If tax authorities determine that amounts paid by our taxable REIT subsidiaries to us are not reasonable compared to similar arrangements among unrelated parties, we could be subject to a 100% penalty tax on the excess payments. Such a penalty tax could have a material adverse impact on our net income.

Impairment of Long-Lived Assets: The analysis of impairment of our long-lived assets involves identification of indicators of impairment, projections of future operating cash flows, and estimates of fair values, all of which require significant judgment and subjectivity. Others could come to materially different conclusions. In addition, we may not have identified all current facts and circumstances that may affect impairment. Any unidentified impairment loss, or change in conclusions, could have a material adverse impact on our net income.

Accrual for Uncertain and Contingent Liabilities: We accrue for certain contingent and other liabilities that have significant uncertain elements, such as property taxes, workers compensation claims, tenant reinsurance claims, as well as other legal claims and disputes involving customers, employees, governmental agencies and other third parties. We estimate such liabilities based upon many factors such as assumptions of past and future trends and

our evaluation of likely outcomes. However, the estimates of known liabilities could be incorrect or we may not be aware of all such liabilities, in which case our accrued liabilities and net income could be misstated.

Accounting for Acquired Real Estate Facilities:We estimate the fair values of the land, buildings and intangible assets acquired for purposes of allocating the purchase price. Such estimates are based upon many assumptions and judgments, including (i) market rates of return and capitalization rates on real estate and intangible assets, (ii) building and material cost levels, (iii) comparisons of the acquired underlying land parcels to recent land transactions, and (iv) future cash flows from the real estate and the existing tenant base. Others could come to materially different conclusions as to the estimated fair values, which would result in different depreciation and amortization expense, gains and losses on sale of real estate assets, and real estate and intangible assets.

Overview

Our self-storage operations generate most of our net income, and we believe that our earnings growth is most impacted by the level of organic growth in our existing self-storage portfolio. Accordingly, a significant portion of management’s time is devoted to maximizing cash flows from our existing self-storage facilities.

Most of our facilities compete with other well-managed and well-located competitors and we are subject to general economic conditions, particularly those that affect the spending habits of consumers and moving trends. We believe that our centralized information networks, national telephone and online reservation system, the brand name “Public Storage,” and our economies of scale enable us to meet such challenges effectively.

In the last three years, there has been a marked increase in development of new self-storage facilities in many of the markets we operate in, due to the favorable economics of development which we have also taken advantage of. These newly developed facilities compete with many of the facilities we own, negatively impacting our occupancies, rental rates, and rental growth. This increase in supply has been most notable in Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, New York, and Portland.

We plan on growing organically as well as through the acquisition and development of new facilities and expanding our existing self-storage facilities. Since the beginning of 2013 through June 30, ~~2018,~~2019, we acquired a total of ~~276~~318 facilities with ~~19.4~~22.1 million net rentable square feet from third parties for approximately ~~$2.5~~$2.9 billion, and we opened newly developed and expanded self-storage space for a total cost of ~~$1.1~~$1.5 billion, adding approximately ~~10.0~~13.9 million net rentable square feet.

Subsequent to June 30, ~~2018,~~2019, we acquired or were under contract to acquire (subject to customary closing conditions) 14ten self-storage facilities, with approximately 0.8 million net rentable square feet, for ~~$95.2~~$86.5 million. We will continue to seek to acquire properties; however, there is significant competition to acquire existing facilities and there can be no assurance as to the level of facilities we may acquire.

As of June 30, ~~2018,~~2019, we had additional development and redevelopment projects to build approximately ~~6.1~~3.8 million net rentable square feet at a total cost of approximately ~~$679.2~~$520.5 million. We expect to continue to seek additional development projects; however, the level of such activity may be limited due to various constraints such as difficulty in finding available sites that meet our risk-adjusted yield expectations, as well as challenges in obtaining building permits for self-storage activities in certain municipalities.

We believe that our development and redevelopment activities ~~are beneficial to our business~~generate favorable risk-adjusted returns over the long run. However, in the short run, ~~such activities dilute~~ our earnings are diluted during the construction and stabilization period due to ~~the three to four year period that it takes to fill up newly developed and redeveloped storage facilities and reach a stabilized level of cash flows offset by~~ the cost of capital to fund the development cost, ~~combined with~~as well as the related construction and development overhead expenses ~~flowing through~~included in general and administrative expense. We believe ~~this~~the level of dilution incurred in the first six months of 2019 will ~~increase~~continue at similar levels in the remainder of 2019.

On October 15, 2018, Shurgard Self Storage SA (“Shurgard”, formerly referred to in previous filings as “Shurgard Europe”) completed an initial global offering (the “Offering”) of its common shares, and ~~beyond, because~~its shares commenced trading on Euronext Brussels under the “SHUR” symbol. In the Offering, Shurgard issued 25.0 million of ~~an increased level~~its common shares to third parties at a price of ~~net rentable square feet being added~~€23 per share, for €575 million in gross proceeds. The gross proceeds were used to ~~our portfolio due~~repay short-term borrowings, invest in real estate assets, and for other corporate purposes. Our equity interest, comprised of a direct and indirect pro-rata ownership interest in 31.3 million shares, decreased from 49% to ~~continued development and redevelopment efforts.~~approximately 35% as a result of the Offering. See “Investment in Shurgard” below for more information.

On September 18, 2017, we completed a public offering of $1.0 billion in aggregate principal amount of unsecured notes in two equal tranches (collectively, the “U.S. Dollar Notes”), one maturing in September 2022 bearing interest at 2.370%, and another maturing in September 2027 bearing interest at 3.094%. This was our first public offering of debt, which should also serve to facilitate future offerings.

As of June 30, ~~2018, our~~2019, we expect capital resources over the next year ~~are expected to be~~of approximately ~~$1.2~~$1.1 billion, which exceeds our ~~current planned~~currently identified capital needs ~~over the next year~~ of approximately ~~$551.5~~$415.1 million. Our expected capital resources include: (i) ~~$338.4~~$360.3 million of cash as of June 30, ~~2018,~~2019, (ii) ~~$483.9~~$484.1 million of available borrowing capacity on our revolving line of credit, ~~(iii) a $145.4 million cash distribution received from Shurgard Europe on July 13,~~

~~2018,~~ and ~~(iv)~~(iii) approximately $200 million to $250 million of expected retained operating cash flow ~~for~~in the next ~~twelve months.~~year. Retained operating cash flow represents our expected cash flow provided by operating activities, less shareholder distributions and capital expenditures to maintain our real estate facilities.

Our ~~planned~~currently identified capital needs ~~over the next year~~ consist primarily of ~~(i) $445.2 million of remaining spend on our current development pipeline, (ii) $95.2~~$86.5 million in property acquisitions currently under contract and ~~(iii) $11.1~~$328.6 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 months. We have no substantial principal ~~repayments~~payments on ~~existing debt.~~debt until 2022. Our capital needs may increase over the next year as we expect to add projects to our development pipeline and acquire additional properties. In addition to other investment activities, we may also redeem outstanding preferred securities or repurchase shares of our common stock in the future.

See Liquidity and Capital Resources for further information regarding our capital requirements and anticipated sources of capital to fund such requirements.

Results of Operations

Operating Results for the Three Months Ended June 30, ~~2018~~2019

For the three months ended June 30, ~~2018,~~2019, net income allocable to our common shareholders was $306.4 million or $1.76 per diluted common share, compared to $348.3 million or $2.00 per diluted common share ~~compared to $276.7~~in 2018 representing a decrease of $41.9 million or ~~$1.59 per diluted common share in 2017 representing an increase of $71.6 million or $0.41~~$0.24 per diluted common share. The ~~increase~~decrease is due primarily to i)(i) a ~~$12.3~~$27.2 million ~~increase in self-storage net operating income (described below), ii)~~decrease due to the impact of foreign currency exchange gains and losses associated with our euro denominated debt, (ii) our $24.0 million equity share of a gain on sale of assets recorded by PS Business Parks in the three months ended June 30, 2018, ~~iii) a $47.4 million increase due to the impact of foreign exchange gains~~ and ~~losses associated with our euro denominated debt and iv) a $14.6~~(iii) an $8.9 million allocation to our preferred shareholders associated with our preferred share ~~redemptions~~redemption activities in the three months ended June 30, ~~2017.~~2019. These ~~increases~~decreases were offset partially by (iv) a ~~$13.0~~$7.9 million increase in self-storage net operating income (described below), and (v) a reduction in general and administrative expense ~~due~~attributable to ~~the acceleration of~~$7.8 million in incremental share-based compensation ~~accruals~~expense in the three months ended June 30, 2018 for the planned retirement of our former CEO and ~~CFO in 2018 as a result of their upcoming retirement and the reversal of share-based compensation accruals forfeited by retiring executives in 2017.~~CFO.

The ~~$12.3~~$7.9 million increase in self-storage net operating income is a result of a ~~$4.7~~$3.4 million increase in our Same Store Facilities (as defined below) and a ~~$7.6~~$4.5 million increase in our Non Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased ~~1.5%~~1.9% or ~~$8.5~~$11.5 million in the three months ended June 30, ~~2018~~2019 as compared to ~~2017,~~2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by ~~2.6%~~5.1% or ~~$3.8~~$8.1 million in the three months ended June 30, ~~2018~~2019 as compared to ~~2017,~~2018, due primarily to increased property ~~taxes.~~taxes and higher marketing expenses. The increase in net operating income of ~~$7.6~~$4.5 million for the Non Same Store Facilities is due primarily to the impact of ~~137 self-storage~~ facilities acquired in 2018 and 2019 and the fill-up of recently developed ~~since January 2016.~~ and expanded facilities.

Operating Results for the Six Months Ended June 30, ~~2018~~2019

For the six months ended June 30, ~~2018,~~2019, net income allocable to our common shareholders was $608.2 million or $3.49 per diluted common share, compared to $636.1 million or $3.65 per diluted common share ~~compared to $557.8~~in 2018 representing a decrease of $27.9 million or ~~$3.20 in 2017 representing an increase of $78.3 million or $0.45~~$0.16 per diluted common share. The ~~increase~~decrease is due primarily to ~~i) a $25.9 million increase in self-storage net operating income, ii)~~(i) our $34.9 million equity share of gains recorded by PS Business Parks in the six months ended June 30, 2018, ~~iii)~~(ii) a ~~$41.1 million increase due to the impact of foreign exchange gains and losses associated with our euro denominated debt and iv) a $14.6~~

$17.4 million allocation to our preferred shareholders associated with our preferred share ~~redemptions~~redemption activities in the six months ended June 30, ~~2017.~~2019 and (iii) a $7.6 million decrease due to the impact of foreign currency exchange gains associated with our euro denominated debt. These ~~increases~~decreases were offset partially by (iv) a ~~$21.0~~$15.3 million increase in self-storage net operating income (described below) and (v) a reduction in general and administrative expense ~~due~~attributable to ~~the acceleration of~~$15.6 million in incremental share-based compensation ~~accruals~~expense in the six months ended June 30, 2018 for the planned retirement of our former CEO and ~~CFO in 2018 as a result of their upcoming retirement and the reversal of share-based compensation accruals forfeited by retiring executives in 2017.~~CFO.

The ~~$25.9~~$15.3 million increase in self-storage net operating income is a result of ~~an $11.2~~a $5.7 million increase in our Same Store Facilities and ~~$14.7~~a $9.6 million increase in our Non Same Store Facilities. Revenues for the Same Store Facilities increased ~~1.8%~~1.7% or ~~$20.0~~$20.2 million in the six months ended June 30, ~~2018~~2019 as compared to ~~2017,~~2018, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by

~~3.0%~~ 4.5% or ~~$8.8~~$14.4 million in the six months ended June 30, ~~2018~~2019 as compared to ~~2017,~~2018, due primarily to increased property taxes ~~property manager payroll,~~ and ~~allocated overhead.~~higher marketing expenses. The increase in net operating income of ~~$14.7~~$9.6 million for the Non Same Store Facilities is due primarily to the impact of ~~137 self-storage~~ facilities acquired in 2018 and 2019 and the fill-up of recently developed ~~since January 2016.~~and expanded facilities.

Funds from Operations and Core Funds from Operations

Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents GAAP net income before ~~real estate~~ depreciation and amortization, which is excluded because it is based upon historical ~~real estate~~ costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical ~~real estate~~ costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

For the three months ended June 30, ~~2018,~~2019, FFO was ~~$2.65~~$2.57 per diluted common share, as compared to ~~$2.31~~$2.65 per diluted common share for the same period in ~~2017,~~2018, representing ~~an increase~~a decrease of ~~14.7%~~3.0%, or ~~$0.34~~$0.08 per diluted common share.

For the six months ended June 30, ~~2018,~~2019, FFO was ~~$5.02~~$5.09 per diluted common share, as compared to ~~$4.65~~$5.02 per diluted common share for the same period in ~~2017,~~2018, representing an increase of ~~8.0%~~1.4%, or ~~$0.37~~$0.07 per diluted common share.

The following tables reconcile diluted earnings per share to FFO per share and set forth the computation of FFO per share:

‎

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

(Amounts in thousands, except per share data)
Reconciliation of Diluted Earnings per Share to

FFO per Share:

Diluted Earnings per Share

$
2.00

$
1.59

$
3.65

$
3.20
Eliminate amounts per share excluded from FFO:

Depreciation and amortization

0.79

0.73

1.58

1.46
Gains on sale of real estate investments,

including our equity share from

investments

(0.14)

(0.01)

(0.21)

(0.01)
FFO per share

$
2.65

$
2.31

$
5.02

$
4.65

Computation of FFO per Share:

Net income allocable to common shareholders

$
348,300

$
276,681

$
636,119

$
557,812
Eliminate items excluded from FFO:

Depreciation and amortization

119,777

110,177

237,756

221,106
Depreciation from unconsolidated

real estate investments

19,308

17,368

38,623

34,581
Depreciation allocated to noncontrolling

interests and restricted share unitholders

(1,014)

(837)

(1,932)

(1,799)
Gains on sale of real estate investments,

including our equity share from

investments

(23,873)

(1,466)

(35,764)

(3,077)
FFO allocable to common shares

$
462,498

$
401,923

$
874,802

$
808,623
Diluted weighted average common shares

174,224

174,075

174,186

174,072
FFO per share

$
2.65

$
2.31

$
5.02

$
4.65


		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2019		2018		2019		2018
	(Amounts in thousands, except per share data)
Reconciliation of Diluted Earnings per Share to
FFO per Share:

Diluted Earnings per Share		$	1.76	$	2.00	$	3.49	$	3.65
Eliminate amounts per share excluded from FFO:
Depreciation and amortization			0.82		0.79		1.61		1.58
Gains on sale of real estate investments,
including our equity share from
investments			(0.01)		(0.14)		(0.01)		(0.21)
FFO per share		$	2.57	$	2.65	$	5.09	$	5.02

Computation of FFO per Share:

Net income allocable to common shareholders		$	306,411	$	348,300	$	608,154	$	636,119
Eliminate items excluded from FFO:
Depreciation and amortization			126,859		119,777		248,800		237,756
Depreciation from unconsolidated
real estate investments			17,247		19,308		34,761		38,623
Depreciation allocated to noncontrolling
interests and restricted share unitholders			(1,088)		(1,014)		(2,286)		(1,932)
Gains on sale of real estate investments,
including our equity share from
investments			(992)		(23,873)		(992)		(35,764)
FFO allocable to common shares		$	448,437	$	462,498	$	888,437	$	874,802
Diluted weighted average common shares			174,542		174,224		174,459		174,186
FFO per share		$	2.57	$	2.65	$	5.09	$	5.02

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) EITF D-42 charges related to the redemption of preferred securities, ~~and~~ (iii) acceleration of accruals or reduction of accruals due to the ~~upcoming retirement~~departure of ~~our CEO~~senior executives, and ~~CFO and reversals of accruals with respect to share-based awards forfeited by retiring senior executive officers.~~(iv) certain other non-cash and/or nonrecurring income or expense items. We review Core FFO per share to evaluate our ongoing operating performance and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles FFO per share to Core FFO per share:


		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,					Six Months Ended June 30,
						Percentage					Percentage						Percentage					Percentage
		2018		2017		Change	2018		2017		Change		2019		2018		Change	2019		2018		Change

FFO per share	FFO per share	$	2.65	$	2.31	14.7%	$	5.02	$	4.65	8.0%	FFO per share	$	2.57	$	2.65	(3.0)%	$	5.09	$	5.02	1.4%
Eliminate the per share impact of items	Eliminate the per share impact of items											Eliminate the per share impact of items
excluded from Core FFO, including	excluded from Core FFO, including											excluded from Core FFO, including
our equity share from investments:	our equity share from investments:											our equity share from investments:
Foreign currency exchange (gain) loss			(0.13)		0.15			(0.06)		0.18
Foreign currency exchange loss (gain)												Foreign currency exchange loss (gain)		0.03		(0.13)			(0.01)		(0.06)
Application of EITF D-42	Application of EITF D-42		-		0.08			-		0.08		Application of EITF D-42		0.05		-			0.10		-
Acceleration (reversal) of share-based
compensation expense due to
executive officer retirement			0.04		(0.03)			0.09		(0.03)
(Forfeiture)/Acceleration of share-based												(Forfeiture)/Acceleration of share-based
compensation expense due to the												compensation expense due to the
departure of senior executives												departure of senior executives		(0.01)		0.04			(0.01)		0.09
Other items	Other items		0.01		-			-		-		Other items		-		0.01			0.01		-
Core FFO per share	Core FFO per share	$	2.57	$	2.51	2.4%	$	5.05	$	4.88	3.5%	Core FFO per share	$	2.64	$	2.57	2.7%	$	5.18	$	5.05	2.6%

Analysis of Net Income by Reportable Segment

The following discussion and analysis is presented and organized in accordance with Note 11 to our June 30, ~~2018~~2019 financial statements, “Segment Information.” Accordingly, refer to the tables presented in Note 11 in order to reconcile such amounts to our total net income and for further information on our reportable segments.

Self-Storage Operations

Our self-storage operations are analyzed in ~~two~~four groups: (i) the ~~2,048~~2,165 facilities that we have owned and operated on a stabilized basis since January 1, ~~2016~~2017 (the “Same Store Facilities”), (ii) 81 facilities we acquired after December 31, 2016 (the “Acquired facilities”), (iii) 138 facilities that have been newly developed or expanded, or that we are in the process of expanding or that we expect to commence expansion by December 31, 2019 (the “Newly developed and ~~(ii) all~~expanded facilities”) and (iv) 72 other facilities, which ~~are newly acquired, newly developed, recently redeveloped, or~~ are otherwise not stabilized with respect to occupancies or rental rates since January 1, ~~2016~~2017 (the ~~“Non Same Store Facilities”~~“Other non-same store facilities”). See Note 11 to our June 30, ~~2018~~2019 financial statements “Segment Information,” for a reconciliation of the amounts in the tables below to our total net income.


Self-Storage Operations
Summary	Three Months Ended June 30,					Six Months Ended June 30,
					Percentage					Percentage
	2019		2018		Change	2019		2018		Change
	(Dollar amounts and square footage in thousands)
Revenues:
Same Store facilities	$	602,055	$	590,585	1.9%	$	1,190,802	$	1,170,642	1.7%
Acquired facilities		13,999		7,575	84.8%		25,207		14,502	73.8%
Newly developed and expanded facilities		36,888		30,357	21.5%		71,342		58,669	21.6%
Other non-same store facilities		16,397		16,689	(1.7)%		32,396		32,930	(1.6)%
		669,339		645,206	3.7%		1,319,747		1,276,743	3.4%
Cost of operations:
Same Store facilities		167,735		159,631	5.1%		336,922		322,476	4.5%
Acquired facilities		5,358		2,624	104.2%		9,969		5,153	93.5%
Newly developed and expanded facilities		17,712		11,972	47.9%		32,301		23,004	40.4%
Other non-same store facilities		5,278		5,649	(6.6)%		10,547		11,430	(7.7)%
		196,083		179,876	9.0%		389,739		362,063	7.6%
Net operating income (a):
Same Store facilities		434,320		430,954	0.8%		853,880		848,166	0.7%
Acquired facilities		8,641		4,951	74.5%		15,238		9,349	63.0%
Newly developed and expanded facilities		19,176		18,385	4.3%		39,041		35,665	9.5%
Other non-same store facilities		11,119		11,040	0.7%		21,849		21,500	1.6%
Total net operating income		473,256		465,330	1.7%		930,008		914,680	1.7%

Depreciation and amortization expense:
Same Store facilities		(97,370)		(96,224)	1.2%		(193,194)		(191,389)	0.9%
Acquired facilities		(8,636)		(5,166)	67.2%		(15,359)		(11,025)	39.3%
Newly developed and expanded facilities		(13,416)		(10,542)	27.3%		(25,633)		(19,529)	31.3%
Other non-same store facilities		(7,437)		(7,845)	(5.2)%		(14,614)		(15,813)	(7.6)%
Total depreciation and
amortization expense		(126,859)		(119,777)	5.9%		(248,800)		(237,756)	4.6%

Net income:
Same Store facilities		336,950		334,730	0.7%		660,686		656,777	0.6%
Acquired facilities		5		(215)	(102.3)%		(121)		(1,676)	(92.8)%
Newly developed and expanded facilities		5,760		7,843	(26.6)%		13,408		16,136	(16.9)%
Other non-same store facilities		3,682		3,195	15.2%		7,235		5,687	27.2%
Total net income	$	346,397	$	345,553	0.2%	$	681,208	$	676,924	0.6%

Number of facilities at period end:
Same Store facilities							2,165		2,165	-
Acquired facilities							81		39	107.7%
Newly developed and expanded facilities							138		125	10.4%
Other non-same store facilities							72		74	(2.7)%
							2,456		2,403	2.2%
Net rentable square footage at period end:
Same Store facilities							139,801		139,801	-
Acquired facilities							5,263		2,470	113.1%
Newly developed and expanded facilities							15,572		11,810	31.9%
Other non-same store facilities							5,371		5,500	(2.3)%
							166,007		159,581	4.0%

Self-Storage Operations

Summary
Three Months Ended June 30,

Six Months Ended June 30,

Percentage

Percentage

2018

2017

Change

2018

2017

Change

(Dollar amounts in thousands)
Revenues:

Same Store Facilities
$
558,651

$
550,136

1.5%

$
1,107,194

$
1,087,208

1.8%
Non Same Store Facilities

86,555

74,063

16.9%

169,549

144,769

17.1%

645,206

624,199

3.4%

1,276,743

1,231,977

3.6%
Cost of operations:

Same Store Facilities

150,802

146,971

2.6%

304,454

295,655

3.0%
Non Same Store Facilities

29,074

24,224

20.0%

57,609

47,518

21.2%

179,876

171,195

5.1%

362,063

343,173

5.5%
Net operating income (a):

Same Store Facilities

407,849

403,165

1.2%

802,740

791,553

1.4%
Non Same Store Facilities

57,481

49,839

15.3%

111,940

97,251

15.1%
Total net operating income

465,330

453,004

2.7%

914,680

888,804

2.9%

Depreciation and amortization expense:

Same Store Facilities

(87,881)

(88,602)

(0.8)%

(176,411)

(176,537)

(0.1)%
Non Same Store Facilities

(31,896)

(21,575)

47.8%

(61,345)

(44,569)

37.6%
Total depreciation and

amortization expense

(119,777)

(110,177)

8.7%

(237,756)

(221,106)

7.5%

Net income:

Same Store Facilities

319,968

314,563

1.7%

626,329

615,016

1.8%
Non Same Store Facilities

25,585

28,264

(9.5)%

50,595

52,682

(4.0)%
Total net income
$
345,553

$
342,827

0.8%

$
676,924

$
667,698

1.4%

Number of facilities at period end:

Same Store Facilities

2,048

2,048

-
Non Same Store Facilities

355

299

18.7%
Net rentable square footage at period end (in thousands):

Same Store Facilities

131,307

131,307

-
Non Same Store Facilities

28,274

23,254

21.6%

~~(a)~~

Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, net operating cash flow, or other related GAAP financial measures, in evaluating our operating results. See Note 11 to our June 30, 2018 financial statements for a reconciliation of NOI to our total net income for all periods presented.

(a)Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related GAAP financial measures, in evaluating our operating results. See Note 11 to our June 30, 2019 financial statements for a reconciliation of NOI to our total net income for all periods presented.

Net operating income from our self-storage operations has increased ~~2.7% and 2.9%~~1.7% in each of the three and six months ended June 30, ~~2018, respectively,~~2019, as compared to the same periods in ~~2017.~~2018. These increases are due to ~~higher~~increased revenues in our Same Store Facilities, as well as the acquisition and development of new facilities and the fill-up of unstabilized facilities.

Same Store Facilities

The Same Store Facilities represent ~~those~~the 2,165 facilities that have been owned and operated at a stabilized level of occupancy, revenues and cost of operations since January 1, ~~2016. We review the operations of~~2017. Accordingly, our Same Store Facilities ~~which excludes~~exclude (i) facilities acquired after December 31, 2016, (ii) newly developed or expanded facilities, (iii) facilities where expansion is under construction or that we expect to commence by December 31, 2019, (iv) facilities whose operating trends are significantly affected by factors such as casualty events, ~~as well~~and (v) facilities which were otherwise not stabilized at December 31, 2016 (such as recently developed orfacilities acquired ~~facilities,~~from third parties before December 31, 2016). The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in ~~2016,~~ 2017, 2018, and ~~2018.~~2019 and exclude the impact of fill-up unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and REIT analysts in a similar manner. ~~The Same Store pool decreased from 2,052 facilities at March 31, 2018 to 2,048 facilities at June 30, 2018.~~

The following table summarizes the historical operating results of these ~~2,048~~2,165 facilities ~~(131.3~~(139.8 million net rentable square feet) that represent approximately ~~82%~~84% of the aggregate net rentable square feet of our ~~U.S.~~ consolidated self-storage portfolio at June 30, ~~2018.~~2019.

Selected Operating Data for the Same Store Facilities (2,048 facilities)

Three Months Ended June 30,

Six Months Ended June 30,

Percentage

Percentage

2018

2017

Change

2018

2017

Change

(Dollar amounts in thousands, except weighted average amounts)
Revenues:

Rental income
$
534,997

$
526,249

1.7%

$
1,058,876

$
1,039,210

1.9%
Late charges and

administrative fees

23,654

23,887

(1.0)%

48,318

47,998

0.7%
Total revenues (a)

558,651

550,136

1.5%

1,107,194

1,087,208

1.8%

Cost of operations:

Property taxes

59,174

56,066

5.5%

117,566

111,928

5.0%
On-site property manager

payroll

27,847

27,554

1.1%

56,511

55,061

2.6%
Supervisory payroll

9,296

9,895

(6.1)%

18,891

20,035

(5.7)%
Repairs and maintenance

11,602

11,397

1.8%

23,139

23,089

0.2%
Utilities

9,556

9,339

2.3%

20,379

19,552

4.2%
Advertising and selling
7,706

8,138

(5.3)%

14,229

14,937

(4.7)%
Other direct property costs

14,521

14,247

1.9%

29,557

28,520

3.6%
Allocated overhead

11,100

10,335

7.4%

24,182

22,533

7.3%
Total cost of operations (a)

150,802

146,971

2.6%

304,454

295,655

3.0%
Net operating income

407,849

403,165

1.2%

802,740

791,553

1.4%
Depreciation and

amortization expense
(87,881)

(88,602)

(0.8)%

(176,411)

(176,537)

(0.1)%
Net income
$
319,968

$
314,563

1.7%

$
626,329

$
615,016

1.8%

Gross margin (before depreciation

and amortization expense)
73.0%

73.3%

(0.4)%

72.5%

72.8%

(0.4)%

Weighted average for the period:

Square foot occupancy
94.0%

94.6%

(0.6)%

93.1%

93.8%

(0.7)%

Realized annual rental income per (b):

Occupied square foot
$
17.35

$
16.95

2.4%

$
17.32

$
16.87

2.7%
Available square foot
$
16.30

$
16.03

1.7%

$
16.13

$
15.83

1.9%

At June 30:

Square foot occupancy

93.7%

94.7%

(1.1)%
Annual contract rent per

occupied square foot (c)

$
17.93

$
17.63

1.7%


Selected Operating Data for the Same Store Facilities (2,165 facilities)
	Three Months Ended June 30,					Six Months Ended June 30,
					Percentage					Percentage
		2019	2018		Change		2019	2018		Change

	(Dollar amounts in thousands, except weighted average amounts)
Revenues:
Rental income	$	576,681	$	565,717	1.9%	$	1,139,311	$	1,119,833	1.7%
Late charges and
administrative fees		25,374		24,868	2.0%		51,491		50,809	1.3%
Total revenues (a)		602,055		590,585	1.9%		1,190,802		1,170,642	1.7%

Cost of operations:
Property taxes		66,076		62,940	5.0%		131,429		125,166	5.0%
On-site property manager
payroll		30,283		29,461	2.8%		60,546		59,757	1.3%
Supervisory payroll		9,937		9,826	1.1%		19,717		19,958	(1.2)%
Repairs and maintenance		11,735		12,139	(3.3)%		25,149		24,320	3.4%
Utilities		9,670		10,152	(4.7)%		20,698		21,632	(4.3)%
Marketing		12,126		8,115	49.4%		20,906		14,994	39.4%
Other direct property costs		16,260		15,310	6.2%		32,699		31,146	5.0%
Allocated overhead		11,648		11,688	(0.3)%		25,778		25,503	1.1%
Total cost of operations (a)		167,735		159,631	5.1%		336,922		322,476	4.5%
Net operating income		434,320		430,954	0.8%		853,880		848,166	0.7%
Depreciation and
amortization expense		(97,370)		(96,224)	1.2%		(193,194)		(191,389)	0.9%
Net income	$	336,950	$	334,730	0.7%	$	660,686	$	656,777	0.6%

Gross margin (before depreciation
and amortization expense)		72.1%		73.0%	(1.2)%		71.7%		72.5%	(1.1)%

Weighted average for the period:
Square foot occupancy		94.0%		93.8%	0.2%		93.2%		93.0%	0.2%

Realized annual rental income per (b):
Occupied square foot	$	17.55	$	17.25	1.7%	$	17.48	$	17.23	1.5%
Available square foot	$	16.50	$	16.19	1.9%	$	16.30	$	16.02	1.7%

At June 30:
Square foot occupancy							94.1%		93.6%	0.5%
Annual contract rent per
occupied square foot (c)						$	18.01	$	17.81	1.1%

(a)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.

(b)Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.

~~(a)~~

~~Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities.~~

~~(b)~~

Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.

~~(c)~~

Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

(c)Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

Analysis of Same Store Revenue

Revenues generated by our Same Store Facilities increased by ~~1.5%~~1.9% and ~~1.8%~~1.7% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018, due primarily to increases of ~~2.4%~~1.7% and ~~2.7%~~1.5% in realized annual rent per occupied square foot for the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017 in realized annual rental income per occupied square foot.~~ 2018.

~~Year-over-year growth in our~~ Same Store revenues has declined from 3.4% for the three months ended June 30, 2017 as compared to the same period in 2016, to 1.5% for the three months ended June 30, 2018 as compared to the same period in 2017. Growth trends decelerated throughout 2017 and the first six months of 2018, with year over year revenue growth ~~at 2.4% for the three months ended September 30, 2017, 2.2% for the three months ended December 31, 2017 and 2.1% for the three months ended March 31, 2018. We are experiencing~~is lower than long-term historical averages due to softness in demand ~~in substantially all of~~for our ~~major markets,~~storage space, which has led to lower move-in ~~volumes combined with a lack of pricing power with respect to~~rental rates for new ~~tenants.~~tenants (see below). We attribute some of this softness to local economic conditions and, in some markets most notably Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, ~~and~~ New York and Portland, increased supply of newly constructed self-storage facilities.

Same Store weighted average square foot occupancy ~~was~~remained strong at 94.0% and ~~93.1% during the three and six months ended June 30, 2018, respectively, as compared to 94.6% and 93.8% for the same periods in 2017, as move-out volume declined~~93.2% in the three and six months ended June 30, ~~2018~~2019, respectively, as compared to 93.8% and 93.0% for the same periods in ~~2017, partially offset by lower move-in volume.~~ 2018.

We believe that high occupancies help maximize our rental income. We seek to maintain a weighted average square foot occupancy level of at least 90%, by regularly adjusting the rental rates and promotions offered to attract new tenants as well as adjusting our marketing efforts on the Internet and other channels in order to generate sufficient move-in volume to replace tenants that vacate.

Increasing rental rates to existing tenants, generally on an annual basis, is a key component of our revenue growth. We determine the level of rental increases based upon our expectations regarding the impact of existing tenant rate increases on incremental move-outs. Rental rate increases to existing tenants in the three and six months ended June 30, 2018 have been similar to the same periods in 2017, and we expect rate increases to existing tenants in the remainder of 2018 to be similar to the same period in 2017.

Annual contract rent per ~~occupied~~ foot increased 1.7% from June 30, 2017 to June 30, 2018, as compared to a 3.1% increase from December 31, 2016 to December 31, 2017. These year-over-year increases were primarily driven by annual rate increases given to existing tenants, partially offset by the net impact of replacing vacating tenants with new tenants with lower contract rates, or “rent roll down.” The reductionfor customers moving in ~~the year over year growth in annual contract rent per occupied foot from 3.1% at the beginning of the year to 1.7% at the end of the quarter is due primarily to continued rent roll down.~~

~~During~~was $13.81 and $14.38 for the three months ended June 30, 2019 and 2018, respectively, and the ~~annual~~related square footage for the space they moved into was 28.1 million for each period. Annual contract rent for tenants who moved in decreased 4.2% to $14.48 per foot as compared to $15.11 for the same period in 2017, and the annual contract rent for tenants who moved out increased 1.6% to $16.17 per foot as compared to $15.92 per foot for customers moving out was $16.06 and $16.08 for the ~~same period~~three months ended June 30, 2019 and 2018, respectively, and the related square footage for the space they moved out of was 25.4 million and 25.8 million, respectively.

Annual contract rent per foot for customers moving in ~~2017. During~~was $13.71 and $14.08 for the six months ended June 30, 2019 and 2018, respectively, and the ~~annual~~related square footage for the space they moved into was 52.4 million and 53.0 million, respectively. Annual contract rent for tenants who moved in decreased 3.4% to $14.17 per foot as compared to $14.67 for the same period in 2017, and the annual contract rent for tenants who moved out increased 2.3% to $16.17 per foot as compared to $15.81 per foot for customers moving out was $16.04 for each of the ~~same period in 2017.~~ six months ended June 30, 2019 and 2018, and the related square footage for the space they moved out of was 48.5 million and 49.5 million, respectively.

In order to stimulate move-in volume, we often give promotional discounts, generally in the form of a “$1.00 rent for the first month” offer. Promotional discounts, based upon the move-in contractual rates for the related promotional period, totaled ~~$18.5~~$19.6 million and ~~$37.1~~$39.6 million for the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to ~~$21.5~~$21.0 million and ~~$41.7~~$41.8 million for the same periods in ~~2017 and are recorded as~~2018. The decline in promotional discounts is due primarily to a ~~reduction to revenue.~~ lower volume of move-ins combined with lower average move-in rates.

Demand is higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months than in the winter months. Demand fluctuates due to various local and regional factors, including the overall economy. Demand into our system is also impacted by new supply of self-storage space as well as alternatives to self-storage.

We increase rental rates to our long-term tenants (generally, those that have been with us for at least a year) generally once per year. As a result, the number of long-term tenants we have in our facilities is an important factor in our revenue growth. The level of rate increases to long-term tenants is based upon balancing the additional revenue from the increase against the negative impact of incremental move-outs.

Throughout 2018 and the first six months of 2019, we have had an increased average length of stay and fewer move-outs. The increased average length of stay contributed to an increased beneficial effect of rent increases to

existing tenants, due to more long-term customers that were eligible for rate increases. The extent to which these positive trends will continue in 2019 is uncertain at this time.

We believe rental revenue growth in the remainder of ~~2018~~2019 will come primarily from continued annual rent increases to existing tenants. Our future rental growth will also be dependent upon many factors for each market that we operate in, including demand for self-storage space, the level of new supply of self-storage space and the average length of stay of our tenants.

We believe that the current trends in move-in, move-out, in place contractual rents and occupancy levels are consistent with continued moderate revenue growth in the remainder of ~~2018.~~2019. However, there can be no assurance of continued revenue growth, because current trends, when viewed in the short-run, are volatile and not necessarily predictive of our revenues going forward because they are subject to many ~~short-term factors. Such~~ factors include initial move-in rates, seasonal factors, the unit size and geographical mix of the specific tenants moving in or moving out, the length of stay of the tenants moving in or moving out, changes in our pricing strategies,which cannot be predicted, such as the level of consumer demand and competition from newly developed ~~facilities~~ and ~~the degree and timing of rate increases previously passed to~~ existing ~~tenants.~~

facilities. We are taking a number of actions to improve demand into our system, including ~~(i)~~ increasing marketing spend on the Internet, and (ii) reducing rental rates and continuing to offer promotional discounts to new tenants. Even if these actions are successful in improving demand into our system, in at least the near term, we believe these actions may have a negative impact on our revenue trends due to lower initial rental rates.Internet.

Analysis of Same Store Cost of Operations

Cost of operations (excluding depreciation and amortization) increased ~~2.6%~~5.1% and ~~3.0%~~4.5% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018, due primarily to increased property tax ~~expense, on-site property manager payroll,~~ and ~~allocated overhead.~~ marketing expense.

Property tax expense increased ~~5.5%~~5.0% and 5.0% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017, due primarily to higher assessed values.~~2018. We expect property tax expense growth of approximately 5.0% in the remainder of ~~2018~~2019 due primarily to higher assessed ~~values.~~values and, to a lesser extent, increased tax rates.

On-site property manager payroll expense increased ~~1.1%~~2.8% and ~~2.6%~~1.3% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018, due primarily to higher wage ~~rates.~~rates offset partially by lower hours incurred. We expect on-site property manager payroll expense to increase on an inflationary basis in the remainder of ~~2018.~~2019. We have been impacted by a tight labor market across the country, as well as increases in minimum wages in certain jurisdictions, and expect additional impacts in the remainder of 2019 as existing minimum wage increases become effective and new increases are enacted.

Supervisory payroll expense, which represents compensation paid to the management personnel who directly and indirectly supervise the on-site property managers, increased 1.1% and decreased ~~6.1% and 5.7%~~1.2% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018, due primarily to ~~lower~~changes in headcount. We expect inflationary increases in wage rates and ~~stable~~increased headcount in the remainder of ~~2018.~~2019.

Repairs and maintenance expense decreased 3.3% and increased ~~1.8% and 0.2%~~3.4% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018. Repair and maintenance costs include snow removal expense totaling ~~$0.7~~$0.3 million and ~~$2.8~~$3.1 million in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to ~~$0.2~~$0.7 million and ~~$2.2~~$2.9 million for the same periods in ~~2017.~~2018. Excluding snow removal costs, repairs and maintenance decreased ~~2.3%~~0.4% and ~~2.5%~~increased 2.8% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018.

Repairs and maintenance expense levels are dependent upon many factors such as weather conditions, which can impact repair and maintenance needs including snow removal, inflation in material and labor costs, and random events. ~~We expect inflationary increases in~~Accordingly, it is difficult to estimate future repairs and maintenance ~~expense in the remainder of 2018, excluding snow removal expense, which is primarily weather dependent and not predictable.~~ expense.

Our utility expenses are comprised primarily of electricity costs, which are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Utility expense ~~increased 2.3%~~decreased 4.7% and ~~4.2%~~4.3% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018, due primarily to reduced usage attributable to unseasonably mild weather conditions in the three and six months ended June 30, 2019. It is difficult to estimate future utility costs, because weather, temperature, and energy prices are volatile and not predictable.

~~Advertising and selling~~

Marketing expense is comprised principally of Internet ~~advertising, television~~ advertising and the operating costs of our telephone reservation center. ~~Advertising and selling~~Internet advertising expense, comprised primarily of keyword search fees assessed on a “per click” basis, varies based upon demand for self-storage space, the quantity of people inquiring about self-storage through online search, occupancy levels, the number and aggressiveness of bidding competitors and other factors. ~~Television and~~These factors are volatile; accordingly, Internet advertising ~~in particular,~~ can increase or decrease significantly in the ~~short term. Advertising~~short-term. Marketing expense increased 49.4% and ~~selling expenses decreased 5.3% and 4.7%~~39.4% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018, due primarily to ~~decreased television~~increases in Internet advertising ~~spending partially offset by increased Internet marketing expenditures.~~expense. We expect ~~moderate~~similar continued increases in Internet advertising ~~and selling~~ expense in the remainder of ~~2018.~~2019 as we seek to capture more customers for our space, and as cost per click for keyword search terms increases due to more aggressive keyword bidding competition from owners of newly developed facilities, nontraditional storage providers, as well as existing self-storage owners and operators.

Other direct property costs include administrative expenses incurred at the self-storage facilities, such as property insurance, telephone and data communication lines, business license costs, bank charges related to processing the facilities’ cash receipts, credit card fees, and the cost of operating each property’s rental office. These costs increased ~~1.9%~~6.2% and ~~3.6%~~5.0% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018, due primarily to increased credit card fees as a result of a higher proportion of our revenues being collected through credit cards. We expect inflationary increases in other direct property costs in the remainder of ~~2018.~~2019.

Allocated overhead represents administrative expenses for shared general corporate functions ~~which are allocated to self-storage property operations~~ to the extent their efforts are devoted to self-storage operations. Such functions include information technology, human resources, operational accounting and finance, marketing, legal, and costs of senior executives (other than ~~the~~our Chief Executive Officer ~~(“CEO”)~~ and Chief Financial Officer, ~~(“CFO”),~~ which are included in general and administrative expense). Allocated overhead decreased 0.3% and increased ~~7.4% and 7.3%~~1.1% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017, due primarily to increased information technology expenses.~~2018. We expect ~~greater than inflationary~~minimal increases in allocated overhead in the remainder of ~~2018 due primarily to increased information technology expenses.~~2019.

Analysis of Same Store Depreciation and Amortization

Depreciation and amortization for Same Store Facilities ~~decreased 0.8%~~increased 1.2% and ~~0.1%~~0.9% in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018. We expect modest increases in depreciation ~~to be flat~~expense in the remainder of ~~2018 as compared to the same period in 2017.~~2019.

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities:

‎

3943


	For the Quarter Ended
	March 31		June 30		September 30		December 31		Entire Year

	(Amounts in thousands, except for per square foot amounts)
Total revenues:
2019	$	588,747	$	602,055
2018	$	580,057	$	590,585	$	607,598	$	594,302	$	2,372,542

Total cost of operations:
2019	$	169,187	$	167,735
2018	$	162,845	$	159,631	$	161,324	$	130,477	$	614,277

Property taxes:
2019	$	65,353	$	66,076
2018	$	62,226	$	62,940	$	62,750	$	36,550	$	224,466

Repairs and maintenance:
2019	$	13,414	$	11,735
2018	$	12,181	$	12,139	$	11,903	$	12,475	$	48,698

Marketing:
2019	$	8,780	$	12,126
2018	$	6,879	$	8,115	$	8,246	$	9,205	$	32,445

REVPAF:
2019	$	16.10	$	16.50
2018	$	15.86	$	16.19	$	16.62	$	16.25	$	16.23

Weighted average realized annual rent per occupied square foot:
2019	$	17.41	$	17.55
2018	$	17.21	$	17.25	$	17.72	$	17.57	$	17.44

Weighted average occupancy levels for the period:
2019		92.5%		94.0%
2018		92.1%		93.8%		93.8%		92.5%		93.1%

‎

For the Quarter Ended

March 31

June 30

September 30

December 31

Entire Year

(Amounts in thousands, except for per square foot amounts)
Total revenues:

2018
$
548,543

$
558,651

2017
$
537,072

$
550,136

$
568,429

$
555,588

$
2,211,225

Total cost of operations:

2018
$
153,652

$
150,802

2017
$
148,684

$
146,971

$
148,198

$
118,351

$
562,204

Property taxes:

2018
$
58,392

$
59,174

2017
$
55,862

$
56,066

$
55,855

$
32,332

$
200,115

Repairs and maintenance:

2018
$
11,537

$
11,602

2017
$
11,692

$
11,397

$
11,421

$
11,983

$
46,493

Advertising and selling expense:

2018
$
6,523

$
7,706

2017
$
6,799

$
8,138

$
6,972

$
6,802

$
28,711

REVPAF:

2018
$
15.96

$
16.30

2017
$
15.63

$
16.03

$
16.54

$
16.17

$
16.09

Weighted average realized annual rent per occupied square foot:

2018
$
17.30

$
17.35

2017
$
16.79

$
16.95

$
17.49

$
17.37

$
17.15

Weighted average occupancy levels for the period:

2018

92.3%

94.0%

2017

93.1%

94.6%

94.6%

93.1%

93.8%

Analysis of Market Trends

The following table sets forth selected market trends in our Same Store Facilities:


Same Store Facilities Operating Trends by Market	Same Store Facilities Operating Trends by Market										Same Store Facilities Operating Trends by Market
		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
		2018		2017	Change		2018		2017	Change		2019		2018	Change		2019	2018		Change
	(Amounts in thousands, except for weighted average data)										(Amounts in thousands, except for weighted average data)
Market (number of facilities,
square footage in millions)
Revenues:
Los Angeles (198 facilities)	$	84,446	$	81,400	3.7%	$	167,509	$	160,884	4.1%
San Francisco (124 facilities)		47,957		46,707	2.7%		95,016		92,216	3.0%
New York (82 facilities)		34,883		33,786	3.2%		69,046		66,964	3.1%
Seattle-Tacoma (81 facilities)		26,062		25,439	2.4%		51,491		50,050	2.9%
Washington DC (82 facilities)		26,145		26,291	(0.6)%		51,710		51,873	(0.3)%
Miami (73 facilities)		24,225		23,889	1.4%		48,149		47,539	1.3%
Chicago (129 facilities)		29,414		30,200	(2.6)%		58,403		59,863	(2.4)%
Atlanta (98 facilities)		20,922		20,489	2.1%		41,383		40,540	2.1%
Houston (70 facilities)		16,345		15,992	2.2%		32,688		32,041	2.0%
Dallas-Ft. Worth (78 facilities)		15,990		16,411	(2.6)%		31,953		32,573	(1.9)%
Philadelphia (57 facilities)		14,224		13,883	2.5%		28,051		27,345	2.6%
Orlando-Daytona (64 facilities)		13,635		13,099	4.1%		26,962		25,778	4.6%
West Palm Beach (38 facilities)		11,583		11,308	2.4%		23,051		22,506	2.4%
Tampa (47 facilities)		10,974		10,851	1.1%		21,825		21,445	1.8%
Portland (41 facilities)		9,918		10,052	(1.3)%		19,644		19,753	(0.6)%
All other markets
(786 facilities)		171,928		170,339	0.9%		340,313		335,838	1.3%
Los Angeles (204, 14.1)											$	90,490	$	87,594	3.3%	$	179,112	$	173,737	3.1%
San Francisco (127, 7.9)												50,813		49,580	2.5%		100,375		98,262	2.2%
New York (87, 6.0)												38,548		37,569	2.6%		76,247		74,349	2.6%
Seattle-Tacoma (85, 5.8)												28,311		27,826	1.7%		55,777		54,965	1.5%
Washington DC (88, 5.4)												28,339		27,457	3.2%		55,852		54,314	2.8%
Miami (81, 5.7)												28,268		28,584	(1.1)%		56,197		56,862	(1.2)%
Atlanta (99, 6.5)												21,988		21,360	2.9%		43,553		42,253	3.1%
Chicago (129, 8.1)												29,601		29,414	0.6%		58,502		58,403	0.2%
Dallas-Ft. Worth (98, 6.2)												20,571		20,760	(0.9)%		40,906		41,479	(1.4)%
Houston (78, 5.3)												17,078		17,872	(4.4)%		34,307		35,749	(4.0)%
Orlando-Daytona (69, 4.3)												15,176		14,929	1.7%		30,040		29,553	1.6%
Philadelphia (56, 3.5)												14,766		14,047	5.1%		29,070		27,699	4.9%
West Palm Beach (37, 2.4)												10,984		10,834	1.4%		21,797		21,586	1.0%
Tampa (50, 3.3)												11,576		11,573	0.0%		22,960		23,004	(0.2)%
Portland (43, 2.3)												10,355		10,406	(0.5)%		20,477		20,623	(0.7)%
All other markets (834, 53.0)												185,191		180,780	2.4%		365,630		357,804	2.2%
Total revenues	$	558,651	$	550,136	1.5%	$	1,107,194	$	1,087,208	1.8%	$	602,055	$	590,585	1.9%	$	1,190,802	$	1,170,642	1.7%

Net operating income:
Los Angeles	$	69,749	$	67,291	3.7%	$	137,841	$	132,450	4.1%	$	74,084	$	72,396	2.3%	$	146,448	$	143,014	2.4%
San Francisco		38,949		37,858	2.9%		76,672		74,487	2.9%		40,840		40,345	1.2%		80,496		79,454	1.3%
New York		24,802		24,138	2.8%		47,506		46,453	2.3%		26,914		26,639	1.0%		52,054		50,975	2.1%
Seattle-Tacoma		20,241		19,876	1.8%		39,725		38,907	2.1%		21,593		21,643	(0.2)%		42,519		42,449	0.2%
Washington DC		19,210		19,581	(1.9)%		37,692		38,350	(1.7)%		20,673		20,194	2.4%		40,456		39,631	2.1%
Miami		16,938		16,838	0.6%		33,569		33,501	0.2%		19,919		20,321	(2.0)%		39,686		40,329	(1.6)%
Atlanta												15,778		15,188	3.9%		31,552		30,493	3.5%
Chicago		16,112		17,427	(7.5)%		30,269		32,765	(7.6)%		15,724		16,112	(2.4)%		28,939		30,269	(4.4)%
Atlanta		14,873		14,844	0.2%		29,866		29,349	1.8%
Dallas-Ft. Worth												13,325		13,789	(3.4)%		26,603		27,710	(4.0)%
Houston		10,767		10,633	1.3%		21,617		21,450	0.8%		10,702		11,730	(8.8)%		21,629		23,525	(8.1)%
Dallas-Ft. Worth		10,536		10,905	(3.4)%		21,208		21,664	(2.1)%
Orlando-Daytona												10,791		10,694	0.9%		21,311		21,117	0.9%
Philadelphia		9,875		10,006	(1.3)%		19,375		19,338	0.2%		10,358		9,797	5.7%		20,357		19,224	5.9%
Orlando-Daytona		9,766		9,324	4.7%		19,263		18,432	4.5%
West Palm Beach		8,549		8,259	3.5%		16,953		16,526	2.6%		8,002		7,925	1.0%		15,886		15,732	1.0%
Tampa		7,669		7,605	0.8%		15,302		15,055	1.6%		7,935		8,068	(1.6)%		15,744		16,081	(2.1)%
Portland		7,641		7,787	(1.9)%		15,048		15,162	(0.8)%		7,743		8,018	(3.4)%		15,255		15,804	(3.5)%
All other markets		122,172		120,793	1.1%		240,834		237,664	1.3%		129,939		128,095	1.4%		254,945		252,359	1.0%
Total net operating income	$	407,849	$	403,165	1.2%	$	802,740	$	791,553	1.4%	$	434,320	$	430,954	0.8%	$	853,880	$	848,166	0.7%

4145


Same Store Facilities Operating Trends by Market (Continued)

		Three Months Ended June 30,					Six Months Ended June 30,
		2019	2018		Change		2019	2018		Change
Weighted average square foot
occupancy:
Los Angeles		95.2%		95.4%	(0.2)%		95.0%		95.1%	(0.1)%
San Francisco		94.9%		95.1%	(0.2)%		94.3%		94.6%	(0.3)%
New York		94.5%		94.9%	(0.4)%		93.9%		94.2%	(0.3)%
Seattle-Tacoma		93.9%		94.3%	(0.4)%		92.8%		93.1%	(0.3)%
Washington DC		94.5%		93.7%	0.9%		93.2%		92.0%	1.3%
Miami		93.0%		93.3%	(0.3)%		92.6%		92.9%	(0.3)%
Atlanta		93.6%		93.7%	(0.1)%		93.1%		92.8%	0.3%
Chicago		92.6%		90.8%	2.0%		91.0%		89.5%	1.7%
Dallas-Ft. Worth		92.5%		92.0%	0.5%		91.7%		91.3%	0.4%
Houston		88.9%		91.3%	(2.6)%		88.7%		91.5%	(3.1)%
Orlando-Daytona		94.7%		95.5%	(0.8)%		94.2%		94.9%	(0.7)%
Philadelphia		96.0%		95.7%	0.3%		95.3%		94.6%	0.7%
West Palm Beach		94.2%		94.3%	(0.1)%		93.7%		93.9%	(0.2)%
Tampa		93.1%		93.7%	(0.6)%		92.5%		93.1%	(0.6)%
Portland		95.3%		95.2%	0.1%		94.3%		94.4%	(0.1)%
All other markets		94.3%		93.8%	0.5%		93.4%		92.7%	0.8%
Total weighted average
square foot occupancy		94.0%		93.8%	0.2%		93.2%		93.0%	0.2%

Realized annual rent per
occupied square foot:
Los Angeles	$	26.11	$	25.24	3.4%	$	25.88	$	25.07	3.2%
San Francisco		26.56		25.83	2.8%		26.38		25.71	2.6%
New York		26.10		25.36	2.9%		25.94		25.27	2.7%
Seattle-Tacoma		20.18		19.79	2.0%		20.11		19.77	1.7%
Washington DC		21.25		20.86	1.9%		21.20		20.99	1.0%
Miami		20.38		20.56	(0.9)%		20.34		20.51	(0.8)%
Atlanta		13.56		13.13	3.3%		13.46		13.09	2.8%
Chicago		15.04		15.24	(1.3)%		15.11		15.36	(1.6)%
Dallas-Ft. Worth		13.58		13.80	(1.6)%		13.60		13.87	(1.9)%
Houston		13.73		14.02	(2.1)%		13.82		13.97	(1.1)%
Orlando-Daytona		14.09		13.74	2.5%		13.99		13.67	2.3%
Philadelphia		16.54		15.78	4.8%		16.37		15.71	4.2%
West Palm Beach		18.46		18.18	1.5%		18.39		18.17	1.2%
Tampa		14.15		14.01	1.0%		14.10		13.99	0.8%
Portland		18.48		18.58	(0.5)%		18.42		18.55	(0.7)%
All other markets		14.12		13.86	1.9%		14.06		13.86	1.4%
Total realized rent per
occupied square foot	$	17.55	$	17.25	1.7%	$	17.48	$	17.23	1.5%

‎

Same Store Facilities Operating Trends by Market (Continued)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

Change

2018

2017

Change
Weighted average square foot

occupancy:

Los Angeles

95.6%

96.0%

(0.4)%

95.3%

95.8%

(0.5)%
San Francisco

95.2%

95.9%

(0.7)%

94.7%

95.4%

(0.7)%
New York

95.0%

94.7%

0.3%

94.2%

94.0%

0.2%
Seattle-Tacoma

94.3%

95.4%

(1.2)%

93.2%

94.4%

(1.3)%
Washington DC

93.8%

94.2%

(0.4)%

92.0%

92.9%

(1.0)%
Miami

93.1%

93.7%

(0.6)%

92.7%

93.5%

(0.9)%
Chicago

90.8%

92.4%

(1.7)%

89.5%

91.3%

(2.0)%
Atlanta

93.7%

94.2%

(0.5)%

92.8%

93.4%

(0.6)%
Houston

91.2%

90.2%

1.1%

91.5%

90.3%

1.3%
Dallas-Ft. Worth

92.3%

94.2%

(2.0)%

91.6%

93.7%

(2.2)%
Philadelphia

95.6%

95.6%

0.0%

94.5%

94.7%

(0.2)%
Orlando-Daytona

95.4%

95.6%

(0.2)%

94.8%

95.1%

(0.3)%
West Palm Beach

94.6%

94.8%

(0.2)%

94.3%

94.8%

(0.5)%
Tampa

93.8%

94.8%

(1.1)%

93.2%

94.3%

(1.2)%
Portland

95.2%

96.5%

(1.3)%

94.4%

95.8%

(1.5)%
All other markets

94.0%

94.7%

(0.7)%

92.9%

93.7%

(0.9)%
Total weighted average

square foot occupancy

94.0%

94.6%

(0.6)%

93.1%

93.8%

(0.7)%

Realized annual rent per

occupied square foot:

Los Angeles
$
25.45

$
24.35

4.5%

$
25.28

$
24.12

4.8%
San Francisco

25.85

24.99

3.4%

25.72

24.77

3.8%
New York

24.90

24.17

3.0%

24.81

24.12

2.9%
Seattle-Tacoma

19.74

19.01

3.8%

19.71

18.88

4.4%
Washington DC

21.00

20.82

0.9%

21.12

20.82

1.4%
Miami

19.71

19.29

2.2%

19.65

19.20

2.3%
Chicago

15.24

15.40

(1.0)%

15.36

15.46

(0.6)%
Atlanta

13.06

12.73

2.6%

13.01

12.68

2.6%
Houston

14.34

14.17

1.2%

14.28

14.15

0.9%
Dallas-Ft. Worth

13.24

13.31

(0.5)%

13.30

13.26

0.3%
Philadelphia

15.83

15.48

2.3%

15.76

15.36

2.6%
Orlando-Daytona

13.74

13.17

4.3%

13.65

13.01

4.9%
West Palm Beach

18.41

17.94

2.6%

18.36

17.85

2.9%
Tampa

14.14

13.81

2.4%

14.11

13.70

3.0%
Portland

18.54

18.51

0.2%

18.49

18.29

1.1%
All other markets

14.09

13.85

1.7%

14.09

13.79

2.2%
Total realized rent per

occupied square foot
$
17.35

$
16.95

2.4%

$
17.32

$
16.87

2.7%

4246


Same Store Facilities Operating Trends by Market (Continued)

	Three Months Ended June 30,						Six Months Ended June 30,
		2019	2018		Change		2019	2018		Change
REVPAF:
Los Angeles	$	24.87	$	24.07	3.3%	$	24.60	$	23.84	3.2%
San Francisco		25.21		24.57	2.6%		24.89		24.33	2.3%
New York		24.67		24.07	2.5%		24.36		23.79	2.4%
Seattle-Tacoma		18.95		18.65	1.6%		18.66		18.41	1.4%
Washington DC		20.08		19.55	2.7%		19.76		19.31	2.3%
Miami		18.96		19.18	(1.1)%		18.83		19.05	(1.2)%
Atlanta		12.69		12.31	3.1%		12.53		12.14	3.2%
Chicago		13.92		13.85	0.5%		13.75		13.75	0.0%
Dallas-Ft. Worth		12.56		12.69	(1.0)%		12.47		12.66	(1.5)%
Houston		12.20		12.80	(4.7)%		12.25		12.79	(4.2)%
Orlando-Daytona		13.34		13.13	1.6%		13.17		12.97	1.5%
Philadelphia		15.88		15.10	5.2%		15.60		14.85	5.1%
West Palm Beach		17.39		17.15	1.4%		17.22		17.05	1.0%
Tampa		13.17		13.13	0.3%		13.04		13.03	0.1%
Portland		17.61		17.68	(0.4)%		17.38		17.51	(0.7)%
All other markets		13.32		13.00	2.5%		13.13		12.85	2.2%
Total REVPAF	$	16.50	$	16.19	1.9%	$	16.30	$	16.02	1.7%

Same Store Facilities Operating Trends by Market (Continued)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

Change

2018

2017

Change
REVPAF:

Los Angeles
$
24.32

$
23.38

4.0%

$
24.08

$
23.10

4.2%
San Francisco

24.62

23.95

2.8%

24.37

23.64

3.1%
New York

23.64

22.89

3.3%

23.37

22.66

3.1%
Seattle-Tacoma

18.62

18.14

2.6%

18.38

17.82

3.1%
Washington DC

19.69

19.61

0.4%

19.44

19.33

0.6%
Miami

18.35

18.07

1.5%

18.21

17.96

1.4%
Chicago

13.85

14.22

(2.6)%

13.75

14.10

(2.5)%
Atlanta

12.24

11.99

2.1%

12.08

11.84

2.0%
Houston

13.07

12.78

2.3%

13.06

12.78

2.2%
Dallas-Ft. Worth

12.21

12.54

(2.6)%

12.19

12.43

(1.9)%
Philadelphia

15.14

14.80

2.3%

14.89

14.55

2.3%
Orlando-Daytona

13.11

12.59

4.1%

12.94

12.37

4.6%
West Palm Beach

17.42

17.01

2.4%

17.31

16.92

2.3%
Tampa

13.26

13.09

1.3%

13.16

12.92

1.9%
Portland

17.65

17.85

(1.1)%

17.46

17.53

(0.4)%
All other markets

13.25

13.11

1.1%

13.09

12.92

1.3%
Total REVPAF
$
16.30

$
16.03

1.7%

$
16.13

$
15.83

1.9%

We believe that our geographic diversification and scale provide some insulation from localized economic effects and add to the stability of our cash flows. It is difficult to predict localized trends in short-term self-storage demand and operating results. Over the long run, we believe that markets that experience population growth, high employment, and otherwise exhibit economic strength and consistency will outperform markets that do not exhibit these characteristics.

~~Non Same Store~~Acquired Facilities

The ~~Non Same Store~~Acquired Facilities ~~at June 30, 2018~~ represent ~~355~~81 facilities that ~~were not stabilized with respect to occupancies or rental rates since January 1, 2016, or that~~ we ~~did not own as~~acquired in 2017, 2018, and the first six months of ~~January 1, 2016.~~2019. As a result of the stabilization process and timing of when these facilities were acquired, ~~developed, or redeveloped,~~ year-over-year changes can be significant.

The following table summarizes operating data with respect to the ~~Non Same Store~~Acquired Facilities:


ACQUIRED FACILITIES	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		Change (a)		2019		2018		Change (a)
	($ amounts in thousands, except for per square foot amounts)
Revenues (b):
2017 Acquisitions	$	7,559	$	7,116	$	443	$	14,846	$	13,976	$	870
2018 Acquisitions		3,982		459		3,523		7,706		526		7,180
2019 Acquisitions		2,458		-		2,458		2,655		-		2,655
Total revenues		13,999		7,575		6,424		25,207		14,502		10,705

Cost of operations (b):
2017 Acquisitions		2,501		2,459		42		4,998		4,966		32
2018 Acquisitions		1,993		165		1,828		4,047		187		3,860
2019 Acquisitions		864		-		864		924		-		924
Total cost of operations		5,358		2,624		2,734		9,969		5,153		4,816

Net operating income:
2017 Acquisitions		5,058		4,657		401		9,848		9,010		838
2018 Acquisitions		1,989		294		1,695		3,659		339		3,320
2019 Acquisitions		1,594		-		1,594		1,731		-		1,731
Net operating income		8,641		4,951		3,690		15,238		9,349		5,889
Depreciation and
amortization expense		(8,636)		(5,166)		(3,470)		(15,359)		(11,025)		(4,334)
Net income (loss)	$	5	$	(215)	$	220	$	(121)	$	(1,676)	$	1,555

At June 30:
Square foot occupancy:
2017 Acquisitions								90.6%		92.7%		(2.3)%
2018 Acquisitions								86.8%		72.0%		20.6%
2019 Acquisitions								78.2%		-		-
								86.0%		89.7%		(4.1)%
Annual contract rent per
occupied square foot:
2017 Acquisitions							$	15.20	$	14.57		4.3%
2018 Acquisitions								11.73		9.55		22.8%
2019 Acquisitions								12.48		-		-
							$	13.45	$	13.99		(3.9)%

Number of facilities:
2017 Acquisitions								34		34		-
2018 Acquisitions								25		5		20
2019 Acquisitions								22		-		22
								81		39		42
Net rentable square feet (in thousands):
2017 Acquisitions								2,206		2,114		92
2018 Acquisitions								1,629		356		1,273
2019 Acquisitions								1,428		-		1,428
								5,263		2,470		2,793

NON SAME STORE
Three Months Ended June 30,

Six Months Ended June 30,
FACILITIES
2018

2017

Change

2018

2017

Change

(Dollar amounts in thousands, except square foot amounts)
Revenues:

2018 acquisitions
$
459

$
-

$
459

$
526

$
-

$
526
2017 acquisitions

7,116

799

6,317

13,976

1,138

12,838
2016 acquisitions

9,761

9,031

730

19,190

17,612

1,578
2016 - 2018 new developments

8,618

3,630

4,988

15,738

5,957

9,781
2013 - 2015 new developments

6,591

6,151

440

12,992

11,949

1,043
Other facilities

54,010

54,452

(442)

107,127

108,113

(986)
    Total revenues

86,555

74,063

12,492

169,549

144,769

24,780

Cost of operations:

2018 acquisitions

165

-

165

187

-

187
2017 acquisitions

2,459

229

2,230

4,966

380

4,586
2016 acquisitions

3,521

3,502

19

7,158

6,984

174
2016 - 2018 new developments

4,937

2,918

2,019

8,992

5,214

3,778
2013 - 2015 new developments

2,098

1,913

185

4,197

3,780

417
Other facilities

15,894

15,662

232

32,109

31,160

949
    Total cost of operations

29,074

24,224

4,850

57,609

47,518

10,091

Net operating income:

2018 acquisitions

294

-

294

339

-

339
2017 acquisitions

4,657

570

4,087

9,010

758

8,252
2016 acquisitions

6,240

5,529

711

12,032

10,628

1,404
2016 - 2018 new developments

3,681

712

2,969

6,746

743

6,003
2013 - 2015 new developments

4,493

4,238

255

8,795

8,169

626
Other facilities

38,116

38,790

(674)

75,018

76,953

(1,935)
    Net operating income

57,481

49,839

7,642

111,940

97,251

14,689
Depreciation and

amortization expense

(31,896)

(21,575)

(10,321)

(61,345)

(44,569)

(16,776)
Net income
$
25,585

$
28,264

$
(2,679)

$
50,595

$
52,682

$
(2,087)

At June 30:

Square foot occupancy:

2018 acquisitions

72.0%

-

-
2017 acquisitions

90.8%

93.0%

(2.4)%
2016 acquisitions

89.1%

90.3%

(1.3)%
2016 - 2018 new developments

61.4%

57.5%

6.8%
2013 - 2015 new developments

92.9%

93.3%

(0.4)%
Other facilities

87.4%

88.7%

(1.5)%

83.0%

85.9%

(3.4)%
Annual contract rent per

occupied square foot:

2018 acquisitions

$
9.55

$
-

-
2017 acquisitions

14.57

9.89

47.3%
2016 acquisitions

10.27

9.92

3.5%
2016 - 2018 new developments

11.49

12.92

(11.1)%
2013 - 2015 new developments

14.98

14.24

5.2%
Other facilities

16.92

16.87

0.3%

$
14.66

$
14.93

(1.8)%

NON SAME STORE

Six Months Ended June 30,
FACILITIES (Continued)

2018

2017

Change

Number of facilities:

2018 acquisitions

5

-

5
2017 acquisitions

34

7

27
2016 acquisitions

55

55

-
2016 - 2018 new developments

43

19

24
2013 - 2015 new developments

20

20

-
Other facilities

198

198

-

355

299

56
Net rentable square feet (in thousands):

2018 acquisitions

356

-

356
2017 acquisitions

2,114

398

1,716
2016 acquisitions

4,247

4,121

126
2016 - 2018 new developments

5,479

2,595

2,884
2013 - 2015 new developments

1,877

1,877

-
Other facilities (a)

14,201

14,263

(62)

28,274

23,254

5,020

As of
June 30, 2018

Costs to acquire or develop:

2018 acquisitions

$
33,930

2017 acquisitions (b)

291,329

2016 acquisitions

429,123

2016 - 2018 new developments

660,629

2013 - 2015 new developments

188,049

Other facilities (c)

-

$
1,603,060


ACQUIRED FACILITIES (Continued)	As of ‎June 30, 2019
Costs to acquire (in thousands):
2017 Acquisitions (c)	$	291,329
2018 Acquisitions		181,020
2019 Acquisitions		198,002
	$	670,351

~~(a)~~

Square footage at June 30, 2018 for the “other facilities” excludes 665,000 net rentable square feet of storage space that was demolished with respect to redevelopments that are in process. Our current pipeline of $363.9 million in redevelopment projects will result in the demolishment of an additional 153,000 net rentable square feet of space, and build 3.9 million net rentable square feet of storage space.

~~(b)~~

~~Acquisition costs includes i)~~

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.

(c)Acquisition costs includes (i) $149.8 million paid for 22 facilities acquired from third parties, ii) $135.5 million cash paid for the remaining 74.25% interest we did not own in 12 stabilized properties owned by a legacy institutional partnership and iii) the $6.3 million historical book value of our existing investment in the legacy institutional partnership.

~~(c)~~

Other facilities include existing facilities for which we recently expanded their square footage at a cost of $188.8 million. We have not included these costs or the historical costs incurred to initially acquire or develop these 198 facilities in the table, as they would not be meaningful or consistent with the amounts for the acquired and newly developed facilities.

~~The facilities included above under “2017 acquisitions” include~~ 22 facilities acquired from third parties, ~~and~~(ii) $135.5 million cash paid for the remaining 74.25% interest we did not own in 12 stabilized ~~facilities previously~~properties owned by a legacy institutional partnership ~~that we began consolidating effective December 31, 2017.~~

~~For~~and (iii) the six months ended June 30, 2018, the weighted average annualized yield on cost, based upon net operating income, for i) the facilities acquired in 2016 was 5.6% and ii) the 22 facilities acquired in 2017 from third parties for $149.8$6.3 million ~~was 4.9%. The yield for the other facilities acquired are not meaningful due to~~historical book value of our ~~limited ownership period~~existing investment in the ~~case of facilities acquired in 2018 and our preexisting ownership interest in and management of the 12 stabilized facilities owned by a~~ legacy institutional partnership.

We believe that our management and operating infrastructure allows us to generate higher net operating income from newly acquired facilities than was achieved by the previous owners. However, it can take 24 or more months for us to fully achieve the higher net operating income and the ultimate levels of net operating income to be achieved can be affected by changes in general economic conditions. As a result, there can be no assurance that we will achieve our expectations with respect to these newly acquired facilities.

We believe that our real estate development activities are beneficial to our business over the long run. However, in the short run, development activities dilute our earnings due to the three to four year period to reach a stabilized levelThe facilities included above under “2017 acquisitions,” “2018 acquisitions,” and “2019 acquisitions” have an aggregate of cash flows and the cost of capital to fund development, combined with general and administrative expenses associated with development. We believe this dilution will increase in the remainder of 2018 because of an increased level ofapproximately 5.3 million net rentable square feet, ~~being added to our portfolio.~~including 0.7 million in each of Texas and Virginia, 0.5 million in each of Florida and Minnesota, 0.3 million in each of Nebraska and Ohio, 0.2 million in each of California, Georgia, Indiana, Kentucky, New York, North Carolina and South Carolina, and 0.9 million in other states.

~~We expect~~For the ~~Non Same Store Facilities to continue to provide increased~~six months ended June 30, 2019, the weighted average annualized yield on cost, based upon net operating income, for (i) the 22 facilities acquired in 2017 from third parties was 5.8%, (ii) the ~~remainder of 2018 as these~~12 stabilized facilities ~~approach stabilized occupancy levels~~owned by a legacy institutional partnership, with respect to the 74.25% interest we acquired was 6.0%, and (iii) the ~~earnings of the 2017 acquisitions are reflected in our operations for a longer period~~25 properties acquired in 2018 ~~as compared to 2017.~~

~~We also expect to increase~~was 4.0%. The yield for the ~~number and net rentable square feet of Non Same Store Facilities through development of new self-storage~~ facilities ~~redevelopment of existing facilities and acquisitions of facilities.~~

~~At June 30, 2018, we had various facilities~~acquired in ~~development (2.2 million net rentable square feet) estimated to cost $315.3 million and various expansion projects (3.9 million net rentable square feet) estimated to cost $363.9million.~~ 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 limited2019 is not meaningful 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.~~ limited ownership period.

Subsequent to June 30, ~~2018,~~2019, we acquired or were under contract to acquire ~~(subject to customary closing conditions) 14~~ten self-storage facilities (two each in Georgia and Texas and one each in Florida, Indiana, Minnesota, North Carolina, Tennessee and Virginia) with 0.8 net rentable square feet for ~~$95.2~~$86.5 million. ~~We will continue to seek to acquire properties; however, there is significant competition to acquire existing facilities~~

Analysis of Depreciation and ~~therefore the dollar value~~Amortization of ~~acquisitions is unpredictable.~~ Acquired Facilities

Depreciation and amortization with respect to the ~~Non Same Store~~Acquired Facilities for the three months ended June 30, 2019 and 2018 totaled ~~$31.9~~$8.6 million and ~~$61.3~~$5.2 million, inrespectively, and $15.4 million and $11.0 million for the ~~three and~~ six months ended June 30, 2019 and 2018, ~~respectively, as compared to $21.6 million $44.6 million for the same periods in 2017.~~respectively. These amounts include i)(i) depreciation of the ~~buildings~~ acquired ~~or developed,~~buildings, which is recorded generally on a straight line basis over a 25 year period, and ~~ii)~~(ii) amortization of cost allocated to the tenants in place upon acquisition of a facility, which is recorded based upon the benefit of such existing tenants to each period and thus is highest when the facility is first acquired and declines as such tenants vacate. With respect to ~~Non Same Store~~the Acquired Facilities owned at June 30, ~~2018,~~2019, depreciation of buildings and amortization of tenant intangibles is expected to ~~total $58.0~~aggregate approximately $30.5 million ~~and $4.6 million, respectively,~~in the year ending December 31, 2019. There will be additional depreciation with respect to new buildings that are acquired in the remainder of ~~2018.~~ 2019.

‎

Developed and Expanded Facilities

The ~~level~~developed and expanded facilities include 76 facilities that were developed on new sites since January 1, 2013, and 62 facilities subject to expansion of ~~future depreciation~~their net rentable square footage. Of these expansions, 40 are completed at June 30, 2019 and ~~amortization will also depend~~22 are currently in process or are expected to commence renovation in 2019.

The following table summarizes operating data with respect to the Developed and Expanded Facilities:


DEVELOPED AND EXPANDED	Three Months Ended June 30,						Six Months Ended June 30,
FACILITIES	2019		2018		Change (a)		2019		2018		Change (a)
	($ amounts in thousands, except for per square foot amounts)
Revenues (b):
Developed in 2013 - 2015	$	6,976	$	6,591	$	385	$	13,774	$	12,992	$	782
Developed in 2016 and 2017		10,476		8,211		2,265		20,353		15,298		5,055
Developed in 2018 and 2019		3,276		407		2,869		5,671		440		5,231
Completed Expansions		9,396		7,792		1,604		17,940		15,263		2,677
Expansions in process		6,764		7,356		(592)		13,604		14,676		(1,072)
Total revenues		36,888		30,357		6,531		71,342		58,669		12,673

Cost of operations (b):
Developed in 2013 - 2015		2,249		2,098		151		4,285		4,197		88
Developed in 2016 and 2017		5,116		3,772		1,344		9,752		7,593		2,159
Developed in 2018 and 2019		3,003		1,165		1,838		5,342		1,399		3,943
Completed Expansions		5,216		2,903		2,313		8,653		5,668		2,985
Expansions in process		2,128		2,034		94		4,269		4,147		122
Total cost of operations		17,712		11,972		5,740		32,301		23,004		9,297

Net operating income:
Developed in 2013 - 2015		4,727		4,493		234		9,489		8,795		694
Developed in 2016 and 2017		5,360		4,439		921		10,601		7,705		2,896
Developed in 2018 and 2019		273		(758)		1,031		329		(959)		1,288
Completed Expansions		4,180		4,889		(709)		9,287		9,595		(308)
Expansions in process		4,636		5,322		(686)		9,335		10,529		(1,194)
Net operating income		19,176		18,385		791		39,041		35,665		3,376
Depreciation and
amortization expense		(13,416)		(10,542)		(2,874)		(25,633)		(19,529)		(6,104)
Net income	$	5,760	$	7,843	$	(2,083)	$	13,408	$	16,136	$	(2,728)

At June 30:
Square foot occupancy:
Developed in 2013 - 2015								93.3%		92.9%		0.4%
Developed in 2016 and 2017								81.7%		71.0%		15.1%
Developed in 2018 and 2019								56.2%		30.3%		85.5%
Completed Expansions								57.7%		73.7%		(21.7)%
Expansions in process								91.4%		91.5%		(0.1)%
								71.7%		73.6%		(2.6)%
Annual contract rent per occupied square foot:
Developed in 2013 - 2015							$	15.89	$	14.98		6.1%
Developed in 2016 and 2017								12.55		11.78		6.5%
Developed in 2018 and 2019								10.99		9.25		18.8%
Completed Expansions								13.27		15.66		(15.3)%
Expansions in process								18.04		18.30		(1.4)%
							$	13.78	$	14.38		(4.2)%


DEVELOPED AND EXPANDED	Six Months Ended June 30,
FACILITIES (Continued)	2019		2018		Change (a)
	(Amounts in thousands,
	except for number of facilities)
Number of facilities:
Developed in 2013 - 2015		20		20		-
Developed in 2016 and 2017		32		32		-
Developed in 2018 and 2019		24		11		13
Completed Expansions		40		40		-
Expansions in process		22		22		-
		138		125		13

Net rentable square feet (c):
Developed in 2013 - 2015		1,877		1,877		-
Developed in 2016 and 2017		4,181		4,181		-
Developed in 2018 and 2019		2,666		1,298		1,368
Completed Expansions		5,229		2,739		2,490
Expansions in process		1,619		1,715		(96)
		15,572		11,810		3,762

	As of ‎June 30, 2019
Costs to develop:
Developed in 2013 - 2015	$	188,049
Developed in 2016 and 2017		497,456
Developed in 2018 and 2019		333,037
Completed Expansions (d)		306,362
Expansions in process (e)		-
	$	1,324,904

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.

(c)The facilities included above have an aggregate of approximately 15.6 million net rentable square feet at June 30, 2019, including 6.5 million in Texas, 2.4 million in California, 1.7 million in Florida, 1.3 million in Colorado, 0.6 million in North Carolina, 0.4 million each of Arizona, Minnesota and Washington, and 1.9 million in other states.

(d)These amounts only include the direct cost incurred to expand and renovate these facilities, and do not include (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.

(e)We expect to add 2.7 million net rentable square feet to these facilities at an aggregate cost of approximately $331.6 million, not including (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.

It typically takes at least three to four years for a newly developed or expanded self-storage facility to stabilize with respect to revenues. Physical occupancy can be achieved as early as two to three years following completion of the development or expansion, through offering lower rental rates during fill-up. As a result, even after achieving high occupancy, there can still be a period of elevated revenue growth as the tenant base matures and higher rental rates are achieved. Our earnings are diluted during the construction and stabilization period due to the cost of capital to fund the development cost, as well as the related construction and development overhead expenses in general and

administrative expense. Despite this short-term dilution, we believe that our development and expansion activities generate favorable risk-adjusted returns over the long run.

Newly Developed Facilities

The facilities included under “Developed in 2013-2015” were opened in 2013, 2014, and 2015, and we believe they have reached stabilization at June 30, 2019. The annualized yield on cost, based upon the ~~level~~net operating income for the six months ended June 30, 2019 was 10.1%.

The facilities included under “Developed in 2016 and 2017” and “Developed in 2018 and 2019” are not stabilized with respect to occupancy or revenues at June 30, 2019, and we expect continued growth in these facilities throughout 2019 and beyond as they continue to stabilize. The annualized yields that may be achieved on these facilities upon stabilization will depend on many factors, including local and current market conditions in the vicinity of ~~acquisitions of facilities~~each property such as consumer demand and the level of new and existing supply. Accordingly, the 10.1% yield achieved on the facilities under “Developed in 2013 - 2015”may not be indicative of the yield on cost to be achieved on these facilities.

We have ten additional newly developed facilities in process, which will have a total of 1.1 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $189.0 million. We expect these facilities to open over the next 18 months.

Expansions of Existing Facilities

The expansion of an existing facility involves the construction of new space on an existing facility, either on existing unused land or through the demolition of existing buildings in order to facilitate densification. The construction costs for an expanded facility may include, in addition to adding space, adding amenities such as climate control to existing space, improving the visual appeal of the facility, and to a much lesser extent, the replacement of existing doors, roofs, and HVAC.

The return profile on the expansion of existing facilities differs from a new facility, due to a lack of land cost, and there can be less cash flow risk because we have more direct knowledge of the local demand for space on the site as compared to a new facility. However, expansions involve the demolition of existing revenue-generating space with the loss of the related revenues, during the construction and fill-up period.

The facilities under “completed expansions” represent those facilities where the expansions have been completed at June 30, 2019. We incurred a total of $306.4 million in direct cost to expand these facilities, demolished a total of 0.9 million net rentable square feet of storage space, and built a total of 3.6 million net rentable square feet of new storage space.

The facilities under “expansions in process” represent those facilities where development is in process or that we expect to commence development in 2019. We have already demolished a total of 0.1 million net rentable square feet at June 30, 2019, we expect to demolish an additional 0.2 million net rentable square feet, and we expect to build a total of 2.7 million net rentable square feet of storage space for an aggregate direct development cost of $331.6 million.

Analysis of Depreciation and Amortization of Developed and Expanded Facilities

Depreciation and amortization with respect to the Developed and Expanded Facilities for the three and six months ended June 30, 2019 totaled $13.4 million and $25.6 million, respectively, as compared to $10.5 million and $19.5 million for the same periods in 2018. These amounts represent depreciation of the developed buildings and, in the case of the expanded facilities, the legacy depreciation on the existing buildings. With respect to the Developed and Expanded Facilities completed at June 30, 2019, depreciation of buildings is expected to aggregate approximately $53.1 million in the year ending December 31, 2019. There will be additional depreciation of new buildings that are developed or expanded in the remainder of 2019.

Other non-same store facilities

The facilities under “Other non-same store facilities” represent facilities which, while not newly acquired, developed, or expanded, are not fully stabilized since January 1, 2017, due primarily to casualty events such as hurricanes, floods, and fires, as well as facilities acquired from third parties prior to January 1, 2017 that were recently developed or expanded by the previous owner.

The Other non-same store facilities have an aggregate of 5.4 million net rentable square feet, including 1.1 million in Texas, 0.8 million in Oklahoma, 0.7 million in California, 0.6 million in each of Ohio and South Carolina, 0.4 million in Florida and 1.2 million in other states.

The net operating income for these facilities increased from $11.0 million in the three months ended June 30, 2018 to $11.1 million in the three months ended June 30, 2019. During the three months ended June 30, 2019, the average occupancy for these facilities totaled 89.6% (87.9% for the same period in 2018), and the realized rent per occupied square feet totaled $13.11 ($13.48 for the same period in 2018).

Over the longer term, we expect the growth in operations of these facilities to be similar to that of our Same Store facilities. However, in the short run, year over year will vary due to the impact of the underlying events which resulted in these facilities being classified as non-same store.

Depreciation and amortization with respect to the other non-same store facilities for the three and six months ended June 30, 2019, totaled $7.4 million and $14.6 million, respectively, as compared to $7.8 million and $15.8 million for the same periods in 2018. We expect depreciation for these facilities to approximate $29.2 million for the year ending December 31, 2019.

Ancillary Operations

Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by tenants in our self-storage facilities in the U.S. and the sale of merchandise at our self-storage facilities. The following table sets forth our ancillary operations:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		Change		2019		2018		Change
	(Amounts in thousands)
Revenues:
Tenant reinsurance premiums	$	32,972	$	31,605	$	1,367	$	64,565	$	62,442	$	2,123
Merchandise		8,639		8,717		(78)		15,676		16,267		(591)
Total revenues		41,611		40,322		1,289		80,241		78,709		1,532

Cost of Operations:
Tenant reinsurance		6,671		5,941		730		12,922		12,141		781
Merchandise		4,982		5,160		(178)		9,276		9,600		(324)
Total cost of operations		11,653		11,101		552		22,198		21,741		457

Net income
Tenant reinsurance		26,301		25,664		637		51,643		50,301		1,342
Merchandise		3,657		3,557		100		6,400		6,667		(267)

Total net income	$	29,958	$	29,221	$	737	$	58,043	$	56,968	$	1,075

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

Change

2018

2017

Change

(Amounts in thousands)
Revenues:

Tenant reinsurance premiums
$
31,605

$
30,979

$
626

$
62,442

$
60,919

$
1,523
Merchandise

8,717

9,134

(417)

16,267

16,963

(696)
Total revenues

40,322

40,113

209

78,709

77,882

827

Cost of Operations:

Tenant reinsurance

5,941

5,986

(45)

12,141

12,263

(122)
Merchandise

5,160

5,397

(237)

9,600

10,044

(444)
Total cost of operations

11,101

11,383

(282)

21,741

22,307

(566)

Net income

Tenant reinsurance

25,664

24,993

671

50,301

48,656

1,645
Merchandise

3,557

3,737

(180)

6,667

6,919

(252)

Total net income
$
29,221

$
28,730

$
491

$
56,968

$
55,575

$
1,393

Tenant reinsurance operations:Our customers have the option of purchasing insurance from a non-affiliated insurance company to cover certain losses to their goods stored at our facilities. A wholly-owned, consolidated subsidiary of Public Storage fully reinsures such policies, and thereby assumes all risk of losses under these policies from the insurance company. The subsidiary receives reinsurance premiums, substantially equal to the premiums

collected from our tenants, from the non-affiliated insurance company. Such reinsurance premiums are shown as “Tenant reinsurance premiums” in the above table.

The subsidiary pays a fee to Public Storage to assist with the administration of the program and to allow the insurance to be marketed to our tenants. This fee represents a substantial amount of the reinsurance premiums received by our subsidiary. The fee is eliminated in consolidation and is therefore not shown in the above table.

Tenant reinsurance revenue increased ~~from $31.0~~to $33.0 million and ~~$60.9~~$64.6 million infor the three and six months ended June 30, ~~2017,~~2019, respectively, tofrom $31.6 million and $62.4 million ~~during~~for the same periods in 2018, due primarily to an increase in our tenant base ~~due~~with respect to acquired, newly ~~acquired~~developed, and ~~developed~~expanded facilities.

Tenant insurance revenues increased $0.4 million in each of the three and six months ended June 30, 2019, respectively, as compared to the same periods in 2018, with respect to the Same Store Facilities.

We expect future growth will come primarily from customers of newly acquired and developed facilities, as well as additional tenants at our existing unstabilized self-storage facilities.

Cost of operations primarily includes claims paid that are not covered by our outside third-party insurers, as well as claims adjustment expenses. Claims expenses vary based upon the level of insured tenants, and the level of events affecting claims at particular properties (such as burglary) as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Cost of operations ~~decreased from $6.0~~were $6.7 million and ~~$12.3~~$12.9 million in the three and six months ended June 30, ~~2017,~~2019, respectively, as compared to $5.9 million and $12.1 million ~~during~~for the same periods in 2018.

Merchandise sales:We sell locks, boxes, and packing supplies at our self-storage facilities and the level of sales of these items is primarily impacted by the level of move-ins and other customer traffic at our self-storage facilities. We do not expect any significant changes in revenues or profitability from our merchandise sales in the remainder of ~~2018.~~2019.

Equity in earnings of unconsolidated real estate entities

At June 30, ~~2018,~~2019, we have equity investments in PSB and Shurgard, ~~Europe,~~ which we account for on the equity method and record our pro-rata share of the net income of these entities for each period. The following table, and the discussion below, sets forth the significant components of our equity in earnings of unconsolidated real estate entities:

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

Change

2018

2017

Change

(Amounts in thousands)
Equity in earnings:

PSB
$
36,612

$
12,733

$
23,879

$
60,443

$
26,433

$
34,010
Shurgard Europe

5,351

6,650

(1,299)

12,315

12,241

74
Disposed Investment (a)

-

685

(685)

-

1,343

(1,343)
Total equity in earnings
$
41,963

$
20,068

$
21,895

$
72,758

$
40,017

$
32,741

~~(a)~~

This represents our equity earnings in a legacy institutional partnership. On December 31, 2017, we acquired the 74.25% interest that we did not own in this partnership for $135.5 million. As a result, no further equity earnings will be recorded.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		Change		2019		2018		Change
	(Amounts in thousands)
Equity in earnings:
PSB	$	14,864	$	36,612	$	(21,748)	$	28,584	$	60,443	$	(31,859)
Shurgard		4,050		5,351		(1,301)		8,002		12,315		(4,313)
Total equity in earnings	$	18,914	$	41,963	$	(23,049)	$	36,586	$	72,758	$	(36,172)

Investment in PSB:~~At June 30, 2018 and December 31, 2017,~~Throughout all periods presented, we ~~had approximately a 42% common equity interest in~~owned 7,158,354 shares of PS Business Parks, Inc. (“PSB”)~~, comprised of our ownership of 7,158,354 shares of PSB’s~~ common stockand 7,305,355 limited partnership units in an operating partnership controlled by ~~PSB.~~PSB, representing an aggregate approximately 42% common equity interest. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

At June 30, ~~2018,~~2019, PSB ~~wholly-owned~~owned approximately 2828.3 million rentable square feet of commercial space and had a 95% interest in a 395-unit apartment complex. PSB also manages commercial space that we own pursuant to property management agreements.

Equity in earnings from PSB ~~increased $23.9~~totaled $14.9 million and ~~$34.0~~$28.6 million for the three and six months ended June 30, 2019, respectively, as compared to $36.6 million and $60.4 million for the same periods in 2018. Included

in the amount for three and six months ended June 30, 2018 is our equity share of gains on sale of real estate totaling $24.0 million and $34.9 million, respectively.

Equity in earnings from PSB, excluding the aforementioned real estate gains, increased $2.2 million and $3.0 million in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017,~~2018 due ~~primarily~~ to increases of $23.5 million and $32.8 million in our equity share of gains on sales of real estate in three and six months ended June 30, 2018, respectively, as compared to the same periods in 2017 and from improved ~~real estate facility operating results.~~property operations. See Note 4 to our June 30, ~~2018~~2019 financial statements for ~~selected financial information on PSB, as well as~~further discussion regarding PSB. PSB’s filings and selected financial information that can be accessed through the SEC, and on PSB’s website, www.psbusinessparks.com. Information on this website is not incorporated by reference herein and is not a part of this Quarterly Report on Form 10-Q.

Investment in Shurgard:Throughout all periods presented, we effectively owned, directly and indirectly 31.3 million Shurgard ~~Europe:We have a~~common shares, representing, prior to October 15, 2018, an approximate 49% equity interest in Shurgard. On October 15, 2018, Shurgard completed an initial global offering (the “Offering”), issuing 25.0 million of its common shares to third parties at a price of €23 per share (€575 million in ~~Shurgard Europe’s net income.~~ gross proceeds), reducing our ownership interest to approximately 35%. Following the Offering, Shurgard’s shares trade on Euronext Brussels under the “SHUR” symbol.

At June 30, ~~2018,~~2019, Shurgard ~~Europe’s operations are comprised of 227 wholly-owned~~owned 231 self-storage facilities with 12approximately 13 million net rentable square feet. ~~See Note 4 to our June 30, 2018 financial statements~~Shurgard pays us license fees for ~~selected financial data on Shurgard Europe for~~use of the ~~six months ended June 30, 2018 and 2017. As~~“Shurgard” trademark, as described in more detail in Note 4 ~~we receive trademark license fees from Shurgard Europe. On~~to our June 30, 2019 financial statements.

On July 13, 2018, Shurgard ~~Europe~~paid a cash distribution totaling $296.7 million, of which we received our 49% equity share totaling $145.4 million.

In 2018, Shurgard acquired ~~five~~eight self-storage facilities from third parties (five in Sweden and three in the United Kingdom) for ~~$45.7~~an aggregate of $114.5 million, acquired one facility from us located in West London for $42.1 million in cash, and opened two newly developed facilities, one each in Sweden and Germany at an aggregate cost of $19.6 million.

Our equity in earnings from Shurgard ~~Europe decreased $1.3~~totaled $4.1 million and $8.0 million for the three and six months ended June 30, ~~2018 as compared to~~2019, respectively. Our equity in earnings from Shurgard totaled $5.4 million and $12.3 million for the ~~same period in 2017, due primarily to our equity share of increased depreciation~~three and ~~income tax expense, offset partially by improved property operations. For the~~ six months ended June 30, 2018, our equity in earnings from Shurgard Europe were flat as compared to the same period in 2017, with our equity share of improved property operations offset by increased income tax and depreciation expense.

Unlike our operations in the U.S., Shurgard Europe operates through taxable corporations in each of the countries in which it does business and incurs tax expense. Our equity share of such income tax expense was approximately $3.1respectively. The $1.3 million and ~~$5.8~~$4.3 million decreases in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to ~~$2.0 million and $3.5 million for~~ the same periods in ~~2017.~~

~~As previously reported, Shurgard Europe is considering an initial public offering. There can be no assurance as~~2018, were due primarily to ~~whether Shurgard Europe will actually complete an initial public offering. We do not expect to liquidate any~~the impact of ~~our investment~~uninvested Offering proceeds and reductions of 5.7% and 6.7% in ~~Shurgard Europe in connection with any such initial public offering; accordingly, we do not expect any such initial public offering to have a material impact upon our earnings.~~

On July 13, 2018, we received a cash distribution from Shurgard Europe totaling $145.4 million, representing our 49% share of an aggregate dividend totaling $296.8 million. The dividend was funded by Shurgard Europe in part through proceeds from a bank loan.

For purposes of recording our equity in earnings from Shurgard Europe, the Euro was translated at exchange rates of approximately 1.168 U.S. Dollars per Euro at June 30, 2018 (1.198 at December 31, 2017), and average exchange rates of ~~1.192 and 1.099~~the U.S. Dollar to the Euro for the respective three ~~months ended June 30, 2018~~ and ~~2017, respectively,~~six month periods, offset partially by the impact (prior to the impact of exchange rates) of increased self-storage net operating income, both from Shurgard’s stabilized properties and ~~average exchange rates~~newly acquired and developed facilities.

We expect year-over-year reductions in ongoing equity earnings from Shurgard in the remainder of ~~1.210 and 1.082 for~~2019. The level of these decreases will depend in part on the ~~six months ended June 30, 2018 and 2017, respectively.~~

portion of the proceeds of the Offering which remain uninvested. Shurgard expects to distribute a substantial portion of its earnings to its shareholders, which will result in reduced cash available to reinvest in real estate. Our future earnings from Shurgard ~~Europe~~ will also be affected ~~primarily~~ by (i) the operating results of its existing facilities, (ii) the level of development and acquisition activities, (iii) the income tax rates applicable in the various European jurisdictions in which Shurgard operates, and (iv) the exchange rate between the U.S. Dollar and currencies in the countries in which Shurgard ~~Europe~~ conducts its business (principally the Euro),.

Shurgard’s public filings and publicly reported information can be obtained on its website, https://corporate.shurgard.eu and on the ~~impact~~website of ~~income taxes,~~the Luxembourg Stock Exchange, http://www.bourse.lu. Information on these websites is not incorporated by reference herein and ~~the degree to which Shurgard Europe reinvests the cash it generates from operations into real estate investments or distributes the amounts to its shareholders.~~is not a part of this Quarterly Report on Form 10-Q.

Analysis of items not allocated to segments

General and administrative expense: The following table sets forth our general and administrative expense:


	Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017		Change		2018		2017		Change		Three Months Ended June 30,						Six Months Ended June 30,
													2019		2018		Change		2019		2018		Change
	(Amounts in thousands)												(Amounts in thousands)

Share-based compensation expense	$	17,278	$	4,265	$	13,013	$	34,188	$	13,162	$	21,026	$	5,646	$	17,278	$	(11,632)	$	13,240	$	34,188	$	(20,948)
Costs of senior executives		416		416		-		3,986		5,036		(1,050)		327		416		(89)		1,655		3,986		(2,331)
Development and acquisition costs		1,208		1,912		(704)		3,541		5,189		(1,648)		1,723		1,208		515		3,790		3,541		249
Tax compliance costs and taxes paid	Tax compliance costs and taxes paid	1,118		1,098		20		2,466		2,447		19	Tax compliance costs and taxes paid	1,285		1,118		167		2,718		2,466		252
Legal costs		2,192		1,735		457		3,936		3,681		255		1,222		2,192		(970)		4,926		3,936		990
Public company costs		1,129		1,023		106		2,348		2,148		200		1,215		1,129		86		2,727		2,348		379
Other costs		7,988		4,543		3,445		12,384		8,357		4,027		3,846		7,988		(4,142)		5,711		12,384		(6,673)
Total	$	31,329	$	14,992	$	16,337	$	62,849	$	40,020	$	22,829	$	15,264	$	31,329	$	(16,065)	$	34,767	$	62,849	$	(28,082)

Share-based compensation expense includes the amortization of restricted share units and stock options granted to employees and trustees, as well as related employer taxes. Share-based compensation expense varies based upon the level of grants and their related vesting and amortization periods, forfeitures, as well as the Company’s common share price on the date of grant.

In February 2018, we announced that our CEO and CFO ~~are~~at the time were retiring from their executive roles at the end of 2018 and ~~will then~~would serve only as Trustees of the Company. Pursuant to our share-based compensation plans, their unvested grants will continue to vest over the original vesting periods during their service as ~~long as they remain~~ Trustees. For financial reporting, effective February 2018, the end of the service periods for previous stock option and RSU grants for these executives ~~have~~ changed from (i) the ~~grants’~~various vesting ~~periods~~dates to (ii) ~~the end of 2018 when they will retire.~~December 31, 2018. Accordingly, all remaining share-based compensation expense for these two executives ~~will now be~~was amortized bythrough the end of 2018. Included in ~~share-based compensation expense for~~ the three and six months ended June 30, 2018 is approximately $7.8 million and $15.6 million ~~respectively, due to~~in incremental share-based compensation expense for the ~~accelerated amortization~~planned retirement of ~~grants to~~ our former CEO and CFO. ~~Similar increases~~The remaining decreases are due primarily to reductions in ongoing share-based compensation ~~expense are expected in the remainder of 2018.~~ Share-based compensation costs in the three and six months ended June 30, 2017 include a $5.4 million reversal of previously amortized costs, due to the forfeiture of share-based compensation resulting from the retirement of certain senior executives in the quarter ended

~~June 30, 2017. See~~awards. See Note 10 to our June 30, ~~2018~~2019 financial statements for further information on our share-based compensation. We expect a reduction in share-based compensation expense in the remainder of 2019 as compared to the same period in 2018.

Costs of senior executives represent the cash compensation paid to our ~~chief executive officer~~CEO and ~~chief financial officer.~~ CFO.

Development and acquisition costs primarily represent internal and external expenses related to our development and acquisition of real estate facilities and varies primarily based upon the level of activities. The amounts in the above table are net of ~~$3.2~~$3.0 million and ~~$6.3~~$6.0 million for the three and six months ended June 30, ~~2018,~~2019, respectively, ~~and $2.0~~as compared to $3.2 million and ~~$4.1~~$6.3 million for the same periods in ~~2017,~~2018, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. Development and acquisition costs are expected to remain stable in the remainder of ~~2018.~~ 2019.

Tax compliance costs and taxes paid include taxes paid to various state and local authorities, the internal and external costs of filing tax returns, costs associated with complying with federal and state tax laws, and maintaining our compliance with Internal Revenue Service REIT rules. Such costs vary primarily based upon the tax rates of the various states in which we do business.

Legal costs include internal personnel as well as fees paid to legal firms and other third parties with respect to general corporate legal matters and risk management, and varies based upon the level of legal activity. The future level of legal costs is not determinable.

Public company costs represent the incremental costs of operating as a publicly-traded company, such as internal and external investor relations expenses, stock listing and transfer agent fees, board of trustees’ (our “Board”)

costs, and costs associated with maintaining compliance with applicable laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and Sarbanes-Oxley Act of 2002.

Other costs represent certain professional and consulting fees, payroll, and overhead that are not attributable to our property operations. Such costs vary depending upon the level of corporate activities, initiatives, and other factors and, as such, are not predictable. ~~Amounts for~~The decrease is due primarily to certain nonrecurring costs in the three and six months ended June 30, ~~2018 include approximately $2.0 million in costs incurred to demolish certain buildings that were damaged in flooding in 2017 and are being rebuilt.~~2018.

Our future general and administrative expenses are difficult to estimate, due to their dependence upon many factors, including those noted above.

Interest and other income: Interest and other income is comprised primarily of the net income from our commercial operations, ~~and~~our property management ~~operations and to a lesser extent~~operation, interest earned on cash balances, and trademark license fees received from Shurgard, ~~Europe,~~ as well as sundry other income items that are received from time to time in varying amounts. Amounts attributable to our commercial operations and property management operations totaled ~~$3.0~~$2.6 million and ~~$5.8~~$5.3 million in the three and six months ended June 30, ~~2018,~~2019, respectively, as compared to ~~$2.6~~$3.0 million and ~~$5.2~~$5.8 million for the same periods in ~~2017.~~2018. The increase in interest and other income is attributable to higher interest rates on uninvested cash balances. We do not expect any significant changes in interest and other income in the remainder of ~~2018.~~ 2019.

Interest expense: For the three and six months ended June 30, ~~2018,~~2019, we incurred ~~$9.4~~$13.1 million, and ~~$18.8~~$22.4 million, respectively, of interest on our outstanding debt, as compared to ~~$2.2~~$9.4 million and ~~$4.3~~$18.8 million for the same periods in ~~2017.~~2018. In determining interest expense, these amounts were offset by capitalized interest of ~~$1.0~~$0.8 million and ~~$2.3~~$2.0 million during the three and six months ended June 30, ~~2018,~~2019, respectively, associated with our development activities, as compared to ~~$1.1~~$1.0 million and ~~$2.1~~$2.3 million for the same periods in ~~2017. On September 18, 2017, we completed a public offering of $1.0 billion notes (the “U.S. Dollar Notes”) bearing an average annual interest rate of 2.732%. For~~2018. The increase in the three and six months ended June 30, 2019, as compared to the same periods in 2018, ~~we incurred~~is due to our issuance on April 12, 2019 of $500 million in senior notes bearing interest ~~expense totaling $7.1 million and $14.2 million, respectively, on the U.S. Dollar Notes.~~at an annual rate of 3.385%. At June 30, ~~2018,~~2019, we had ~~$1.4~~$1.9 billion of debt outstanding, with an average interest rate of ~~2.6%~~2.9%. See Note 6 to our June 30, ~~2018~~2019 financial statements for further information on the maturity of our debt balances.

Future interest expense will be dependent upon the level of outstanding debt and the amount of in-process development costs.

Foreign Exchange Gain (Loss): For the three months ended June 30, 2019, we recorded foreign currency translation losses of $5.2 million, and for the six months ended June 30, ~~2018,~~2019, we recorded foreign currency ~~exchange~~translation gains of $2.6 million (gains of $21.9 million and $10.1 million ~~respectively, representing~~for the same periods in 2018). These gains and losses represent the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange ~~rates (losses of $25.4 million and $31.0 million for the same periods in 2017).~~rates. The Euro was translated at exchange rates of approximately ~~1.168~~1.137 U.S. Dollars per Euro at June 30, 2019, 1.122 at March 31, 2019, 1.144 at December 31, 2018, 1.168 at June 30, 2018, 1.232 at March 31, 2018 and 1.198 at December 31, ~~2017, 1.142 at June 30, 2017, 1.068 at March 31, 2017 and 1.052 at December 31, 2016.~~2017. Future gains and losses on foreign currency ~~exchange~~translation will be dependent upon changes in the relative value of the Euro to the U.S. Dollar, and the level of Euro-denominated debt outstanding.

Gain on Real Estate Investment Sales: In the three and six months ended June 30, 2019, we recorded gains totaling $341,000, and in the six months ended June 30, 2018, we recorded gains totaling $424,000, ~~and in the three and six months ended June 30, 2017, we recorded gains totaling $975,000,~~ primarily in connection with the partial sale of real estate facilities pursuant to eminent domain proceedings.

Net Income Allocable to Preferred Shareholders: Net income allocable to preferred shareholders based upon distributions decreased from $54.1 million in the three months ended June 30, 2018 to $53.5 million in the same period in 2019, due to lower average rates, and increased from $108.2 million in the six months ended June 30, 2018 to $108.5 million in the same period in 2019, due to higher average preferred shares outstanding partially offset by lower average rates. We also allocated $8.9 million of income from our common shareholders to the holders of our preferred shares in the three and six months ended June 30, ~~2018 as compared to~~2019 in connection with the ~~same periods~~redemption of our Series Z Preferred Shares and $8.5 million in ~~2017, due to lower average rates and lower weighted average preferred shares outstanding.~~the six months ended June 30, 2019 in connection with the redemption of our Series Y Preferred Shares. Based upon our preferred shares outstanding at June 30, ~~2018,~~2019, our quarterly distribution to our preferred shareholders is expected to be approximately ~~$54.1~~$49.2 million.

Liquidity and Capital Resources

Financing Strategy: As a REIT, we generally distribute 100% of our taxable income to our shareholders, which relative to a taxable C corporation, limits the amount of cash flow from operations that we can retain for investments. As a result, in order to grow our asset base, access to capital is important. Historically we have primarily financed our cash investment activities with retained operating cash flow combined with the proceeds from the issuance of preferred securities. Over the past ~~two~~three years, we have diversified our capital sources by issuing medium term debt.

Our financial profile is characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. We are one of the highest rated REITs, as rated by major rating agencies Moody’s and Standard & Poor’s. Our unsecured debt has an “A” credit rating by Standard & Poor’s and “A2” by Moody’s. Our credit ratings on each of our series of preferred shares are “A3” by Moody’s and “BBB+” by Standard & Poor’s. Our credit profile and ratings enables us to effectively access both the public and private capital markets to raise capital.

We have a $500.0 million revolving line of credit which we occasionally use as temporary “bridge” financing until we are able to raise longer term capital. As of June 30, ~~2018~~2019 and ~~August 1, 2018,~~July 30, 2019, there were no borrowings outstanding on the revolving line of credit, however, we do have approximately ~~$16.1~~$15.9 million of outstanding letters of credit which limits our borrowing capacity to ~~$483.9~~$484.1 million.

On April 19, 2019, we amended our revolving line of credit to (i) extend the maturity date from March 31, 2020 to April 19, 2024, (ii) decrease the current effective borrowing spread over LIBOR from 0.850% to 0.70%, and (iii) decrease the current effective facility fee from 0.080% to 0.070%. All other terms remain substantially the same.

Over the long-term, we expect to fund our capital requirements with retained operating cash flow, the issuance of additional medium or ~~long term~~long-term debt, and proceeds from the issuance of common and preferred securities. We will select among these sources of capital based upon availability, relative cost, the desire for leverage, refinancing risk, and considering potential constraints caused by certain features of capital sources, such as debt covenants.

Liquidity and Capital Resource Analysis: We believe that our net cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing requirements for principal payments on debt, maintenance capital expenditures and distributions to our shareholders for the foreseeable future.

As of June 30, ~~2018, our~~2019, we expect capital resources over the next year ~~are expected to be~~of approximately ~~$1.2~~$1.1 billion, which exceeds our ~~current planned~~currently identified capital needs ~~over the next year~~ of approximately ~~$551.5~~$415.1 million. Our expected capital resources include: (i) ~~$338.4~~$360.3 million of cash as of June 30, ~~2018,~~2019, (ii) ~~$483.9~~$484.1 million of available borrowing capacity on our revolving line of credit, ~~(iii) $145.4 million in cash distributions received from Shurgard Europe on July 13, 2018,~~ and ~~(iv)~~(iii) approximately $200 million to $250 million of expected retained operating cash flow ~~for~~in the next ~~twelve~~

~~months.~~year. Retained operating cash flow represents our expected cash ~~flows from our~~flow provided by operating activities, less shareholder distributions and capital expenditures to maintain our real estate facilities.

To the extent our retained operating cash flow, cash on hand, and line of credit are insufficient to fund our activities, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, issuing debt, or entering into joint venture arrangements to acquire or develop facilities.

Required Debt Repayments:As of June 30, ~~2018,~~2019, our outstanding debt totaled approximately ~~$1.4~~$1.9 billion, consisting of $28.3 million of secured debt, ~~$399.6~~$388.9 million of Euro-denominated unsecured debt and ~~$1.0~~$1.5 billion of U.S. Dollar denominated unsecured debt. Approximate principal maturities are as follows (amounts in thousands):

Remainder of 2018
$
10,361
2019

1,505
2020

1,585
2021

1,503
2022

502,071
Thereafter

910,888

$
1,427,913


Remainder of 2019	$	971
2020		2,015
2021		1,883
2022		502,584
2023		19,226
Thereafter		1,390,485
	$	1,917,164

The remaining maturities on our debt over ~~at least~~ the next three years are nominal compared to our expected annual retained operating cash flow.

Capital Expenditure Requirements: Capital expenditures include general maintenance, major repairs or replacements to elements of our facilities to keep our facilities in good operating condition and maintain their visual appeal. Capital expenditures do not include costs relating to the development of new facilities or redevelopment of existing facilities to increase their available rentable square footage.

Capital expenditures totaled ~~$53.2~~$72.6 million in the first six months of ~~2018,~~2019, and are expected to ~~be between $140~~approximate $200 million in the year ending December 31, 2019. Our capital expenditures for 2019 include certain projects that are upgrades and not traditional like-for-like replacements of existing components, and in certain circumstances replace existing components before the end of their functional lives. Such projects include installation of LED lighting, replacing existing planting configurations with more drought tolerant and low maintenance configurations, installation of solar panels, improvements to office configurations to provide a more customer-friendly experience, and improvements to outdoor facades and color schemes. Such incremental investments improve customer satisfaction, the attractiveness and competitiveness of our facilities to new and existing customers, or reduce operating costs. The $200 million in capital expenditures expected for 2019 represents a substantial increase of the amounts incurred of $139.4 million, $124.8 million and ~~$180~~$86.0 million in ~~2018. The level of our~~2018, 2017, and 2016, respectively. We expect continued elevated capital expenditures ~~are dependent upon~~beyond 2019; however, the ~~results~~level and persistence of our evaluation of the potential upgrade of existing HVAC equipment, offices, lighting, and elevator units in certain facilities. For the last four years, maintenance capital expenditures have ranged between approximately $0.45 and $0.75 per net rentable square foot per year.this elevation is uncertain at this time.

Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the Code. As a REIT, we do not incur federal income tax on our REIT taxable income (generally, net rents and gains from real property, dividends, and interest) that is fully distributed each year (for this purpose, certain distributions paid in a subsequent year may be considered), and if we meet certain organizational and operational rules. We believe we have met these requirements in all periods presented herein, and we expect to continue to elect and qualify as a REIT.

On July ~~25, 2018,~~24, 2019, our Board declared a regular common quarterly dividend of $2.00 per common share totaling approximately ~~$348~~$349 million, which will be paid at the end of September ~~2018.~~2019. Our consistent, long-term dividend policy has been to distribute only our taxable income. Future quarterly distributions with respect to the common shares will continue to be determined based upon our REIT distribution requirements after taking into consideration distributions to the preferred shareholders and will be funded with cash flows from operating activities.

We estimate the annual distribution requirements with respect to our Preferred Shares outstanding at June 30, ~~2018,~~2019, to be approximately ~~$216.3~~$196.8 million per year.

We estimate we will pay approximately ~~$6.0~~$7.1 million per year in distributions to noncontrolling interests outstanding at June 30, ~~2018.~~ 2019.

Real Estate Investment Activities:Subsequent to June 30, ~~2018,~~2019, we acquired or were under contract to acquire (subject to customary closing conditions) 14ten self-storage facilities for ~~$95.2~~$86.5 million. We will continue to seek to acquire properties; however, there is significant competition to acquire existing facilities and there can be no assurance as to the level of facilities we may acquire.

As of June 30, ~~2018~~2019 we had development and ~~redevelopment~~expansion projects at a total cost of approximately ~~$679.2~~$520.5 million. Costs incurred through June 30, ~~2018~~2019 were ~~$234.0~~$191.9 million, with the remaining cost to complete of ~~$445.2~~$328.6 million expected to be incurred primarily in the next 18 months. Some of these projects are subject to significant contingencies such as entitlement approval. We expect to continue to seek additional projects; however, the level of future development and redevelopment 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.

~~Shurgard Europe:~~ As previously reported, Shurgard Europe is considering an initial public offering. On July 13, 2018, we received a cash distribution from Shurgard Europe of $145.4 million, representing our 49% share of an aggregate dividend totaling $296.8 million. The dividend was funded by Shurgard Europe in part through proceeds from a bank loan. There can be no assurance as to whether Shurgard Europe will actually complete an initial public offering. We do not expect to liquidate any of our investment in Shurgard Europe in connection with any such initial public offering.

Redemption of Preferred Securities: Historically, we have taken advantage of refinancing higher coupon preferred securities with lower coupon preferred securities. In the future, we may also elect to finance the redemption of preferred securities with proceeds from the issuance of debt. As of ~~August 1, 2018,~~July 30, 2019, we have ~~four~~the following additional series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice; our 5.625% Series U Preferred Shares ~~with $287.5 million outstanding,~~($288 million), our 5.375% Series V Preferred Shares ~~with $495.0 million outstanding,~~($495 million), our 5.200% Series W Preferred Shares ~~with $500.0 million outstanding~~($500 million), and our 5.200% Series X Preferred Shares ~~with $225.0 million outstanding.~~($225 million). See Note 8 to our June 30, 2019 financial statements for the redemption dates of our other series of preferred shares. Redemption of such preferred shares will depend upon many ~~factors.~~factors, including the rate at which we could issue replacement preferred securities. None of our preferred securities are redeemable at the option of the holders.

Repurchases of Common Shares: Our Board has authorized management to repurchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. During the three months ended June 30, ~~2018,~~2019, we did not repurchase any of our common shares. From the inception of the repurchase program through ~~August 1, 2018,~~July 30, 2019, we have repurchased a total of 23,721,916 common shares at an aggregate cost of approximately $679.1 million. Future levels of common share repurchases will be dependent upon our available capital, investment alternatives and the trading price of our common shares.

Contractual Obligations

Our significant contractual obligations at June 30, ~~2018~~2019 and their impact on our cash flows and liquidity are summarized below for the years ending December 31 (amounts in thousands):


																		Remainder
																		of
																Total		2019		2020		2021		2022		2023		Thereafter
				Remainder
		Total		of 2018		2019		2020		2021		2022		Thereafter
Interest and principal payments
on debt (1)	$	1,677,437	$	28,556	$	37,592	$	37,592	$	37,423	$	534,464	$	1,001,810	$	2,299,289	$	27,596	$	55,189	$	54,955	$	552,106	$	59,835	$	1,549,608

Operating leases (2)		83,431		2,033		4,311		4,554		4,832		3,939		63,762
Leases and other commitments (2)																71,302		2,160		4,366		4,482		3,642		3,535		53,117

Construction commitments (3)		162,438		134,594		27,844		-		-		-		-		87,104		45,243		41,861		-		-		-		-

Total	$	1,923,306	$	165,183	$	69,747	$	42,146	$	42,255	$	538,403	$	1,065,572	$	2,457,695	$	74,999	$	101,416	$	59,437	$	555,748	$	63,370	$	1,602,725

(1)Represents contractual principal and interest payments. Amounts with respect to certain Euro-denominated debt are based upon exchange rates at June 30, 2019. See Note 6 to our June 30, 2019 financial statements for further information.

~~(1)~~

Represents contractual principal and interest payments. Amounts with respect to certain Euro-denominated debt are based upon exchange rates at June 30, 2018. See Note 6 to our June 30, 2018 financial statements for further information.

(2)Represents future contractual payments on land, equipment and office space under various ~~operating leases.~~ leases and other commitments.

(3)Represents future expected ~~development spending that was~~payments for construction under contract at June 30, ~~2018.~~2019.

We estimate the annual distribution requirements with respect to our Preferred Shares outstanding at June 30, ~~2018~~2019 to be approximately ~~$216.3~~$196.8 million per year. Dividends are paid when and if declared by our Board and accumulate if not paid.

Off-Balance Sheet Arrangements: At June 30, ~~2018,~~2019, we had no material off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) and the instructions thereto.

ITEM 3.Quantitative and Qualitative Disclosures about Market Risk

To limit our exposure to market risk, we are capitalized primarily with preferred and common equity. Our preferred shares are redeemable at our option generally five years after issuance, but the holder has no redemption option. Our debt is our only market-risk sensitive portion of our capital structure, which totals approximately ~~$1.4~~$1.9 billion and represents ~~16.0%~~21.8% of the book value of our equity at June 30, ~~2018.~~ 2019.

We have foreign currency exposure at June 30, ~~2018~~2019 related to i)(i) our investment in Shurgard, ~~Europe,~~ with a book value of ~~$326.3~~$345.8 million and ~~ii)~~(ii) €342.0 million ($~~399.6~~388.9 million) of Euro-denominated unsecured notes payable.

The fair value of our fixed rate debt at June 30, ~~2018~~2019 is approximately ~~$1.4~~$2.0 billion. The table below summarizes the annual maturities of our fixed rate debt, which had a weighted average effective rate of ~~2.6%~~2.9% at June 30, ~~2018.~~2019. See Note 6 to our June 30, ~~2018~~2019 financial statements for further information regarding our fixed rate debt (amounts in thousands).


	Remainder of
	2019			2020		2021		2022		2023		Thereafter		Total

Fixed rate debt	$	971	$	2,015	$	1,883	$	502,584	$	19,226	$	1,390,485	$	1,917,164

Remainder of

2018

2019

2020

2021

2022

Thereafter

Total

Fixed rate debt

$
10,361

$
1,505

$
1,585

$
1,503

$
502,071

$
910,888

$
1,427,913

ITEM 4.Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file and submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in accordance with SEC guidelines and that such information is communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures in reaching that level of reasonable assurance. We also have investments in certain unconsolidated real estate entities and because we do not control these entities, our disclosure controls and procedures with respect to such entities are substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

‎


Part II.		OTHER INFORMATION


~~Part II.~~ITEM 1.	~~OTHER INFORMATION~~Legal Proceedings


~~ITEM 1.~~	~~Legal Proceedings~~


ITEM 1A.	Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in our Annual Report on Form 10-K filed for the year ended December 31, ~~2017,~~2018, in Part I, Item 1A, Risk Factors, and in our other filings with the SEC. These factors may materially affect our business, financial condition and operating results and could cause our actual results to differ materially from expectations. In addition, in considering the forward-looking statements contained in this Form 10-Q and elsewhere, you should refer to the qualifications and limitations on our forward-looking statements that are described in Forward Looking Statements at the beginning of Part I, Item 2 of this Form 10-Q.


ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Common Share Repurchases

Our Board has authorized management to repurchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. From the inception of the repurchase program through ~~August 1, 2018,~~July 30, 2019, we have repurchased a total of 23,721,916 common shares (all purchased prior to 2010) at an aggregate cost of approximately $679.1 million. Our common share repurchase program does not have an expiration date and there are 11,278,084 common shares that may yet be repurchased under our repurchase program as of June 30, ~~2018.~~2019. We have no current plans to repurchase shares; however, future levels of common share repurchases will be dependent upon our available capital, investment alternatives, and the trading price of our common shares.

Preferred Share Redemptions

We ~~had no~~redeemed, pursuant to our option to redeem such shares, 11,500,000 of our 6.000% Series Z preferred ~~redemptions during the three months ended~~shares in June ~~30, 2018.~~ 2019, at $25.00 per share.


ITEM 6.	Exhibits

Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index which is incorporated herein by reference.

‎

5662

‎

	PUBLIC STORAGE
	INDEX TO EXHIBITS (1)
	(Items 15(a)(3) and 15(c))


~~3.1~~	Articles of Amendment and Restatement of Declaration of Trust of Public Storage, filed with the Maryland State Department of Assessments and Taxation on May 4, 2018. Filed with the Registrant’s Current Report on Form 8-K dated May 4, 2018 and incorporated by reference herein.

~~3.2~~31.1	~~Amended and Restated Bylaws of Public Storage, dated May 4, 2018. Filed with the Registrant’s Current Report on Form 8-K dated May 4, 2018 and incorporated by reference herein.~~

12	~~Statement Re: Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Share Income Allocations. Filed herewith.~~

~~31.1~~	Rule 13a – 14(a) Certification. Filed herewith.

31.2	Rule 13a – 14(a) Certification. Filed herewith.

32	Section 1350 Certifications. Filed herewith.

101 .INS	XBRL Instance Document. Filed herewith.

101 .SCH	XBRL Taxonomy Extension Schema. Filed herewith.

101 .CAL	XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.

101 .DEF	XBRL Taxonomy Extension Definition Linkbase. Filed herewith.

101 .LAB	XBRL Taxonomy Extension Label Linkbase. Filed herewith.

101 .PRE	XBRL Taxonomy Extension Presentation Link. Filed herewith.

_ (1) SEC	File No. 001-33519 unless otherwise indicated.


‎

‎

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

4
		DATED: ~~August 1, 2018~~July 30, 2019 PUBLIC STORAGE

		By: /s/ ~~John Reyes~~ H. Thomas Boyle
		~~John Reyes~~H. Thomas Boyle ‎Senior Vice President ~~and~~& Chief Financial Officer ‎(Principal financial officer and duly authorized officer)
‎

5864


Maryland	95-3551121
(State or other jurisdiction of ‎incorporation or organization)	(I.R.S. Employer Identification Number)

701 Western Avenue, Glendale, California	91201-2349
(Address of principal executive offices)	(Zip Code)


Title of Class	Trading Symbol	Name of exchange on which registered
Common Shares, $0.10 par value	PSA	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.625% Cum Pref Share, Series U, $0.01 par value	PSAPrU	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.375% Cum Pref Share, Series V, $0.01 par value	PSAPrV	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series W, $0.01 par value	PSAPrW	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Share, Series X, $0.01 par value	PSAPrX	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.875% Cum Pref Share, Series A, $0.01 par value	PSAPrA	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.400% Cum Pref Share, Series B, $0.01 par value	PSAPrB	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.125% Cum Pref Share, Series C, $0.01 par value	PSAPrC	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.950% Cum Pref Share, Series D, $0.01 par value	PSAPrD	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.900% Cum Pref Share, Series E, $0.01 par value	PSAPrE	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.150% Cum Pref Share, Series F, $0.01 par value	PSAPrF	New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 5.050% Cum Pref Share, Series G, $0.01 par value		PSAPrG		New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.600% Cum Pref Share, Series H, $0.01 par value		PSAPrH		New York Stock Exchange


	Investments in Unconsolidated Real Estate Entities at
	June 30, 2018		December 31, 2017

PSB	$	435,987	$	400,133
Shurgard Europe		326,260		324,040
Total	$	762,247	$	724,173


			Amounts at June 30, 2018
	Coupon	Effective				Unamortized		Book		Fair		Book Value at
	Rate	Rate		Principal	Costs			Value		Value		December 31, 2017
			($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 2022	2.370%	2.483%	$	500,000	$	(2,211)	$	497,789	$	479,952	$	497,525
Notes due September 2027	3.094%	3.218%		500,000		(4,868)		495,132		470,908		494,868
				1,000,000		(7,079)		992,921		950,860		992,393

Euro Denominated Unsecured Debt
Notes due April 2024	1.540%	1.540%		116,836		-		116,836		120,040		119,795
Notes due November 2025	2.175%	2.175%		282,759		-		282,759		297,490		289,921
				399,595		-		399,595		417,530		409,716
Mortgage Debt, secured by 30 real estate
facilities with a net book value
of $115.5 million	4.031%	3.980%		28,318		-		28,318		29,144		29,213

			$	1,427,913	$	(7,079)	$	1,420,834	$	1,397,534	$	1,431,322


			At June 30, 2018			At December 31, 2017
Series	Earliest Redemption Date	Dividend Rate	Shares Outstanding	Liquidation Preference		Shares Outstanding	Liquidation Preference
			(Dollar amounts in thousands)
Series U	6/15/2017	5.625%	11,500	$	287,500	11,500	$	287,500
Series V	9/20/2017	5.375%	19,800		495,000	19,800		495,000
Series W	1/16/2018	5.200%	20,000		500,000	20,000		500,000
Series X	3/13/2018	5.200%	9,000		225,000	9,000		225,000
Series Y	3/17/2019	6.375%	11,400		285,000	11,400		285,000
Series Z	6/4/2019	6.000%	11,500		287,500	11,500		287,500
Series A	12/2/2019	5.875%	7,600		190,000	7,600		190,000
Series B	1/20/2021	5.400%	12,000		300,000	12,000		300,000
Series C	5/17/2021	5.125%	8,000		200,000	8,000		200,000
Series D	7/20/2021	4.950%	13,000		325,000	13,000		325,000
Series E	10/14/2021	4.900%	14,000		350,000	14,000		350,000
Series F	6/2/2022	5.150%	11,200		280,000	11,200		280,000
Series G	8/9/2022	5.050%	12,000		300,000	12,000		300,000
Total Preferred Shares			161,000	$	4,025,000	161,000	$	4,025,000


Three months ended June 30, 2017

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	624,199	$	-	$	-	$	-	$	-	$	624,199
Ancillary operations		-		40,113		-		-		-		40,113
		624,199		40,113		-		-		-		664,312

Cost of operations:
Self-storage operations		171,195		-		-		-		-		171,195
Ancillary operations		-		11,383		-		-		-		11,383
		171,195		11,383		-		-		-		182,578

Net operating income:
Self-storage operations		453,004		-		-		-		-		453,004
Ancillary operations		-		28,730		-		-		-		28,730
		453,004		28,730		-		-		-		481,734

Other components of net income (loss):
Depreciation and amortization		(110,177)		-		-		-		-		(110,177)
General and administrative		-		-		-		-		(14,992)		(14,992)
Interest and other income		-		-		-		-		4,155		4,155
Interest expense		-		-		-		-		(1,116)		(1,116)
Equity in earnings of
unconsolidated real estate entities		-		-		12,733		6,650		685		20,068
Foreign currency exchange loss		-		-		-		-		(25,440)		(25,440)
Gain on sale of real estate		-		-		-		-		975		975
Net income (loss)	$	342,827	$	28,730	$	12,733	$	6,650	$	(35,733)	$	355,207


Six months ended June 30, 2017

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	1,231,977	$	-	$	-	$	-	$	-	$	1,231,977
Ancillary operations		-		77,882		-		-		-		77,882
		1,231,977		77,882		-		-		-		1,309,859

Cost of operations:
Self-storage operations		343,173		-		-		-		-		343,173
Ancillary operations		-		22,307		-		-		-		22,307
		343,173		22,307		-		-		-		365,480

Net operating income:
Self-storage operations		888,804		-		-		-		-		888,804
Ancillary operations		-		55,575		-		-		-		55,575
		888,804		55,575		-		-		-		944,379

Other components of net income (loss):
Depreciation and amortization		(221,106)		-		-		-		-		(221,106)
General and administrative		-		-		-		-		(40,020)		(40,020)
Interest and other income		-		-		-		-		8,153		8,153
Interest expense		-		-		-		-		(2,164)		(2,164)
Equity in earnings of
unconsolidated real estate entities		-		-		26,433		12,241		1,343		40,017
Foreign currency exchange loss		-		-		-		-		(31,006)		(31,006)
Gain on sale of real estate		-		-		-		-		975		975
Net income (loss)	$	667,698	$	55,575	$	26,433	$	12,241	$	(62,719)	$	699,228


NON SAME STORE	Three Months Ended June 30,						Six Months Ended June 30,
FACILITIES	2018		2017		Change		2018		2017		Change
	(Dollar amounts in thousands, except square foot amounts)
Revenues:
2018 acquisitions	$	459	$	-	$	459	$	526	$	-	$	526
2017 acquisitions		7,116		799		6,317		13,976		1,138		12,838
2016 acquisitions		9,761		9,031		730		19,190		17,612		1,578
2016 - 2018 new developments		8,618		3,630		4,988		15,738		5,957		9,781
2013 - 2015 new developments		6,591		6,151		440		12,992		11,949		1,043
Other facilities		54,010		54,452		(442)		107,127		108,113		(986)
Total revenues		86,555		74,063		12,492		169,549		144,769		24,780

Cost of operations:
2018 acquisitions		165		-		165		187		-		187
2017 acquisitions		2,459		229		2,230		4,966		380		4,586
2016 acquisitions		3,521		3,502		19		7,158		6,984		174
2016 - 2018 new developments		4,937		2,918		2,019		8,992		5,214		3,778
2013 - 2015 new developments		2,098		1,913		185		4,197		3,780		417
Other facilities		15,894		15,662		232		32,109		31,160		949
Total cost of operations		29,074		24,224		4,850		57,609		47,518		10,091

Net operating income:
2018 acquisitions		294		-		294		339		-		339
2017 acquisitions		4,657		570		4,087		9,010		758		8,252
2016 acquisitions		6,240		5,529		711		12,032		10,628		1,404
2016 - 2018 new developments		3,681		712		2,969		6,746		743		6,003
2013 - 2015 new developments		4,493		4,238		255		8,795		8,169		626
Other facilities		38,116		38,790		(674)		75,018		76,953		(1,935)
Net operating income		57,481		49,839		7,642		111,940		97,251		14,689
Depreciation and
amortization expense		(31,896)		(21,575)		(10,321)		(61,345)		(44,569)		(16,776)
Net income	$	25,585	$	28,264	$	(2,679)	$	50,595	$	52,682	$	(2,087)

At June 30:
Square foot occupancy:
2018 acquisitions								72.0%		-		-
2017 acquisitions								90.8%		93.0%		(2.4)%
2016 acquisitions								89.1%		90.3%		(1.3)%
2016 - 2018 new developments								61.4%		57.5%		6.8%
2013 - 2015 new developments								92.9%		93.3%		(0.4)%
Other facilities								87.4%		88.7%		(1.5)%
								83.0%		85.9%		(3.4)%
Annual contract rent per
occupied square foot:
2018 acquisitions							$	9.55	$	-		-
2017 acquisitions								14.57		9.89		47.3%
2016 acquisitions								10.27		9.92		3.5%
2016 - 2018 new developments								11.49		12.92		(11.1)%
2013 - 2015 new developments								14.98		14.24		5.2%
Other facilities								16.92		16.87		0.3%
							$	14.66	$	14.93		(1.8)%



Remainder of 2018	$	10,361
2019		1,505
2020		1,585
2021		1,503
2022		502,071
Thereafter		910,888
	$	1,427,913