SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the quarterly period ended September 30, 2002

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the transition period from to .
--------------- ---------------

Commission File Number: 1-8389
------

PUBLIC STORAGE, INC.
--------------------
(Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code: (818) 244-8080.
--------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

[X] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 11, 2002:

Common Stock, $.10 Par Value - 117,490,454 shares
- -------------------------------------------------

Class B Common Stock, $.10 Par Value - 7,000,000 shares
- -------------------------------------------------------

Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
- ------------------------------------------------------------------------------
A, $.01 Par Value - 8,776,102 depositary shares (representing 8,776.102 shares
- ------------------------------------------------------------------------------
of Equity Stock, Series A)
- --------------------------

Equity Stock, Series AA, $.01 Par Value - 225,000 shares
- --------------------------------------------------------

Equity Stock, Series AAA, $.01 Par Value - 4,289,544 shares
- -----------------------------------------------------------

PUBLIC STORAGE, INC.

INDEX

Pages
-----

PART I. FINANCIAL INFORMATION
---------------------

Item 1. Financial Statements

Condensed Consolidated Balance Sheets at
September 30, 2002 and December 31, 2001 1

Condensed Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 2002 and 2001 2

Condensed Consolidated Statement of Shareholders' Equity
for the Nine Months Ended September 30, 2002 3

Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2002 and 2001 4-5

Notes to Condensed Consolidated Financial Statements 6-28

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 29-51

Item 2A. Risk Factors 52-54

Item 3. Quantitative and Qualitative Disclosures about Market Risk 55

Item 4. Controls and Procedures 55

PART II. OTHER INFORMATION (Items 2 - 4 are not applicable)
-----------------

Item 1. Legal Proceedings 56

Item 5. Other Items 56

Item 6. Exhibits and Reports on Form 8-K 57-63

PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)

September 30, December 31,
2002 2001
---------------- ----------------
(Unaudited)
ASSETS
------

Cash and cash equivalents................................................ $ 276,255 $ 49,347
Real estate facilities, at cost:
Land................................................................ 1,299,937 1,165,111
Buildings........................................................... 3,662,258 3,265,943
---------------- ----------------
4,962,195 4,431,054
Accumulated depreciation............................................ (945,303) (819,932)
---------------- ----------------
4,016,892 3,611,122
Construction in process............................................. 83,132 121,181
Land held for development........................................... 24,469 30,001
---------------- ----------------
Total real estate............................................... 4,124,493 3,762,304

Investment in real estate entities....................................... 327,621 479,300
Goodwill................................................................. 78,204 78,204
Intangible assets, net................................................... 119,544 124,497
Mortgage notes receivable from affiliates................................ 24,344 59,344
Other assets............................................................. 87,504 72,883
---------------- ----------------
Total assets............................................... $ 5,037,965 $ 4,625,879
================ ================

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Notes payable............................................................ $ 121,582 $ 143,552
Line of credit borrowings................................................ - 25,000
Accrued and other liabilities (Note 2)................................... 136,546 93,143
Cumulative Preferred Stock, Series J called for redemption (Note 9) ..... 150,000 -
---------------- ----------------
Total liabilities.......................................... 408,128 261,695
Minority interest:
Preferred partnership interests..................................... 285,000 285,000
Other partnership interests......................................... 156,860 169,601

Commitments and contingencies

Shareholders' equity:
Cumulative Preferred Stock, $0.01 par value, 50,000,000 shares
authorized, 9,258,486 shares issued in series and outstanding
(11,156,500 at December 31, 2001), at liquidation preference...... 1,817,025 1,540,150
Common Stock, $0.10 par value, 200,000,000 shares authorized,
116,915,390 shares issued and outstanding (114,961,915 at December
31, 2001)......................................................... 11,692 11,496
Equity Stock, Series A, $0.01 par value, 200,000,000 shares
authorized, 8,776.102 shares issued and outstanding............... - -
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized
and outstanding................................................... 700 700
Paid-in capital..................................................... 2,369,214 2,325,898
Cumulative net income............................................... 1,962,793 1,711,269
Cumulative distributions paid....................................... (1,973,447) (1,679,930)
---------------- ----------------
Total shareholders' equity................................. 4,187,977 3,909,583
---------------- ----------------
Total liabilities and shareholders' equity............. $ 5,037,965 $ 4,625,879
================ ================

See accompanying notes.
1

PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except net income per share amounts)

(Unaudited)

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
REVENUES:

Rental income:
Self-storage facilities...................... $ 196,386 $ 186,615 $ 573,980 $ 537,530
Commercial properties........................ 2,933 3,081 9,185 9,353
Containerized storage facilities............. 13,113 11,397 34,509 31,461
Tenant reinsurance premiums...................... 5,112 - 14,843 -
Interest and other income........................ 2,538 3,178 7,005 9,916
---------------- ---------------- ---------------- ----------------
220,082 204,271 639,522 588,260
---------------- ---------------- ---------------- ----------------
EXPENSES:
Cost of operations:
Self-storage facilities...................... 62,919 58,680 181,419 169,753
Commercial properties........................ 1,095 1,013 3,339 2,845
Containerized storage facilities............. 10,699 9,324 26,909 27,570
Tenant reinsurance........................... 2,387 - 7,203 -
Depreciation and amortization.................... 45,367 42,516 135,057 123,187
General and administrative....................... 3,968 5,965 12,273 16,549
Interest expense................................. 969 928 3,284 3,023
---------------- ---------------- ---------------- ----------------
127,404 118,426 369,484 342,927
---------------- ---------------- ---------------- ----------------
Income before equity in earnings of real estate
entities, minority interest, discontinued operations
and gain (loss) on disposition of real estate 92,678 85,845 270,038 245,333
investments........................................
Equity in earnings of real estate entities (including
the Company's pro-rata share of gain on sale of real
estate totaling $483 and $2,724 for the three and
nine months ended September 30, 2002, respectively) 7,483 9,826 23,739 28,912
MINORITY INTEREST IN INCOME:
Preferred partnership interests.................. (6,726) (7,820) (20,179) (24,830)
Other partnership interests...................... (4,782) (4,180) (13,284) (10,540)
---------------- ---------------- ---------------- ----------------
Income before discontinued operations and gain (loss) on
disposition of real estate investments............. 88,653 83,671 260,314 238,875
Discontinued operations - containerized storage (Note 4) (5,302) (67) (6,951) (431)
Gain (loss) on disposition of real estate investments. - - (1,839) 1,568
---------------- ---------------- ---------------- ----------------
NET INCOME............................................ $ 83,351 $ 83,604 $ 251,524 $ 240,012
================ ================ ================ ================

NET INCOME ALLOCATION:
- ----------------------
Allocable to preferred shareholders.............. $ 37,928 $ 28,736 $ 111,704 $ 85,508
Allocable to Equity Stock, Series A.............. 5,375 5,314 16,126 14,080
Allocable to common shareholders................. 40,048 49,554 123,694 140,424
---------------- ---------------- ---------------- ----------------
$ 83,351 $ 83,604 $ 251,524 $ 240,012
================ ================ ================ ================
PER COMMON SHARE:
- -----------------
Net income per share - Basic..................... $ 0.32 $ 0.41 $ 1.01 $ 1.14
================ ================ ================ ================
Net income per share - Diluted................... $ 0.32 $ 0.41 $ 0.99 $ 1.13
================ ================ ================ ================
Net income per depositary share of Equity Stock,
Series A - Basic and Diluted................... $ 0.61 $ 0.61 $ 1.84 $ 1.84
================ ================ ================ ================
Weighted average common shares - Basic........... 123,341 120,092 122,707 122,951
================ ================ ================ ================
Weighted average common shares - Diluted......... 124,784 121,754 124,539 123,977
================ ================ ================ ================
Weighted average depositary shares of Equity Stock,
Series A - Basic and Diluted................... 8,776 8,676 8,776 7,663
================ ================ ================ ================

See accompanying notes.
2

PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except share data)

(Unaudited)

Cumulative Class B Common
Preferred Stock Common Stock Stock Paid-in Capital
--------------- -------------- -------------- ---------------

Balances at December 31, 2001............................. $ 1,540,150 $ 11,496 $ 700 $ 2,325,898
Issuance of preferred stock, net of issuance costs:
Series T (6,000 shares)................................ 150,000 - - (4,925)
Series U (6,000 shares)................................ 150,000 - - (4,925)
Series V (6,900 shares)................................ 172,500 - - (5,634)

Exchange of Series B Preferred Stock for Series T Preferred
Stock:
Series B (86,000 shares)............................... (2,150) - - -
Series T (86 shares)................................... 2,150 - - -

Redemption of preferred stock, including redemption costs:
Series A (1,825,000 shares)............................ (45,625) - - (18)
Series J (6,000 shares)................................ (150,000) - - (18)

Issuance of common stock:
In connection with the exercise of Stock Options
(872,867 shares)..................................... - 88 - 21,421
To acquire minority interest (1,091,608 shares - Note 8) - 109 - 37,795

Repurchase of common stock (11,000 shares)................ - (1) - (380)

Net income................................................ - - - -

Cash distributions:
Cumulative Senior Preferred Stock (Note 9)............. - - - -
Equity Stock, Series A ($1.838 per share).............. - - - -
Class B Common Stock ($1.31 per share)................. - - - -
Common Stock ($1.35 per share)......................... - - - -
--------------- -------------- -------------- ---------------
Balances at September 30, 2002............................ $ 1,817,025 $ 11,692 $ 700 $ 2,369,214
=============== ============== ============== ===============

Total
Cumulative Net Cumulative Shareholders'
Income Distributions Equity
-------------- -------------- -------------

Balances at December 31, 2001............................. $ 1,711,269 $ (1,679,930) $ 3,909,583
Issuance of preferred stock, net of issuance costs:
Series T (6,000 shares)................................ - - 145,075
Series U (6,000 shares)................................ - - 145,075
Series V (6,900 shares)................................ - - 166,866

Exchange of Series B Preferred Stock for Series T Preferred
Stock:
Series B (86,000 shares)............................... - - (2,150)
Series T (86 shares)................................... - - 2,150

Redemption of preferred stock, including redemption costs:
Series A (1,825,000 shares)............................ - - (45,643)
Series J (6,000 shares)................................ - - (150,018)

Issuance of common stock:
In connection with the exercise of Stock Options
(872,867 shares)..................................... - - 21,509
To acquire minority interest (1,091,608 shares - Note 8) - - 37,904

Repurchase of common stock (11,000 shares)................ - - (381)

Net income................................................ 251,524 - 251,524

Cash distributions:
Cumulative Senior Preferred Stock (Note 9)............. - (111,704) (111,704)
Equity Stock, Series A ($1.838 per share).............. - (16,126) (16,126)
Class B Common Stock ($1.31 per share)................. - (9,167) (9,167)
Common Stock ($1.35 per share)......................... - (156,520) (156,520)
-------------- -------------- -------------
Balances at September 30, 2002............................ $ 1,962,793 $ (1,973,447) $ 4,187,977
============== ============== =============

See accompanying notes.
3

PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

(Unaudited)

For the Nine Months Ended
September 30,
-------------------------------------
2002 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income.......................................................... $ 251,524 $ 240,012
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain included in equity in earnings of real estate investments.. (2,724) -
Loss (gain) on sale of real estate investments.................. 1,839 (1,568)
Depreciation and amortization................................... 135,057 123,187
Depreciation included in equity in earnings of real estate 19,717 17,727
entities.....................................................
Minority interest in income..................................... 33,463 35,370
Discontinued operations - non cash items (Note 4)............... 6,232 459
Other........................................................... 14,997 4,841
---------------- ----------------
Total adjustments.......................................... 208,581 180,016
---------------- ----------------
Net cash provided by operating activities.............. 460,105 420,028
---------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on mortgage notes receivable............ 35,210 2,086
Business combinations (Note 3)...................................... (139,680) -
Capital improvements to real estate facilities...................... (16,041) (24,484)
Construction in process and acquisition of land held for development (77,408) (135,207)
Acquisition of minority interests................................... (26,519) (11,212)
Proceeds from the disposition of real estate facilities............. 5,322 13,415
Investment in real estate entities.................................. (25,550) (33,241)
Acquisition of real estate facilities............................... (29,899) (3,503)
Other investments................................................... (11,452) (5,475)
---------------- ----------------
Net cash used in investing activities.................. (286,017) (197,621)
---------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net paydowns on revolving line of credit............................ (25,000) -
Principal payments on notes payable................................. (21,970) (6,945)
Net proceeds from the issuance of common stock...................... 21,509 6,068
Net proceeds from the issuance of preferred stock................... 457,016 660,051
Net proceeds from the issuance of Equity Stock, Series A............ - 72,130
Issuance of Put Option.............................................. - 910
Repurchase of common stock.......................................... (381) (276,270)
Repurchase of preferred partnership units........................... - (30,000)
Redemption of preferred stock....................................... (45,643) (172,525)
Distributions paid to shareholders.................................. (293,517) (250,006)
Distributions paid to holders of preferred partnership units........ (20,179) (24,830)
Distributions paid to minority interests............................ (19,015) (15,206)
Investment of minority interests.................................... - 13,142
---------------- ----------------
Net cash provided by (used in) financing activities.... 52,820 (23,481)
---------------- ----------------

Net increase in cash and cash equivalents................................ 226,908 198,926
Cash and cash equivalents at the beginning of the period................. 49,347 89,467
---------------- ----------------
Cash and cash equivalents at the end of the period....................... $ 276,255 $ 288,393
================ ================

See accompanying notes.
4

PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

(Unaudited)

For the Nine Months Ended
September 30,
--------------------------------------
2002 2001
----------------- -----------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Business combinations (Note 3):
Real estate facilities.......................................... $ (330,426) $ -
Other assets.................................................... (16,728) -
Accrued and other liabilities................................... 23,891 -
Minority interest............................................... 14,806 -

Non-cash portion of aggregate purchase price of business
combinations (Note 3):
Reduction in investment in real estate entities................. 160,236 -
Reduction in other assets....................................... 8,541 -

Note received in exchange for sale of real estate................... (210) -
Real estate sold in exchange for note............................... 210 -

Acquisition of minority interests for consideration including common
stock:
Real estate facilities.......................................... (39,318) -
Minority interest............................................... (25,105) -

Issuance of common stock to acquire minority interests.............. 37,904 -

Disposition of interests in the Consolidated Entities resulting in a
loss of $1,839 (Note 8):
Increase in other assets........................................ (1,450) -
Increase in minority interest................................... 3,289 -

Exchange of Series B Preferred Stock for Series T Preferred Stock:
Reduction in Series B Preferred Stock outstanding............... (2,150) -
Increase in Series T Preferred Stock outstanding................ 2,150 -

Series J Preferred Stock called for redemption (Note 9):
Cumulative Preferred Stock...................................... (150,018) -
Accrued and Other liabilities................................... 150,018 -

See accompanying notes.
5

PUBLIC STORAGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

(Unaudited)

1. Description of the Business
---------------------------

Public Storage, Inc. (the "Company") is a California corporation
which was organized in 1980. We are a fully integrated, self-administered
and self-managed real estate investment trust ("REIT") whose principal
business activities include the acquisition, development, ownership and
operation of self-storage facilities which offer storage spaces for lease,
usually on a month-to-month basis, for personal and business use. In
addition, to a much lesser extent, we have interests in commercial
properties, containing commercial and industrial rental space, and
interests in facilities that lease storage containers.

We invest in real estate facilities by acquiring wholly owned
facilities or by acquiring interests in real estate entities which own
facilities. At September 30, 2002 we had direct and indirect equity
interests in 1,407 self-storage facilities located in 37 states and
operating under the "Public Storage" name. We also have direct and indirect
equity interests in approximately 15.2 million net rentable square feet of
commercial space.

2. Summary of Significant Account Policies
---------------------------------------

Basis of Presentation
---------------------

The consolidated financial statements include the accounts of the
Company and 33 controlled entities (the "Consolidated Entities").
Collectively, the Company and the Consolidated Entities own a total of
1,376 real estate facilities, consisting of 1,371 self-storage facilities
and five commercial properties. All intercompany transactions between the
Company and any of the Consolidated Entities are eliminated in
consolidation.

At September 30, 2002, we had equity investments in eight limited
partnerships in which we do not have a controlling interest. These limited
partnerships collectively own 36 self-storage facilities, which are managed
by the Company. In addition, we own approximately 44% of the common equity
of PS Business Parks, Inc. ("PSB"), which owns and operates 14.8 million
net rentable square feet of commercial space at September 30, 2002. We do
not control these entities. Accordingly, our investment in these limited
partnerships and PSB (these entities are referred to collectively as the
"Unconsolidated Entities") are accounted for using the equity method.

Certain amounts previously reported have been reclassified to
conform to the September 30, 2002 presentation, including Discontinued
Operations - Containerized Storage (See note 4).

Use of Estimates
----------------

The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.

Income Taxes
------------

For all taxable years subsequent to 1980, the Company qualified
and intends to continue to qualify as a REIT, as defined in Section 856 of
the Internal Revenue Code. As a REIT, we are not taxed on that portion of
our taxable income, which is distributed to our shareholders, provided that
we meet certain tests. We believe we will meet these tests during 2002 and,
accordingly, no provision for income taxes has been made in the
accompanying financial statements.

Financial Instruments
---------------------

The methods and assumptions used to estimate the fair value of
financial instruments is described below. We have estimated the fair value
of our financial instruments using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop estimates of market value. Accordingly,
estimated fair values are not necessarily indicative of the amounts that
could be realized in current market exchanges.

For purposes of financial statement presentation, we consider all
highly liquid debt instruments with a maturity of three months or less to
be cash equivalents.

Due to the short period to maturity of our cash and cash
equivalents, accounts receivable, other assets, and accrued and other
liabilities, the carrying values as presented on the consolidated balance
sheets are reasonable estimates of fair value. The carrying amount of
mortgage notes receivable approximates fair value because the aggregate
mortgage notes receivable's applicable interest rates approximate current
market rates for similar loans.

Financial assets that are exposed to credit risk consist primarily
of cash and cash equivalents, accounts receivable, and notes receivable.
Cash equivalents, which consist of short-term investments, including
commercial paper, are only invested in entities with an investment grade
rating. Notes receivable are substantially all secured by real estate
facilities that we believe are valued in excess of the related note
receivable. Accounts receivable are not a significant portion of total
assets and are comprised of a large number of individual customers.

Real Estate Facilities
----------------------

Real estate facilities are recorded at cost. Costs associated with
the acquisition, development, construction and improvement of properties
are capitalized. Interest, property taxes, and other costs associated with
development are capitalized as building cost. Expenditures for repairs and
maintenance are charged to expense as incurred. Depreciation is computed
using the straight-line method over the estimated useful lives of the
buildings and improvements, which are generally between 5 and 25 years.

Evaluation of Asset Impairment
------------------------------

In October 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). In June
2001, the FASB issued Statement of Financial Accounting Standard No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). We adopted these
statements effective January 1, 2002.

We evaluate our long-lived assets on a quarterly basis for
indicators of impairment. When indicators of impairment are detected in our
evaluation, we evaluate the recoverability of such long-lived assets. We
determine the assets' recoverable amount based upon (i) the fair value of
our goodwill, or (ii) the estimated undiscounted cash flows of our other
long-lived assets. If the asset's recoverable amount is less than the
carrying value of the asset, then an impairment charge is booked for the
excess of carrying value over the asset's fair value. Other than the
impairment losses described below under "Discontinued Operations -
Containerized Storage," our evaluations identified no such impairments at
September 30, 2002.

SFAS 144 also addresses the accounting for long-lived assets that
are likely to be disposed of before the end of their previously estimated
useful life. Such assets are to be reported at the lower of their carrying
amount or fair value, less cost to sell.

Other Assets
------------

Other assets primarily consist of furniture, fixtures, equipment,
and other such assets associated with the containerized storage operations,
system development and computer software costs, assets associated with the
truck rental business, accounts receivable, and prepaid expenses.
Expenditures with respect to the containerized storage operations, system
development and computer software costs, and truck rental business are
included in "other investments" on the statements of cash flows. Accounts
receivable from customers are net of allowances for doubtful accounts.

Included in other assets with respect to the containerized storage
business is furniture, fixtures, and equipment (net of accumulated
depreciation) of $26,814,000 and $30,699,000 at September 30, 2002 and
December 31, 2001, respectively.

Included in depreciation and amortization expense for the three
months ended September 30, 2002 and 2001 is $1,589,000 and $1,194,000,
respectively, and $4,733,000 and $3,809,000 for the nine months ended
September 30, 2002 and 2001, respectively, related to depreciation of other
assets. Included in discontinued operations - containerized storage is
depreciation expense of $184,000 and $185,000 for the three months ended
September 30, 2002 and 2001, respectively, and $543,000 and $459,000 for
the nine months ended September 30, 2002 and 2001, respectively, related to
depreciation of furniture, fixtures, and equipment of the discontinued
operations of the containerized storage business.

Other assets at September 30, 2002 also include $11,480,000 in
held to maturity debt securities owned by STOR-Re Mutual Insurance Company,
Inc. (see Note 3) stated at amortized cost.

Accrued and Other Liabilities
-----------------------------

Accrued and other liabilities consist primarily of trade payables,
real and personal property tax accruals, accrued interest, and losses and
loss adjustment liabilities, as discussed below.

A newly consolidated entity, STOR-Re Mutual Insurance Company,
Inc. ("Stor-RE") (Note 3), provides limited property and liability
insurance coverage to the Company and affiliates of the Company. This
entity accrues liabilities for losses and loss adjustments expense which at
September 30, 2002 totaled $17,615,000. This liability includes an amount
determined from loss reports and individual cases and an amount, based on
recommendations from an outside actuary using a frequency and severity
method, for losses incurred but not reported. Determining the liability for
unpaid losses and loss adjustment expense is based upon estimates and,
while we believe that the amount is adequate, the ultimate liability may be
in excess of or less than the amounts provided. The methods for making such
estimates and for establishing the resulting liability are continually
reviewed.

If multiple significant events occur, Stor-RE will not have
sufficient capital to cover all of claims of the Company and its affiliates
thereby exposing the Company and its affiliates to a level of uninsured
risk. The Company's and its affiliates' maximum annual exposure for
uninsured losses, assuming multiple significant events occur, is
approximately $30 million.

Intangible Assets and Goodwill
------------------------------

Intangible assets consist of property management contracts
($165,000,000) and the excess of acquisition cost over the fair value of
net tangible and identifiable intangible assets or "goodwill" ($94,719,000)
acquired in business combinations.

Prior to January 1, 2002, the Company amortized its goodwill using
the straight-line method over a 25 year life. The Company's goodwill has an
indeterminate life and, in accordance with the provisions of SFAS 142,
amortization of goodwill ceased effective January 1, 2002. Our other
intangibles continue to be amortized over a 25 year period.

Goodwill is net of accumulated amortization of $16,515,000 at
September 30, 2002 and December 31, 2001. At September 30, 2002, property
management contracts are net of accumulated amortization of $45,456,000
($40,503,000 at December 31, 2001). Included in depreciation and
amortization expense for the three and nine months ended September 30, 2002
and for the same periods in 2001 is $1,651,000 and $4,953,000,
respectively, with respect to the amortization of property management
contracts. In addition, included in depreciation and amortization expense
for the three and nine months ended September 30, 2001, is $677,000 and
$2,031,000, respectively, relating to the amortization of goodwill.

Revenue and Expense Recognition
-------------------------------

Property rents are recognized as earned. Equity in earnings of
real estate entities is recognized based on our ownership interest in the
earnings of each of the Unconsolidated Entities. Advertising costs are
expensed as incurred. As described more fully in Note 11, compensation
expense with respect to stock options granted after December 31, 2001 is
recorded based upon the options' estimated fair value on the date of grant
and their vesting period.

Environmental Costs
-------------------

Our policy is to accrue environmental assessments and/or
remediation cost when it is probable that such efforts will be required and
the related cost can be reasonably estimated. Our current practice is to
conduct environmental investigations in connection with property
acquisitions. Although there can be no assurance, we are not aware of any
environmental contamination of any of our facilities which individually or
in the aggregate would be material to our overall business, financial
condition, or results of operations.

Net Income per Common Share
---------------------------

Dividends paid to our preferred shareholders totaling $37,928,000
and $28,736,000 for the three months ended September 30, 2002 and 2001,
respectively, and $111,704,000 and $85,508,000 for the nine months ended
September 30, 2002 and 2001, respectively, have been deducted from net
income to arrive at net income allocable to our common shareholders.

Net income allocated to our common shareholders has been further
allocated among our two classes of common stock; our regular common stock
and our Equity Stock, Series A. The allocation among each class was based
upon the two-class method. Under the two-class method, earnings per share
for each class of common stock is determined according to dividends
declared (or accumulated) and participation rights in undistributed
earnings. Under the two-class method, the Equity Stock, Series A was
allocated net income of approximately $5,375,000 and $16,126,000, for the
three and nine months ended September 30, 2002, respectively, as compared
to $5,314,000 and $14,080,000, respectively, for the same periods in 2001.
The remaining $40,048,000 and $123,694,000 for the three and nine months
ended September 30, 2002, respectively, and $49,554,000 and $140,424,000,
for the three and nine months ended September 30, 2001, respectively, was
allocated to the regular common shares.

Basic net income per share is computed using the weighted average
common shares (prior to the dilutive impact of stock options outstanding).
Diluted net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). Distributions per
share of Class B common stock are equal to 97% of the per share
distribution paid to the Company's regular common shares. As a result of
this participation in distribution of earnings, for purposes of computing
net income per common share, the Company includes 6,790,000 (7,000,000 x
97%) Class B common shares in the weighted average common equivalent shares
for the three and nine months ended September 30, 2001 and the three months
ended March 31, 2002.

As of March 31, 2002, the remaining contingency for the conversion
of the Class B common stock into regular common stock has been satisfied
(see Note 9) and the Class B common stock will convert into 7,000,000
shares of common stock on January 1, 2003. As a result, beginning April 1,
2002, 7,000,000 Class B common shares are included in the weighted average
common equivalent shares.

3. Business Combinations
---------------------

Development Joint Venture
-------------------------

On January 16, 2002, we acquired the remaining 70% interest we did
not own in a partnership (the "Development Joint Venture"). The aggregate
cost of this business combination was $268,209,000, consisting of our
pre-existing investment in the Development Joint Venture of $115,131,000
and cash of $153,078,000. This acquisition was completed in order to expand
the Company's real estate investments. The Development Joint Venture was
formed in April 1997 and was funded with equity capital consisting of 30%
from the Company and 70% from an institutional investor, and owns 47
storage facilities. Prior to January 16, 2002, we accounted for our
investment in the Development Joint Venture using the equity method of
accounting.

STOR-Re Mutual Insurance Company, Inc.
--------------------------------------

As a result of obtaining a controlling ownership interest,
effective July 1, 2002 we began consolidating STOR-Re Mutual Insurance
Company, Inc. ("Stor-RE"). As a result, we began including the assets and
liabilities of Stor-RE on our financial statements, and eliminated our
pre-existing investment in this entity, which at June 30, 2002 was
classified as an Other Asset in the amount of $8,541,000. Our pre-existing
investment was allocated to the cash, other assets, and liabilities of
Stor-RE as described in the table below.

Stor-RE, which was formed in 1994, is an association captive
insurance company owned by the Company and affiliates. Stor-RE provides
limited property and liability insurance to the Company and affiliates. The
Company also utilizes other insurance carriers to provide property and
liability coverage in excess of Stor-RE's limitations. Stor-RE offers
insurance only to the Company and its affiliates.

Prior to July 1, 2002, the insurance premiums paid to Stor-RE are
included in property operating expenses. After June 30, 2002, the amounts
incurred by Stor-RE with respect to the Company and the Consolidated
entities are presented as property operating expenses. The insured
liability costs incurred by Stor-RE are substantially equivalent to the
premiums paid by the Company and its affiliates; accordingly, the
consolidation of Stor-RE had no material impact upon the Company's income
statement. The net operating results of Stor-RE with respect to its
insurance services provided to the Unconsolidated Entities are included in
"interest and other income."

Other Partnerships
------------------

As a result of obtaining a controlling ownership interest, we
began to consolidate the accounts of two publicly-held limited partnerships
owning 31 self-storage facilities in which we are the general partner,
effective January 1, 2002. Our $45,105,000 investment at December 31, 2001
was allocated to the cash, other assets, liabilities, and minority
interests of these entities as described in the table below. Previously, we
accounted for our investment in these entities using the equity method of
accounting.

PS Insurance Company
--------------------

On December 31, 2001, we acquired all of the capital stock of PS
Insurance Company, Ltd. ("PS Insurance Company"), which reinsures policies
against losses to goods stored by tenants in our self-storage facilities
and which owned, and continues to own, 301,032 shares of the Company's
common stock. The 301,032 shares owned by this entity are eliminated in
consolidation.

Each of the transactions indicated above has been accounted for
using the purchase method. Accordingly, allocations of our acquisition cost
(consisting of our preexisting investment and the cost of acquisition of
interests acquired in connection with the transaction) was allocated to the
net assets acquired based upon the fair value of such assets and
liabilities assumed with respect to the transactions. Accordingly,
allocations of the total acquisition cost to the net assets acquired were
made based upon the fair value of such assets and liabilities assumed. The
allocations were as follows with respect to the business combinations
completed during 2002:

2002 Business Combinations
- --------------------------

Development Other
Joint Venture Stor - RE Partnerships Total
-------------- -------------- -------------- --------------
(amounts in thousands)

Real estate facilities......... $ 269,898 $ - $ 60,528 $ 330,426
Cash (a)....................... - 12,647 751 13,398
Other assets................... 1,122 14,553 1,053 16,728
Minority interest.............. - - (14,806) (14,806)
Accrued and other liabilities.. (2,811) (18,659) (2,421) (23,891)
-------------- -------------- -------------- --------------
$ 268,209 $ 8,541 $ 45,105 $ 321,855
============== ============== ============== ==============

(a) This represents the cash held by the entity immediately prior to the
business combination.

The historical operating results of the above acquisitions prior
to each respective acquisition date have not been included in the Company's
historical operating results. Pro forma data (unaudited) for the nine
months ended September 30, 2002 and 2001 as though the business
combinations above had been effective at the beginning of fiscal 2001 are
as follows:

For the Nine Months Ended
September 30,
---------------------------------
2002 2001
--------------- ---------------
(amounts in thousands)
Revenues............................... $ 640,646 $ 637,783
Net income............................. $ 251,300 $ 245,646
Net income per common share (Basic).... $ 1.01 $ 1.18
Net income per common share (Diluted).. $ 0.99 $ 1.17

The pro forma data does not purport to be indicative either of
results of operations that would have occurred had the transactions
occurred at the beginning of fiscal 2001 or the future results of
operations of the Company. Certain pro forma adjustments were made to the
combined historical amounts to reflect (i) expected reductions in general
and administrative expenses, (ii) estimated increased interest expense from
bank borrowings to finance the cash portion of the acquisition cost and
(iii) estimated increase in depreciation expense.

4. Discontinued Operations - Containerized Storage
-----------------------------------------------

SFAS No. 144, which was adopted by the Company on January 1, 2002,
addresses accounting for discontinued operations. The Statement requires
the segregation of all disposed components of an entity with operations
that (i) can be distinguished from the rest of the entity and (ii) will be
eliminated from the ongoing operations of the entity in a disposal
transaction.

During the nine months ended September 30, 2002, management
adopted a business plan that included the closure of certain non-strategic
containerized storage facilities (the "Closed Facilities"), representing
components of the containerized storage segment. The related assets of the
Closed Facilities (consisting primarily of storage containers) were deemed
not recoverable from future operations, and as a result an asset impairment
charge for the excess of these assets' net book value over their fair value
was recorded. The impairment charges totaled $2,718,000 for the three and
nine months ended September 30, 2002. In addition, lease termination costs,
representing the expected remaining lease liability following closure of
the facilities, were recorded in the amount of $2,073,000 for the three and
nine months ended September 30, 2002.

In accordance with SFAS 144, the historical operations of the
Closed Facilities (including the asset impairment and lease termination
costs) are classified as discontinued operations, with the rental income,
cost of operations, and depreciation expense with respect to these
facilities for current and prior periods included in the line-item
"Discontinued Operations - Containerized Storage" on the income statement.

Following are the amounts with respect to the Closed Facilities
that are included in Discontinued Operations - Containerized Storage.

Discontinued Operations - Containerized
- ---------------------------------------
Storage Facilities
- ------------------

Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- ----------------------------------------
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ ------------
(amounts in thousands)

Rental income (a)....................... $ 1,473 $ 1,622 $ (149) $ 4,534 $ 3,814 $ 720

Costs and Expenses:
Cost of operations (a).............. 1,553 1,262 291 5,354 3,075 2,279
Facility lease expense (a).......... 247 242 5 797 711 86
------------ ------------ ------------ ------------ ------------ ------------
Total Cost and expenses 1,800 1,504 296 6,151 3,786 2,365

Net operating income before depreciation
and charges.......................... (327) 118 (445) (1,617) 28 (1,645)

Depreciation (a)........................ 184 185 (1) 543 459 84
Asset impairment and lease termination
charges (b).......................... 4,791 - 4,791 4,791 - 4,791
------------ ------------ ------------ ------------ ------------ ------------
Net discontinued operations.......... $ (5,302) $ (67) $ (5,235) $ (6,951) $ (431) $ (6,520)
============ ============ ============ ============ ============ ============

(a) These amounts represent the historical operations of the facilities prior
to their closure. Amounts with respect to these facilities were classified
as containerized storage rental income, containerized storage - cost of
operations, and depreciation expense in the Company's June 30, 2002
financial statements. Costs of operations for the nine months ended
September 30, 2002 includes $898,000 in expenses with respect to container
obsolescence.

(b) Amounts for the quarter ended September 30, 2002 include $2,718,000 in
asset impairment charges and lease termination costs totaling $2,073,000.

(c) The losses of the Discontinued Operations are $0.04 and $0.06 per diluted
common share for the three and nine months ended September 30, 2002,
respectively, and $0.00 and $0.00 for the same periods in 2001.

Other than lease termination costs, there are no significant
assets or liabilities of the discontinued operations.

5. Real Estate Facilities
----------------------

Activity in real estate facilities during 2002 is as follows:

In thousands
----------------
Operating facilities, at cost:
Balance at December 31, 2001........................ $ 4,431,054
Developed facilities................................ 115,457
Property acquisitions:
Business combinations (Note 3).................... 330,426
From third parties................................ 29,899
Acquisition of minority interests (Note 8).......... 39,318
Capital improvements................................ 16,041
----------------
Balance at September 30, 2002....................... 4,962,195
----------------

Accumulated depreciation:
Balance at December 31, 2001........................ (819,932)
Additions during the year........................... (125,371)
----------------
Balance at September 30, 2002....................... (945,303)
----------------

Construction in process:
Balance at December 31, 2001........................ 121,181
Current development................................. 77,408
Developed facilities................................ (115,457)
----------------
Balance at September 30, 2002....................... 83,132
----------------

Land held for development:
Balance at December 31, 2001........................ 30,001
Dispositions........................................ (5,532)
----------------
Balance at September 30, 2002....................... 24,469
----------------

Total real estate facilities........................... $ 4,124,493
================

During the nine months ended September 30, 2002, we opened 14
newly developed facilities with an aggregate cost of $94,599,000, and
expansions of storage facilities with an aggregate cost of $20,858,000. In
addition, during the nine months ended September 30, 2002, we acquired nine
self-storage facilities, in separate transactions, for $29,899,000 cash.

During the nine months ended September 30, 2002, we sold one plot
of land for $5,532,000, consisting of $5,322,000 of cash and a note
receivable in the amount of $210,000. No gain or loss was recorded on this
sale.

Construction in process at September 30, 2002 consists primarily
of 25 storage facilities and six expansion projects to existing
self-storage facilities. In addition, we have ten parcels of land held for
development with total costs of approximately $24,469,000.

Our policy is to capitalize interest incurred on debt during the
course of construction of our self-storage facilities. Interest capitalized
during the three and nine months ended September 30, 2002 was $1,374,000
and $4,646,000, respectively, compared to $2,044,000 and $6,263,000,
respectively, for the same periods in 2001.

6. Investment in Real Estate Entities
----------------------------------

At September 30, 2002, our investment in real estate entities
consists of our ownership interests in eight partnerships, which
principally own self-storage facilities, and our ownership interest in PSB
(defined below). These interests are non-controlling interests of less than
50% and are accounted for using the equity method of accounting.
Accordingly, earnings are recognized based upon our ownership interest in
each of the entities. The accounting policies of these entities are similar
to the Company's.

The following table sets forth the Company's equity in earnings of
real estate entities for the three and nine months ended September 30, 2002
(amounts in thousands):

Equity in Earnings of Real Equity in Earnings of Real
Estate Entities for the Three Estate Entities for the Nine
Months Ended September 30, Months Ended September 30,
-------------------------------- --------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------

PSB (a)............................. $ 5,351 $ 5,343 $ 17,680 $ 17,004
Newly consolidated investments (b).. - 2,456 223 7,090
Other investments................... 2,132 2,027 5,836 4,818
-------------- -------------- -------------- --------------
Total............................. $ 7,483 $ 9,826 $ 23,739 $ 28,912
============== ============== ============== ==============

(a) Included in equity in earnings for the three and nine months ended
September 30, 2002 is our pro rata share of PSB's gain on sale of real
estate in the amount of $483,000 and $2,724,000, respectively.

(b) As described in Note 3, in the first quarter of 2002 we began consolidating
the results of the Development Joint Venture and two other partnerships,
and as a result eliminated our investment in the three months ended March
31, 2002.

The following table sets forth our investments in real estate
entities at September 30, 2002 and December 31, 2001, and our distributions
received from the real estate entities in the nine months ended September
30, 2002 and 2001 (amounts in thousands):

Distributions from Real Estate
Investments in Real Estate Entities for the Nine Months
Entities at Ended September 30,
-------------------------------- --------------------------------
September 30, December 31,
2002 2001 2002 2001
-------------- -------------- -------------- --------------

PSB................................. $ 270,767 $ 267,472 $ 14,385 $ 10,958
Newly consolidated investments (a).. - 160,013 - 888
Other investments................... 56,854 51,815 1,135 3,761
-------------- -------------- -------------- --------------
Total............................. $ 327,621 $ 479,300 $ 15,520 $ 15,607
============== ============== ============== ==============

(a) As described in Note 3, in the first quarter of 2002 we began consolidating
the results of the Development Joint Venture and two other partnerships,
and as a result eliminated our investment in the three months ended March
31, 2002.

Following is a description of PSB, the Newly Consolidated
Investments, and the Other Investments.

Investment in PSB
-----------------

At September 30, 2002, the Company and the Consolidated Entities
had a 44% common equity interest in PS Business Parks, Inc., a REIT traded
on the American Stock Exchange, and an operating partnership controlled by
PS Business Parks, Inc. (collectively, the REIT and the operating
partnership are referred to as "PSB"). This 44% common equity interest is
comprised of the ownership of 5,418,273 shares of common stock and
7,305,355 limited partnership units in the operating partnership. These
limited partnership units are convertible at our option, subject to certain
conditions, on a one-for-one basis into PSB common stock. Based upon PSB's
trading price at September 30, 2002 ($34.00), the shares and units had a
market value of approximately $432.6 million.

At September 30, 2002, PSB owned and operated 14.8 million net
rentable square feet of commercial space located in nine states. PSB also
manages the commercial space owned by the Company and the Consolidated
Entities.

Our pro-rata share of earnings and distributions from PSB, as well
as our investment balance, are denoted in the tables above. The following
table sets forth the condensed consolidated statements of operations and
the condensed consolidated balance sheets of PSB. These amounts below
represent 100% of PSB's balances and not our pro-rata share.

PSB
- ---

For the Nine Months Ended
September 30,
---------------------------------------
2002 2001
------------------ ------------------
(amounts in thousands)

Total revenue.................................. $ 150,336 $ 121,229
Cost of operations and other expenses.......... (47,402) (36,010)
Gain on disposition of real estate investments. 6,548 15
Depreciation and amortization.................. (42,885) (30,058)
Discontinued operations........................ 1,677 1,711
Gain on disposition of real estate investments. 6,548 15
Minority interest.............................. (24,256) (19,743)
------------------ ------------------
Net income................................... $ 44,018 $ 37,144
================== ==================

At September 30, At December 31,
2002 2001
------------------ ------------------
Total assets (primarily real estate)........... $ 1,138,136 $ 1,169,955
Total debt..................................... 77,720 165,145
Other liabilities.............................. 32,335 45,188
Preferred equity and preferred minority interest 368,700 318,750
Common equity and common minority interest..... 659,381 640,872

Newly Consolidated Investments
------------------------------

As described in Note 3, effective in the first quarter of 2002, we
began consolidating the results of the Development Joint Venture and two
other partnerships, and as a result eliminated our pre-existing investment
of $160,236,000 ($160,013,000 at December 31, 2001). Prior to their
respective dates of consolidation, these entities were accounted for on the
equity method of accounting. The Company's operating results and
investments with respect to these entities are included as the "Newly
Consolidated Investments" in the tables above.

Other Investments
-----------------

At September 30, 2002, the Other Investments consist primarily of
an average 40% common equity ownership in eight limited partnerships
(collectively, the "Other Investments") owning an aggregate of 36 storage
facilities. During the nine months ended September 30, 2002, we invested a
total of $338,000 in the Other Investments.

Our pro-rata share of earnings and distributions from these
entities as well as our investment balances are denoted in the tables
above. The following table sets forth certain condensed financial
information (representing 100% of these entities' balances and not our
pro-rata share) with respect to the Other Investments:

Other Investments
- -----------------

For the Nine Months Ended September 30,
----------------------------------------
2002 2001
------------------ -------------------
(amounts in thousands)

Total revenue.................................. $ 19,960 $ 19,477
Cost of operations and other expenses.......... (7,027) (6,983)
Depreciation and amortization.................. (1,903) (1,919)
------------------ -------------------
Net income.................................. $ 11,030 $ 10,575
================== ===================

At September 30, At December 31,
2002 2001
------------------ -------------------
Total assets (primarily storage facilities).... $ 59,467 $ 61,046
Total debt..................................... 6,741 11,357
Other liabilities.............................. 915 1,233
Partners' equity............................... 51,811 48,456

7. Revolving Line of Credit
------------------------

Our $200 million revolving line of credit (the "Credit Agreement")
has a maturity date of October 31, 2004 and bears an annual interest rate
ranging from the London Interbank Offered Rate ("LIBOR") plus 0.45% to
LIBOR plus 1.50% depending on our credit ratings (currently LIBOR plus
0.45%). In addition, we are required to pay a quarterly commitment fee
ranging from 0.20% per annum to 0.30% per annum depending on our credit
ratings (currently the fee is 0.20% per annum). At September 30, 2002, we
had no borrowings on our line of credit.

The Credit Agreement includes various covenants, the more
significant of which requires us to (i) maintain a balance sheet leverage
ratio of less than 0.50 to 1.00, (ii) maintain certain quarterly interest
and fixed-charge coverage ratios (as defined) of not less than 2.50 to 1.0
and 1.75 to 1.0, respectively, and (iii) maintain a minimum total
shareholders' equity (as defined). In addition, we are limited in our
ability to incur additional borrowings (we are required to maintain
unencumbered assets with an aggregate book value equal to or greater than
two times our unsecured recourse debt). We were in compliance with all the
covenants of the Credit Agreement at September 30, 2002.

8. Minority Interest
-----------------

In consolidation, we classify ownership interests in the net
assets of each of the Consolidated Entities, other than our own, as
minority interest on the consolidated financial statements. Minority
interest in income consists of the minority interests' share of the
operating results of the Consolidated Entities.

Preferred Partnership Interests
-------------------------------

During 2000, one of our consolidated operating partnerships issued
an aggregate $365.0 million of preferred partnership units: March 17, 2000
- $240.0 million of 9.5% Series N Cumulative Redeemable Perpetual Preferred
Units, March 29, 2000 - $75.0 million of 9.125% Series O Cumulative
Redeemable Perpetual Preferred Units, and August 11, 2000 - $50.0 million
of 8.75% Series P Cumulative Redeemable Perpetual Preferred Units.

In August 2001, we repurchased $30 million of the 9.125% Series O
Cumulative Redeemable Perpetual Preferred Units and in October 2001, we
repurchased all of the 8.75% Series P Cumulative Redeemable Perpetual
Preferred Units. The units were repurchased at an amount equal to the
original issuance price.

For the nine months September 30, 2002 and 2001, the holders of
the preferred units were paid an aggregate of approximately $20,179,000 and
$24,830,000, respectively, in distributions and received an equivalent
allocation of minority interest in earnings.

The following table summarizes the preferred partnership units
outstanding at September 30, 2002 and December 31, 2001:

Series Distribution Rate Units Outstanding Carrying Amount
- -------------------- ----------------- ----------------- ---------------
(amounts in thousands)
Series N......... 9.500% 9,600 $240,000
Series O......... 9.125% 1,800 45,000
----------------- ---------------
Total......... 11,400 $285,000
================= ===============

These preferred units are not redeemable during the first 5 years
after issuance. Thereafter, at our option, we can call the units for
redemption at the issuance amount plus any unpaid distributions. The units
are not redeemable by the holder. Subject to certain condition, the Series
N preferred units are convertible into shares of 9.5% Series N Cumulative
Preferred Stock, and the Series O preferred units are convertible into
shares of 9.125% Series O Cumulative Preferred Stock of the Company.

Other Partnership Interests
---------------------------

The following table sets forth the minority interest at September
30, 2002 and December 31, 2001, as well as the distributions paid to
minority interest for the nine months September 30, 2002 and 2001 with
respect to the other partnership interests (amounts in thousands):

Distributions to Minority Interests
Minority Interest at for the Nine Months Ended September 30,
----------------------------------- ---------------------------------------
September 30, December 31,
Description 2002 2001 2002 2001
- ----------------------------------------- ---------------- ---------------- ---------------- -------------------

Consolidated Development Joint Venture.. $ 77,069 $ 82,879 $ 7,384 $ 4,633
Convertible Partnership Units........... 6,340 6,418 321 212
Newly consolidated partnerships......... 18,388 - 2,127 -
Other consolidated partnerships......... 55,063 80,304 9,183 10,361
---------------- ---------------- ---------------- -------------------
Total other partnership interests..... $ 156,860 $ 169,601 $ 19,015 $ 15,206
================ ================ ================ ===================

Income is allocated to the minority interests based upon their
pro-rata interest in the operating results of the Consolidated Entities.
The following table sets forth the income allocated to minority interests
with respect to the Other Partnership interests for the three and nine
months ended September 30, 2002 and 2001 (amounts in thousands):

Minority Interest in Income for the Minority Interest in Income for the
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- -------------------------------------
Description 2002 2001 2002 2001
- ---------------------------------------- ------------------ ------------------ ------------------ ------------------

Consolidated Development Joint Venture.. $ 938 $ 500 $ 1,574 $ 725
Convertible Partnership Units........... 81 110 243 297
Newly consolidated partnerships......... 789 - 2,420 -
Other consolidated partnerships......... 2,974 3,570 9,047 9,518
------------------ ------------------ ------------------ ------------------
Total other partnership interests..... $ 4,782 $ 4,180 $ 13,284 $ 10,540
================== ================== ================== ==================

Following is a description of each of the Other Partnership
Interests and a description of the other transactions affecting the
minority interests in these entities.

Consolidated Development Joint Venture
--------------------------------------

In November 1999, we formed a development joint venture (the
"Consolidated Development Joint Venture") with a joint venture partner
(PSAC Storage Investors, LLC) whose partners include an institutional
investor and B. Wayne Hughes ("Mr. Hughes"), chairman of the Company, to
develop approximately $100 million of self-storage facilities and to
purchase $100 million of the Company's Equity Stock, Series AAA (see Note
9). In consolidation, the Equity Stock Series AAA and the related dividend
income have been eliminated.

At September 30, 2002, the Consolidated Development Joint Venture
was fully committed having completed construction on all 22 storage
facilities for a total cost of approximately $108 million.

The Consolidated Development Joint Venture is funded solely with
equity capital consisting of 51% from the Company and 49% from PSAC Storage
Investors. The accounts of the Consolidated Development Joint Venture are
included in the Company's consolidated financial statements. The accounts
of PSAC Storage Investors are not included in the Company's consolidated
financial statements, as the Company has no ownership interest in this
entity. Minority interests primarily represent the total contributions
received from PSAC Storage Investors combined with the accumulated net
income allocated to PSAC Storage Investors, net of cumulative
distributions. The amounts included in our financial statements with
respect to the minority interest in the Consolidated Development Joint
Venture are denoted in the tables above.

The term of the Consolidated Development Joint Venture is 15
years; however, during the sixth year PSAC Storage Investors has the right
to cause an early termination of the partnership. If PSAC Storage Investors
exercises this right, we then have the option, but not the obligation, to
acquire their interest for an amount that will allow them to receive an
annual return of 10.75%. If the Company does not exercise its option to
acquire PSAC Storage Investors' interest, the partnership's assets will be
sold to third parties and the proceeds distributed to the Company and PSAC
Storage Investors in accordance with the partnership agreement. If PSAC
Storage Investors does not exercise its right to early termination during
the sixth year, the partnership will be liquidated 15 years after its
formation with the assets sold to third parties and the proceeds
distributed to the Company and PSAC Storage Investors in accordance with
the partnership agreement.

PSAC Storage Investors, LLC provides Mr. Hughes with a fixed yield
of approximately 8.0% per annum on his preferred non-voting interest
(representing an investment of approximately $64.1 million at September 30,
2002). In addition, Mr. Hughes receives 1% of the remaining cash flow of
PSAC Storage Investors, LLC (estimated to be less than $50,000 per year).
If PSAC Storage Investors, LLC does not elect to cause an early
termination, Mr. Hughes' 1% interest in residual cash flow can increase to
10%.

Convertible Partnership Units
-----------------------------

As of September 30, 2002, one of our Consolidated Entities had
approximately 237,935 convertible partnership units ("Convertible Units")
outstanding, representing a limited partnership interest in one of the
Consolidated Entities. The Convertible Units are convertible on a
one-for-one basis (subject to certain limitations) into common shares of
the Company at the option of the unitholder. Minority interest in income
with respect to the Convertible Units reflects an allocation of net income
on a per unit basis equal to diluted earnings per common share. During the
nine months ended September 30, 2002, no units were converted.

Newly Consolidated Partnerships
-------------------------------

As described in Note 3, we began consolidating the results of two
other partnerships owning 31 properties, and as a result, minority interest
increased by $14,806,000 in the first quarter of 2002.

Other Consolidated Partnerships
-------------------------------

The minority interests in the Other Consolidated Partnerships at
September 30, 2002 reflect the common equity interests that the Company
does not own in 23 entities owning an aggregate of 141 real estate
facilities.

On April 19, 2002, we acquired through a merger all of the
remaining minority interest we did not own in PS Partners V, Ltd. The
acquisition cost consisted of 533,796 shares ($20,054,000) of our common
stock and cash of approximately $12,815,000. This acquisition had the
effect of reducing minority interest by $12,342,000, with the excess of
cost over underlying book value ($20,527,000) allocated to real estate.

On September 19, 2002, we acquired through a merger all of the
remaining minority interest we did not own in PS Partners VI, Ltd. The
acquisition cost consisted of 557,812 shares ($17,850,000) of our common
stock and cash of approximately $12,347,000. This acquisition had the
effect of reducing minority interest by $12,260,000, with the excess of
cost over underlying book value ($17,937,000) allocated to real estate.

In addition, during the nine months ended September 30, 2002, we
acquired minority interests in the Other Consolidated Partnerships for an
aggregate cash cost of $1,357,000. These acquisitions had the effect of
reducing minority interest by $503,000, with excess of cost over underlying
book value ($854,000) allocated to real estate.

In the second quarter of 2002, we recorded the pending sale of a
partnership interest in the Consolidated Entities for an aggregate of
$1,450,000. We recorded a loss on sale of the interest in the amount of
$1,839,000. As a result of this pending sale, minority interest increased
by $3,289,000.

9. Shareholders' Equity
--------------------

Preferred Stock
---------------

At September 30, 2002 and December 31, 2001, we had the following
series of Preferred Stock outstanding:

At September 30, 2002 At December 31, 2001
-------------------------------- --------------------------------
Shares Carrying Shares Carrying
Dividend Rate Outstanding Amount Outstanding Amount
----------------- -------------- --------------- -------------- ---------------
(dollar amounts in thousands)

Series A................ 10.000% - $ - 1,825,000 $ 45,625
Series B................ 9.200% 2,300,000 57,500 2,386,000 59,650
Series C................ Adjustable 1,200,000 30,000 1,200,000 30,000
Series D................ 9.500% 1,200,000 30,000 1,200,000 30,000
Series E................ 10.000% 2,195,000 54,875 2,195,000 54,875
Series F................ 9.750% 2,300,000 57,500 2,300,000 57,500
Series J (a)............ 8.000% - - 6,000 150,000
Series K................ 8.250% 4,600 115,000 4,600 115,000
Series L................ 8.250% 4,600 115,000 4,600 115,000
Series M................ 8.750% 2,250 56,250 2,250 56,250
Series Q................ 8.600% 6,900 172,500 6,900 172,500
Series R................ 8.000% 20,400 510,000 20,400 510,000
Series S................ 7.875% 5,750 143,750 5,750 143,750
Series T................ 7.625% 6,086 152,150 - -
Series U................ 7.625% 6,000 150,000 - -
Series V................ 7.500% 6,900 172,500 - -
-------------- --------------- -------------- ---------------
Total Senior Preferred Stock..................... 9,258,486 $ 1,817,025 11,156,500 $ 1,540,150
============== =============== ============== ===============

(a) On September 3, 2002, the Series J preferred stock was called for
redemption and on October 7, 2002 it was redeemed at par. Accordingly, the
Series J preferred stock has been classified as a liability at September
30, 2002.

We issued the Series T preferred stock on January 18, 2002,
resulting in net proceeds from the issuance of approximately $145,075,000,
the Series U preferred stock on February 19, 2002, resulting in net
proceeds from the issuance of approximately $145,075,000 and the Series V
preferred stock on September 30, 2002, resulting in net proceeds from the
issuance of approximately $166,866,000. On September 30, 2002, the Series A
preferred stock was redeemed at par for a total cost, which includes
redemption costs, of $45,643,000.

On August 30, 2002, in a privately negotiated transaction, we
exchanged an aggregate of 86,000 shares (par value of $2,150,000) of our
Preferred Stock, Series B for 86 shares (representing 86,000 depositary
shares with a par value of $2,150,000) of our Preferred Stock, Series T.

In addition, on October 7, 2002, we redeemed all outstanding
shares of our 8.00% Cumulative Preferred Stock, Series J held by the
depositary and, as a result, the depositary redeemed in full all
outstanding depositary shares representing interests in the Series J
Preferred Stock at a redemption price of $25 per depositary share for a
total of $150,000,000 plus accrued dividends.

The Series B through Series V preferred stock (collectively the
"Senior Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. Holders of the preferred stock,
except under certain conditions and as noted above, will not be entitled to
vote on most matters. In the event of a cumulative arrearage equal to six
quarterly dividends or failure to maintain a Debt Ratio (as defined) of 50%
or less, holders of all outstanding series of preferred stock (voting as a
single class without regard to series) will have the right to elect two
additional members to serve on the Company's Board of Directors until
events of default have been cured. At September 30, 2002, there were no
dividends in arrears and the Debt Ratio was 2.0%.

Except under certain conditions relating to the Company's
qualification as a REIT, the Senior Preferred Stock is not redeemable prior
to the following dates: Series B - March 31, 2003, Series C - June 30,
1999, Series D - September 30, 2004, Series E - January 31, 2005, Series F
- April 30, 2005, Series J - August 31, 2002, Series K - January 19, 2004,
Series L - March 10, 2004, Series M - August 17, 2004, Series Q - January
19, 2006, Series R - September 28, 2006, Series S - October 31, 2006,
Series T - January 18, 2007, Series U - February 19, 2007 and Series V -
September 30, 2007. On or after the respective dates, each of the series of
Senior Preferred Stock will be redeemable (the Series C and J are presently
redeemable) at the option of the Company, in whole or in part, at $25 per
share (or depositary share in the case of the Series J through Series V),
plus accrued and unpaid dividends.

Equity Stock
------------

The Company is authorized to issue 200,000,000 shares of Equity
Stock. The Articles of Incorporation provide that the Equity Stock may be
issued from time to time in one or more series and gives the Board of
Directors broad authority to fix the dividend and distribution rights,
conversion and voting rights, redemption provisions and liquidation rights
of each series of Equity Stock.

Equity Stock, Series A
----------------------

At September 30, 2002, we had 8,776,102 depositary shares
outstanding, each representing 1/1,000 of a share of Equity Stock, Series A
("Equity Stock A"). The Equity Stock A ranks on a parity with common stock
and junior to the Senior Preferred Stock with respect to general preference
rights and has a liquidation amount which cannot exceed $24.50 per share.
Distributions with respect to each depositary share shall be the lesser of:
(i) five times the per share dividend on the Common Stock or (ii) $2.45 per
annum. We have no obligation to pay distributions on the depositary shares
if no distributions are paid to common shareholders.

Except in order to preserve the Company's federal income tax
status as a REIT, we may not redeem the depositary shares before March 31,
2010. On or after March 31, 2010, we may, at our option, redeem the
depositary shares at $24.50 per depositary share. If the Company fails to
preserve its federal income tax status as a REIT, the depositary shares
will be convertible at the option of the shareholder into .956 shares of
common stock. The depositary shares are otherwise not convertible into
common stock. Holders of depositary shares votes as a single class with our
holders of common stock on shareholder matters, but the depositary shares
have the equivalent of one-tenth of a vote per depositary share.

Equity Stock, Series AA
-----------------------

In June 1997, we contributed $22,500,000 (225,000 shares) of
equity stock, now designated as Equity Stock, Series AA (Equity Stock AA")
to a partnership in which we are the general partner. The Company has a
controlling interest in the partnership and therefore consolidates the
accounts of the partnership. As a result, the Equity Stock AA is eliminated
in consolidation. The Equity Stock AA ranks on a parity with Common Stock
and junior to the Senior Preferred Stock with respect to general preference
rights and has a liquidation amount of ten times the amount paid to each
Common Share up to a maximum of $100 per share. Quarterly distributions per
share on the Equity Stock AA are equal to the lesser of (i) 10 times the
amount paid per share of Common Stock or (ii) $2.20. We have no obligation
to pay distributions on these shares if no distributions are paid to common
shareholders.

If the Company determines that it is necessary to maintain its
status as a Real Estate Investment Trust, subject to certain limitations it
may cause the redemption of shares of Equity Stock, Series AA at a price of
$100 per share. The shares are not otherwise redeemable or convertible into
shares of any other class or series of the Company's capital stock. Other
than as required by law, the Equity Stock, Series AA has no voting rights.

Equity Stock, Series AAA
------------------------

In November 1999, we sold $100,000,000 (4,289,544 shares) of
Equity Stock, Series AAA ("Equity Stock AAA") to a newly formed joint
venture. We control the joint venture and consolidate the accounts of the
joint venture, and accordingly the Equity Stock AAA is eliminated in
consolidation. The Equity Stock AAA ranks on a parity with common stock and
junior to the Senior Preferred Stock (as defined below) with respect to
general preference rights, and has a liquidation amount equal to 120% of
the amount distributed to each common share. Annual distributions per share
are equal to the lesser of (i) five times the amount paid per common share
or (ii) $2.1564. We have no obligation to pay distributions on these shares
if no distributions are paid to common stockholders.

Upon liquidation of the Consolidated Development Joint Venture, at
the Company's option either a) each share of Equity Stock, Series AAA shall
convert into 1.2 shares of our common stock or b) the Company can redeem
the Equity Stock, Series AAA at a per share amount equal to 120% of the
market price of our common stock. In addition, if the Company determines
that it is necessary to maintain its status as a Real Estate Investment
Trust, subject to certain limitations it may cause the redemption of shares
of Equity Stock, Series AAA at a per share amount equal to 120% of the
market price of our common stock. The shares are not otherwise redeemable
or convertible into shares of any other class or series of the Company's
capital stock. Other than as required by law, the Equity Stock, Series AAA
has no voting rights.

Common Stock
------------

The Company's Board of Directors authorized the repurchase from
time to time of up to 25,000,000 shares of the Company's common stock on
the open market or in privately negotiated transactions. From the initial
authorization through September 30, 2002, we have repurchased a total of
21,497,020 shares of common stock at an aggregate cost of approximately
$535.9 million.

Class B Common Stock
--------------------

The Class B Common Stock participates in distributions at the rate
of 97% of the per share distributions on the Common Stock, provided that
cumulative distributions of at least $0.22 per quarter per share have been
paid on the Common Stock. The Class B Common Stock will not participate in
liquidating distributions, not be entitled to vote (except as expressly
required by California law) and automatically converts into Common Stock,
on a share for share basis, upon the later to occur of FFO per common share
aggregating $3.00 during any period of four consecutive calendar quarters
or January 1, 2003. The financial condition of attaining FFO per common
share was met on March 31, 2002, accordingly, on January 1, 2003, the Class
B Common Stock will automatically convert into Common Stock on a share for
share basis.

Dividends
---------

The following table summarizes dividends declared and paid during
the nine months ended September 30, 2002:

Distributions per
Share or Depositary Share Total Distributions
------------------------- -------------------
Preferred Stock:
Series A................... $1.875 $ 3,422,000
Series B................... $1.768 4,066,000
Series C................... $1.266 1,519,000
Series D................... $1.781 2,137,000
Series E................... $1.875 4,116,000
Series F................... $1.828 4,205,000
Series J................... $1.500 9,000,000
Series K................... $1.547 7,116,000
Series L................... $1.547 7,116,000
Series M................... $1.641 3,690,000
Series Q................... $1.613 11,126,000
Series R................... $1.500 30,600,000
Series S................... $1.477 8,490,000
Series T................... $1.333 8,111,000
Series U................... $1.165 6,990,000
Series V................... - -
-------------------
111,704,000
Common Stock:
Equity Stock, Series A..... $1.838 16,126,000
Common .................... $1.350 156,520,000
Class B Common............. $1.310 9,167,000
-------------------
Total Dividends......... $ 293,517,000
===================

The dividend rate on the Series T and the Series U preferred stock
was prorated from January 18, 2002 and February 19, 2002, the respective
dates of issuance, through March 31, 2002. The dividend rate on the Series
C Preferred Stock for the third quarter of 2002 was equal to 6.75% per
annum. The dividend rate per annum will be adjusted quarterly and will be
equal to the highest of one of three U.S. Treasury indices (Treasury Bill
Rate, Ten Year Constant Maturity Rate, or Thirty Year Constant Maturity
Rate) multiplied by 110%. However, the dividend rate for any dividend
period will neither be less than 6.75% per annum nor greater than 10.75%.
The dividend rate for the quarter ending December 31, 2002 will be equal to
6.75% per annum.

10. Segment Information
-------------------

For a description of each of our reportable segments, our policies
relating to the measurement of segment profit or loss and segment assets,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 2001.

The following table reconciles the performance of each segment, in
terms of segment revenues, of our consolidated revenues.

Reconciliation of Revenues by Segment
- -------------------------------------

Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------------------- --------------------------------------------
2002 2001 Change 2002 2001 Change
------------- ------------- ------------- ------------- ------------- -------------
(amounts in thousands)

Self-Storage property rentals..... $ 196,386 $ 186,615 $ 9,771 $ 573,980 $ 537,530 $ 36,450
Commercial property rentals....... 2,933 3,081 (148) 9,185 9,353 (168)
Containerized storage rentals..... 13,113 11,397 1,716 34,509 31,461 3,048
Tenant re-insurance premiums...... 5,112 - 5,112 14,843 - 14,843
Interest and other income (not 3,178
allocated to segments).......... 2,538 (640) 7,005 9,916 (2,911)
------------- ------------- ------------- ------------- ------------- -------------
Total revenues................ $ 220,082 $ 204,271 $ 15,811 $ 639,522 $ 588,260 $ 51,262
============= ============= ============= ============= ============= =============

The following table reconciles the performance of each segment, in
terms of segment income, of our consolidated net income. It further
provides detail of the segment components of the income statement item,
"Equity in earning of real estate entities."

Reconciliation of Net Income by Segment
- ---------------------------------------

Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- ---------------------------------------
2002 2001 Change 2002 2001 Change
------------ ------------ ---------- ------------ ------------ -----------
(amounts in thousands)

Self-Storage
Self-storage property net operating income. $ 133,467 $ 127,935 $ 5,532 $ 392,561 $ 367,777 $ 24,784
Depreciation and amortization - self-storage (42,988) (40,305) (2,683) (127,656) (116,614) (11,042)
Equity in earnings - self-storage property
operations............................... 1,685 5,788 (4,103) 5,585 16,636 (11,051)
Equity in earnings - depreciation
(self-storage property operations)....... (409) (1,726) 1,317 (958) (5,105) 4,147
------------ ------------ ---------- ------------ ------------ -----------
Total self-storage segment net income.. 91,755 91,692 63 269,532 262,694 6,838
------------ ------------ ---------- ------------ ------------ -----------

Containerized Storage
Containerized storage net operating income. 2,414 2,073 341 7,600 3,891 3,709
Containerized storage depreciation......... (1,730) (1,578) (152) (5,323) (4,570) (753)
Discontinued operations (Note 4)........... (5,302) (67) (5,235) (6,951) (431) (6,520)
------------ ------------ ---------- ------------ ------------ -----------
Total containerized storage segment net
income............................... (4,618) 428 (5,046) (4,674) (1,110) (3,564)
------------ ------------ ---------- ------------ ------------ -----------
Tenant Re-Insurance Segment Net Income........ 2,725 - 2,725 7,640 - 7,640
------------ ------------ ---------- ------------ ------------ -----------

Commercial Properties
Commercial property net operating income... 1,838 2,068 (230) 5,846 6,508 (662)
Depreciation and amortization - Commercial
properties............................... (649) (633) (16) (2,078) (2,003) (75)
Equity in earnings - commercial property
operations............................... 15,296 13,330 1,966 46,854 37,368 9,486
Equity in earnings - depreciation (commercial
property operations)..................... (6,412) (4,787) (1,625) (18,759) (12,622) (6,137)
------------ ------------ ---------- ------------ ------------ -----------

Total commercial property segment net
income............................... 10,073 9,978 95 31,863 29,251 2,612
------------ ------------ ---------- ------------ ------------ -----------

Other Items not Allocated to Segments
Equity in earnings - general and
administrative and other................. (3,160) (2,779) (381) (11,707) (7,365) (4,342)
Interest and other income.................. 2,538 3,178 (640) 7,005 9,916 (2,911)
General and administrative................. (3,968) (5,965) 1,997 (12,273) (16,549) 4,276
Interest expense........................... (969) (928) (41) (3,284) (3,023) (261)
Gain on sale of real estate investments,
including the Company's share of PSB's gain 483 - 483 885 1,568 (683)
on sale..................................
Minority interest in income................ (11,508) (12,000) 492 (33,463) (35,370) 1,907
------------ ------------ ---------- ------------ ------------ -----------
Total other items not allocated to
segments............................. (16,584) (18,494) 1,910 (52,837) (50,823) (2,014)
------------ ------------ ---------- ------------ ------------ -----------

Total net income................... $ 83,351 $ 83,604 $ (253) $ 251,524 $ 240,012 $ 11,512
============ ============ ========== ============ ============ ===========

11. Stock Options
-------------

The Company has a 1990 Stock Option Plan (the "1990 Plan") which
provides for the grant of non-qualified stock options. The Company has a
1994 Stock Option Plan (the "1994 Plan"), a 1996 Stock Option and Incentive
Plan (the "1996 Plan") and a 2000 Non-Executive/Non-Director Stock Option
and Incentive Plan (the "2000 Plan"), each of which provides for the grant
of non-qualified options and incentive stock options. (the 1990 Plan, the
1994 Plan, the 1996 Plan and the 2000 Plan are collectively referred to as
the "PSI Plans"). Under the PSI Plans, the Company has granted
non-qualified options to certain directors, officers and key employees to
purchase shares of the Company's common stock at a price equal to the fair
market value of the common stock at the date of grant. Generally, options
under the Plans vest over a three-year period from the date of grant at the
rate of one-third per year and expire (i) under the 1990 Plan, five years
after the date they became exercisable and (ii) under the 1994 Plan, the
1996 Plan and the 2000 Plan, ten years after the date of grant. The 1996
Plan and the 2000 Plan also provide for the grant of restricted stock to
officers, key employees and service providers on terms determined by an
authorized committee of the Board of Directors; no shares of restricted
stock have been granted.

In October 1995, the Financial Accounting Standards Board issued
Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS 123")
which encourages, but does not require, companies to recognize compensation
expense for stock-based awards based on their fair value at date of grant,
which is then amortized as compensation expense over the vesting period
(the "Fair Value Method").

Companies could also elect the method prescribed by APB Opinion
No. 25 ("APB 25"). APB 25 generally does not require the recognition of
stock option expense when stock options are granted to employees at an
exercise price equal to the market price at the date of grant (the "APB 25
Method"). Companies that elected the APB 25 Method must make pro-forma
disclosures of what net income and earnings per share would have been had
the Fair Value Method been used.

Until December 31, 2001, we elected to adopt the disclosure
requirements of FAS 123 but continued to account for stock-based
compensation under APB 25. As of January 1, 2002, we have adopted the Fair
Value Method of accounting for stock options. As required by the transition
requirements of FAS 123, we will recognize compensation expense in our
income statement using the Fair Value Method only with respect to stock
options issued after January 1, 2002, but continue to disclose the
pro-forma impact of utilizing the Fair Value Method on stock options issued
prior to January 1, 2002.

Included in the Company's income statement for the nine months
ended September 30, 2002 is approximately $97,000 in stock option
compensation expense related to options granted after January 1, 2002. With
respect to stock options granted prior to December 31, 2001, the Company
would have reported net income of approximately $248,444,000 and
$236,918,000 for the nine months ended September 30, 2002 and 2001,
respectively, and reported diluted earnings per share of $0.97 and $1.11,
respectively, had we utilized the Fair Value Method for options granted
prior to December 31, 2001.

12. Recent Accounting Pronouncements
--------------------------------

In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("FAS 146"), which is
effective for disposal activities entered into after December 31, 2002,
with early adoption encouraged.

FAS 146 requires that a liability for costs associated with exit
or disposal activities be recognized when the liability is incurred.
Current generally accepted accounting principles result in the recognition
of such liabilities at the time management has committed to an exit plan.
The Company has not fully evaluated the impact of the adoption of FAS 146.

13. Legal Matters
-------------

Henriquez v. Public Storage, Inc. (Filed June 2002).
----------------------------------------------------

The plaintiff in this case is suing the Company on behalf of a
purported class of renters who rented self-storage units from the
Company. Plaintiff alleges that the Company misrepresents the size
of its units and seeks damages and injunctive and declaratory
relief under California statutory and common law relating to
consumer protection, unfair competition, fraud and deceit and
negligent misrepresentation. The Company does not currently
believe that the outcome of this litigation will have a material
adverse affect. However, the Company cannot presently determine
the potential total damages, if any, or the ultimate outcome of
the litigation. The Company intends to vigorously contest the
claims in this case.

Salaam, et. Al V. Public Storage, Inc. (filed February 2000).
-------------------------------------------------------------

The plaintiffs in this case are suing the Company on behalf of a
purported class of California resident property managers who claim
that they were not compensated for all the hours they worked. The
named plaintiffs have indicated that their claims total less than
$20,000 in aggregate. This maximum potential liability can only be
increased if a class is certified or if claims are permitted to be
brought on behalf of the others under the California Unfair
Business Practices Act. The plaintiffs' motion for class
certification was denied in August 2002; the plaintiffs have
appealed this denial.

The Company is continuing to vigorously contest the claims in this
case and intends to resist any expansion beyond the named
plaintiffs on the grounds of lack of commonality of claims. The
Company's resistance will include opposing the plaintiffs' appeal
of the court's denial of class certification.

The Company is a party to various claims, complaints, and other
legal actions that have arisen in the normal course of business from time
to time. We believe that it is unlikely that the outcome of these other
pending legal proceedings, in the aggregate, will have a material adverse
effect upon the operations or financial position of the Company.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------

The following discussion and analysis should be read in conjunction
with our consolidated financial statements and notes thereto.

FORWARD LOOKING STATEMENTS: When used within this document, the words
"expects," "believes," "anticipates," "should," "estimates," and similar
expressions are intended to identify "forward-looking statements" within the
meaning of that term in Section 27A of the Securities Exchange Act of 1933, as
amended, and in Section 21F of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors, which may cause the actual results and performance of the
Company to be materially different from those expressed or implied in the
forward looking statements. Such factors described herein in Item 2A, "Risk
Factors," include the impact of competition from new and existing storage and
commercial facilities which could impact rents and occupancy levels at our
facilities; the risk of terrorist attacks; our ability to evaluate, finance, and
integrate acquired and developed properties into our existing operations; our
ability to effectively compete in the markets in which we do business; the
impact of the regulatory environment as well as national, state, and local laws
and regulations including, without limitations, those governing real estate
investment trusts; the acceptance by consumers of the containerized storage
concept; the impact of general economic conditions upon rental rates and
occupancy levels at our facilities; and the availability of permanent capital at
attractive rates.

CRITICAL ACCOUNTING POLICIES

QUALIFICATION AS A REIT - INCOME TAX EXPENSE: We believe that we have
been organized and operated, and we intend to continue to operate, as a
qualifying REIT under the Internal Revenue Code and applicable state laws. A
qualifying REIT generally does not pay corporate level income taxes on its
taxable income that is distributed to its shareholders, and accordingly, we do
not pay or record as an expense income tax on the share of our taxable income
that is distributed to shareholders.

Given the complex nature of the REIT qualification requirements, the
ongoing importance of factual determinations and the possibility of future
changes in our circumstances, we cannot provide any assurance that we actually
have satisfied or will satisfy the requirements for taxation as a REIT for any
particular taxable year. For any taxable year that we fail or failed to qualify
as a REIT and applicable relief provisions did not apply, we would be taxed at
the regular corporate rates on all of our taxable income, whether or not we made
or make any distributions to our shareholders. Any resulting requirement to pay
corporate income tax, including any applicable penalties or interest, could have
a material adverse impact on our financial condition or results of operations.
Unless entitled to relief under specific statutory provisions, we also would be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualifications was lost. There can be no assurance that we
would be entitled to any statutory relief.

IMPAIRMENT OF LONG LIVED ASSETS: Substantially all of our assets
consist of long-lived assets, including real estate, the assets associated with
the containerized storage business, goodwill, and other intangible assets. We
evaluate our long-lived assets on a quarterly basis for indicators of
impairment. We have determined at September 30, 2002 that no such indicators of
impairment existed, other than the impairments noted with respect to
discontinued operations. Future events could cause us to conclude that our
long-lived assets are impaired. Any resulting impairment loss could have a
material adverse impact on our financial condition and results of operations.

ESTIMATED USEFUL LIVES OF LONG-LIVED ASSETS: Substantially all of our
assets consist of depreciable, long-lived assets. We record depreciation expense
with respect to these assets based upon their estimated useful lives. Any change
in the estimated useful lives of those assets, caused by functional or economic
obsolescence or other factors, could have a material adverse impact on our
financial condition or results of operations.

ESTIMATED LEVEL OF RETAINED RISK LIABILITIES: As described in Note 2 to
the financial statements, the Company retains certain risks with respect to
property perils, legal liability, and other such risks. In connection with its
retention of these risks, the Company accrues losses based upon the Company's
estimated level of losses incurred using certain actuarial assumptions followed
in the insurance industry and based upon the Company's experience. While we
believe that the amount of the accrued losses is adequate, the ultimate
liability may be in excess of or less than the amounts provided.

ACCRUALS FOR CONTINGENCIES: The Company is exposed to business and
legal liability risks with respect to events that have occurred, but in
accordance with generally accepted accounting principles we have not accrued for
such potential liabilities because the loss is either not probable or not
estimable or because the Company is not aware of the event. Future events and
the result of pending litigation could result in such potential losses becoming
probable and estimable, which could have a material adverse impact on our
financial condition or results of operations. Some of these potential losses,
which the Company is aware of, are described in Note 13 to the financial
statements.

Results of Operations
- --------------------------------------------------------------------------------

Net income for the three months ended September 30, 2002 was
$83,351,000 compared to $83,604,000 for the same period in 2001, representing a
decrease of $253,000. This decrease in net income is primarily a result of a
reduction in Same Store operating results, increased depreciation expense
resulting primarily from new property additions and special charges relating to
the closure of certain containerized storage facilities, as discussed further
below. The impact of these items was offset by an increase in the earnings
generated by the acquisition of additional real estate investments during 2001
and 2002, the earnings generated by the tenant reinsurance business which was
acquired at the end of 2001, reduced general and administrative expense and a
decrease in income allocated to minority interests due to the repurchase of
preferred operating partnership units during 2001.

Net income allocable to our regular common shareholders was $40,048,000
or $0.32 per common share on a diluted basis (based on 124,784,000 weighted
average diluted common equivalent shares) for the three months ended September
30, 2002 compared to $49,554,000 or $0.41 per common share on a diluted basis
(based on 121,754,000 weighted average diluted common equivalent shares) for the
same period in 2001, representing a decrease of 19.2% in the aggregate or 22.0%
on a per share basis.

Weighted average diluted shares increased from 121,754,000 for the
three months ended September 30, 2001 to 124,784,000 for the three months ended
September 30, 2002. This increase was due primarily to the net issuance of
1,138,733 shares on December 31, 2001 in connection with the acquisition of the
tenant reinsurance business and the issuance of 1,091,608 shares during 2002 in
connection with the acquisition of partnership interests, as well as the
exercise of employee stock options.

During the three months ended September 30, 2002 and 2001, we allocated
$37,928,000 and $28,736,000 of our net income (based on distributions paid),
respectively, to our preferred shareholders, representing an increase of 32.0%.
This increase is due to the issuance of additional preferred stock in both the
first quarter of 2002 and throughout 2001, offset partially by the redemption of
several series of our higher coupon preferred stock in 2001. In addition, during
the three months ended September 30, 2002 and 2001, we allocated $5,375,000 and
$5,314,000 of our net income, respectively, to our Equity Stock, Series A
shareholders, representing an increase of 1.1%. This increase is due to the
issuance of additional shares of equity stock in 2001.

Net income for the nine months ended September 30, 2002 was
$251,524,000 compared to $240,012,000 for the same period in 2001, representing
an increase of $11,512,000 or 4.8%. The increase in net income was primarily the
result of the earnings generated by the acquisition of additional real estate
investments during 2001 and 2002, the earnings generated by the acquisition of
the tenant reinsurance business in 2001, reduced general and administrative
expense, a decrease in income allocated to minority interests due to the
repurchase of preferred operating partnership units during 2001 and increased
earnings from equity investments. The impact of these items was partially offset
by a decrease in Same Store property operations, increased depreciation expense
resulting primarily from new property additions, and special charges relating to
the closure of certain containerized storage facilities.

Net income allocable to our regular common shareholders was
$123,694,000 or $0.99 per common share on a diluted basis (based on 124,539,000
weighted average diluted common equivalent shares) for the nine months ended
September 30, 2002 compared to $140,424,000 or $1.13 per common share on a
diluted basis (based on 123,977,000 weighted average diluted common equivalent
shares) for the same period in 2001, representing a decrease of 11.9% in the
aggregate or 12.4% on a per share basis. The decrease in net income allocable to
our regular common shareholders, compared to the increase in aggregate net
income, is due primarily to the increase in income allocated to the preferred
shareholders.

Weighted average diluted shares outstanding increased from 123,977,000
for the nine months ended September 30, 2001 to 124,539,000 for the nine months
ended September 30, 2002, due primarily to an increase of approximately 806,000
in the dilutive impact of employee stock options outstanding computed using the
treasury stock method, the net issuance of approximately 1,138,733 shares on
December 31, 2001 in connection with the acquisition of the tenant reinsurance
business, the issuance of 1,091,608 shares during 2002 in connection with the
acquisition of partnership interests, and the exercise of employee stock
options, offset partially by the impact of share repurchases in the first half
of 2001.

During the nine months ended September 30, 2002 and 2001, we allocated
$111,704,000 and $85,508,000 of our net income (based on distributions paid),
respectively, to our preferred shareholders, representing an increase of 30.6%.
This increase is due to the issuance of additional preferred stock in 2001 and
the first quarter of 2002, partially offset by the redemption of several series
of our higher coupon preferred stock in 2001. In addition, during the nine
months ended September 30, 2002 and 2001, we allocated $16,126,000 and
$14,080,000 of our net income, respectively, to our Equity Stock, Series A
shareholders, representing an increase of 14.5%. This increase is due to the
issuance of additional shares of equity stock in 2001.

Real Estate Operations
- --------------------------------------------------------------------------------

SELF-STORAGE OPERATIONS: Our self-storage operations are by far the
largest component of our operations, representing approximately 90% of our total
revenues generated for the nine months ended September 30, 2002. As a result of
significant acquisitions and development of self-storage facilities, year over
year comparisons as presented on the consolidated statements of income with
respect to our self-storage operations are not meaningful.

To enhance year over year comparisons, the following table summarizes,
and the ensuing discussion describes, the operating results of (i) 1,154
self-storage facilities that are reflected in the financial statements on a
stabilized basis since January 1, 2000 (the "Consistent Group"), (ii) 113
facilities that were acquired since January 1, 2000 and were owned at September
30, 2002 (the "Acquired Facilities"), (iii) 40 facilities that were owned prior
to January 1, 2000 but were not stabilized (the "Expansion Facilities"), (iv) 64
development facilities that were opened after January 1, 1998 (the "Developed
Facilities") and (v) a facility that was disposed of since January 1, 2001 (the
"Disposed Facility"):

Self-Storage Operations Summary
- -------------------------------

Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- ----------------------------------------
Percentage Percentage
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ ------------
(dollar amounts in thousands)

Rental Income (a):
- ------------------
Consistent Group (b)........ $ 165,141 $ 172,227 (4.1)% $ 487,956 $ 499,377 (2.3)%
Acquired Facilities (c)..... 19,459 5,062 284.4% 54,339 14,382 277.8%
Expansion Facilities (d).... 4,790 4,913 (2.5)% 13,866 13,597 2.0%
Developed Facilities (e).... 6,996 4,413 58.5% 17,819 9,824 81.4%
Disposed Facility (f)....... - - 0.0% - 350 (100.0)%
------------ ------------ ------------ ------------ ------------ ------------
Total rental income..... 196,386 186,615 5.2% 573,980 537,530 6.8%
------------ ------------ ------------ ------------ ------------ ------------
Cost of Operations:
- -------------------
Consistent Group............ 51,515 52,139 (1.2)% 150,383 149,835 0.4%
Acquired Facilities......... 6,159 1,704 261.4% 16,549 4,721 250.5%
Expansion Facilities........ 1,982 2,039 (2.8)% 5,299 6,878 (23.0)%
Developed Facilities........ 3,263 2,798 16.6% 9,188 8,139 12.9%
Disposed Facility........... - - 0.0% - 180 (100.0)%
------------ ------------ ------------ ------------ ------------ ------------
Total cost of operations 62,919 58,680 7.2% 181,419 169,753 6.9%
------------ ------------ ------------ ------------ ------------ ------------
Net Operating Income (before depreciation):
- -------------------------------------------
Consistent Group............ 113,626 120,088 (5.4)% 337,573 349,542 (3.4)%
Acquired Facilities......... 13,300 3,358 296.1% 37,790 9,661 291.2%
Expansion Facilities........ 2,808 2,874 (2.3)% 8,567 6,719 27.5%
Developed Facilities........ 3,733 1,615 131.1% 8,631 1,685 412.2%
Disposed Facility........... - - 0.0% - 170 (100.0)%
------------ ------------ ------------ ------------ ------------ ------------
Total net operating income 133,467 127,935 4.3% 392,561 367,777 6.7%
------------ ------------ ------------ ------------ ------------ ------------
Depreciation 42,988 40,305 6.7% 127,656 116,614 9.5%
------------ ------------ ------------ ------------ ------------ ------------
Operating income............ $ 90,479 $ 87,630 3.3% $ 264,905 $ 251,163 5.5%
============ ============ ============ ============ ============ ============
Number of self-storage facilities
(at end of period).......... 1,371 1,264 8.5% 1,371 1,264 8.5%
Net rentable square feet (at end
of period - in thousands)... 83,206 76,385 8.9% 83,206 76,385 8.9%

(a) Rental income includes late charges and administrative fees. Rental income
does not include retail sales or truck rental income generated at the
facilities.

(b) The Consistent Group includes 1,154 facilities with 67,126,000 net rentable
square feet that were owned and operated at a mature, stabilized occupancy
level since January 1, 2000. See below for discussion of Consistent Group
operating results.

(c) The Acquired Facilities includes 113 facilities with 6,650,000 net rentable
square feet that were acquired through business combinations or from third
parties after January 1, 2000 and were still owned as of September 30,
2002. Substantially all of these facilities were mature, stabilized
facilities at the time of their acquisition.

(d) The Expansion Facilities includes 40 facilities with 4,546,000 net rentable
square feet that, while owned for the periods presented, had operating
results that were not comparable primarily due to expansions in their net
rentable square feet or their conversion into Combination Facilities. Such
construction activities can cause a drop in revenue levels, as existing
capacity is made unavailable in order to accommodate construction
activities. We completed construction on expansion projects with a total
cost of $20,858,000 for the nine months ended September 30, 2002,
$84,948,000 in the year ended December 31, 2001, and $12,206,000 in the
year ended December 31, 2000 with respect to these expansions.

(e) The Developed Facilities includes 64 facilities with 4,884,000 net rentable
square feet that were developed and opened since January 1, 1998 at a total
cost of $408.8 million, and includes traditional stand-alone self-storage
facilities as well as facilities that combine self-storage facilities and
containerized storage space at the same location. See "Self-Storage
Operations - Developed Facilities" for further information. These
facilities were all still owned at of September 30, 2002.

(f) The Disposed Facility includes a facility that was disposed of during 2001,
after being condemned by a government agency.

Self-Storage Operations - Consistent Group of Facilities

At September 30, 2002, we owned 1,154 facilities with approximately
67,126,000 net rentable square feet that we owned and operated at a stabilized
level of operations since January 1, 2000.

As previously reported, we have increased the number of facilities
included in the Consistent Group of Facilities from 909 at December 31, 2001 to
1,154 facilities. As a result of the change in the Consistent Group of
Facilities, the relative weighting of markets has changed. Accordingly,
comparisons should not be made between information presented prior to 2002 for
the Consistent Group of Facilities of 909 facilities and this current pool of
1,154 facilities in order to identify trends in occupancies, realized rents per
square foot, or operating results.

Revenues and expenses with respect to the Consistent Group properties
are set forth in the above Self-Storage Operations table. The following table
sets forth additional operating data with respect to the Consistent Group of
facilities:

Selected Operating Data for the
- -------------------------------
Consistent Group of Facilities (1,154 Facilities)
- -------------------------------------------------

Weighted average:
Occupancy (a)....................... 85.8% 90.7% (4.9)% 85.2% 89.6% (4.4)%
Realized annual rent per square foot $ 11.48 $ 11.32 1.4% $ 11.38 $ 11.08 2.7%
(b)..............................

Late charges and administrative fees... $ 5,558 $ 6,042 (8.0)% $ 15,780 $ 17,614 (10.4)%
Promotional discounts (c).............. $ 4,188 $ 319 1,212.9% $ 10,413 $ 4,787 117.5%

Gross margin........................... 68.8% 69.7% (0.9)% 69.2% 70.0% (0.8)%

(a) Occupancies in the above table represent weighted average occupancy levels
over the entire three and nine month periods. Comparisons should not be
made between the occupancies of this Consistent Group of Facilities of
1,154 facilities and the occupancies for the 909 Consistent Group of
Facilities presented previously in order to evaluate trends in occupancies.

(b) Realized annual rent per square foot is computed by dividing annualized
rental income, including late charges and administrative fees, by the
weighted average occupied square footage for the period.

The Consistent Group's net operating income decreased 5.4% in the
quarter ended September 30, 2002 as compared to the same period in 2001. The
decrease was due to a decrease of 4.1% in rental income partially offset by a
1.2% decrease in cost of operations. The 4.1% decrease in rental income for the
third quarter is attributable to a 4.9% decrease in the weighted average
occupancy level offset partially by a 1.4% increase in realized annual rent per
square foot.

During each of calendar years 1999 and 2000, the Consistent Group's
occupancy levels averaged approximately 92% and 91%, respectively. These
relatively high occupancy levels were attained and sustained through a variety
of promotional activities offering new tenants move-in discounts aggregating
approximately $18 million per year. During 2001, we changed our marketing
strategy to aggressively increase rental rates and reduce the amount of
discounts offered at the risk of lower occupancy levels. As a result of this
strategy, rental income for 2001 was approximately 6.9% higher than the prior
year. However, this improvement in rental income came at the expense of
declining occupancy levels in 2001. During the first nine months of 2001,
average occupancy levels were approximately 1.9% below those of 2000 for the
same period, which we believed to be a manageable reduction. However, during the
fourth quarter of 2001 and through February 2002, there was a rapid decline in
occupancy levels which caused the year-over-year reduction to increase to 4.7%
as of the end of February 2002. This reduction in occupancy level coincided with
a reduction in call volume to our national telephone reservation center. We
believe that these reductions were attributable to the absence of any
significant promotional discounts offered to tenants as well as to general
economic conditions.

In the second half of March 2002, we reduced rental rates charged to
new incoming tenants and began a national television campaign. The national
television campaign, which offered a significant promotional discount as part of
the advertisement, was run from the second half of March 2002 through the first
half of May 2002, resulting in increased move-in activity during April and May
2002 compared to the prior year. This campaign was terminated in the middle of
May, and in the absence of significant promotional discounts from mid-May
through the end of July 2002, rental activity during June and July 2002
decreased and the average occupancy for the Consistent Group of facilities at
July 31, 2002 was approximately 5.5% less than at July 31, 2001.

Beginning in mid-August 2002, we reinstated a discount program and
advertised on television in selected markets in an effort to enhance move-in
activity and improve occupancy levels. This program had a positive impact upon
move-in activity throughout the remainder of the third quarter. In addition,
move-out activity began to subside which also contributed to positive occupancy
gains. Average occupancy for the Consistent Group of facilities at the end of
September 2002 was 85.7%, as compared to 89.9% and the end of September 2001,
representing a decrease of 4.2%.

The narrowing of the year-over-year negative spread in occupancy from
5.5% at the end of July 2002 to 4.2% at the end of September 2002 was attained
in part through our promotional discounting and television advertising program.
Discounts given to new tenants totaled $4,188,000 for the quarter ended
September 30, 2002 as compared to only $319,000 for the same period in 2001.
Television advertising totaled $1,887,000 for the quarter ended September 30,
2002 as compared to $4,281,000 for the quarter ended September 31, 2001.

We expect to continue promotional discounting and television
advertising during the fourth quarter. The up front costs of these marketing
activities, and the increases in discounts, are expected to adversely impact our
net operating income during the fourth quarter of 2002 as compared to the fourth
quarter of 2001. No assurance can be provided as to the impact of these efforts
on our realized rents, occupancy levels, or net income of the Company. At
October 31, 2002, the weighted average occupancy for the Consistent Group was
85.5% as compared to 88.4% at October 31, 2001, representing a decrease of 2.9%.
Television advertising totaled $1,343,000 for the month October 2002 as compared
to $1,060,000 for the month of October 2001. In addition, discounts given
totaled $2,180,000 for the month of October 2002 as compared to only $48,000 for
October 2001. As a result, we estimate that rental income and net operating
income was lower in October 2002 than in October 2001.

Cost of operations includes all direct and indirect costs of operating,
marketing and managing the facilities. The following table summarizes major
operating expenses with respect to the Consistent Group:

Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------ -----------------------------------------
Percentage Percentage
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ ------------
(dollar amounts in thousands)

Direct property payroll............ $ 12,589 $ 12,011 4.8% $ 37,199 $ 35,168 5.8%
Property taxes..................... 14,923 14,411 3.6% 44,230 42,634 3.7%
Repairs and maintenance............ 3,719 3,514 5.8% 10,580 11,993 (11.8)%
Advertising and promotion.......... 4,059 6,958 (41.7)% 10,774 13,512 (20.3)%
Telephone reservation center costs. 2,479 2,479 0.0% 6,889 7,622 (9.6)%
Cost of managing facilities........ 4,576 4,629 (1.1)% 14,120 13,068 8.1%
Office, insurance, utilities and
other expenses.................. 9,170 8,137 12.7% 26,591 25,838 2.9%
------------ ------------ ------------ ------------ ------------ ------------
Total cost of operations........ $ 51,515 $ 52,139 (1.2)% $ 150,383 $ 149,835 0.4%
============ ============ ============ ============ ============ ============

Increases in direct property payroll expense for the three and nine
months ended September 30, 2002 as compared to the same periods in 2001 are due
primarily to increased compensation to property managers. Included in
advertising and promotion is $1,887,000 and $4,281,000 in television advertising
for the three months ended September 30, 2002 and 2001, respectively; and
$3,818,000 and $5,185,000 in television advertising for the nine months ended
September 30, 2002 and 2001, respectively.

Included in cost of operations is $1,320,000 and $4,230,000 in
insurance expense for the three and nine months ended September 30, 2002,
respectively, as compared to $1,326,000 and $4,166,000, respectively, for the
same periods in 2001.

Self-Storage Operations - Acquired Facilities

As of September 30, 2002, we had 113 facilities with 6,650,000 net
rentable square feet that we acquired in 2000, 2001 and during the nine months
ended September 30, 2002 in connection with third-party acquisitions and
business combinations. The operations of these facilities are included in the
above table under the caption "Acquired Facilities."

In August 2001, we acquired an operating self-storage facility for an
aggregate cost of $3,503,000. Included in the table above with respect to this
facility, is rental income and cost of operations of $122,000 and $50,000,
respectively, for the three months ended September 30, 2002 and $322,000 and
$124,000, respectively, for the nine months ended September 30, 2002. Included
in rental income and cost of operations is $42,000 and $2,000 for the three and
nine months ended September 30, 2002, respectively, with respect to this
facility.

During 2002, we acquired 47 self-storage facilities in connection with
the acquisition of the Development Joint Venture (described in Note 3 of the
Company's financial statements). Included in the table above is rental income
and cost of operations of $24,348,000 and $7,921,000, respectively, for the nine
months ended September 30, 2002, with respect to these facilities, representing
the operating results of these properties from January 16, 2002 through
September 30, 2002. Included in rental income and cost of operations,
respectively, is $9,004,000 and $2,905,000 for the three months ended September
30, 2002 with respect to these facilities.

Effective January 1, 2002, we began consolidating the accounts of two
partnership (described in Note 3 of the Company's financial statements) owning
31 self-storage facilities. Included in the table above is rental income and
cost of operations of $4,751,000 and $1,221,000, respectively, for the three
months ended September 30, 2002 and $14,146,000 and $3,399,000, respectively,
for the nine months ended September 30, 2002, with respect to these facilities.

During the nine months ended September 30, 2002, we acquired nine
additional self-storage facilities from third parties, primarily in separate
transactions, for an aggregate cost of $29,899,000. Included in the table above
is rental income and cost of operations of $541,000 and $244,000, respectively,
for the three months ended September 30, 2002 and $823,000 and $379,000,
respectively, for the nine months ended September 30, 2002, with respect to
these facilities.

Rental income and cost of operations for the Acquired Facilities
increased significantly for the nine months ended September 30, 2002 as compared
to the same period in 2001 due to the aforementioned acquisitions of facilities.

Self-Storage Operations - Expansion Facilities

Throughout the three-year period ended December 31, 2001, the Company
has expanded certain real estate facilities that it previously owned or
converted them to facilities that combine self-storage and containerized storage
at the same location ("Combination Facilities"). Such construction activities
can cause a drop in revenue levels, as existing capacity is made unavailable in
order to accommodate construction activities. Primarily as a result of these
expansion activities, 40 of these facilities with 4,546,000 net rentable square
feet at September 30, 2002 (which includes the expanded space that has been
completed, and includes 1,305,000 net rentable square feet of containerized
storage space) had results that were not comparable. The self-storage operating
results for these facilities are presented in the Self-Storage Operations table
above under the caption, "Expansion Facilities." The operations of the
containerized storage operations which are conducted in the expansion facilities
are included in the Company's containerized storage results. We completed
construction on projects with a total cost of $20,858,000 for the nine months
ended September 30, 2002, $84,948,000 in the year ended December 31, 2001,and
$12,206,000 in the year ended December 31, 2000 with respect to these
expansions.

Self-Storage Operations - Developed Facilities

Since January 1, 1998, we have opened 64 newly developed self-storage
facilities and facilities that combine self-storage and containerized storage
("Combination Facilities") at the same location, with a total of 4,884,000 net
rentable square feet and a total cost of approximately $408.8 million. The
operating results of these 64 facilities with respect to their self-storage
operations are reflected in the Self-Storage Operations table under the caption,
"Developed Facilities." The operating results with respect to the containerized
storage operations conducted at the Combination Facilities are included in the
Company's containerized storage operating results.

The following table segregates the operations of the stand-alone
self-storage facilities and the Combination Facilities:

Developed Facilities Operations
- -------------------------------
Summary
- -------

Three Months Ended September 30,` Nine Months Ended September 30,
---------------------------------------- -----------------------------------------
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ ------------
(amounts in thousands)

Rental Income:
Self-storage facilities...... $ 5,174 $ 3,349 $ 1,825 $ 13,185 $ 7,773 $ 5,412
Combination facilities....... 1,822 1,064 758 4,634 2,051 2,583
------------ ------------ ------------ ------------ ------------ ------------
Total rental income...... 6,996 4,413 2,583 17,819 9,824 7,995
------------ ------------ ------------ ------------ ------------ ------------

Cost of Operations:
Self-storage facilities...... 2,062 1,819 243 5,967 5,438 529
Combination facilities....... 1,201 979 222 3,221 2,701 520
------------ ------------ ------------ ------------ ------------ ------------
Total cost of operations. 3,263 2,798 465 9,188 8,139 1,049
------------ ------------ ------------ ------------ ------------ ------------

Net Operating Income/(Loss) (before
depreciation):
Self-storage facilities...... 3,112 1,530 1,582 7,218 2,335 4,883
Combination facilities....... 621 85 536 1,413 (650) 2,063
------------ ------------ ------------ ------------ ------------ ------------
Total net operating income 3,733 1,615 2,118 8,631 1,685 6,946
============ ============ ============ ============ ============ ============

The Self-storage facilities consist of 48 facilities with an aggregate
of 3,115,000 net rentable square feet. These facilities were developed by the
Company at a total cost of $271,527,000. Nineteen of these facilities with an
aggregate of 1,114,000 net rentable square feet (development costs totaling
$85,383,000) have been opened longer than 24 months as of September 30, 2002.

Rental income and cost of operations with respect to these nineteen
facilities were $2,847,000 and $924,000, respectively for the three months ended
September 30, 2002 compared to $2,487,000 and $1,043,000, respectively, for the
same period in 2001. Weighted average occupancies with respect to these nineteen
facilities were 85.9% for the three months ended September 30, 2002 compared to
74.6% for the same period in 2001. Rental income and cost of operations with
respect to these nineteen facilities were $7,869,000 and $2,827,000,
respectively, for the nine months ended September 30, 2002 compared to
$6,324,000 and $3,547,000, respectively, for the same period in 2001. Weighted
average occupancies with respect to these nineteen facilities were 79.7% for the
nine months ended September 30, 2002 compared to 62.9% for the same period in
2001.

The Combination facilities consist of 16 facilities with an aggregate
of 1,769,000 net rentable square feet (878,000 square feet which was utilized
for the containerized storage operations) that were developed and opened since
January 1, 1998 at a total cost of $137,293,000. The operations of the
containerized storage business conducted at these facilities is included in
containerized storage revenues and cost of operations. As of September 30, 2002,
the Combination facilities had been opened on average approximately 18 months
and had a weighted average occupancy with respect to the self-storage net
rentable square feet of approximately 62.8% for the three months ended September
30, 2002 as compared to 39.2% for the same period in 2001.

Unlike many other forms of real estate, we are unable to pre-lease our
newly developed facilities due to the nature of our tenants. Accordingly, at the
time a newly developed self-storage facility opens for operations, the facility
is entirely vacant generating no rental income. It has generally taken
approximately 24 months for a newly developed self-storage facility to fill-up
and reach a targeted occupancy level of approximately 90% (the "Stabilized
Period"). However, we believe that the rate of fill-up of our newly developed
facilities has declined in the nine months ended September 30, 2002 relative to
the prior year for the same reasons that our consistent group of facilities'
occupancies have declined.

Property operating expenses are substantially fixed. The rental revenue
of a newly developed facility will generally not cover its property operating
expenses (excluding depreciation) until the facility has reached an occupancy
level of approximately 30%. However, at that occupancy level, the rental
revenues from the facility are still not sufficient to cover related
depreciation expense and cost of capital with respect to the facility's
development cost. During construction of the facility, we capitalize interest
costs and include such cost as part of the overall development cost of the
facility. Once the facility is opened for operation, interest is no longer
capitalized. Due to the relationship between the generation of rental income and
immediate recognition of expenses upon opening the facility, our development
activities have a negative impact on our net income.

We estimate that our net income has been negatively impacted as a
result of our development activities by approximately $20,668,000 and
$18,180,000 for the nine months ended September 30, 2002 and 2001, respectively,
and $7,075,000 and $5,959,000 for the three months ended September 30, 2002 and
2001, primarily representing the difference between the revenues of the
Developed Facilities and the related costs denoted above. These amounts include
depreciation expense of approximately $2,349,000 and $1,982,000 for the three
months ended September 30, 2002 and 2001, respectively, and $5,934,000 and
$4,665,000 for the nine months ended September 30, 2002 and 2001, respectively.

We continue to develop facilities, despite the short-term earnings
dilution experienced during the Stabilization Period and recent occupancy
declines in 2002 relative to 2001, because we believe that the ultimate returns
on developed facilities are favorable. In addition, we believe that it is
advantageous for us to continue to expand our asset base and benefit from the
resultant increased critical mass, with facilities that will improve our
portfolio's overall average construction and location quality.

We expect that over at least the next 24 months, the Developed
Facilities will continue to have a negative impact to our earnings. Furthermore,
the 31 facilities in our development pipeline described in "Liquidity and
Capital Resources - Acquisition and Development of Facilities" that will be
opened for operation over the next 12-24 months will also negatively impact our
earnings until they reach a stabilized occupancy level.

COMMERCIAL PROPERTY OPERATIONS: Commercial property operations includes
five wholly-owned commercial facilities, as well as the commercial portion of
facilities that combine self-storage and commercial space at the same location.
A substantial portion of our investment in commercial properties is represented
by our investment in PSB, which is accounted for using the equity method of
accounting, and accordingly our share of PSB's earnings is reflected as "Equity
in Earnings of Real Estate Entities" in our condensed consolidated statements of
income.

The following table sets forth the historical commercial property
amounts included in the financial statements. We have owned substantially all of
these facilities on a stabilized basis since January 1, 2001.

Commercial Property Operations
- ------------------------------

Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- -----------------------------------------
2002 2001 Change 2002 2001 Change
------------ ------------ ------------ ------------ ------------ ------------
(amounts in thousands)

Rental income.......................... $ 2,933 $ 3,081 $ (148) $ 9,185 $ 9,353 $ (168)
Cost of operations..................... 1,095 1,013 82 3,339 2,845 494
------------ ------------ ------------ ------------ ------------ ------------
Net operating income prior to depreciation 1,838 2,068 (230) 5,846 6,508 (662)
Depreciation........................... 649 633 16 2,078 2,003 75
------------ ------------ ------------ ------------ ------------ ------------
Net income.......................... $ 1,189 $ 1,435 $ (246) $ 3,768 $ 4,505 $ (737)
============ ============ ============ ============ ============ ============

CONTAINERIZED STORAGE FACILITIES OPERATIONS: At September 30, 2002,
Public Storage Pickup and Delivery ("PSPUD") operated 44 facilities. As
described in "Discontinued Operations" below, in the nine months ended September
30, 2002, PSPUD has closed or is in the process of closing certain of its
facilities (the "Closed Facilities") that were deemed not strategic to our
business plan. The operations with respect to these closed facilities, including
historical operating results for previous periods, are not included in the table
below and instead are included in Discontinued Operations. PSPUD's operations,
which exclude the Closed Facilities, are reflected on the table below:

Containerized Storage Facilities
- --------------------------------
(excluding the Closed Facilities)
- ---------------------------------

Rental income........................... $ 13,113 $ 11,397 $ 1,716 $ 34,509 $ 31,461 $ 3,048
Cost of operations...................... 9,969 8,166 1,803 24,688 23,494 1,194
Facility lease expense.................. 730 1,158 (428) 2,221 4,076 (1,855)
------------ ------------ ------------ ------------ ------------ ------------
Net operating income before 2,414 2,073 341 7,600 3,891 3,709
depreciation.........................
Depreciation (a)........................ 1,730 1,578 152 5,323 4,570 753
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss).................... $ 684 $ 495 $ 189 $ 2,277 $ (679) $ 2,956
============ ============ ============ ============ ============ ============

(a) Depreciation for the three and nine months ended September 30, 2002
includes $418,000 and $1,143,000, respectively, as compared to $384,000 and
$761,000 for the same periods in 2001, with respect to real estate assets.
The remaining portion of depreciation primarily relates to the storage
containers.

For the three months ended September 30, 2002, PSPUD's operating income
(prior to discontinued operations) increased to $684,000 from $495,000 for the
same period in 2001. For the nine months ended September 30, 2002, PSPUD's
operating income (prior to discontinued operations) increased to $2,277,000 from
a loss of $679,000 for the same period in 2001. These improvements are
attributable primarily to decreases in facility lease expense.

The Company combines the marketing activities of containerized storage
and miniwarehouse facilities, including television, yellow page, and telephone
reservation center costs. The Company allocates these costs based upon
anticipated or realized benefits. Combined advertising costs allocated to the
containerized storage facilities totaled $1,046,000 and $1,911,000,
respectively, for the three and nine months ended September 30, 2002, and
$508,000 and $1,199,000 for the same periods in 2001.

The decrease in facility lease expense for the three and nine months
ended September 30, 2002, as compared to the same periods in 2001, is
attributable to our replacing certain leased facilities with facilities we have
developed which combine self-storage and containerized storage space in the same
location ("Combination Facilities"). As a result of the opening of these newly
developed combination facilities throughout 2001 and 2002 and the closure of
facilities during 2002, the number of leased facilities decreased from 25 at
December 31, 2000 to 10 at September 30, 2002.

No assurance can be made regarding PSPUD's level of gross rentals,
level of move-outs, or ongoing profitability.

See "Discontinued Operations" below for a discussion of operating
results of the Closed Facilities.

TENANT REINSURANCE OPERATIONS: On December 31, 2001, we acquired PS
Insurance Company, Ltd. ("PS Insurance") which reinsures policies against losses
to goods stored by tenants in our self-storage facilities. Effective January 1,
2002, the operations of PS Insurance are included in the income statement under
"Revenues - tenant reinsurance premiums" and "Cost of operations - tenant
reinsurance." The tenant reinsurance business earned $5,112,000 and $14,843,000
in revenues for the three and nine months ended September 30, 2002,
respectively, and incurred $2,387,000 and $7,203,000 in operating expenses,
respectively, for a net operating profit of $2,725,000 and $7,640,000,
respectively.

The level of tenant reinsurance revenues is largely dependent upon our
occupancy level and move-in activity. Approximately 35% of our self-storage
tenant base has such policies. New insurance business comes from tenants who
sign up for insurance as they move-in. A large portion of tenants who initially
sign up for the insurance coverage under this program, drop their coverage in
subsequent months.

EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our
ownership of equity interest in PSB, we had general and limited partnership
interests in eight limited partnership at September 30, 2002. PSB and the
limited partnerships are collectively referred to as the "Unconsolidated
Entities." Due to our limited ownership interest and control of these entities,
we do not consolidate the accounts of these entities for financial reporting
purposes and account for such investments using the equity method.

Equity in earnings of real estate entities consists of our pro rata
share of the Unconsolidated Entities net income based upon our ownership
interest for the period. Similar to the Company, the Unconsolidated Entities
(other than PSB) generate substantially all of their income from their ownership
of self-storage facilities, which we manage. PSB is an equity real estate
investment trust specializing in the ownership, management, acquisition,
development and redevelopment of business parks containing principally office
"flex" space. In the aggregate, at September 30, 2002 the Unconsolidated
Entities own a total of 36 storage facilities and PSB has interests in 14.8
million net rentable square feet of commercial space located in nine states. See
Note 6 to the financial statements for further discussion of the nature and
operating results of the Unconsolidated Entities. The following table sets forth
the significant components of equity in earnings of real estate entities:

Historical Summary
- ------------------

Property Operations:
PSB....................................... $ 15,296 $ 13,330 $ 1,966 $ 46,854 $ 37,368 $ 9,486
Other investments held at September 30, 2002,
primarily self-storage................. 1,685 1,997 (312) 5,297 5,163 134
Newly Consolidated Investments (a)........ - 3,791 (3,791) 288 11,473 (11,185)
------------ ------------ ------------ ------------ ------------ -----------
16,981 19,118 (2,137) 52,439 54,004 (1,565)
------------ ------------ ------------ ------------ ------------ -----------
Depreciation:
PSB....................................... (6,412) (4,787) (1,625) (18,759) (12,622) (6,137)
Other investments held at September 30, 2002,
primarily self-storage................. (409) (408) (1) (893) (975) 82
Newly Consolidated Investments (a)........ - (1,318) 1,318 (65) (4,130) 4,065
------------ ------------ ------------ ------------ ------------ -----------
(6,821) (6,513) (308) (19,717) (17,727) (1,990)
------------ ------------ ------------ ------------ ------------ -----------
Other: (b)
PSB (c)................................... (3,533) (3,200) (333) (10,415) (7,742) (2,673)
Other investments held at September 30, 2002,
primarily self-storage................. 856 438 418 1,432 630 802
Newly Consolidated Investments (a)........ - (17) 17 - (253) 253
------------ ------------ ------------ ------------ ------------ -----------
(2,677) (2,779) 102 (8,983) (7,365) (1,618)
------------ ------------ ------------ ------------ ------------ -----------
Total equity in earnings of real estate
entities.............................. $ 7,483 $ 9,826 $ (2,343) $ 23,739 $ 28,912 $ (5,173)
============ ============ ============ ============ ============ ===========

(a) Amounts include equity in earnings recorded for the Development Joint
Venture and two additional partnerships prior to their respective dates of
consolidation (see Note 3 to the financial statements).

(b) "Other" reflects our share of general and administrative expense, interest
expense, interest income, and other non-property, non-depreciation related
operating results of these entities.

(c) Amounts for the three and nine months ended September 30, 2002 for PSB
include our pro-rata share of a gain on sale of real estate investments
recorded by PSB in the amount of $483,000 and $2,724,000, respectively.

The decrease in equity in earnings of real estate entities is due
primarily to a decrease of $2,456,000 and $6,867,000 for the three and nine
months ended September 30, 2002, respectively, caused by the consolidation of
the Development Joint Venture and two additional partnerships (as discussed in
Note 3 to the financial statements), partially offset by our pro-rata share of
PSB's gain on sale of real estate investments totaling $483,000 and $2,724,000
for the three and nine months ended September 30, 2002, respectively.

On January 16, 2002, we acquired our Partner's 70% ownership interest
in the Development Joint Venture. As a result, we began consolidating the
operating results of the Development Joint Venture and no further equity in
earnings will be recorded with respect to this entity for periods after January
16, 2002. Effective January 1, 2002 (see Note 3 to the financial statements), we
began consolidating the operating results of two other partnerships and no
longer record equity in these entity's earnings with respect to our investments
in these partnerships. Our earnings with respect to these investments are
included in the table above in the line "Newly Consolidated Investments." No
further equity in earnings will be recorded with respect to these partnerships
for periods after their respective dates of consolidation.

Other Income and Expense Items
- --------------------------------------------------------------------------------

INTEREST AND OTHER INCOME: Interest in other income includes (i) the
net operating results from our property management operations, (ii) merchandise
sales and consumer truck rentals and (iii) interest income.

Interest and other income has decreased in the three and nine months
ended September 30, 2002 as compared to the same period in 2001 primarily as a
result a reduction in property management operations. Beginning in the first
quarter of 2002, we began to consolidate the operations of the Development Joint
Venture and two other partnerships, as described in Note 3 to the financial
statements. As a result, property management operations with respect to the 78
self-storage properties owned by these entities will no longer be recorded after
their respective dates of consolidation. At September 30, 2002, we managed 31
facilities for third parties and 36 facilities on behalf of the Unconsolidated
Entities for a fee, and the net results of these operations are included in
"Interest and Other Income." The decrease in interest and other income for the
nine months ended September 30, 2002 as compared to the same period in 2001 also
includes lower interest earned on outstanding cash balances.

DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
has increased $2,851,000 to $45,367,000 for the three months ended September 30,
2002 as compared to $42,516,000 for the same period in 2001. Depreciation and
amortization expense has increased $11,870,000 to $135,057,000 for the nine
months ended September 30, 2002 as compared to $123,187,000 for the same period
in 2001. These increases are principally due to the acquisition and development
of additional real estate facilities during 2001 and 2002.

Included in depreciation and amortization expense for the three and
nine months ended September 30, 2002 and for the same periods in 2001 is
$1,651,000 and $4,953,000, respectively, with respect to the amortization of
property management contracts. In addition, included in depreciation and
amortization expense for the three and nine months ended September 30, 2001, is
$677,000 and $2,031,000, respectively, relating to the amortization of goodwill.

GENERAL AND ADMINISTRATIVE: General and administrative expense for the
three months ended September 30, 2002 decreased to $3,968,000 as compared to
$5,965,000 for the same period in 2001. General and administrative expense for
the nine months ended September 30, 2002 decreased to $12,273,000 as compared to
$16,549,000 for the same period in 2001. General and administrative expense
principally consists of state income taxes, investor relation expenses, certain
overhead associated with the acquisition and development of real estate
facilities, corporate payroll, and overhead associated with the containerized
storage business. The decrease in general and administrative expense is due
primarily to decreased expenses associated with lease terminations on leased
containerized storage facilities which were replaced by newly-developed
facilities, decreased severance costs, and decreased overhead relating to the
development of self-storage facilities, offset by increases in other areas.
These three areas accounted for an approximately $1,987,000 and $4,670,000
decrease in general and administrative costs for the three and nine months ended
September 30, 2002, respectively, as compared to the same periods last year.

Beginning January 1, 2002, we began to expense the fair value of stock
options in accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"). As indicated by FAS 123,
the estimated fair value of stock options issued after January 1, 2002 will be
expensed over their vesting period. The total of such expense included in
general and administrative expense was approximately $39,000 and $97,000 for the
three and nine months ended September 30, 2002, respectively. Based upon stock
options granted between January 1, 2002 and September 30, 2002, the total
expected annual expense is approximately $175,000. In addition, pro-forma
disclosures of the impact of stock options issued prior to January 1, 2002
(which are not expensed per the transition provisions of FAS 123) are presented
in Note 11 to the financial statements.

INTEREST EXPENSE: Interest expense was $969,000 and $928,000 for the
three months ended September 30, 2002 and 2001, respectively, and $3,284,000 and
$3,023,000 for the nine months ended September 30, 2002 and 2001, respectively.
Capitalized interest expense totaled $1,374,000 and $2,044,000 for the three
months ended September 30, 2002 and 2001, respectively, and $4,646,000 and
$6,263,000 for the nine months ended September 30, 2002 and 2001, respectively.
The increase in interest expense in 2002 compared to 2001 is principally the
result of a reduction in the amount of capitalized interest, offset by lower
interest expense on notes payable due to principal payments.

MINORITY INTEREST IN INCOME - PREFERRED PARTNERSHIP INTERESTS: Minority
interest in income - preferred partnership interests represents the income
allocable to holders of our preferred partnership units. During 2000, one of our
operating partnerships issued $365 million of preferred partnership units. For
the three and nine months ended September 30, 2002, the holders of these
preferred units were paid aggregate distributions of approximately $6,726,000
and $20,179,000, respectively, as compared to $7,820,000 and $24,830,000,
respectively, for the same periods in 2001, and received a corresponding
allocation of minority interest in earnings. The decrease in the three and nine
months ended September 30, 2002 as compared to the same periods in 2001 is due
to our repurchase, during the latter half of 2001, of $80 million of these
preferred operating partnership units.

MINORITY INTEREST IN INCOME - OTHER PARTNERSHIP INTERESTS: Minority
interest in income - common equity represents the income allocable to equity
interests (other than the preferred partnership interests noted above) in the
Consolidated Entities which are not owned by the Company. Minority interest in
income - common equity increased from $4,180,000 for the three months ended
September 30, 2001 to $4,782,000 for the three months ended September 30, 2002.
Minority interest in income - common equity increased from $10,540,000 for the
nine months ended September 30, 2001 to $13,284,000 for the nine months ended
September 30, 2002. These minority interests include depreciation of $1,760,000
and $6,298,000 for the three and nine months ended September 30, 2002 as
compared to $2,166,000 and $5,734,000 for the same periods in 2001. Income
allocated to the minority interests is summarized as follows (in thousands):

Minority Interest in Income for the Minority Interest in Income for the
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------ ------------------------------------
Description 2002 2001 2002 2001
- ---------------------------------------- ----------------- ---------------- ----------------- ----------------

Consolidated Development Joint Venture.. $ 938 $ 500 $ 1,574 $ 725
Convertible Partnership Units........... 81 110 243 297
Newly consolidated partnerships......... 789 - 2,420 -
Other consolidated partnerships......... 2,974 3,570 9,047 9,518
----------------- ---------------- ----------------- ----------------
Total other partnership interests..... $ 4,782 $ 4,180 $ 13,284 $ 10,540
================= ================ ================= ================

The increase in minority interest in income with respect to the
Consolidated Development Joint Venture is due to an increase in income with
respect to the properties owned by this entity. Included in minority interest in
income for the Consolidated Development Joint Venture is depreciation expense of
$836,000 and $2,386,000 for the three and nine months ended September 30, 2002,
respectively, as compared to $620,000 and $1,478,000, respectively, for the same
periods in 2001. We expect that minority interest in income with respect to the
Consolidated Development Joint Venture will continue to increase as the
properties owned by this entity, substantially all of which are newly developed
facilities in the fill-up stage, continue to increase their occupancy to a
stabilized occupancy level and increase the earnings of this entity.

The increase in minority interest in income is also attributable to the
consolidation of two partnerships (described in Note 3 to the financial
statements) effective January 1, 2002. For the three and nine months ended
September 30, 2002, a total of $789,000 and $2,420,000 in income was allocated
to the minority interests with respect to these two newly consolidated
partnerships as noted in the table above under "Newly Consolidated Partnerships"
(including $281,000 and $611,000, respectively, in depreciation expense).

On April 19, 2002, we acquired through a merger all of the remaining
limited partnership interest not currently owned by the Company in PS Partners
V, Ltd., a partnership which is consolidated with the Company. The acquisition
cost consisted of 533,796 shares ($20,054,000) of our common stock and
approximately $12,815,000 in cash. Minority interest in income for the nine
months ended September 30, 2002 with respect to these interests was
approximately $625,000, including $345,000 in depreciation expense, representing
their share of the earnings from January 1, 2002 through the date of
acquisition.

On September 19, 2002, we acquired through a merger all of the
remaining limited partnership interest not currently owned by the Company in PS
Partners VI, Ltd., a partnership which is consolidated with the Company. The
acquisition cost consisted of approximately 557,812 shares ($17,850,000) of our
common stock and approximately $12,347,000 in cash. Minority interest in income
for the three and nine months ended September 30, 2002 with respect to these
interests was approximately $340,000 and $967,000, respectively, (including
$260,000 and $917,000, respectively, in depreciation expense), representing
their share of the earnings from January 1, 2002 through the date of
acquisition.

DISCONTINUED OPERATIONS: As described more fully in the Note 4 to the
financial statements, management implemented a business plan which included the
closure of certain non-strategic containerized storage facilities (the "Closed
Facilities").

In connection with the closure or planned closure of these facilities,
we recorded asset impairment losses with respect to the furniture, fixtures, and
equipment totaling $2,718,000 for the three and nine months ended September 30,
2002. In addition, lease termination costs for the expected remaining lease
liability following closure of the facilities were recorded in the amount of
$2,073,000 for the three and nine months ended September 30, 2002.

The historical operations of the Closed Facilities (including the asset
impairment losses and lease termination costs) are classified as discontinued
operations, with the rental income, cost of operations, and depreciation expense
with respect to these facilities for current and prior periods included in the
line-item "Discontinued Operations - Containerized Storage" on the income
statement.

Following are the amounts with respect to the Closed Facilities that
are included in Discontinued Operations - Containerized Storage.

Discontinued Operations - Containerized
- ---------------------------------------
Storage Facilities
- ------------------

Rental income (a)...................... $ 1,473 $ 1,622 $ (149) $ 4,534 $ 3,814 $ 720

Costs of operations:
Cost of operations (a) (c)......... 1,553 1,262 291 5,354 3,075 2,279
Facility lease expense (a)......... 247 242 5 797 711 86
------------ ------------ ------------ ------------ ------------ ------------
Total cost of operations............ 1,800 1,504 296 6,151 3,786 2,365

Net operating income (loss) before
depreciation and charges............ (327) 118 (445) (1,617) 28 (1,645)

Depreciation (a)....................... 184 185 (1) 543 459 84
Asset impairment and lease termination
charges (b)......................... 4,791 - 4,791 4,791 - 4,791
------------ ------------ ------------ ------------ ------------ ------------
Net discontinued operations......... $ (5,302) $ (67) $ (5,235) $ (6,951) $ (431) $ (6,520)
============ ============ ============ ============ ============ ============

(b) Amounts for the quarter ended September 30, 2002 include $2,718,000 in
asset impairment charges and lease termination costs totaling $2,073,000.

(c) Amounts for the nine months ended September 30, 2002 include $898,000 in
container obsolescence charges which were previously classified as cost of
operations on the June 30, 2002 financial statements.

Many of the Closed Facilities are in the process of closing which may
take up to several months to complete. We expect that these facilities will
continue to generate operating losses until final closure.

Supplemental Property Data and Trends
- --------------------------------------------------------------------------------

At September 30, 2002, there were approximately 46 ownership entities
owning in aggregate 1,407 storage facilities, including the facilities which we
own and/or operate. At September 30, 2002, 36 of these facilities were owned by
the Unconsolidated Entities, entities in which we have an ownership interest and
use the equity method for financial statement presentation. The remaining 1,371
facilities are owned by the Company and the Consolidated Entities.

The following table summarizes our investment in real estate facilities
as of September 30, 2002:

Net Rentable
Number of Square Footage of
Storage Storage Facilities
Facilities (in thousands)
---------- --------------

Consolidated facilities:
Wholly-owned by the Company................. 845 52,278
Owned by Controlled Entities................ 526 30,928
---------- --------------
1,371 83,206
Facilities owned by Unconsolidated Entities.... 36 2,186
---------- --------------

Total facilities in which the Company has an
ownership interest....................... 1,407 85,392
========== ==============

In addition to the Company's interest in storage facilities noted
above, the Company and the Consolidated Entities own five commercial facilities
with an aggregate of 385,000 net rentable square feet. The Company and the
entities it controls also have a 44% common interest in PSB, which at September
30, 2002 owned and operated 14.8 million net rentable square feet of commercial
space.

Same Store Operating Results
- --------------------------------------------------------------------------------

The Company derives substantially all of its revenues from the
ownership and management of self-storage facilities. In order to evaluate the
performance of the Company's overall storage facility portfolio, management
analyzes the operating performance of a consistent group of self-storage
facilities.

We have increased the number of facilities included in the "Same Store"
pool from 945 at December 31, 2001 to 1,260 facilities (which at September 30,
2002 includes 32 facilities that are owned by the Unconsolidated Entities).

As a result of the change in the Same Store pool, the relative
weighting of markets has changed. Accordingly, comparisons should not be made
between information presented previously for the Same Store pool of 945
facilities and this current pool of 1,260 facilities in order to identify trends
in occupancies, realized rents per square foot, or operating results.

The following table summarizes the pre-depreciation historical
operating results of the Same Store self-storage facilities:

Same Store Self-Storage Facilities (1,260 Facilities, 73.1 Million Net Rentable
- -------------------------------------------------------------------------------
Square Feet
- -----------
(historical property operations)

Rental income (a) (b)........... $ 184,461 $ 192,007 (3.9)% $ 544,358 $ 556,218 (2.1)%
Cost of operations (b).......... 56,857 57,335 (0.8)% 165,820 164,954 0.5%
------------ ------------ ------------ ------------ ------------ ------------
Net operating income (b)........ $ 127,604 $ 134,672 (5.2)% $ 378,538 $ 391,264 (3.3)%
============ ============ ============ ============ ============ ============

Gross profit margin............. 69.2% 70.1% (0.9)% 69.5% 70.3% (0.8)%

WEIGHTED AVERAGE:
Occupancy (c)................. 85.9% 90.7% (4.8)% 85.3% 89.6% (4.3)%
Annualized realized rent per sq.
ft. for the period (d)..... $ 11.77 $ 11.59 1.6% $ 11.65 $ 11.34 2.7%

a. Rental income includes late charges and administrative fees of $6,125,000
and $6,630,000 for the three months ended September 30, 2002 and 2001,
respectively, and $17,358,000 and $19,339,000 for the nine months ended
September 30, 2002 and 2001, respectively. Rental income is net of
promotional discounts given to new incoming tenants. Discounts totaled
$4,632,000 and $352,000 for the three months ended September 30, 2002 and
2001, respectively. Discounts totaled $11,558,000 and $5,358,000 for the
nine months ended September 30, 2002 and 2001, respectively.

b. Historical property operations excludes the sale of locks, boxes, and
packing supplies, tenant re-insurance revenues and truck rental revenues.

c. Occupancies indicated in the above table represent the weighted average
physical occupancy levels over the entire three and nine month periods.

d. Realized annual rent per square foot is computed by annualizing rental
income including late charges and administrative fees divided by weighted
average occupied square footage for the period.

The Same Store net operating income decreased 5.2% in the quarter ended
September 30, 2002 as compared to the same period in 2001. The decrease was due
to a decrease of 3.9% in rental income partially offset by a 0.8% decrease in
cost of operations. The 3.9% decrease in rental income for the third quarter is
attributable to a 4.8% decrease in the weighted average occupancy level
partially offset by a 1.6% increase in realized rent per occupied square foot
during the period.

During each of calendar years 1999 and 2000, the Same Store facilities'
occupancy levels averaged approximately 92%. These relatively high occupancy
levels were attained and sustained through a variety of promotional activities
offering new tenants move-in discounts aggregating approximately $20 million per
year. During 2001, we changed our marketing strategy to aggressively increase
rental rates and reduce the amount of discounts offered at the risk of lower
occupancy levels. As a result of this strategy, rental income for 2001 was
approximately 7.4% higher than the prior year. However, this improvement in
rental income came at the expense of declining occupancy levels in 2001. During
the first nine months of 2001, average occupancy levels were approximately 1.8%
below those of 2000 for the same period, which we believed to be a manageable
reduction. However, during the fourth quarter of 2001 and through February 2002,
there was a rapid decline in occupancy levels which caused the year-over-year
reduction to increase to 4.7% as of the end of February 2002. This reduction in
occupancy level coincided with a reduction in call volume to our national
telephone reservation center. We believe that these reductions were attributable
to the absence of any significant promotional discounts offered to tenants as
well as to general economic conditions.

In the second half of March 2002, we reduced rental rates charged to
new incoming tenants and began a national television advertising campaign. The
national television campaign, which offered a significant promotional discount
as part of the advertisement, was run from the second half of March 2002 through
the first half of May 2002, resulting in increased move-in activity during April
and May 2002 compared to the prior year. This campaign was terminated in the
middle of May, and in the absence of significant promotional discounts from
mid-May through the end of July 2002, rental activity during June and July 2002
decreased and the average occupancy for the Same Store facilities at July 31,
2002 was approximately 5.5% less than at July 31, 2001.

Beginning in mid-August 2002, we reinstated a discount program and
advertised on television in selected markets in an effort to enhance move-in
activity and improve occupancy levels. This program had a positive impact upon
move-in activity throughout the remainder of the third quarter. In addition,
move-out activity began to subside which also contributed to positive occupancy
gains. Average occupancy for the Same Store facilities at the end of September
2002 was 85.9%, as compared to 89.9% and the end of September 2001, representing
a decrease of 4.0%.

The narrowing of the year-over-year negative spread in occupancy from
5.5% at the end of July 2002 to 4.0% at the end of September 2002 was attained
in part through our promotional discounting and television advertising program.
Discounts given to new tenants totaled $4,632,000 for the quarter ended
September 30, 2002 as compared to only $352,000 for the same period in 2001.
Television advertising totaled $2,155,000 for the quarter ended September 30,
2002 as compared to $4,638,000 for the quarter ended September 31, 2001.

We expect to continue promotional discounting and television
advertising during the fourth quarter. The up front costs of these marketing
activities, and the increases in discounts, are expected to adversely impact our
net operating income during the fourth quarter of 2002 as compared to the fourth
quarter of 2001. No assurance can be provided as to the impact of these efforts
on our realized rents, occupancy levels, or net income of the Company. At
October 31, 2002, the weighted average occupancy for our Same Store facilities
was 85.7% as compared to 88.4% at October 31, 2001, representing a decrease of
2.7%. Television advertising totaled $1,493,000 for the month October 2002 as
compared to $1,142,000 for the month of October 2001. In addition, discounts
given totaled $2,406,000 for the month of October 2002 as compared to only
$52,000 for October 2001. As a result, rental income and net operating income
were lower in October 2002 than in October 2001.

Cost of operations includes all direct and indirect costs of operating,
marketing and managing the facilities, and is analyzed as follows:

Direct property payroll............ $ 13,817 $ 13,149 5.1% $ 40,816 $ 38,510 6.0%
Property taxes..................... 16,451 15,913 3.4% 48,848 47,183 3.5%
Repairs and maintenance............ 4,133 3,890 6.2% 11,706 13,228 (11.5)%
Advertising and promotion.......... 4,538 7,609 (40.4)% 11,900 14,784 (19.5)%
Telephone reservation center costs. 2,716 2,715 0.0% 7,546 8,349 (9.6)%
Cost of managing facilities........ 5,016 5,060 (0.9)% 15,493 14,279 8.5%
Office, insurance, utilities and
other expenses.................. 10,186 8,999 13.2% 29,511 28,621 3.1%
------------ ------------ ------------ ------------ ------------ ------------
Total cost of operations...... $ 56,857 $ 57,335 (0.8)% $ 165,820 $ 164,954 0.5%
============ ============ ============ ============ ============ ============

Increases in direct property payroll expense for the three and nine
months ended September 30, 2002 as compared to the same periods in 2001 are due
primarily to increased compensation to property managers. Included in
advertising and promotion is $2,155,000 and $4,638,000 in television advertising
for the three months ended September 30, 2002 and 2001, respectively; and
$4,231,000 and $5,593,000 in television advertising for the nine months ended
September 30, 2002 and 2001, respectively.

The following table summarizes Same Store operating trends by region
for the nine months ended September 30, 2002 and 2001 (dollar amounts in
thousands):

Northern Southern
California California Texas Florida Illinois Other States Total
-------------- -------------- ------------- ------------- ------------- ------------- -------------

Rental income:
- --------------
2002 $ 67,562 $ 91,505 $ 48,368 $ 47,006 $ 41,824 $ 248,093 $ 544,358
2001 $ 71,372 $ 91,763 $ 49,491 $ 47,524 $ 43,321 $ 252,747 $ 556,218
% change (5.3)% (0.3)% (2.3)% (1.1)% (3.5)% (1.8)% (2.1)%

Cost of operations:
- -------------------
2002 $ 15,975 $ 21,115 $ 18,771 $ 16,027 $ 16,003 $ 77,929 $ 165,820
2001 $ 15,802 $ 19,498 $ 19,161 $ 16,961 $ 15,793 $ 77,739 $ 164,954
% change 1.1% 8.3% (2.0)% (5.5)% 1.3% 0.2% 0.5%

Net operating income:
- ---------------------
2002 $ 51,587 $ 70,390 $ 29,597 $ 30,979 $ 25,821 $ 170,164 $ 378,538
2001 $ 55,570 $ 72,265 $ 30,330 $ 30,563 $ 27,528 $ 175,008 $ 391,264
% change (7.2)% (2.6)% (2.4)% 1.4% (6.2)% (2.8)% (3.3)%

Weighted avg. occupancy:
- ------------------------
2002 85.1% 86.8% 84.7% 85.2% 84.2% 85.2% 85.3%
2001 91.8% 91.5% 90.1% 88.2% 90.3% 88.8% 89.6%
% change (6.7)% (4.7)% (5.4)% (3.0)% (6.1)% (3.6)% (4.3)%

Weighted avg. annualized realized rents per occupied sq.
- ----------------------------------------------------------
ft.:
2002 $ 15.47 $ 15.91 $ 8.71 $ 10.59 $ 12.76 $ 10.63 $ 11.65
2001 $ 15.13 $ 15.13 $ 8.37 $ 10.36 $ 12.32 $ 10.42 $ 11.34
% change 2.2% 5.2% 4.1% 2.2% 3.6% 2.0% 2.7%

Number of facilities:
- ---------------------
127 143 142 123 86 639 1,260

Liquidity and Capital Resources
- --------------------------------------------------------------------------------

We believe that our internally generated net cash provided by operating
activities will continue to be sufficient to enable us to meet our operating
expenses, capital improvements, debt service requirements and distributions to
shareholders for the foreseeable future.

Operating as a real estate investment trust ("REIT"), our ability to
retain cash flow for reinvestment is restricted. In order for us to maintain our
REIT status, a substantial portion of our operating cash flow must be
distributed to our shareholders (see "REQUIREMENT TO PAY DISTRIBUTIONS" below).
However, despite the significant distribution requirements, we have been able to
retain a significant amount of our operating cash flow. The following table
summarizes our ability to fund distributions to the minority interest, capital
improvements to maintain our facilities, and distributions to our shareholders
through the use of cash provided by operating activities. The remaining cash
flow generated is available to fund principal payments on debt and reinvestment
opportunities.

For the nine months ended
September 30,
---------------------------------
2002 2001
-------------- --------------
(amounts in thousands)

Net cash provided by operating activities.................. $ 460,105 $ 420,028

Allocable to minority interest (Preferred Units)........... (20,179) (24,830)
Allocable to minority interest (common equity)............. (19,582) (16,274)
-------------- --------------
Cash from operations allocable to our shareholders......... 420,344 378,924

Capital improvements to maintain our facilities............ (16,041) (24,484)
Add back: minority interest share of capital improvements
to maintain facilities................................. 659 452
-------------- --------------

Remaining operating cash flow available for distributions to
our shareholders....................................... 404,962 354,892

Distributions paid:
Preferred stock dividends................................ (111,704) (85,508)
Equity Stock, Series A dividends......................... (16,126) (14,080)
Distributions to Common and Class B shareholders (a)..... (165,687) (150,418)
-------------- --------------

Cash available for principal payments on debt and reinvestment $ 111,445 $ 104,886
============== ==============

(a) Distributions to common shareholders include the regular common
distribution of $1.35 and $0.89 per common share for the nine months ended
September 30, 2002 and 2001, respectively. In addition, during the quarter
ended September 30, 2001, a special distribution was declared and paid in
the amount of $0.35 per common share.

Our financial profile is characterized by a low level of debt to total
capitalization, increasing net income, increasing cash flow from operations, and
a conservative dividend payout ratio with respect to the common stock. We expect
to fund our growth strategies with cash on hand at September 30, 2002,
internally generated retained cash flows, and proceeds from issuing equity
securities. In general, our current strategy is to continue to finance our
growth with permanent capital; either common or preferred equity. We have in the
past used our $200 million line of credit as temporary "bridge" financing, and
repaid borrowings with internally generated cash flows and proceeds from the
placement of permanent capital. As of September 30, 2002, we had no outstanding
borrowings on the line of credit.

Over the past three years we have funded substantially all of our
acquisitions with permanent capital (both common and preferred securities). We
have elected to use preferred securities as a form of leverage despite the fact
that the dividend rates of our preferred securities exceed the prevailing market
interest rates on conventional debt. We have chosen this method of financing for
the following reasons: (i) under the REIT structure, a significant amount of
operating cash flow needs to be distributed to our shareholders making it
difficult to repay debt with operating cash flow alone, (ii) our perpetual
preferred stock has no sinking fund requirement, or maturity date and does not
require redemption, all of which eliminate any future refinancing risks, (iii)
after the end of a non-call period, we have the option to redeem the preferred
stock at any time, which in 2001 enabled us to effectively refinance higher
coupon preferred stock with new preferred stock at lower rates, (iv) preferred
stock does not contain onerous covenants, thus allowing us to maintain
significant financial flexibility, and (v) dividends on the preferred stock can
be applied to our REIT distribution requirements.

Our credit ratings on each of our series of Cumulative Preferred Stock
by each of the three major credit agencies are "Baa2" by Moody's and BBB+ by
both Standard & Poor's and Fitch IBCA.

Our portfolio of real estate facilities remains substantially
unencumbered. At September 30, 2002, we had mortgage debt outstanding of $21.4
million and unsecured debt in the amount of $100.2 million, and had real estate
facilities with a book value of approximately $4.1 billion.

We believe that our size and financial flexibility enables us to access
capital when appropriate. Between January 1, 2001 and September 30, 2002, we
raised a total of $1.3 billion through the issuance of preferred securities, and
$74.8 million through the issuance of our Equity Stock, Series A. From August
2001 through October 2002, we redeemed for cash $636.9 million in cumulative
preferred stock and $80.0 million in preferred operating partnership units,
allowing us to take advantage of favorable rate spreads.

* During 2002, we have completed the following issuances of equity
for cash:

* On January 18, 2002, we completed a public offering of 6,000,000
depositary shares ($25 stated value per depositary share) each
representing 1/1,000 of a share of 7.625% Cumulative Preferred
Stock, Series T, raising net proceeds of $145,075,000.

* On February 19, 2002, we completed a public offering of 6,000,000
depositary shares ($25 stated value per depositary share) each
representing 1/1,000 of a share of 7.625% Cumulative Preferred
Stock, Series U, raising net proceeds of $145,075,000.

* On September 30, 2002, we completed a public offering of 6,900,000
depositary shares ($25 stated value per depositary share) each
representing 1/1,000 of a share of 7.500% Cumulative Preferred
Stock, Series V, raising net proceeds of $166,866,000.

During 2002, we have completed the following redemptions of equity:

* On September 30, 2002, we redeemed all 1,825,000 outstanding
shares of our 10.00% Cumulative Preferred Stock, Series A at a
redemption price of $25 per share for a total of $45,625,000, plus
redemption costs of $18,000, plus accrued dividends.

* On October 7, 2002, we redeemed all outstanding shares of our
8.00% Cumulative Preferred Stock, Series J held by the depositary
and, as a result, the depositary redeemed all 6,000,000 depositary
shares representing interests in its 8.00% Series J Preferred
Stock at a redemption price of $25 per depositary share for a
total of $150,000,000, plus redemption costs of $18,000, plus
accrued dividends.

REQUIREMENT TO PAY DISTRIBUTIONS: We have operated, and intend to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that we will at all time so
qualify. To the extent that the Company continues to qualify as a REIT, we will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to our shareholders, provided that at least 90% of our taxable
income is so distributed prior to filing of the Company's tax return. We have
satisfied the REIT distribution requirement since 1980.

During the nine months ended September 30, 2002 and 2001, we paid cash
dividends totaling $111,704,000 and $85,508,000, respectively, to the holders of
our Senior Preferred Stock. The amounts paid in 2002 include an aggregate of
$15,101,000 with respect to the Series T and Series U Preferred Stock, which
reflects a payment for a partial period from the date of their respective
issuances. We estimate the regular annual distribution requirements with respect
to our Preferred Stock outstanding at September 30, 2002 to be approximately
$148.1 million, which excludes $12.0 million for our Senior Preferred Stock,
Series J, which we redeemed in October 2002.

During the nine months ended September 30, 2002 and 2001, we paid cash
dividends totaling $20,179,000 and $24,830,000, respectively, to the holders of
our preferred partnership units. The annual distribution requirement with
respect to the preferred partnership units outstanding at September 30, 2002 is
estimated at $26.9 million.

During the nine months ended September 30, 2002 and 2001, we paid cash
dividends totaling $16,126,000 and $14,080,000, respectively, to the holders of
our Equity Stock, Series A. With respect to the depositary shares of Equity
Stock, Series A, we have no obligation to pay distributions if no distributions
are paid to the common shareholders. To the extent that we do pay common
distributions in any year, the holders of the depositary shares receive annual
distributions equal to the lesser of (i) five times the per share dividend on
the common stock or (ii) $2.45. The depositary shares are noncumulative, and
have no preference over our Common Stock either as to dividends or in
liquidation. With respect to the Equity Stock, Series A outstanding at September
30, 2002, we estimate the total annual regular distribution to be approximately
$21.5 million assuming that dividends of at least $0.49 per share per year are
paid to the common shareholders.

During the nine months ended September 30, 2002, we paid dividends
totaling $165,687,000 ($1.35 per common share) to the holders of our common
stock and Class B common stock. Based upon shares outstanding at September 11,
2002 and a quarterly distribution of $0.45 per share which was declared by the
Board of Directors on November 7, 2002 and payable on December 31, 2002, we
estimate dividend payments with respect to our common stock and Class B common
stock of approximately $55.6 million for the fourth quarter of 2002.

We anticipate that, at a minimum, quarterly distributions per common
share will remain at $0.45 per common share. Over the past several years, in
addition to the regular quarterly dividends paid to our common shareholder, we
also paid special distributions. These special distributions were necessary to
meet our distribution requirements in order to maintain our REIT tax status. It
is unlikely that any special distribution will be required to enable the Company
to meet its distribution requirements in 2002.

CAPITAL IMPROVEMENT REQUIREMENTS: For 2002, we have budgeted
approximately $28 million for capital improvements. During the nine months ended
September 30, 2002, we incurred capital improvements of approximately $16.0
million.

DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our notes payable, all of which are fixed
rate. At September 30, 2002, we had total outstanding notes payable of
approximately $121.6 million. Approximate principal maturities of notes payable
at September 30, 2002 are as follows:

Unsecured Senior
Notes Mortgage Debt Total
---------------- --------------- ------------------
(amounts in thousands)

2002 (remainder of)................... $ 4,875 $ 1,135 $ 6,010
2003.................................. 35,900 3,585 39,485
2004.................................. 25,800 15,063 40,863
2005.................................. 11,200 156 11,356
2006.................................. 11,200 170 11,370
Thereafter............................ 11,200 1,298 12,498
---------------- --------------- ------------------
$ 100,175 $ 21,407 $ 121,582
================ =============== ==================

Weighted average rate................. 7.5% 10.2% 8.0%
================ =============== ==================

ACQUISITION OF INTERESTS IN SELF-STORAGE FACILITIES: On January 16,
2002, we acquired the remaining 70% interest in the Development Joint Venture
for approximately $153,078,000 in cash. The Development Joint Venture was formed
in April 1997 with equity capital consisting of 30% from the Company and 70%
from an institutional investor, owns 47 storage facilities opened since 1997. On
April 19, 2002, we acquired through a merger all of the remaining limited
partnership interest not currently owned by the Company in PS Partners V, Ltd.,
a partnership which is consolidated with the Company. The acquisition cost
consisted of approximately 533,796 shares ($20,054,000) of our common stock and
approximately $12,815,000 in cash. On September 19, 2002, we acquired through a
merger all of the remaining limited partnership interest not currently owned by
the Company in PS Partners VI, Ltd., a partnership which is consolidated with
the Company. The acquisition cost consisted of approximately 557,812 shares
($17,850,000) of our common stock and approximately $12,347,000 in cash.

ACQUISITION OF SELF-STORAGE FACILITIES FROM THIRD PARTIES: During the
nine months ended September 30, 2002, we acquired nine self-storage facilities
from third parties for an aggregate acquisition cost of $29,899,000. Our low
level of third-party acquisitions in recent years is not indicative of either
the supply of facilities offered for sale or our ability to finance the
acquisitions, but is primarily due to prices sought by sellers and our lack of
desire to pay such prices. During the remainder of 2002, we will continue to
seek to acquire additional self-storage facilities from third parties; however,
it is difficult to estimate the level of third-party acquisitions.

DEVELOPMENT OF SELF-STORAGE FACILITIES: We anticipate that the cost of
development of self-storage facilities for the year ended December 31, 2002 and
beyond will be approximately $125 million to $150 million per year. We have
utilized two development joint ventures in the past 5 years; we acquired our
partner's interest in January 2002 for one of the development joint ventures,
and the other joint venture is fully committed. However, we believe that it is
unlikely that we will form a development joint venture to fund our current
pipeline described below.

At September 30, 2002, our development "pipeline" consisted of 31
identified projects comprised of new and expansion self-storage facilities.
Total estimated costs with respect to these facilities is approximately $207.5
million, of which $83.1 million has been spent, with opening dates estimated
through the fourth quarter of 2003. The development and fill-up of these storage
facilities is subject to significant contingencies such as obtaining appropriate
governmental approvals. We estimate that the amount remaining to be spent of
approximately $124.4 million on these 31 projects, which will be entirely funded
by the Company, will be incurred over approximately the next 24 months.

Land has been acquired for 24 of the 31 projects. These 24 projects
have an aggregate estimated cost of $156.6 million and costs incurred through
September 30, 2002 of approximately $79.8 million. The remaining 7 facilities
represent identified sites where we have an agreement in place to acquire the
land, generally within one year. However, there are no assurances that we will
acquire and/or develop the land.

The following table sets forth our development pipeline and a range of
estimate opening dates for these projects (dollar amounts in thousands):

Total Estimated Total Cost
Number of Cost of Incurred through Estimated Time Frames
Facilities Development September 30, 2002 of Facility Openings
---------- ------------------ ------------------ --------------------

Development - land acquired at 9/30/02
- --------------------------------------
Self-storage facilities.......................... 18 $ 131,520 $ 71,191 Q4'02 - Q3'03
Expansions of existing self-storage facilities... 6 25,127 8,650 Q4'02 - Q2'03
---------- ------------------ ------------------
Total....................................... 24 156,647 79,841

Potential development - land to be acquired at
- --------------------------------------------------
9/30/02
- -------
Self-storage facilities.......................... 7 50,891 3,291 Q3'03 - Q4'03
---------- ------------------ ------------------
Total................................... 31 $ 207,538 $ 83,132
========== ================== ==================

REPURCHASES OF THE COMPANY'S COMMON STOCK: The Company's Board of
Directors authorized the repurchase from time to time of up to 25,000,000 shares
of our common stock on the open market or in privately negotiated transactions.
From the initial authorization through September 30, 2002, we have repurchased a
total of 21,497,020 shares of common stock at an aggregate cost of approximately
$535.9 million. There have been no substantial repurchases of our common stock
since May 2001.

FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $394,935,000 for the nine months September 30, 2002 compared to $369,815,000
for the same period in 2001. FFO available to common shareholders (after
deducting preferred stock and equity stock dividends) was $267,105,000 for the
nine months ended compared to $270,227,000 for the same period in 2001. FFO is
defined as net income or (loss) (computed in accordance with generally accepted
accounting principles) before: (i) gain or (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain or (loss) on the
disposition of real estate, adjusted as follow: (a) plus depreciation and
amortization (including our pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in a merger,
including property management agreements and goodwill), and (b) less FFO
attributable to minority interest.

FFO is supplemental performance measure for equity REITs as defined by
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The
NAREIT definition does not specifically address the treatment of minority
interest in the determination of FFO or the treatment of the amortization of
property management agreements and goodwill. In our case, FFO represents amounts
attributable to our shareholders after deducting amounts attributable to the
minority interests and before deductions for the amortization of property
management agreements and goodwill. FFO is presented because management, as well
as many industry analysts, consider FFO to be one measure of our performance and
it is used in establishing the terms of the Class B Common Stock. FFO does not
take into consideration capital improvements, scheduled principal payments on
debt, distributions and our other obligations. Accordingly, FFO is not a
substitute for cash flow or net income (as discussed above) as a measure of our
liquidity or operating performance. FFO is not comparable to similarly entitled
items reported by other REITs that do not define it exactly as we have defined
it.

Item 2A. Risk Factors
- -----------------------

In addition to the other information in our Form 10-Q and our Form 10-K
for the year ended December 31, 2001, you should consider the following factors
in evaluating the Company:

The Hughes family could control us.
- -----------------------------------

At September 30, 2002, the Hughes family owned approximately 33.6% of
our outstanding shares of common stock (approximately 37.3% upon conversion of
our class B common stock). Consequently, the Hughes family could control matters
submitted to a vote of our shareholders, including electing directors, amending
our organizational documents, dissolving and approving other extraordinary
transactions, such as a takeover attempt.

Provisions in our organizational documents may prevent changes in control.
- --------------------------------------------------------------------------

Restrictions in our organizational documents may further limit changes
in control. Unless our board of directors waives these limitations, no
shareholder may own more than (1) 2.0% of our outstanding shares of our common
stock or (2) 9.9% of the outstanding shares of each class or series of our
preferred or equity stock. Our organizational documents in effect provide,
however, that the Hughes family may continue to own the shares of our common
stock held by them at the time of a 1995 reorganization. These limitations are
designed, to the extent possible, to avoid a concentration of ownership that
might jeopardize our ability to qualify as a REIT. These limitations, however,
also make a change of control significantly more difficult (if not impossible)
even if it would be favorable to the interests of our public shareholders. These
provisions will prevent future takeover attempts not approved by our board of
directors even if a majority of our public shareholders deem it to be in their
best interests because they would receive a premium for their shares over the
shares' then market value or for other reasons.

Provisions in our organizational documents may prevent changes in control.
- --------------------------------------------------------------------------

You will be subject to the risk that we may not qualify as a REIT. As a
REIT, we must distribute at least 90% of our REIT taxable income to our
shareholders, which include not only holders of our common stock and equity
stock but also holders of our preferred stock. Failure to pay full dividends on
the preferred stock would prevent us from paying dividends on our common stock
and could jeopardize our qualification as a REIT.

For any taxable year that we fail to qualify as a REIT and the relief
provisions do not apply, we would be taxed at the regular rates on all of our
taxable income, whether or not we make any distributions to our shareholders.
Those taxes would reduce the amount of cash available for distribution to our
shareholders or for reinvestment. As a result, our failure to qualify as a REIT
during any taxable year could have a material adverse effect upon us and our
shareholders. Furthermore, unless certain relief provisions apply, we would not
be eligible to elect REIT status again until the fifth taxable year that begins
after the first year for which we fail to qualify.

We may pay some taxes.
- ----------------------

Even if we qualify as a REIT for federal income tax purposes, we are
required to pay some federal, state and local taxes on our income and property.
Several corporate subsidiaries of Public Storage have elected to be treated as
"taxable REIT subsidiaries" of Public Storage for federal income tax purposes
since January 1, 2001. A taxable REIT subsidiary is a fully taxable corporation
and is limited in its ability to deduct interest payments made to us. In
addition, we will be subject to a 100% penalty tax on some payments that we
receive if the economic arrangements among our tenants, our taxable REIT
subsidiaries and us are not comparable to similar arrangements among unrelated
parties. To the extent that Public Storage or any taxable REIT subsidiary is
required to pay federal, state or local taxes, we will have less cash available
for distribution to shareholders.

We would incur a corporate level tax if we sell certain assets.
- ---------------------------------------------------------------

We will generally be subject to a corporate level tax on any net
built-in gain if before November 2005 we sell any of the assets we acquired in a
November 1995 reorganization.

We and our shareholders are subject to financing risks.
- -------------------------------------------------------

Debt increases the risk of loss. In making real estate investments, we
may borrow money, which increases the risk of loss. At September 30, 2002, our
debt of $121.6 million was approximately 2.4% of our total assets.

Certain securities have a liquidation preference over our common stock
and Equity Stock, Series A. If we liquidated, holders of our preferred
securities would be entitled to receive liquidating distributions, plus any
accrued and unpaid distributions, before any distribution of assets to the
holders of our common stock and Equity Stock, Series A. Holders of preferred
securities are entitled to receive, when declared by our board of directors,
cash distributions in preference to holders of our common stock and Equity
Stock, Series A.

Since our business consists primarily of acquiring and operating real estate, we
- --------------------------------------------------------------------------------
are subject to real estate operating risks.
- -------------------------------------------

The value of our investments may be reduced by general risks of real
estate ownership. Since we derive substantially all of our income from real
estate operations, we are subject to the general risks of owning real
estate-related assets, including:

* lack of demand for rental spaces or units in a locale;

* changes in general economic or local conditions;

* changes in supply of or demand for similar or competing facilities
in an area;

* potential terrorist attacks;

* the impact of environmental protection laws;

* changes in interest rates and availability of permanent mortgage
funds which may render the sale or financing of a property
difficult or unattractive; and

* changes in tax, real estate and zoning laws.

There is significant competition among self-storage facilities. Most of
our properties are self-storage facilities, which generated 90% of our total
revenues during the nine months ended September 30, 2002. Competition in the
market areas in which many of our properties are located is significant and has
affected the occupancy levels, rental rates and operating expenses of some of
our properties. Average occupancy levels of the Same Store Facilities has
decreased from 89.6% for the nine months ended September 30, 2001 to 85.3% for
the nine months ended September 30, 2002. Any increase in availability of funds
for investment in real estate may accelerate competition. Further development of
self-storage facilities may intensify competition among operations of
self-storage facilities in the market areas in which we operate.

We may incur significant environmental costs and liabilities. As an
owner and operator of real estate properties, under various federal, state and
local environmental laws, we are required to clean up spills or other releases
of hazardous or toxic substances on or from our properties. Certain
environmental laws impose liability whether or not the owner knew of, or was
responsible for, the presence of the hazardous or toxic substances. In some
cases, liability may not be limited to the value of the property. The presence
of these substances, or the failure to properly remediate any resulting
contamination, also may adversely affect the owner's or operator's ability to
sell, lease or operate its property or to borrow using its property as
collateral.

We have conducted preliminary environmental assessments of most of our
properties (and intend to conduct these assessments in connection with property
acquisitions) to evaluate the environmental condition of, and potential
environmental liabilities associated with, our properties. These assessments
generally consist of an investigation of environmental conditions at the
property (not including soil or groundwater sampling or analysis), as well as a
review of available information regarding the site and publicly available data
regarding conditions at other sites in the vicinity. In connection with these
property assessments, our operations and recent property acquisitions, we have
become aware that prior operations or activities at some facilities or from
nearby locations have or may have resulted in contamination to the soil or
groundwater at these facilities. In this regard, some of our facilities are or
may be the subject of federal or state environment investigations or remedial
actions. We have obtained, with respect to recent acquisitions, and intend to
obtain with respect to pending or future acquisitions, appropriate purchase
price adjustments or indemnifications that we believe are sufficient to cover
any related potential liability. Although we cannot provide any assurance, based
on the preliminary environmental assessments, we believe we have funds available
to cover any liability from environmental contamination or potential
contamination and we are not aware of any environmental contamination of our
facilities material to our overall business, financial condition or results of
operation.

Public Storage has no interest in Canadian mini-warehouses.
- -----------------------------------------------------------

The Hughes family has ownership interest in, and operates,
approximately 38 mini-warehouses in Canada under the name "Public Storage."
Public Storage personnel are engaged at the expense of the Canadian owners, in
the supervision of the operation of these properties. Public Storage has a right
of first refusal to acquire the stock or assets of the corporation engaged in
these operations if the Hughes family or the corporation agree to sell them.
However, Public Storage has no interest in the operations of this corporation,
has no right to acquire this stock or assets unless the Hughes family decides to
sell and receives no benefit from the profits and increases in value of the
Canadian mini-warehouses. There may be conflicts of interest in allocating the
time of Public Storage personnel between Public Storage's properties and the
Canadian properties.

Our portable self-storage business has incurred operating losses.
- -----------------------------------------------------------------

Public Storage Pickup & Delivery was organized in 1996 to operate a
portable self-storage business. We own all of the economic interest of Pickup &
Delivery. Since Pickup & Delivery will operate profitably only if it can succeed
in the relatively new field of portable self-storage, we cannot provide any
assurance as to its profitability. Pickup & Delivery incurred operating losses
(including discontinued operations) of $5,135,000 in 2000 and $2,218,000 in
2001. For the three and nine months ended September 30, 2002, (excluding
discontinued operations) Pickup & Delivery had operating income totaling
approximately $684,000 and $2,277,000, respectively, compared to an operating
profit of $495,000 and an operating loss of $679,000 for the same periods in
2001. Pickup & Delivery had an operating loss from discontinued operations
totaling approximately $5,302,000 and $6,951,000 for the three and nine months
ended September 30, 2002, respectively, as compared to $67,000 and $431,000 for
the same periods in 2001.

Item 3. Qualitative and Quantitative Disclosures about Market Risk
- -------------------------------------------------------------------

To limit our exposure to market risk, we principally finance our
operations and growth with permanent equity capital, consisting of either common
or preferred stock. At September 30, 2002, our debt as a percentage of total
shareholders' equity (based on book values) was 2.8%.

Our preferred stock is not redeemable by the holders. Except under
certain conditions relating to our qualification as a REIT, we may not redeem
the Senior Preferred Stock prior to the following dates: Series B - March 31,
2003, Series C - June 30, 1999, Series D - September 30, 2004, Series E -
January 31, 2005, Series F - April 30, 2005, Series J - August 31, 2002, Series
K - January 19, 2004, Series L - March 10, 2004, Series M - August 17, 2004,
Series Q - January 19, 2006, Series R - September 28, 2006, Series S - October
31, 2006, Series T - January 18, 2007, Series U - February 19, 2007 and Series V
- - September 30, 2007. On or after the respective dates, each of the series of
Senior Preferred Stock will be redeemable (The Series C and Series J are
presently redeemable) at our option, in whole or in part, at $25 per share (or
depositary share in the case of the Series J through Series V), plus accrued and
unpaid dividends. The Series J Preferred Stock was redeemed on October 7, 2002.

Our market risk sensitive instruments include notes payable, which
totaled $121.6 million at September 30, 2002. Substantially all of the Company's
notes payable bear interest at fixed rates. See "Item 2" - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources for approximate principal maturities of the
notes payable as of September 30, 2002.

Item 4. Controls and Procedures
- --------------------------------

The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in reports the
Company files and submits under 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 the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure based on the definition
of "disclosure controls and procedures" in Rule 13a-14(c) 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. Also, the Company has investments in certain unconsolidated
entities. As the Company does not control or manage these entities, its
disclosure controls and procedures with respect to such entities are
substantially more limited than those it maintains with respect to its
consolidated subsidiaries.

Within 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and the
Company's Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based upon this
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date of the Company's evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
- ------- -----------------

Salaam, et. Al V. Public Storage, Inc. (filed February 2000).
-------------------------------------------------------------

The plaintiffs in this case are suing the Company on behalf of a
purported class of California resident property managers who claim that
they were not compensated for all the hours they worked. The named
plaintiffs have indicated that their claims total less than $20,000 in
aggregate. This maximum potential liability can only be increased if a
class is certified or if claims are permitted to be brought on behalf
of the others under the California Unfair Business Practices Act. The
plaintiffs' motion for class certification was denied in August 2002;
the plaintiffs have appealed this denial.

The Company is continuing to vigorously contest the claims in this case
and intends to resist any expansion beyond the named plaintiffs on the
grounds of lack of commonality of claims. The Company's resistance will
include opposing the plaintiffs' appeal of the court's denial of class
certification.

The Company is a party to various claims, complaints, and other legal
actions that have arisen in the normal course of business from time to time. We
believe that the outcome of these other pending legal proceedings, in the
aggregate, will not have a material adverse effect upon the operations or
financial position of the Company.

Item 5. Other Items
- ----------------------

On November 7, 2002, B. Wayne Hughes resigned as Chief Executive
Officer of the Company. He intends to continue as Chairman of the Board.

On November 7, 2002, the board of directors elected Ronald L. Havner,
Jr., age 45, as Vice Chairman and Chief Executive Officer of the Company. Mr.
Havner has been employed by the Company in various accounting and operational
capacities since 1986 and served as Senior Vice President and Chief Financial
Officer of the Company from November 1991 until December 1996 when be became
Chairman, President and Chief Executive Officer of PS Business Parks, Inc.
(AMEX: symbol PSB) an affiliate of the Company.

He is a member of the National Association of Real Estate Investment
Trusts (NAREIT) and the Urban Land Institute (ULI) and a Director of Business
Machine Security, Inc. and Mobile Storage Group, Inc. Mr. Havner earned a
Bachelor of Arts degree in Economics from the University of California, Los
Angeles.

On November 7, 2002, the board of directors of the Company amended the
Company's Bylaws (i) to increase the authorized number of directors from 10 to
11 and (ii) to increase the flexibility of the board to designate a chief
executive officer of the Company.

Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------

(a) Exhibits:

3.1 Restated Articles of Incorporation. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.

3.2 Certificate of Determination for the 10% Cumulative Preferred
Stock, Series A. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.

3.3 Certificate of Determination for the 9.20% Cumulative
Preferred Stock, Series B. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.

3.4 Amendment to Certificate of Determination for the 9.20%
Cumulative Preferred Stock, Series B. Filed with Registrant's
Registration Statement No. 33-56925 and incorporated herein by
reference.

3.5 Certificate of Determination for the 8.25% Convertible
Preferred Stock. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.

3.6 Certificate of Determination for the Adjustable Rate
Cumulative Preferred Stock, Series C. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.

3.7 Certificate of Determination for the 9.50% Cumulative
Preferred Stock, Series D. Filed with Registrant's Form 8-A/A
Registration Statement relating to the 9.50% Cumulative
Preferred Stock, Series D and incorporated herein by
reference.

3.8 Certificate of Determination for the 10% Cumulative Preferred
Stock, Series E. Filed with Registrant's Form 8-A/A
Registration Statement relating to the 10% Cumulative
Preferred Stock, Series E and incorporated herein by
reference.

3.9 Certificate of Determination for the 9.75% Cumulative
Preferred Stock, Series F. Filed with Registrant's Form 8-A/A
Registration Statement relating to the 9.75% Cumulative
Preferred Stock, Series F and incorporated herein by
reference.

3.10 Certificate of Determination for the Convertible Participating
Preferred Stock. Filed with Registrant's Registration
Statement No. 33-63947 and incorporated herein by reference.

3.11 Certificate of Amendment of Articles of Incorporation. Filed
with Registrant's Registration Statement No. 33-63947 and
incorporated herein by reference.

3.12 Certificate of Determination for the 8-7/8% Cumulative
Preferred Stock, Series G. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-7/8% Cumulative Preferred
Stock, Series G and incorporated herein by reference.

3.13 Certificate of Determination for the 8.45% Cumulative
Preferred Stock, Series H. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.45% Cumulative Preferred
Stock, Series H and incorporated herein by reference.

3.14 Certificate of Determination for the Convertible Preferred
Stock, Series CC. Filed with Registrant's Registration
Statement No. 333-03749 and incorporated herein by reference.

3.15 Certificate of Correction of Certificate of Determination for
the Convertible Participating Preferred Stock. Filed with
Registrant's Registration Statement No. 333-08791 and
incorporated herein by reference.

3.16 Certificate of Determination for 8-5/8% Cumulative Preferred
Stock, Series I. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-5/8% Cumulative Preferred
Stock, Series I and incorporated herein by reference.

3.17 Certificate of Amendment of Articles of Incorporation. Filed
with Registrant's Registration Statement No. 333-18395 and
incorporated herein by reference.

3.18 Certificate of Determination for Equity Stock, Series A. Filed
with Registrant's Form 10-Q for the quarterly period ended
June 30, 1997 and incorporated herein by reference.

3.19 Certificate of Determination for Equity Stock, Series AA.
Filed with Registrant's Form 10-Q for the quarterly period
ended September 30, 1999 and incorporated herein by reference.

3.20 Certificate Decreasing Shares Constituting Equity Stock,
Series A. Filed with Registrant's Form 10-Q for the quarterly
period ended September 30, 1999 and incorporated herein by
reference.

3.21 Certificate of Determination for Equity Stock, Series A. Filed
with Registrant's Form 10-Q for the quarterly period ended
September 30, 1999 and incorporated herein by reference.

3.22 Certificate of Determination for 8% Cumulative Preferred
Stock, Series J. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8% Cumulative Preferred
Stock, Series J and incorporated herein by reference.

3.23 Certificate of Correction of Certificate of Determination for
the 8.25% Convertible Preferred Stock. Filed with Registrant's
Registration Statement No. 333-61045 and incorporated herein
by reference.

3.24 Certificate of Determination for 8-1/4% Cumulative Preferred
Stock, Series K. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depostary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred
Stock, Series K and incorporated herein by reference.

3.25 Certificate of Determination for 8-1/4% Cumulative Preferred
Stock, Series L. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred
Stock, Series L and incorporated herein by reference.

3.26 Certificate of Determination for 8.75% Cumulative Preferred
Stock, Series M. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.75% Cumulative Preferred
Stock, Series M and incorporated herein by reference.

3.27 Certificate of Determination for Equity Stock, Series AAA.
Filed with Registrant's Current Report on Form 8-K dated
November 15, 1999 and incorporated herein by reference.

3.28 Certificate of Determination for 9.5% Cumulative Preferred
Stock, Series N. Filed with Registrant's Annual Report on Form
10-K for the year ended December 31, 1999 and incorporated
herein by reference.

3.29 Certificate of Determination for 9.125% Cumulative Preferred
Stock, Series O. Filed with Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2000 and
incorporated herein by reference.

3.30 Certificate of Determination for 8.75% Cumulative Preferred
Stock, Series P. Filed with Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2000 and
incorporated herein by reference.

3.31 Certificate of Determination for 8.600% Cumulative Preferred
Stock, Series, Q. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.600% Cumulative Preferred
Stock, Series Q and incorporated herein by reference.

3.32 Amendment to Certificate of Determination for Equity Stock,
Series A. Filed with Registrant's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2001 and
incorporated herein by reference.

3.33 Certificate of Determination for 8.000% Cumulative Preferred
Stock, Series R. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 8.000% Cumulative Preferred Stock,
Series R and incorporated herein by reference.

3.34 Certificate of Determination for 7.875% Cumulative Preferred
Stock, Series S. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.875% Cumulative Preferred Stock,
Series S and incorporated herein by reference.

3.35 Certificate of Determination for 7.625% Cumulative Preferred
Stock, Series T. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
Series T and incorporated herein by reference.

3.36 Certificate of Determination for 7.625% Cumulative Preferred
Stock, Series U. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
Series U and incorporated herein by reference.

3.37 Amendment to Certificate of Determination for 7.625%
Cumulative Preferred Stock, Series T. Filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2002. Filed herewith.

3.38 Certificate of Determination for 7.500% Cumulative Preferred
Stock, Series V. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.500% Cumulative Preferred Stock,
Series V and incorporated herein by reference.

3.39 Bylaws, as amended. Filed with Registrant's Registration
Statement No. 33-64971 and incorporated herein by reference.

3.40 Amendment to Bylaws adopted on May 9, 1996. Filed with
Registrant's Registration Statement No. 333-03749 and
incorporated herein by reference.

3.41 Amendment to Bylaws adopted on June 26, 1997. Filed with
Registrant's Registration Statement No. 333-41123 and
incorporated herein by reference.

3.42 Amendment to Bylaws adopted on January 6, 1998. Filed with
Registrant's Registration Statement No. 333-41123 and
incorporated herein by reference.

3.43 Amendment to Bylaws adopted on February 10, 1998. Filed with
Registrant's Current Report on Form 8-K dated February 10,
1998 and incorporated herein by reference.

3.44 Amendment to Bylaws adopted on March 4, 1999. Filed with
Registrant's Current Report on Form 8-K dated March 4, 1999
and incorporated herein by reference.

3.45 Amendment to Bylaws adopted on May 6, 1999. Filed with
Registrants' Form 10-Q for the quarterly period ended March
31, 1999 and incorporated herein by reference.

3.46 Amendment to Bylaws adopted on November 7, 2002. Filed
herewith.

10.1 Second Amended and Restated Management Agreement by and among
Registrant and the entities listed therein dated as of
November 16, 1995. Filed with PS Partners, Ltd.'s Annual
Report on Form 10-K for the year ended December 31, 1996 and
incorporated herein by reference.

10.2 Amended Management Agreement between Registrant and Public
Storage Commercial Properties Group, Inc. dated as of February
21, 1995. Filed with Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein
by reference.

10.3 Loan Agreement between Registrant and Aetna Life Insurance
Company dated as of July 11, 1988. Filed with Registrant's
Current Report on Form 8-K dated July 14, 1988 and
incorporated herein by reference.

10.4 Amendment to Loan Agreement between Registrant and Aetna Life
Insurance Company dated as of September 1, 1993. Filed with
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.

10.5 Second Amended and Restated Credit Agreement by and among
Registrant, Wells Fargo Bank, National Association, as agent,
and the financial institutions party thereto dated as of
February 25, 1997. Filed with Registrant's Registration
Statement No. 333-22665 and incorporated herein by reference.

10.6 Note Assumption and Exchange Agreement by and among Public
Storage Management, Inc., Public Storage, Inc., Registrant and
the holders of the notes dated as of November 13, 1995. Filed
with Registrant's Registration Statement No. 33-64971 and
incorporated herein by reference.

10.7 Registrant's 1990 Stock Option Plan. Filed with Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994 and incorporated herein by reference.

10.8* Registrant's 1994 Stock Option Plan. Filed with Registrant's
Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference.

10.9* Registrant's 1996 Stock Option and Incentive Plan. Filed with
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000 and incorporated herein by reference.

10.10 Deposit Agreement dated as of December 13, 1995, among
Registrant, The First National Bank of Boston, and the holders
of the depositary receipts evidencing the Depositary Shares
Each Representing 1/1,000 of a Share of 8-7/8% Cumulative
Preferred Stock, Series G. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-7/8% Cumulative Preferred
Stock, Series G and incorporated herein by reference.

10.11 Deposit Agreement dated as of January 25, 1996, among
Registrant, The First national Bank of Boston, and the holders
of the depositary receipts evidencing the Depositary Shares
Each Representing 1/1,000 of a Share of 8.45% Cumulative
Preferred Stock, Series H. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.45% Cumulative Preferred
Stock, Series H and incorporated herein by reference.

10.12** Employment Agreement between Registrant and B. Wayne Hughes
dated as of November 16, 1995. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31,1995 and
incorporated herein by reference.

10.13 Deposit Agreement dated as of November 1, 1996, among
Registrant, The First National Bank of Boston, and the holders
of the depositary receipts evidencing the Depositary Shares
Each Representing 1/1,000 of a Share of 8-5/8% Cumulative
Preferred Stock, Series I. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-5/8% Cumulative Preferred
Stock, Series I and incorporated herein by reference.

10.14 Limited Partnership Agreement of PSAF Development Partners,
L.P. between PSAF Development, Inc. and the Limited Partner
dated as of April 10, 1997. Filed with Registrant's Form 10-Q
for the quarterly period ended March 31, 1997 and incorporated
herein by reference.

10.15 Deposit Agreement dated as of August 28, 1997 among
Registrant, The First National Bank of Boston, and the holders
of the depositary receipts evidencing the Depositary Shares
Each Representing 1/1,000 of a Share of 8% Cumulative
Preferred Stock, Series J. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8% Cumulative Preferred
Stock, Series J and incorporated herein by reference.

10.16 Agreement of Limited Partnership of PS Business Parks, L.P.
dated as of March 17, 1998. Filed with PS Business Parks,
Inc.'s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998 and incorporated herein by reference.

10.17 Deposit Agreement dated as of January 19, 1999 among
Registrant, BankBoston, N.A. and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series K. Filed with Registrant's Form 8-A/A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series K and incorporated herein by reference.

10.18 Agreement and Plan of Merger among Storage Trust Realty,
Registrant and Newco Merger Subsidiary, Inc. dated as of
November 12, 1998. Filed with Registrant's Registration
Statement No. 333-68543 and incorporated herein by reference.

10.19 Amendment No. 1 to Agreement and Plan of Merger among Storage
Trust Realty, Registrant, Newco Merger Subsidiary, Inc. and
STR Merger Subsidiary, Inc. dated as of January 19, 1999.
Filed with registrant's Registration Statement No. 333-68543
and incorporated herein by reference.

10.20 Amended and Restated Agreement of Limited Partnership of
Storage Trust Properties, L.P., dated as of March 12, 1999.
Filed with Registrant's Form 10-Q for the quarterly period
ended June 30, 1999 and incorporated herein by reference.

10.21* Storage Trust Realty 1994 Share Incentive Plan. Filed with
Storage Trust Realty's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.

10.22 Amended and Restated Storage Trust Realty Retention Bonus Plan
effective as of November 12, 1998. Filed with Registrant's
Registration Statement No. 333-68543 and incorporated herein
by reference.

10.23 Deposit Agreement dated as of March 10, 1999 among Registrant,
BankBoston, N.A. and the holders of the depositary receipts
evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-1/4% Cumulative Preferred Stock, Series L. Filed
with Registrant's Form 8-A/A Registration Statement relating
to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-1/4% Cumulative Preferred Stock, Series L and
incorporated herein by reference.

10.24 Note Purchase Agreement and Guaranty Agreement with respect to
$100,000,000 of Senior Notes of Storage Trust Properties, L.P.
Filed with Storage Trust Realty's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein
by reference.

10.25 Deposit Agreement dated as of August 17, 1999 among
Registrant, BankBoston, N.A. and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 8.75% Cumulative Preferred Stock, Series
M. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of
a Share of 8.75% Cumulative Preferred Stock, Series M and
incorporated herein by reference.

10.26 Limited Partnership Agreement of PSAC Development Partners,
L.P. among PS Texas Holdings, Ltd., PS Pennsylvania Trust and
PSAC Storage Investors, L.L.C. dated as November 15, 1999.
Filed with Registrant's Current Report on Form 8-K dated
November 15, 1999 and incorporated herein by reference.

10.27 Agreement of Limited Liability Company of PSAC Storage
Investors, L.L.C. dated as of November 15, 1999. Filed with
Registrant's Current Report on Form 8-K dated November 15,
1999 and incorporated herein by reference.

10.28 Deposit Agreement dated as of January 14, 2000 among
Registrant, BankBoston, N.A. and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of Equity Stock, Series A. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1,000 of a Share of
Equity Stock, Series A and incorporated herein by reference.

10.29 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. among PS Texas Holdings, Ltd. and
the Limited Partners dated as of March 29, 2000. Filed with
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference.

10.30 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. among PS Texas Holdings, Ltd. and
the Limited Partners dated as of August 11, 2000. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000 and incorporated herein by
reference.

10.31* Registrant's 2000 Non-Executive/Non-Director Stock Option and
Incentive Plan. Filed with Registrant's Registration Statement
No, 333-52400 and incorporated herein by reference.

10.32 Deposit Agreement dated as of January 19, 2001 among
Registrant, Fleet National Bank and the holders of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 8.600% Cumulative Preferred
Stock, Series Q. Filed with Registrant's Form 8-A/A
Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.600% Cumulative Preferred
Stock, Series Q and incorporated herein by reference.

10.33* Registrant's 2001 Non-Executive/Non-Director Stock Option and
Incentive Plan. Filed with Registrant's Registration Statement
No. 333-59218 and incorporated herein by reference.

10.34* Registrant's 2001 Stock Option and Incentive Plan. Filed with
Registrant's Registration Statement No. 333-59218 and
incorporated herein by reference.

10.35 Deposit Agreement dated as of September 28, 2001 among
Registrant, Fleet National Bank and the holders of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 8.000% Cumulative Preferred
Stock, Series R. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 8.000% Cumulative Preferred Stock,
Series R and incorporated herein by reference.

10.36 Deposit Agreement dated as of October 31, 2001 among
Registrant, Fleet National Bank and the holder of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 7.875% Cumulative Preferred
Stock, Series S. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.875% Cumulative Preferred Stock,
Series S and incorporated herein by reference.

10.37 Credit Agreement by and among Registrant, Wells Fargo Bank,
National Association, as agent, and the financial institutions
party thereto dated as of November 1, 2001. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2001 and incorporated herein by
reference.

10.38 Deposit Agreement dated as of January 18, 2002 among
Registrant, Fleet National Bank and the holders of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 7.625% Cumulative Preferred
Stock, Series T. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
Series T and incorporated herein by reference.

10.39 Deposit Agreement dated as of February 19, 2002 among
Registrant, Fleet National Bank and the holders of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 7.625% Cumulative Preferred
Stock, Series U. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
Series U and incorporated herein by reference.

10.40 Deposit Agreement dated as of September 30, 2002 among
Registrant, Fleet National Bank and the holders of the
depositary receipts evidencing the Depositary Shares Each
Representing 1/1,000 of a Share of 7.500% Cumulative Preferred
Stock, Series V. Filed with Registrant's Form 8-A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000 of a Share of 7.500% Cumulative Preferred Stock,
Series V and incorporated herein by reference.

11 Statement Re: Computation of Ratio of Earnings Per Share.
Filed herewith.

12 Statement Re: Computation of Ratio of Earnings to Fixed
Charges. Filed herewith.

99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. Filed herewith.

99.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.

99.3 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.

99.4 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.

99.5 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.

---------------------
* Compensatory benefit plan.
** Management contract.

(b) Reports on Form 8-K

None.

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.

DATED: November 14, 2002

PUBLIC STORAGE, INC.

By: /s/ John Reyes
John Reyes
Senior Vice President and Chief
Financial Officer (Principal financial
officer and duly authorized officer)