SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2005 or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File Number: 1-8389
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PUBLIC STORAGE, INC.
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(Exact name of Registrant as specified in its charter)
California 95-3551121
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( State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2349
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Depositary Shares Each Representing 1/1,000 of a Share of 8.000% Cumulative
Preferred Stock, Series R, $.01 par value.................................. New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.875% Cumulative
Preferred Stock, Series S, $.01 par value.................................. New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.625% Cumulative
Preferred Stock, Series T, $.01 par value.................................. New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.625% Cumulative
Preferred Stock, Series U, $.01 par value.................................. New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.500% Cumulative
Preferred Stock, Series V $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.500% Cumulative
Preferred Stock, Series W $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.450% Cumulative
Preferred Stock, Series X $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.250% Cumulative
Preferred Stock, Series Z $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.125% Cumulative
Preferred Stock, Series A $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.125% Cumulative
Preferred Stock, Series B $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.600% Cumulative
Preferred Stock, Series C $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.180% Cumulative
Preferred Stock, Series D $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.750% Cumulative
Preferred Stock, Series E $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.450% Cumulative
Preferred Stock, Series F $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 7.000% Cumulative
Preferred Stock, Series G $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 6.950% Cumulative
Preferred Stock, Series H $.01 par value................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series A,
$.01 par value............................................................. New York Stock Exchange
Common Stock, $.10 par value.................................................... New York Stock Exchange,
Pacific Exchange
1
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Large Accelerated Filer [X] Accelerated Filer [ ] Non-accelerated
Filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Registrant as of June 30, 2005:
Common Stock, $0.10 Par Value - $5,146,400,000 (computed on the basis of
$63.25per share which was the reported closing sale price of the Company's
Common Stock on the New York Stock Exchange on June 30, 2005).
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
A, $.01 Par Value - $209,493,000 (computed on the basis of $28.35 per share
which was the reported closing sale price of the Depositary Shares each
Representing 1/1,000 of a Share of Equity Stock, Series A on the New York Stock
Exchange on June 30, 2005).
The number of shares outstanding of the registrant's classes of common stock as
of March 14, 2006:
Common Stock, $.10 Par Value - 129,306,139 shares
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
A, $.01 Par Value - 8,744,193 depositary shares (representing 8,744.193 shares
of Equity Stock, Series A)
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
PART I
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ITEM 1. Business
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Forward Looking Statements
All statements in this document, other than statements of historical
fact, are forward-looking statements which may be identified by the use of the
words "expects," "believes," "anticipates," "should," "estimates" and similar
expressions. These forward-looking statements involve known and unknown risks
and uncertainties, which may cause our actual results and performance to be
materially different from those expressed or implied in the forward-looking
statements. Factors and risks that may impact future results and performance are
described in Item 1A, "Risk Factors". These risks include, but are not limited
to, the following: changes in general economic conditions and in the markets in
which we operate; the impact of competition from new and existing storage and
commercial facilities and other storage alternatives, which could impact rents
and occupancy levels at our facilities; difficulties in our ability to evaluate,
finance and integrate acquired and developed properties into our existing
operations and to fill up those properties, which could adversely affect our
profitability; the impact of the regulatory environment as well as national,
state, and local laws and regulations including, without limitation, those
governing Real Estate Investment Trusts, which could increase our expenses and
reduce cash available for distribution; consumers' failure to accept the
containerized storage concept which would reduce our profitability; difficulties
in raising capital at reasonable rates, which would impede our ability to grow;
delays in the development process, which could adversely affect profitability;
economic uncertainty due to the impact of war or terrorism could adversely
affect our business plan; and risks related to our agreement to acquire Shurgard
Storage Centers, Inc. including, among others, difficulties encountered in
integrating the companies, approval of the transaction by the shareholders of
the companies, the satisfaction of closing conditions to the transaction,
inability to realize the expected synergies, unanticipated operating costs and
the effects of general and local economic and real estate conditions. We
disclaim any obligation to update publicly or otherwise revise any
forward-looking statements, whether as a result of new information, new
estimates, or other factors, events or circumstances after the date of this
document, except where expressly required by law.
General
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Public Storage, Inc. (the "Company" or "we" or "our") is an equity real
estate investment trust ("REIT") organized as a corporation under the laws of
California on July 10, 1980. We are a fully integrated, self-administered and
self-managed REIT that acquires, develops, owns and operates self-storage
facilities. We are the largest owner and operator of self-storage space in the
United States with direct and indirect equity investments in 1,501 self-storage
facilities containing approximately 92 million square feet of net rentable space
at December 31, 2005. Our common stock is traded on the New York Stock Exchange
under the symbol "PSA". We also have a 44% ownership interest in PS Business
Parks, Inc., which, as of December 31, 2005, owned and operated commercial
properties containing approximately 17.6 million net rentable square feet of
space. PS Business Parks, Inc. is a publicly traded REIT whose common stock
trades on the American Stock Exchange under the symbol "PSB."
We have elected to be taxed as a REIT under the Internal Revenue Code
of 1986, as amended. To the extent that we continue to qualify as a REIT, we
will not be subject to tax, with certain limited exceptions, on the taxable
income that is distributed to our shareholders.
We have reported annually to the Securities and Exchange Commission
("SEC") on Form 10-K, which includes financial statements certified by
independent public accountants. We have also reported quarterly to the SEC on
Form 10-Q, which included unaudited financial statements with such filings. We
expect to continue such reporting.
Our website is www.publicstorage.com, and we make available free of
charge on our website our reports on Forms 10-K, 10-Q, and 8-K, and all
amendments to those reports as soon as reasonably practicable after the reports
and amendments are electronically filed with or furnished to the SEC.
3
Management
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Ronald L. Havner, Jr. (48) has been vice chairman, chief executive
officer and a director of the Company since November 7, 2002 and President since
July 1, 2005. Mr. Havner joined Public Storage, Inc. in 1986 and has held a
variety of positions, including Chairman of the Board of Directors for the
Company's affiliate, PS Business Parks, Inc., a position he has held since March
1998.
B. Wayne Hughes (72) is Chairman of the Board of Directors, a position
he has held since 1991. Mr. Hughes established the Public Storage organization
in 1972 and has managed the Company through several market cycles.
Our executive management team and their years of experience with the
Company are as follows: John Reyes (45), Senior Vice President - Chief Financial
Officer, 15 years; John S. Baumann (45), Senior Vice President - Chief Legal
Officer, who joined the Company in June 2003; John E. Graul (54), Senior Vice
President and President, Self-Storage Operations, who joined the Company in
February 2004 and David F. Doll (47), Senior Vice President and President, Real
Estate Group, who joined the Company in February 2005.
Our senior management has a significant ownership position in the
Company with executive officers, directors and their families owning
approximately 47 million shares or 36% of the common stock as of March 1, 2006.
Investment Objective
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Our primary objective is to increase shareholder value through internal
growth (by increasing net income, funds from operations and cash available for
distribution) and acquisitions of additional real estate investments and
development of real estate facilities. We believe that our access to capital,
geographic diversification and operating efficiencies resulting from our size
will enhance our ability to achieve this objective.
Competition
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Competition in the market areas in which we operate is significant and
affects the occupancy levels, rental rates and operating expenses of our
facilities. Development of new self-storage facilities has intensified the
competition among storage operators in many market areas in which we operate.
In seeking investments, we compete with a wide variety of institutions
and other investors. The increase in the amount of funds available for real
estate investments has increased competition for ownership interests in
facilities and may reduce yields on acquisitions.
We believe that the significant operating and financial experience of
our executive officers and directors, combined with the Company's conservative
capital structure, national investment scope, geographic diversity, economies of
scale and the "Public Storage" brand name, should enable us to compete
effectively with other entities.
In recent years consolidation has occurred in the fragmented
self-storage industry. In addition to the Company, there are other publicly
traded REITs and numerous private regional and local operators operating in the
self-storage industry. We believe that we are well positioned to capitalize on
this consolidation trend due to our demonstrated access to capital and national
presence.
4
Business Attributes
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We believe that the Company possesses several primary business
attributes that permit us to compete effectively:
COMPREHENSIVE DISTRIBUTION SYSTEM AND NATIONAL TELEPHONE RESERVATION
SYSTEM: Our facilities are part of a comprehensive distribution system
encompassing standardized procedures, integrated reporting and information
networks and centralized marketing. During 2003 and 2004, we implemented an
upgraded information system platform, which has enabled us to more quickly adapt
our pricing and marketing efforts to changing market conditions. This
distribution system, among other benefits, is designed to maximize revenue and
occupancy levels through automated pricing.
A significant component of our distribution system is our national
telephone reservation center, which provides added customer service and helps to
maximize utilization of available self-storage space. Customers calling either
the toll-free telephone referral system, (800) 44-STORE, or a storage facility,
are directed to the national reservation system. A representative discusses with
the customer space requirements, price and location preferences and also informs
the customer of other products and services provided by the Company and its
subsidiaries. We believe that the national telephone reservation system enhances
our ability to market storage space.
ECONOMIES OF SCALE: We are the largest provider of self-storage space
in the industry. As of December 31, 2005, we operated 1,501 storage facilities
in which we had an interest and managed 27 self-storage facilities for third
parties. These facilities are in markets within 37 states. At December 31, 2005,
we had over 770,000 spaces rented. The size and scope of our operations have
enabled us to achieve a high level of profit margins and low level of
administrative costs relative to revenues.
Our size in many markets has enabled us to market efficiently using
television as a media source. We believe the high cost of television makes it
impractical for our competitors to use this form of media without the high
concentration of facilities in markets.
BRAND NAME RECOGNITION: Our operations are conducted under the "Public
Storage" brand name, which we believe is the most recognized and established
name in the self-storage industry. Our storage operations are conducted in 37
states, giving us national recognition and prominence. We focus our operations
within those states in the major metropolitan markets. This concentration
establishes us as one of the largest providers of self-storage space in
virtually all markets that we operate in and enables us to use a variety of
promotional activities, such as television advertising as well as targeted
discounting and referrals which are generally not economically viable for most
of our competitors.
RETAIL OPERATIONS: Through a taxable REIT subsidiary, we have
historically sold retail items associated with the storage business and rented
trucks at our storage facilities. In order to supplement and strengthen the
existing self-storage business by further meeting the needs of storage
customers, we continue to expand our retail activities.
In addition, full-service retail stores have been retrofitted to some
existing storage facility rental offices or "built-in" as part of the
development of new storage facilities, both in high traffic, high visibility
locations. The strategic objective of these retail stores is to provide a retail
environment to (i) rent spaces for the attached storage facility, (ii) rent
spaces for the other Public Storage facilities in adjacent neighborhoods, (iii)
sell locks, boxes and packing materials and (iv) rent trucks and other moving
equipment.
TENANT INSURANCE PROGRAM: On December 31, 2001, we purchased all of the
capital stock of PS Insurance Company, Ltd. ("PSIC"), from Mr. Hughes and
members of his family. PSIC reinsures policies issued to our tenants against
lost or damaged goods stored by tenants in our storage facilities. This
subsidiary receives the premiums and bears the risks associated with the
re-insurance. We believe that this insurance operation further supplements and
strengthens the existing self-storage business and provides an additional source
of earnings for the Company.
5
Growth and Investment Strategies
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Our growth strategies consist of: (i) improving the operating
performance of our existing traditional self-storage properties, (ii) acquiring
interests in properties that are owned or operated by others, (iii) expanding
and repackaging existing real estate facilities, (iv) developing properties in
selected markets and (v) participating in the growth of commercial facilities
owned primarily by PS Business Parks, Inc. These strategies are described as
follows:
IMPROVE THE OPERATING PERFORMANCE OF EXISTING PROPERTIES: We seek to
increase the net cash flow generated by our existing self-storage properties by
a) regularly evaluating our call volume, reservation activity, and
move-in/move-out rates for each of our properties relative to our marketing
activities, b) evaluating market supply and demand factors and, based upon these
analyses, adjusting our marketing activities and rental rates, c) attempting to
maximize revenues through evaluating the appropriate balance between occupancy,
rental rates, and promotional discounting and d) controlling expense levels. We
believe that our property management personnel and systems, combined with the
national telephone reservation system, will continue to enhance our ability to
meet these goals.
ACQUIRE PROPERTIES OWNED OR OPERATED BY OTHERS: We believe our presence
in and knowledge of substantially all of the major markets in the United States
enhances our ability to identify attractive acquisition opportunities and
capitalize on the overall fragmentation in the self-storage industry. We
maintain local market information on rates, occupancy and competition in each of
the markets in which we operate. During 2004 and 2005, we acquired interests in
77 self-storage facilities from third parties at an aggregate cost of
approximately $514.0 million. In addition, between January 1, 2006 and March 15,
2006, we acquired three additional self-storage facilities from third parties
(total net rentable square feet of 170,000) at an aggregate cost of
approximately $20.0 million and we currently are under contract to purchase
seven self-storage facilities (total net rentable square feet of 574,000) at an
aggregate cost of approximately $69.4 million.
EXPAND AND REPACKAGE EXISTING REAL ESTATE FACILITIES: We have a
substantial number of facilities that were developed and constructed 20 or more
years ago based upon local competitive and demographic conditions in place at
that time. Since such conditions may have changed, there are opportunities to
expand and further invest into our existing self-storage locations, either by
improving their visual and structural appeal, or by expanding these facilities
at a per square foot cost that is typically less than the cost incurred in
developing a new location. In addition, there are opportunities to convert
existing vacant space previously used by our containerized storage facilities
into traditional self-storage space. During 2003, 2004, and 2005, we have
invested a total of approximately $96 million in such expansion, conversion, and
repackaging activities. At December 31, 2005, we have identified 58 such
projects to expand or repackage our existing facilities, and to convert the
vacant space previously used by the discontinued containerized storage
facilities, for an aggregate of approximately $262 million, which will add an
aggregate of approximately 3,573,000 net rentable square feet. Completion of
these projects is subject to contingencies, including obtaining governmental
agency approvals. We continue to evaluate our existing real estate portfolio to
identify additional expansion and repackaging opportunities.
DEVELOP PROPERTIES IN SELECTED MARKET: Since 1995, the Company and its
joint venture partnerships (described below in "Financing of the Company's
Growth Strategies") have opened a total of 146 facilities. During 2005, these
facilities contributed significantly to the growth in our earnings as they
continued to gain occupancy and grow their revenues. We expect that these
facilities will continue to provide growth to our earnings into 2006. As of
December 31, 2005, we have a development "pipeline" of four newly-developed
self-storage facilities with an aggregate estimated cost of approximately $61.2
million, and an aggregate of 338,000 net rentable square feet. Development of
these facilities is subject to significant contingencies such as obtaining
appropriate governmental agency approvals. In 2004 and 2005, our rate of
development of new self-storage facilities has declined due to increases in
construction cost, increases in competition with retail, condominium, and
apartment operators for quality self-storage sites in urban locations, and more
difficult zoning and permitting requirements. However, we will continue to seek
favorable sites and markets for development.
6
PARTICIPATE IN THE GROWTH OF COMMERCIAL FACILITIES PRIMARILY THROUGH
OUR OWNERSHIP IN PS BUSINESS PARKS, INC.: We own a 44% common equity interest in
PS Business Parks, Inc. and its operating partnership (PS Business Parks Inc.
and the related operating partnership are hereinafter referred to collectively
as "PSB") which, December 31, 2005, consisted of 5,418,273 shares of common
stock and 7,305,355 limited partnership units in the Operating Partnership. The
limited partnership units are convertible at our option, subject to certain
conditions, on a one-for-one basis into PSB common stock. At December 31, 2005,
PSB owned and operated approximately 17.6 million net rentable square feet of
commercial space located in eight states.
ACQUIRE ADDITIONAL PARTNERSHIPS INTERESTS IN AFFILIATED ENTITIES: The
acquisition of interests in facilities that we have an ownership interest in and
operate has historically comprised a significant component of our growth.
However, the pool of such available acquisitions has continued to decrease as we
have acquired such remaining interests over the years, including $157 million of
such acquisitions in 2005. The potential remaining acquisition opportunities
principally include the remaining 59% that we do not own in the 36 properties
owned by the "Other Investments" described in Note 5 to the consolidated
financial statements for the year ended December 31, 2005 with a book value of
approximately $37 million as well as the "Other partnership interests" described
in Note 9 to the consolidated financial statements for the year ended December
31, 2005 with a book value of approximately $23 million. Accordingly, we do not
expect such acquisitions to comprise a significant component of our growth going
forward.
POLICIES WITH RESPECT TO INVESTING ACTIVITIES: Following are our
policies with respect to certain other investing strategies, each of which may
be entered into without a vote of shareholders:
o Making loans to other entities: We have made loans in connection
with the sale of properties, have made short-term loans to PSB in
the last three years and may make loans to third parties as part
of our investment objectives. However, we do not expect such
items to be a significant part of our investing activities.
o Investing in the securities of other issuers for the purpose of
exercising control: There have been two instances in the past six
years where we invested in the securities of another
publicly-held REIT, one which resulted in control of that REIT
(the merger with Storage Trust, Inc. in 1999), and one that did
not, resulting in the sale of these securities on the open
market. We may engage in these activities in the future as a
component of our real estate acquisition strategy. We also own
partnership interests in various consolidated and unconsolidated
partnerships. See "Investments in Real Estate and Real Estate
Entities."
o Underwriting securities of other issuers: We have not engaged in
this activity in the last three years, and do not intend to in
the future.
o Short-term investing: We have not engaged in investments in real
estate or real estate entities on a short-term basis in the last
three years with the exception of the aforementioned investments
in the securities of other REITs. Instead, historically, we have
acquired real estate assets and held them for an extended period
of time. We do not anticipate any such short-term investments.
o Repurchasing or reacquiring our common shares or other
securities: The Board of Directors has 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.
Cumulatively through March 15, 2006, we repurchased a total of
22,201,720 shares of common stock under this authorization.
Cumulatively through March 15, 2006, we have called for
redemption or repurchased $1.5 billion of our senior preferred
stock and $165 million of our preferred partnership units for
cash, representing a refinancing of these securities into
lower-coupon preferred securities. Any future repurchases of our
common stock will depend primarily upon the attractiveness of
repurchases compared to our other investment alternatives. Future
redemptions or repurchases of our preferred securities, which
will become available for redemption or repurchase on their
respective call dates, will be dependent upon the spread between
market rates and the coupon rates of these securities.
7
Financing of the Company's Growth Strategies
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OVERVIEW OF FINANCING STRATEGY: Over the past three years we have
funded substantially all of the cash portion (represented by our acquisition
cost less debt assumed, as described below) of our acquisitions with permanent
capital (predominantly retained cash flow and the net proceeds from the issuance
of 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, because of
certain benefits described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources." Our
present intent is to continue to finance substantially all our growth with
permanent capital.
BORROWINGS: We have in the past used our $200 million revolving line of
credit described below under "Borrowings" as temporary "bridge" financing, and
repaid those amounts with permanent capital. During 2005, we assumed long-term
secured mortgage notes of $94.7 million in connection with property
acquisitions. Prior to 2005, we incurred long-term debt during the merger with
Storage Trust in 1999 wherein we assumed $100 million in senior unsecured notes.
We were unable to prepay these debt balances either because of the nature of the
loan terms or because it was not economically advantageous to do so. While it is
not our present intention to issue additional debt as a long-term financing
strategy, we have broad powers to borrow in furtherance of our objectives
without a vote of our shareholders. These powers are subject to a limitation on
unsecured borrowings in our Bylaws described in "Limitations on Borrowings"
below.
ISSUANCE OF SENIOR SECURITIES: We have in the last three years, and
expect to continue, to issue additional series of preferred stock that are
senior to our Common Stock and Equity Stock. At December 31, 2005, we had
approximately $2.5 billion of preferred stock outstanding, excluding one series
that was called for redemption on November 2005 and subsequently redeemed in
January, 2006. The preferred stock, which was issued in series, has general
preference rights with respect to liquidation and quarterly distributions. We
intend to continue to issue preferred securities without a vote of our common
shareholders.
ISSUANCE OF SECURITIES IN EXCHANGE FOR PROPERTY: We have issued both
common and preferred equity in exchange for real estate and other investments in
the last three years. On October 12, 2004, we issued $25 million in preferred
units in conjunction with the acquisition of a self-storage business. Future
issuances will be dependent upon market conditions at the time, including the
market prices of our equity securities.
JOINT VENTURE FINANCING: We entered into two separate development joint
venture partnerships since 1997 in order to provide development financing. The
first development joint venture partnership was formed in 1997 and completed in
2001.
In November 1999, we formed PSAC Development Partners, L.P., (the
"Consolidated Development Joint Venture") with a joint venture partner ("PSAC
Storage Investors, LLC") whose partners include a third party institutional
investor, owning approximately 35%, and Mr. Hughes, owning approximately 65%, to
develop approximately $100 million of storage facilities. The Consolidated
Development Joint Venture completed construction on 22 storage facilities with a
total cost of approximately $108.6 million. On August 5, 2005 we acquired the
third party institutional investor's partnership interest in PSAC Storage
Investors, LLC for approximately $41.4 million in cash, and on November 17, 2005
we acquired Mr. Hughes' interest for an aggregate of $64.5 million in cash.
In January 2004, we entered into a joint venture partnership with an
institutional investor for the purpose of acquiring up to $125.0 million of
existing self-storage properties in the United States from third parties (the
"Acquisition Joint Venture"). The venture is funded entirely with equity
consisting of 30% from the Company and 70% from the institutional investor. For
a six-month period beginning 54 months after formation, we have the right to
acquire our joint venture partner's interest based upon the market value of the
properties. If we do not exercise our option, our joint venture partner can
elect to purchase our interest in the properties during a six-month period
commencing upon expiration of our six-month option period.
8
If our joint venture partner fails to exercise its option, the partnership will
be liquidated and the proceeds will be distributed to the partners according to
the joint venture agreement. As of December 31, 2005, the Acquisition Joint
Venture owned interests in a total of 12 self-storage facilities with an
aggregate investment of approximately $60 million. See Note 2 to our
consolidated financial statements at December 31, 2005 for further discussion of
the accounting for the Acquisition Joint Venture. We do not expect the
Acquisition Joint Venture to acquire any additional facilities.
We may continue to form additional joint ventures to facilitate the
funding of future developments or acquisitions.
DISPOSITION OF PROPERTIES: We historically have disposed of
self-storage facilities only because of condemnation proceedings, which compel
us to sell. However, during 2003, we sold five self-storage facilities, which
were located in non-strategic markets and locations for an aggregate of
approximately $21.0 million. We do not presently expect to sell any significant
number of self-storage facilities in the future, though there can be no
assurance that we will not.
Investments in Real Estate and Real Estate Entities
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INVESTMENT POLICIES AND PRACTICES WITH RESPECT TO OUR INVESTMENTS:
Following are our investment practices and policies which, though we do not
anticipate any significant alteration, can be changed by the Board of Directors
without a shareholder vote:
o Our investments primarily consist of direct ownership of
self-storage properties (the nature of our self-storage properties
is described in Item 2, "Properties"), as well as partial
interests in entities that own self-storage properties, which are
located in the United States.
o Our investments are acquired both for income and for capital gain.
o Our partial ownership interests primarily reflect general and
limited partnership interests in entities that own self-storage
facilities that are managed by us under the "Public Storage" brand
name.
o Additional acquired interests in real estate (other than the
acquisition properties from third parties) will include common
equity interests in entities in which we already have an interest.
o To a lesser extent, we have interests in existing commercial
properties (described in Item 2, "Properties"), containing
commercial and industrial rental space, primarily through our
investment in PSB.
o We have a pipeline of 62 development projects, including 58
expansions of real estate facilities, for a total cost of
approximately $323 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
The following table outlines our ownership interest in self-storage
facilities at December 31, 2005:
Net Rentable Square
Footage of Storage
Number of Space
Storage (in thousands)
Facilities
------------ --------------------
Consolidated self-storage facilities:
Wholly-owned by the Company............... 1,018 63,111
Other consolidated facilities............. 445 26,210
------------ --------------------
1,463 89,321
Facilities owned by Unconsolidated Entities. 38 2,306
------------ --------------------
Total self-storage facilities in which the
Company has an ownership interest......... 1,501 91,627
============ ====================
9
In addition to our interest in self-storage facilities noted above, we
own four commercial facilities with an aggregate of 293,000 net rentable square
feet, three industrial facilities with an aggregate of 244,000 net rentable
square feet used by the continuing containerized storage operations, and have
1,003,000 net rentable square feet of commercial space and 544,000 net rentable
square feet of industrial space developed for containerized storage activities
at certain of the self-storage facilities. The Company and the entities it
controls also have a 44% common interest in PSB, which at December 31, 2005
owned and operated approximately 17.6 million net rentable square feet of
commercial space.
Facilities Owned by Controlled Entities
- ---------------------------------------
In addition to our direct ownership of 1,018 self-storage facilities at
December 31, 2005, we had controlling ownership interests in 34 entities owning
an aggregate of 445 storage facilities. Because of our controlling interest in
each of these entities, we consolidate the assets, liabilities, and results of
operations of these entities on our financial statements.
Facilities Owned by Unconsolidated Entities
- -------------------------------------------
At December 31, 2005, we had ownership interests in PSB and eight
limited partnerships (collectively the "Unconsolidated Entities"). Our ownership
interest in these entities is less than 50%.
Due to our limited ownership interest and limited control of these
entities, we do not consolidate the accounts of these entities for financial
reporting purposes and we account for such investments using the equity method.
PSB, which files financial statements with the Securities and Exchange
Commission, has debt and other obligations that are not included in our
consolidated financial statements. The eight limited partnerships do not have
any significant amounts of debt or other obligations. See Note 5 to our
consolidated financial statements for the year ended December 31, 2005 for
further disclosure regarding the assets and liabilities of the Unconsolidated
Entities.
10
The following chart sets forth, as of December 31, 2005, the entities
in which we have a controlling interest and the entities in which we have a
minority interest:
Subsidiaries (Controlled Entities) Entities in which we have
of the Company a Minority Interest (Unconsolidated Entities)
- ---------------------------------------------- --------------------------------------------------
Carson Storage Partners, Ltd. Public Storage Alameda, Ltd. (5)
Carson Storage Ventures Public Storage Glendale Freeway, Ltd. (7)
Connecticut Storage Fund Metropublic Storage Fund (8)
Del Amo Storage Partners, Ltd. PS Business Parks, Inc. (9)
Downey Storage Partners, Ltd. (1) Public Storage Crescent Fund, Ltd. (10)
Huntington Beach Storage Partners, Ltd. Public Storage Partners, Ltd. (11)
Monterey Park Properties, Ltd. (2) Public Storage Partners II, Ltd. (12)
PS Orangeco Partnerships, Inc. Public Storage Properties, Ltd. (13)
PS Partners, Ltd. PSAF Acquisition Partners, Ltd.
PS Partners VIII, Ltd.
PS Texas Holdings, II, Ltd.
Public Storage Properties IV, Ltd. (3)
Public Storage Properties V, Ltd. (4)
PSA Institutional Partners, L.P.
PS HKBF, LLC
Public Storage Euro Fund III, Ltd. (5)
Public Storage Euro Fund IV, Ltd. (5)
Public Storage Euro Fund V, Ltd. (5)
Public Storage Euro Fund VI, Ltd. (5)
Public Storage Euro Fund VII, Ltd. (5)
Public Storage Euro Fund VIII, Ltd. (5)
Public Storage Euro Fund IX, Ltd. (5)
Public Storage Euro Fund X, Ltd. (5)
Public Storage Euro Fund XI, Ltd. (5)
Public Storage Euro Fund XII, Ltd. (5)
Public Storage Euro Fund XIII, Ltd. (5)
Public Storage German Fund II, Ltd. (5)
Public Storage Institutional Fund
Public Storage Institutional Fund III
Secure Mini-Storage
STOR-Re Mutual Insurance Company, Inc.
Storage Trust Properties, L.P.
Van Nuys Storage Partners, Ltd. (6)
Whittier Storage Partners, Ltd.
(1) B. Wayne Hughes owns approximately 2.8% of the limited partnership interest
of this entity.
(2) B. Wayne Hughes owns approximately 4.4% of the limited partnership interest
of this entity.
(3) The Hughes Family owns 20% of the general partner interests and 15.5% of
the limited partnership interests of this entity.
(4) The Hughes Family owns 20% of the general partner interests and 11.4% of
the limited partnership interests of this entity.
(5) B. Wayne Hughes owns approximately 20% of the general partner interest of
these entities.
(6) B. Wayne Hughes owns approximately 17.4% of the limited partnership
interest of this entity.
(7) B. Wayne Hughes is a general partner in this entity and owns a 0.02% equity
interest.
(8) B. Wayne Hughes is a general partner of this entity, and has no economic
interest.
(9) B. Wayne Hughes owns approximately 0.5% of the common shares of PS Business
Parks, Inc.
(10) B. Wayne Hughes owns approximately 17.9% of the general partnership
interest of this entity.
(11) The Hughes Family owns approximately 24.3% of the limited partnership
interest of this entity.
(12) The Hughes Family owns approximately 11.9% of the limited partnership
interest of this entity.
(13) The Hughes Family owns 20% of the general partner interests and 30.5% of
the limited partnership interests of this entity.
11
Prohibited Investments and Activities
- -------------------------------------
Our Bylaws prohibit us from purchasing properties in which the
Company's officers or directors have an interest, or from selling properties to
such persons, unless the transactions are approved by a majority of the
independent directors and are fair to the Company based on an independent
appraisal. This Bylaw provision may be changed with shareholder approval. See
"Limitations on Debt" below for other restrictions in the Bylaws.
Borrowings
- ----------
We have a $200 million revolving line of credit (the "Credit
Agreement") that has a maturity date of April 1, 2007 and bears an annual
interest rate ranging from the London Interbank Offered Rate ("LIBOR") plus
0.45% to LIBOR plus 1.20% depending on our credit ratings (currently LIBOR plus
0.45%). In addition, we are required to pay a quarterly commitment fee ranging
from 0.15% per annum to 0.30% per annum depending on our credit ratings
(currently the fee is 0.15% per annum). At December 31, 2005 and March 15, 2006,
we had no borrowings on our line of credit.
The Credit Agreement includes various covenants, the more significant
of which require us to (i) maintain a balance sheet leverage ratio of less than
0.55 to 1.00, (ii) maintain certain quarterly interest and fixed-charge coverage
ratios (as defined) of not less than 2.25 to 1.0 and 1.5 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 1.5 times our unsecured recourse debt). We were in compliance
with all the covenants of the Credit Agreement at December 31, 2005.
As of December 31, 2005, we had notes payable of approximately $114.0
million and debt to a joint venture partner of approximately $35.7 million. See
Notes 7 and 8 to the consolidated financial statements for a summary of our
borrowings at December 31, 2005.
Subject to a limitation on unsecured borrowings in our Bylaws
(described below), we have broad powers to borrow in support of our objectives.
We have incurred in the past, and may incur in the future, both short-term and
long-term indebtedness to increase our funds available for investment in real
estate, capital expenditures and distributions.
Limitations on Debt
- -------------------
The Bylaws provide that the Board of Directors shall not authorize or
permit the incurrence of any obligation by the Company, which would cause our
"Asset Coverage" of our unsecured indebtedness to become less than 300%. Asset
Coverage is defined in the Bylaws as the ratio (expressed as a percentage) by
which the value of the total assets (as defined in the Bylaws) of the Company
less the Company's liabilities (except liabilities for unsecured borrowings)
bears to the aggregate amount of all unsecured borrowings of the Company. This
Bylaw provision may be changed only upon a shareholder vote.
Our Bylaws prohibit us from issuing debt securities in a public
offering unless our "cash flow" (which for this purpose means net income,
exclusive of extraordinary items, plus depreciation) for the most recent 12
months for which financial statements are available, adjusted to give effect to
the anticipated use of the proceeds from the proposed sale of debt securities,
would be sufficient to pay the interest on such securities. This Bylaw provision
may be changed only upon a shareholder vote.
Without the consent of holders of the various series of Senior
Preferred Stock, we may not take any action that would result in a ratio of
"Debt" to "Assets" (the "Debt Ratio") in excess of 50%. As of December 31, 2005,
the Debt Ratio was approximately 4.5%. "Debt" means the liabilities (other than
"accrued and other liabilities" and "minority interest") that should, in
accordance with accounting principles generally accepted in the United States,
be reflected on our consolidated balance sheet at the time of determination.
"Assets" means our total assets before a reduction for accumulated depreciation
and amortization that should, in accordance with generally accepted accounting
principles, be reflected on the consolidated balance sheet at the time of
determination.
12
Our bank and senior unsecured debt agreements contain various financial
covenants, including limitations on the level of indebtedness of 30% of total
capitalization (as defined) and the prohibition of the payment of dividends upon
the occurrence of an event of default (as defined).
Employees
- ---------
We have approximately 4,030 employees at December 31, 2005 who render
services on behalf of the Company, primarily personnel engaged in property
operation, substantially all of whom are employed by a clearing company that
provides certain administrative and cost-sharing services to the Company and
other owners of properties operated by the Company.
Federal Income Tax
- ------------------
We believe that 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 times so qualify. To the
extent that we continue to qualify as a REIT, we will not be taxed, with certain
limited exceptions, on the taxable income (including gains from the sale of
securities and properties) that we distribute to our shareholders. Our taxable
REIT subsidiaries will be taxed on their taxable income.
For Federal tax purposes, our distributions to our shareholders are
treated by the shareholders as ordinary income, capital gains, return of capital
or a combination thereof. Ordinary income dividends to our shareholders will not
generally be eligible for the lower tax rates that apply to "qualified dividend
income."
Insurance
- ---------
We believe that our properties are adequately insured. Our facilities
have historically carried comprehensive insurance, including fire, earthquake,
liability and extended coverage through our captive insurance programs
(described below), and insured portions of these risks through nationally
recognized insurance carriers. Our captive insurance programs also insure
affiliates of the Company.
For losses incurred prior to April 1, 2004, our captive insurance
activities were conducted through STOR-Re Mutual Insurance Company, Inc.
("STOR-Re"), an association captive insurance company owned by the Company, the
Consolidated Entities, and the Unconsolidated Entities. For losses incurred
after March 31, 2004, these activities were conducted by an entity wholly owned
by the Company, PS Insurance Company Hawaii, Ltd. ("PSIC-H").
The Company, STOR-Re, PSIC-H and its affiliates' maximum aggregate
annual exposure for losses that are below the deductibles set forth in the
third-party insurance contracts, assuming multiple significant events occur, is
approximately $35 million. In addition, if losses exhaust the third-party
insurers' limit of coverage of $125 million for property coverage and $102
million for general liability, our exposure could be greater. These limits are
higher than estimates of maximum probable losses that could occur from
individual catastrophic events (i.e. earthquake and wind damage) determined in
recent engineering and actuarial studies.
Subsequent Event - Agreement to Acquire Shurgard Storage Centers
- ----------------------------------------------------------------
We have entered into an agreement to acquire Shurgard Storage Centers,
Inc. ("Shurgard"), a publicly-held REIT engaged in the operation, development
and acquisition of approximately 646 self-storage facilities located in the
United States and Europe. Under the agreement, and based upon our December 31,
2005 balance sheet and Shurgard's September 30, 2005 balance sheet included in
its related Form 10-Q, i) we would issue 0.82 shares of our common stock for
each share of Shurgard common stock which would increase our common shares
outstanding from 128,089,563 to approximately 166,460,200 shares, ii) we would
assume Shurgard debt which totals approximately $1.8 billion at September 30,
2005, increasing our debt outstanding (assuming no prepayment) from $150 million
to approximately $2.0 billion, and iii) $136 million of Shurgard preferred stock
would be redeemed. The transaction is targeted to close by the end of the second
quarter of 2006.
13
Completion of the transaction is not assured and is subject to risks,
including that shareholders of either Public Storage or Shurgard do not approve
the transaction or that the other closing conditions are not satisfied. In
addition, Shurgard may under limited circumstances terminate the agreement to
take a superior proposal. Public Storage and Shurgard are not aware of any
significant governmental approvals that are required for consummation of the
merger. If any approval or action is required, it is presently contemplated that
Public Storage and Shurgard would use their reasonable best efforts to obtain
such approval. There can be no assurance that any approvals, if required, will
be obtained.
The foregoing description of the terms of our agreement to acquire
Shurgard does not purport to be complete, and is qualified in its entirety by
reference to the full text of the Merger Agreement, copy of which is filed with
our current report on Form 8-K dated March 7, 2006.
ITEM 1A. Risk Factors
------------
In addition to the other information in our Form 10-K, you should
consider the following factors in evaluating the Company:
THE HUGHES FAMILY COULD CONTROL US AND TAKE ACTIONS ADVERSE TO OTHER
SHAREHOLDERS.
At March 3, 2006, B. Wagne Hughes Chairman of the Board and members of
his family (the "Hughes Family") owned approximately 36% of our outstanding
shares of 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, even though such actions may not be
favorable to the other common shareholders.
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 the 1995 reorganization. In the event the
Shurgard transaction is completed, the Hughes Family is permitted to acquire
additional Common Stock to maintain their premerger holding percentage. These
limitations are designed, to the extent possible, to avoid a concentration of
ownership that might jeopardize our ability to qualify as a real estate
investment trust or REIT. These limitations, however, also may 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.
WE WOULD INCUR ADVERSE TAX CONSEQUENCES IF WE FAIL TO QUALIFY AS A REIT.
You will be subject to the risk that we may not qualify as a REIT.
REITs are subject to a range of complex organizational and operational
requirements. As a REIT, we must distribute with respect to each year at least
90% of our REIT taxable income to our shareholders. Other restrictions apply to
our income and assets. Our REIT status is also dependent upon the ongoing
qualification of our affiliate, PS Business Parks, Inc., as a REIT, as a result
of our substantial ownership interest in that company.
14
For any taxable year that we fail to qualify as a REIT and are unable
to avail ourselves of certain savings provisions set forth in the Code, we would
be subject to federal income tax at the regular corporate 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 and would adversely affect our earnings. 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, REDUCING CASH AVAILABLE FOR SHAREHOLDERS.
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 the Company have elected to be treated as
"taxable REIT subsidiaries" of the Company for Federal income tax purposes since
January 1, 2001. A taxable REIT subsidiary is taxable as a regular corporation
and is limited in its ability to deduct interest payments made to us in excess
of a certain amount. In addition, if we receive certain payments and the
economic arrangements among our taxable REIT subsidiaries and us are not
comparable to similar arrangements among unrelated parties we will be subject to
a 100% penalty tax on those payments. To the extent that the Company 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 HAVE BECOME INCREASINGLY DEPENDENT UPON AUTOMATED PROCESSES AND THE INTERNET
AND ARE FACED WITH SECURITY SYSTEM RISKS.
We have become increasingly centralized and dependent upon automated
information technology processes. While we have attempted to mitigate this risk
through offsite backup procedures and contracted data centers that include, in
some cases, redundant operations, we could still be severely impacted by a
catastrophic occurrence, such as a natural disaster or a terrorist attack. In
addition, an increasing portion of our business operations are conducted over
the Internet, increasing the risk of viruses that could cause system failures
and disruptions of operations despite our deployment of anti-virus measures.
Experienced computer programmers may be able to penetrate our network security
and misappropriate our confidential information, create system disruptions or
cause shutdowns.
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 December 31, 2005, our
debt of $149.6 million was 2.7% 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.
15
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:
o lack of demand for rental spaces or units in a locale;
o changes in general economic or local conditions;
o natural disasters, such as earthquakes or hurricanes;
o potential terrorist attacks;
o changes in supply of or demand for similar or competing facilities
in an area;
o the impact of environmental protection laws;
o changes in interest rates and availability of permanent mortgage
funds which may render the sale or financing of a property
difficult or unattractive;
o changes in tax, real estate and zoning laws; and
o tenant claims.
In addition, we self-insure certain of our property loss, liability,
and workers compensation risks; areas that other real estate companies may use
third-party insurers for. This results in a higher risk of losses that are not
covered by third-party insurance contracts, as described in Note 16 under
"Insurance and Loss Exposure" to our consolidated financial statements at
December 31, 2005.
There is significant competition among self-storage facilities and from
other storage alternatives. Most of our properties are self-storage facilities,
which generated most of our revenue for the year ended December 31, 2005. Local
market conditions will play a significant part in how competition will affect
us. Competition in the market areas in which many of our properties are located
from other self-storage facilities and other storage alternatives is significant
and has affected the occupancy levels, rental rates and operating expenses of
some of our properties. Any increase in availability of funds for investment in
real estate may accelerate competition. Further development of self-storage
facilities may intensify competition among operators 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 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, whether from
environmental or microbial issues, 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.
16
There has been an increasing number of claims and litigation against
owners and managers of rental properties relating to moisture infiltration,
which can result in mold or other property damage. When we receive a complaint
concerning moisture infiltration, condensation or mold problems and/or become
aware that an air quality concern exists, we implement corrective measures in
accordance with guidelines and protocols we have developed with the assistance
of outside experts. We seek to work proactively with our tenants to resolve
moisture infiltration and mold-related issues, subject to our contractual
limitations on liability for such claims. However, we can provide no assurance
that material legal claims relating to moisture infiltration and the presence
of, or exposure to, mold will not arise in the future.
Delays in development and fill-up of our properties would reduce our
profitability. Since January 1, 2001, we have opened 53 newly developed
self-storage facilities and 17 facilities that combine self-storage and
containerized storage space at the same location, with aggregate development
costs of approximately $547 million. In addition, at December 31, 2005 we had 62
projects in development that are expected to be completed in approximately the
next two years. These 62 projects have total estimated costs of approximately
$323 million. Construction delays due to weather, unforeseen site conditions,
personnel problems, and other factors, as well as cost overruns, would adversely
affect our profitability. Delays in the rent-up of newly developed facilities as
a result of competition or other factors would also adversely impact our
profitability.
Property taxes can increase and cause a decline in yields on
investments. Each of our properties is subject to real property taxes. These
real property taxes may increase in the future as property tax rates change and
as our properties are assessed or reassessed by tax authorities. Such increases
could adversely impact our profitability.
We must comply with the Americans with Disabilities Act and fire and
safety regulations, which can require significant expenditures. All our
properties must comply with the Americans with Disabilities Act and with related
regulations (the "ADA"). The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities," but generally requires that
buildings be made accessible to persons with disabilities. Various state laws
impose similar requirements. A failure to comply with the ADA or similar state
laws could result in government imposed fines on us and could award damages to
individuals affected by the failure. In addition, we must operate our properties
in compliance with numerous local fire and safety regulations, building codes,
and other land use regulations. Compliance with these requirements can require
us to spend substantial amounts of money, which would reduce cash otherwise
available for distribution to shareholders. Failure to comply with these
requirements could also affect the marketability of our real estate facilities.
Any failure by us to manage acquisitions and other significant
transactions successfully could negatively impact our financial results. As an
increasing part of our business, we acquire other self-storage facilities. We
also evaluate from time to time other significant transactions. If these
facilities are not properly integrated into our system, our financial results
may suffer.
We incur liability from employment related claims. From time to time we
must resolve employment related claims by corporate level and field personnel.
We have no interest in Canadian self-storage facilities owned by the
Hughes Family.
B. Wayne Hughes, Chairman of the Board, and his family (the "Hughes
Family") have ownership interests in, and operate, approximately 44 self-storage
facilities in Canada under the name "Public Storage." We currently do not own
any interests in these facilities nor do we own any facilities in Canada. We
have a right of first refusal to acquire the stock or assets of the corporation
engaged in the operation of the self-storage facilities in Canada if the Hughes
Family or the corporation agrees to sell them. However, we have no ownership
interest in the operations of this corporation, have no right to acquire their
stock or assets unless the Hughes Family decides to sell, and receive no benefit
from the profits and increases in value of the Canadian self-storage facilities.
Prior to December 31, 2003, our personnel were engaged in the
supervision and the operation of these properties and provided certain
administrative services for the Canadian owners, and certain other services,
primarily tax services, with respect to certain other Hughes Family interests.
The Hughes Family and the Canadian owners reimbursed us at cost for these
services in the amount of $542,499 with respect to the Canadian operations and
$151,063 for other services during 2003 (in United States dollars). There were
conflicts of interest in allocating time of our personnel between Company
properties, the Canadian properties, and certain other Hughes Family interests.
The sharing of our personnel with the Canadian entities was substantially
eliminated by December 31, 2003.
17
Through our subsidiaries, we continue to reinsure risks relating to
loss of goods stored by tenants in the self-storage facilities in Canada. We
acquired the tenant insurance business on December 31, 2001 through our
acquisition of PSIC. During the years ended December 31, 2005, 2004 and 2003,
PSIC received $1,052,000, $1,069,000, and $1,017,000, respectively, in
reinsurance premiums attributable to the Canadian operations. Since PSIC's right
to provide tenant reinsurance to the Canadian facilities may be qualified, there
is no assurance that these premiums will continue.
OUR CONTAINERIZED STORAGE BUSINESS HAS INCURRED OPERATING LOSSES.
Public Storage Pickup & Delivery ("PSPUD") was organized in 1996 to
operate a containerized storage business. We own all of the economic interest of
PSPUD. Since PSPUD will operate profitably only if it can succeed in the
relatively new field of containerized storage, we cannot provide any assurance
as to its profitability. PSPUD incurred an operating loss of $10,058,000 in
2002, and generated operating profits of $2,543,000 in 2003, $684,000 in 2004
and $1,818,000 for 2005. Since 2002, PSPUD closed or consolidated facilities
that were deemed not strategic to its business plan, and has 12 facilities open
at December 31, 2005.
INCREASES IN INTEREST RATES MAY ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
One of the factors that influences the market price of our common stock
and our other securities is the annual rate of distributions that we pay on the
securities, as compared with interest rates. An increase in interest rates may
lead purchasers of REIT shares to demand higher annual distribution rates, which
could adversely affect the market price of our common stock and other
securities.
TERRORIST ATTACKS AND THE POSSIBILITY OF WIDER ARMED CONFLICT MAY HAVE AN
ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS AND COULD DECREASE THE
VALUE OF OUR ASSETS.
Terrorist attacks and other acts of violence or war, such as those that
took place on September 11, 2001, could have a material adverse impact on our
business and operating results. There can be no assurance that there will not be
further terrorist attacks against the United States or its businesses or
interests. Attacks or armed conflicts that directly impact one or more of our
properties could significantly affect our ability to operate those properties
and thereby impair our operating results. Further, we may not have insurance
coverage for losses caused by a terrorist attack. Such insurance may not be
available, or if it is available and we decide to obtain such terrorist
coverage, the cost for the insurance may be significant in relationship to the
risk overall. In addition, the adverse effects that such violent acts and
threats of future attacks could have on the United States economy could
similarly have a material adverse effect on our business and results of
operations. Finally, further terrorist acts could cause the United States to
enter into a wider armed conflict, which could further impact our business and
operating results.
DEVELOPMENTS IN CALIFORNIA MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
We are headquartered in, and approximately one-quarter of our
properties are located in, California. California is facing budgetary problems.
Action that may be taken in response to these problems, such as an increase in
property taxes on commercial properties, could adversely impact our business and
results of operations. In addition, we could be adversely impacted by efforts to
reenact legislation mandating medical insurance for employees of California
businesses and members of their families.
OUR PROPOSED ACQUISITION OF SHURGARD SUBJECTS US TO ADDITIONAL RISKS
We have entered into an agreement to acquire Shurgard Storage Centers,
Inc. ("Shurgard"), a publicly held REIT that has interests in approximately 646
self-storage facilities located in the United States and Europe. Under the
agreement, and based upon our December 31, 2005 balance sheet and Shurgard's
September 30, 2005 balance sheet included in its related Form 10-Q, i) we would
issue 0.82 shares of our common stock for each share of Shurgard common stock
which would increase our common shares outstanding from 128,089,563 to
approximately 166,460,200 shares, ii) we would assume Shurgard debt which totals
approximately $1.8 billion at September 30, 2005, increasing our debt
outstanding (assuming no prepayment) from $150 million to approximately $2.0
billion, and iii) $136 million of Shurgard preferred stock would be redeemed.
The transaction is targeted to close by the end of the second quarter of 2006.
18
Completion of the transaction is not assured and is subject to risks,
including that shareholders of either Public Storage or Shurgard do not approve
the transaction or that the other closing conditions are not satisfied. In
addition, Shurgard may under limited circumstances terminate the agreement to
take a superior proposal. Public Storage and Shurgard are not aware of any
significant governmental approvals that are required for consummation of the
merger. If any approval or action is required, it is presently contemplated that
Public Storage and Shurgard would use their reasonable best efforts to obtain
such approval. There can be no assurance that any approvals, if required, will
be obtained.
In addition to the general risks related to real estate noted above
which may also adversely impact Shurgard's operations, we are also subject to
the following risks in connection with our acquisition of Shurgard into our
operations, including without limitation the following:
o difficulties in the integration of operations, technologies and
personnel of Shurgard;
o inability to realize or delays in realizing expected synergies;
o unanticipated operating costs;
o diversion of our management's attention away from other business
concerns;
o exposure to any undisclosed or unknown potential liabilities of
Shurgard;
o potential underinsured losses on Shurgard properties; and
o risk of failure to mitigate any Shurgard material weaknesses in
internal control to the extent that it affects our internal
controls.
Shurgard also holds many of its properties through joint ventures,
which have additional risks, including risks related to the financial strength,
common business goals and strategies and cooperation of the venture partner, as
well as the inability to take some actions that may require approval by the
venture partner. In addition, Shurgard holds substantially all of its real
estate investments in Europe indirectly through partnerships and joint venture
arrangements. If we are unable to effectively control these indirect
investments, there is a risk that our ownership of the joint ventures could
cause us to lose our REIT status.
We have assumed based on public filings that Shurgard has qualified and
will continue to qualify as a REIT and that we would be able to continue to
qualify as a REIT following an acquisition. However, if Shurgard has failed or
fails to qualify as a REIT, we might succeed to or incur significant tax
liabilities and possibly lose our REIT status should disqualifying activities
continue after the acquisition.
Shurgard has a greater level of debt than we do, as well as derivative
instruments that we would assume. Shurgard's outstanding borrowings on its lines
of credit ($569 million at September 30, 2005) would become payable immediately
upon completion of the merger. In addition, there would be additional cash costs
related to the merger, cash requirements for the redemption of $136 million of
Shurgard's preferred stock on the merger date, and additional possible cash
requirements following the merger. Our cash on hand and available borrowing
capacity on our line of credit would be insufficient to fund these immediate
capital requirements and, accordingly, we may look to obtain a larger line of
credit, bridge financing, or issue preferred or common equity. As a result, this
transaction may result in an increase in our exposure to interest rate and
refinancing risks.
19
We would also be acquiring Shurgard's international operations in
Europe, which consist principally of facilities that have been completed in the
last few years and are in various stages of fill-up. Shurgard's international
operations have not been profitable, and there is no assurance they will
ultimately be profitable. We have limited experience in international
operations, which may adversely impact our ability to operate profitably in
Europe. In addition, these operations have specific inherent risks, including
without limitation the following:
o currency risks, including currency fluctuations;
o unexpected changes in legislative and regulatory requirements;
o potentially adverse tax burdens;
o burdens of complying with different permitting standards, labor
laws and a wide variety of foreign laws;
o obstacles to the repatriation of earnings and cash;
o regional, national and local political uncertainty;
o economic slowdown and/or downturn in foreign markets;
o difficulties in staffing and managing international operations;
and
o reduced protection for intellectual property in some countries.
In connection with the proposed acquisition of Shurgard's European
operations, we will be evaluating various strategic alternatives, including, but
not limited to, public or private offerings of securities, one or more possible
joint ventures, and possible asset acquisitions and/or sales.
The foregoing description of the terms and conditions of our agreement
to acquire Shurgard does not purport to be complete, and is qualified in its
entirety by reference to the full text of the merger agreement, a copy of which
is filed with our current report on Form 8-K dated March 7, 2006.
ITEM 1B. Unresolved Staff Comments
-------------------------
Not applicable.
20
ITEM 2. Properties
----------
At December 31, 2005, we had direct and indirect ownership interests in
1,501 storage facilities located in 37 states:
At December 31, 2005
-------------------------------------------
Number of Storage Net Rentable Square
Facilities (a) Feet (in thousands)
------------------- --------------------
California:
Southern............... 170 11,059
Northern............... 142 7,911
Texas....................... 170 11,356
Florida..................... 155 9,622
Illinois.................... 99 6,286
Georgia..................... 71 4,467
Colorado.................... 50 3,207
New York.................... 48 2,948
New Jersey.................. 48 2,958
Washington.................. 42 2,710
Maryland.................... 44 2,642
Virginia.................... 41 2,569
Missouri.................... 38 2,144
Ohio........................ 30 1,859
Minnesota................... 25 1,571
Pennsylvania................ 21 1,418
Nevada...................... 22 1,404
Tennessee................... 23 1,321
North Carolina.............. 25 1,311
Kansas...................... 22 1,310
Massachusetts............... 19 1,180
Oregon...................... 24 1,122
South Carolina.............. 25 1,083
Wisconsin................... 16 1,030
Indiana..................... 18 1,029
Other states (13 states).... 113 6,110
------------------- --------------------
Totals................. 1,501 91,627
=================== ====================
(a) Includes 1,463 self-storage facilities owned by the Company and entities
consolidated with the Company. The remaining 38 facilities are self-storage
facilities owned by entities in which the Company has an interest; however,
the Company does not have a controlling interest in such entities. See
Schedule III: Real Estate and Accumulated Depreciation in the Company's
2005 financials, for a complete list of properties consolidated by the
Company.
Our facilities are generally operated to maximize cash flow through the
regular review and, when warranted by market conditions, adjustment of rents
charged to our tenants. For the year ended December 31, 2005, the weighted
average occupancy level and the average total rental income per rentable square
foot for our self-storage facilities were approximately 90% and $11.01,
respectively. Included in the 1,501 storage facilities are 70 newly developed
facilities opened since January 1, 2001.
At December 31, 2005, 34 of our facilities were encumbered by an
aggregate of $91.6 million in mortgage notes payable.
We have no specific policy as to the maximum size of any one particular
self-storage facility. However, none of our facilities involves, or is expected
to involve, 1% or more of our total assets, gross revenues or net income.
21
DESCRIPTION OF SELF-STORAGE FACILITIES: Self-storage facilities, which
comprise the majority of our investments, are designed to offer accessible
storage space for personal and business use at a relatively low cost. A user
rents a fully enclosed space, which is for the user's exclusive use and to which
only the user has access on an unrestricted basis during business hours. On-site
operation is the responsibility of property managers who are supervised by
district managers. Some self-storage facilities also include rentable uncovered
parking areas for vehicle storage, as well as space for portable storage
containers. Leases for storage facility space may be on a long-term or
short-term basis, although typically spaces are rented on a month-to-month
basis. Rental rates vary according to the location of the property, the size of
the storage space and length of stay. All of our self-storage facilities are
operated under the "Public Storage" brand name.
Users of space in self-storage facilities include individuals and
businesses. Individuals usually obtain this space for storage of furniture,
household appliances, personal belongings, motor vehicles, boats, campers,
motorcycles and other household goods. Businesses normally employ this space for
storage of excess inventory, business records, seasonal goods, equipment and
fixtures.
Our self-storage facilities generally consist of three to seven
buildings containing an aggregate of between 350 to 750 storage spaces, most of
which have between 25 and 400 square feet and an interior height of
approximately 8 to 12 feet.
We experience minor seasonal fluctuations in the occupancy levels of
self-storage facilities with occupancies generally higher in the summer months
than in the winter months. We believe that these fluctuations result in part
from increased moving activity during the summer.
Our self-storage facilities are geographically diversified and are
located primarily in or near major metropolitan markets in 37 states in the
United States. Generally our self-storage facilities are located in heavily
populated areas and close to concentrations of apartment complexes, single
family residences and commercial developments. However, there may be
circumstances in which it may be appropriate to own a property in a less
populated area, for example, in an area that is highly visible from a major
thoroughfare and close to, although not in, a heavily populated area. Moreover,
in certain population centers, land costs and zoning restrictions may create a
demand for space in nearby less populated areas.
Competition from other self-storage facilities as well as other forms
of storage 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 many of our properties.
Since our investments are primarily self-storage facilities, our
ability to preserve our investments and achieve our objectives is dependent in
large part upon success in this field. Historically, upon stabilization after an
initial fill-up period, our self-storage facility interests have generally shown
a high degree of consistency in generating cash flows, despite changing economic
conditions. We believe that our self-storage facilities, upon stabilization,
have attractive characteristics consisting of high profit margins, a broad
tenant base and low levels of capital expenditures to maintain their condition
and appearance.
COMMERCIAL PROPERTIES: In addition to our interests in 1,501
self-storage facilities, we have an interest in PSB, which, as of December 31,
2005, owns and operates approximately 17.6 million net rentable square feet in
eight states. At December 31, 2005, our investment in PSB represents 5.2% of our
total assets based upon book value of $288.7 million. The market value of our
investment in PSB at December 31, 2005 of approximately $626.0 million
represents 11.3% of the book value of our total assets at December 31, 2005 of
approximately $5.6 billion. We also directly own four commercial properties with
293,000 net rentable square feet, have 1,003,000 net rentable square feet of
commercial space that is located at certain of the self-storage facilities, and
own three industrial facilities with an aggregate of 244,000 net rentable square
feet that are being used by the continuing containerized storage operations and
544,000 net rentable square feet of industrial space developed for containerized
storage facilities.
22
The commercial properties owned by PSB consist of flex space, office
space and industrial space. Flex space is defined as buildings that are
configured with a combination of part warehouse space and part office space and
can be designed to fit a wide variety of uses. The warehouse component of the
flex space has a variety of uses including light manufacturing and assembly,
storage and warehousing, showroom, laboratory, distribution and research and
development activities. The office component of flex space is complementary to
the warehouse component by enabling businesses to accommodate management and
production staff in the same facility. PSB also owns low-rise suburban office
space, generally either in business parks that combine office and flex space or
in desirable submarkets where the economics of the market demand an office
build-out. PSB also owns industrial space that has characteristics similar to
the warehouse component of the flex space.
ENVIRONMENTAL MATTERS: Our policy is to accrue environmental
assessments and estimated remediation cost when it is probable that such efforts
will be required and the related costs 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.
ITEM 3. Legal Proceedings
-----------------
Serrao v. Public Storage, Inc. (filed April 2003) (Superior Court - Orange
- --------------------------------------------------------------------------------
County)
- -------
The plaintiff in this case filed a suit against the Company on behalf
of a putative class of renters who rented self-storage units from the Company.
Plaintiff alleges that the Company misrepresented the size of its storage units,
has brought claims under California statutory and common law relating to
consumer protection, fraud, unfair competition, and negligent misrepresentation,
and is seeking monetary damages, restitution, and declaratory and injunctive
relief.
The claim in this case is substantially similar to those in Henriquez
v. Public Storage, Inc., which was disclosed in prior reports. In January 2003,
the plaintiff caused the Henriquez action to be dismissed.
Based upon the uncertainty inherent in any putative class action, we
cannot presently determine the potential damages, if any, or the ultimate
outcome of this litigation. On November 3, 2003, the court granted our motion to
strike the plaintiff's nationwide class allegations and to limit any putative
class to California residents only. In August 2005, we filed a motion to remove
the case to federal court, but the case has been remanded to the Superior Court.
We are vigorously contesting the claims upon which this lawsuit is based,
including class certification efforts.
Gustavson, et al v. Public Storage, Inc. (filed June 2003) (Superior Court - Los
- --------------------------------------------------------------------------------
Angeles County); Potter, et al v. Hughes, et al (filed December 2004) (United
- --------------------------------------------------------------------------------
States District Court - Central District of California)
- -------------------------------------------------------
As previously reported, in November 2002, a shareholder of the Company
made a demand on the Board of Directors that challenged the fairness of the
Company's acquisition of PS Insurance Company, Ltd. ("PSIC") and related
matters. PSIC was previously owned by the Hughes Family.
In June 2003, the Hughes Family filed a complaint (Gustavson, et al v.
Public Storage, Inc.) for declaratory relief asking the court to find that the
acquisition of PSIC and related matters were fair to the Company. The Company
filed an answer to the Hughes Family's complaint requesting a final judicial
determination of the Company's rights of recovery against the Hughes Family in
respect of PSIC. By order of the Superior Court, the matter was tried before
Justice Malcolm Lucas, a former chief justice of the California Supreme Court.
In October 2005, Judge Lucas rendered his decision, ruling against the Company
by finding that the PSIC transaction was just and reasonable as to the Company
and holding that the Hughes Family was not required to make any payment to the
Company. The Superior Court has formally entered judgment accordingly and this
lawsuit has been concluded.
23
At the end of December 2004, the same shareholder referred to above and
a second shareholder filed a shareholder's derivative complaint (Potter, et al
v. Hughes, et al) naming as defendants the Company's directors (and two former
directors) and certain officers of the Company. The matters alleged in the
Potter complaint relate to PSIC, the Hughes Family's Canadian self-storage
operations and the Company's 1995 reorganization. In June 2005, the court
granted the defendants' motion to dismiss the Potter complaint with leave to
amend the complaint. In July 2005, the plaintiffs filed an amended complaint,
and the defendants filed a motion to dismiss the amended complaint. The matter
is currently under submission. We believe the litigation will not have any
financially adverse effect on the Company (other than the costs and other
expenses relating to the lawsuit).
Brinkley et al v. Public Storage, Inc. (filed April, 2005) (Superior court of
- --------------------------------------------------------------------------------
California - Los Angeles County)
- --------------------------------
The Brinkley plaintiffs are suing the Company on behalf of a purported
class of California property managers who claim that they were not compensated
for all the hours they worked. The Brinkley suit is based upon California wage
and hour laws. The maximum potential liability cannot be estimated, but would be
increased if a class or classes are certified or, if claims are permitted to be
brought on behalf of others under the California Unfair Business Practices Act.
We are vigorously contesting the claims and intend to resist any expansion
beyond the named plaintiffs on the grounds of lack of commonality of claims. We
do not believe that this matter will have any material adverse effect on the
results of operations of the Company.
Other Items
- -----------
We are a party to various claims, complaints, and other legal actions
that have arisen in the normal course of business from time to time that are not
described above. We believe that it is unlikely that the outcome of these other
pending legal proceedings including employment and tenant claims, in the
aggregate, will have a material adverse impact upon our operations or financial
position.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
We did not submit any matter to a vote of security holders in the
fourth quarter of the fiscal year ended December 31, 2005.
24
PART II
-------
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
a. Market Price of the Registrant's Common Equity:
Our Common Stock (NYSE and PCX: PSA) has been listed on the New York
Stock Exchange since October 19, 1984 and on the Pacific Exchange since
December 26, 1996. Our Depositary Shares each representing 1/1,000 of a
share of Equity Stock, Series A (NYSE:PSAA) (see section c. below) have
been listed on the New York Stock Exchange since February 14, 2000.
The following table sets forth the high and low sales prices of Common
Stock on the New York Stock Exchange composite tapes for the applicable
periods.
Range
--------------------------------
Year Quarter High Low
------- --------- ------------- ------------
2004 1st $ 50.000 $ 43.470
2nd 49.800 39.500
3rd 52.670 45.240
4th 57.640 49.600
2005 1st 59.490 51.700
2nd 64.500 55.300
3rd 70.450 59.700
4th 72.020 61.360
The following table sets forth the high and low sales prices of
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock,
Series A on the New York Stock Exchange composite tapes for the applicable
periods.
Range
--------------------------------
Year Quarter High Low
------- --------- ------------- ------------
2004 1st $ 31.500 $ 29.220
2nd 30.500 26.010
3rd 28.480 26.130
4th 29.500 27.860
2005 1st 29.950 27.800
2nd 29.000 27.540
3rd 28.900 27.610
4th 28.650 27.380
As of March 1, 2006, there were approximately 18,942 holders of record
of Common Stock and approximately 11,311 holders of Depositary Shares Each
Representing 1/1,000 of a share of Equity Stock, Series A.
b. Dividends
We have paid quarterly distributions to our shareholders since 1981,
our first full year of operations. Overall distributions on Common Stock
for 2005 amounted to $244.2 million or $1.90 per share of Common Stock.
25
Holders of Common Stock are entitled to receive distributions when and
if declared by our Board of Directors out of any funds legally available
for that purpose. In order to maintain our REIT status for federal income
tax purposes, we are generally required to pay dividends at least equal to
90% of our real estate investment trust taxable income for the taxable year
(for this purpose, certain dividends paid in the subsequent year may be
taken into account). We intend to pay distributions sufficient to permit us
to maintain our REIT status.
For Federal income tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. For 2005, the dividends paid to the common
shareholders ($1.90 per share), on all the various classes of preferred
stock, and on our Equity Stock, Series A were classified as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
Ordinary Income.......... 98.5488% 99.3947% 99.9589% 100.0000%
Long-term Capital Gain... 1.4512% 0.6053% 0.0411% 0.0000%
------------- ------------- ------------ -------------
Total.................... 100.0000% 100.0000% 100.0000% 100.0000%
============= ============= ============ =============
A percentage of the long-term capital gain is unrecaptured Section 1250
gain as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
Unrecaptured ss.1250 Gain.. 7.3110% 0.0000% 8.0542% 0.0000%
============= ============= ============ =============
For the corporate shareholders a portion of the long-term capital gain
is required to be recaptured as ordinary income. For each quarter of 2005
the percentage is as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
IRC ss.291 Recapture....... 1.4621% 0.0000% 1.6121% 0.0000%
============= ============= ============ =============
For Federal income tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. For 2004, the dividends paid to the common
shareholders ($1.80 per share), on all the various classes of preferred
stock, and on our Equity Stock, Series A were classified as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
Ordinary Income.......... 99.8683% 99.8694% 99.8712% 98.0855%
Long-term Capital Gain... 0.1317% 0.1306% 0.1288% 1.9145%
------------- ------------- ------------ -------------
Total.................... 100.0000% 100.0000% 100.0000% 100.0000%
============= ============= ============ =============
A percentage of the long-term capital gain is unrecaptured Section 1250
gain for each quarter of 2004 as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
Unrecaptured ss.1250 Gain.. 34.8559% 34.8559% 34.8559% 43.7003%
============= ============= ============ =============
For the corporate shareholders a portion of the long-term capital gain
is required to be recaptured as ordinary income. For each quarter of 2004
the percentage is as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------ -------------
IRC ss.291 Recapture....... 6.9709% 6.9709% 6.9709% 8.7400%
============= ============= ============ =============
The Jobs and Growth Tax Relief Reconciliation Act of 2003 introduced a
new rule that reduces the tax rate for "qualified dividend income."
Generally, qualified dividend income is dividend income received from a
corporation that has been taxed on the dividends distributed to its
shareholders. Public Storage, Inc, as a REIT, is generally not taxed on
dividends it distributes annually to its shareholders, and therefore the
dividends shareholders receive are not qualified dividend income subject to
the lower rates.
26
c. 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.
In April 2001, we completed a public offering of 2,210,500 depositary
shares each representing 1/1,000 of a share of Equity Stock, Series A,
("Equity Stock A") raising net proceeds of approximately $51,836,000. In
May 2001, we completed a direct placement of 830,000 depositary shares,
raising net proceeds of approximately $20,294,000. In November 2001, we
completed a direct placement of 100,000 depositary shares, raising net
proceeds of approximately $2,690,000. In January 2000, we issued 4,300,555
depositary shares (2,200,555 shares as part of a special distribution
declared on November 15, 1999 and 2,100,000 shares in a separate public
offering). In addition, in the second quarter of 2000, we issued 52,547
depositary shares to a related party in connection with the acquisition of
real estate facilities. In December 2000, we issued 1,282,500 depositary
shares in a public offering. All of the issuances of the depositary shares
described in this paragraph were registered under the Securities Act at the
time of issuance.
At December 31, 2005, we had 8,744,193 depositary shares outstanding,
each representing 1/1,000 of a share of Equity Stock A. The Equity Stock A
ranks on a parity with common stock and junior to the Senior Preferred
Stock with respect to distributions and liquidation and has a liquidation
amount which cannot exceed $24.50 per share. Distributions with respect to
each depositary share shall be the lesser of: a) five times the per share
dividend on the Common Stock or b) $2.45 per annum. 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, each depositary share will be convertible into 0.956
shares of our common stock. The depositary shares are otherwise not
convertible into common stock. Holders of depositary shares vote 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. We have no obligation to pay distributions on the
depositary shares if no distributions are paid to common shareholders.
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. The
Equity Stock AAA ranks on a parity with common stock and junior to the
Senior Preferred Stock with respect to general preference rights, and has
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 if no distributions are paid to common
shareholders.
27
ITEM 6. Selected Financial Data
-----------------------
For the year ended December 31,
---------------------------------------------------------------------------
2005 (1) 2004 (1) 2003 (1) 2002 (1) 2001 (1)
------------- ------------ ----------- ----------- -----------
(Amounts in thousands, except per share data)
Revenues:
Rental income and ancillary operations........ $1,044,514 $953,910 $891,419 $846,379 $787,655
Interest and other income..................... 16,447 5,391 2,537 5,210 8,640
------------- ------------ ----------- ----------- -----------
1,060,961 959,301 893,956 851,589 796,295
------------- ------------ ----------- ----------- -----------
Expenses:
Cost of operations (excluding depreciation)... 378,631 362,269 341,182 309,819 279,564
Depreciation and amortization................. 196,397 183,063 184,063 175,726 163,922
General and administrative.................... 21,115 18,813 17,127 15,619 21,038
Interest expense.............................. 8,216 760 1,121 3,809 3,227
------------- ------------ ----------- ----------- -----------
604,359 564,905 543,493 504,973 467,751
------------- ------------ ----------- ----------- -----------
Income from continuing operations before equity
in earnings of real estate entities, gain
(loss) on disposition of real estate
investments and casualty loss and minority
interest in income............................ 456,602 394,396 350,463 346,616 328,544
Equity in earnings of real estate entities...... 24,883 22,564 24,966 29,888 38,542
Gain(loss) on disposition of real estate
investments and casualty loss................. 1,182 67 1,007 (2,541) 4,091
Minority interest in income (3)................. (32,651) (49,913) (43,703) (44,087) (46,015)
------------- ------------ ----------- ----------- -----------
Income from continuing operations............... 450,016 367,114 332,733 329,876 325,162
Discontinued operations (2)..................... 6,377 (901) 3,920 (11,138) (954)
------------- ------------ ----------- ----------- -----------
Net income...................................... $456,393 $366,213 $336,653 $318,738 $324,208
============= ============ =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
Per Common Share:
- -----------------
Distributions................................... $1.90 $1.80 $1.80 $1.80 $1.69
Net income - Basic.............................. $1.98 $1.39 $1.29 $1.15 $1.41
Net income - Diluted............................ $1.97 $1.38 $1.28 $1.14 $1.39
Weighted average common shares - Basic.......... 128,159 127,836 125,181 123,005 122,310
Weighted average common shares - Diluted........ 128,819 128,681 126,517 124,571 123,577
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
- -------------------
Total assets.................................... $5,552,486 $5,204,790 $4,968,069 $4,843,662 $4,625,879
Total debt...................................... $149,647 $145,614 $76,030 $115,867 $168,552
Minority interest (other partnership interests). $28,970 $118,903 $141,137 $154,499 $169,601
Minority interest (preferred partnership
interests)...................................... $225,000 $310,000 $285,000 $285,000 $285,000
Shareholders' equity............................ $4,817,009 $4,429,967 $4,219,799 $4,158,969 $3,909,583
- -----------------------------------------------------------------------------------------------------------------------------------
Other Data:
- -----------
Net cash provided by operating activities....... $ 692,048 $ 616,664 $ 571,387 $ 591,283 $538,534
Net cash used in investing activities........... $(443,656) $(157,638) $(205,133) $(325,786) $(306,058)
Net cash used in financing activities........... $(121,146) $(297,604) $(264,545) $(211,720) $(272,596)
(1) During 2005, 2004, 2003, 2002, and 2001, we completed several significant
asset acquisitions, business combinations and equity transactions. See
Notes 4, 7, 8, 9 and 10 to our consolidated financial statements.
(2) Commencing January 1, 2002, we adopted and modified a business plan that
included the closure or consolidation of certain non-strategic
containerized storage facilities. We sold two commercial properties - one
in 2002, the other in 2004. During 2003 we sold five self-storage
facilities. The historical operations of these facilities are classified as
discontinued operations, with the rental income, cost of operations,
depreciation expense and gain or loss on disposition of these facilities
for current and prior periods included in the line-item "Discontinued
Operations" on the consolidated income statement.
(3) During 2004, holders of $200,000,000 of our Series N preferred partnership
units agreed to a restructuring which included reducing their distribution
rate from 9.5% to 6.4% in exchange for a special distribution of
$8,000,000. This special distribution, combined with $2,063,000 in costs
incurred at the time the units were originally issued that were charged
against income in accordance with the Securities and Exchange Commission's
clarification of EITF Topic D-42, are included in minority interest in
income.
28
ITEM 7. 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: All statements in this document, other than
statements of historical fact, are forward-looking statements which may be
identified by the use of the words "expects," "believes," "anticipates,"
"should," "estimates" and similar expressions. These forward-looking statements
involve known and unknown risks and uncertainties, which may cause Public
Storage's actual results and performance to be materially different from those
expressed or implied in the forward-looking statements. Factors and risks that
may impact future results and performance are described in Item 1A, "Risk
Factors". These risks include, but are not limited to, the following: changes in
general economic conditions and in the markets in which Public Storage operates;
the impact of competition from new and existing storage and commercial
facilities and other storage alternatives, which could impact rents and
occupancy levels at our facilities; difficulties in Public Storage's ability to
evaluate, finance and integrate acquired and developed properties into its
existing operations and to fill up those properties, which could adversely
affect our profitability; the impact of the regulatory environment as well as
national, state, and local laws and regulations including, without limitation,
those governing Real Estate Investment Trusts, which could increase our expenses
and reduce cash available for distribution; consumers' failure to accept the
containerized storage concept which would reduce our profitability; difficulties
in raising capital at reasonable rates, which would impede our ability to grow;
delays in the development process, which could adversely affect profitability;
economic uncertainty due to the impact of war or terrorism could adversely
affect its business plan; and risks related to our agreement to acquire Shurgard
Storage Centers, Inc, including risks related to completion of the transaction,
risks associated with Shurgard's level of debt, Shurgard's investment in
European operations that have not yet generated profits, and risks associated
with the integration of Shurgard's operations. We disclaim any obligation to
update publicly or otherwise revise any forward-looking statements, whether as a
result of new information, new estimates, or other factors, events or
circumstances after the date of this document, except where expressly required
by law.
OVERVIEW
The self-storage industry is highly fragmented and is composed
predominantly of numerous local and regional operators. Competition in the
markets in which we operate is significant and has increased over the past
several years due to additional development of self-storage facilities as well
as the expansion of the containerized storage business by competitors. We
believe that the increase in competition has had a negative impact on our
occupancy levels and rental rates in many markets. However, we believe that we
possess several distinguishing characteristics that enable us to compete
effectively with other owners and operators.
We are the largest owner and operator of self-storage facilities in the
United States with direct and indirect ownership interests as of December 31,
2005 in 1,501 self-storage facilities containing approximately 92 million net
rentable square feet. All of our facilities are operated under the "Public
Storage" brand name, which we believe is the most recognized and established
name in the self-storage industry. Located in the major metropolitan markets of
37 states, our self-storage facilities are geographically diverse, giving us
national recognition and prominence. This concentration establishes us as one of
the dominant providers of self-storage space in most markets in which we operate
and enables us to use a variety of promotional activities, such as television
advertising as well as targeted discounting and referrals, which are generally
not economically viable to most of our competitors. In addition, we believe that
the geographic diversity of the portfolio reduces the impact from regional
economic downturns and provides a greater degree of revenue stability.
We will continue to focus our growth strategies on: (i) improving the
operating performance of our existing self-storage properties, (ii) acquiring
self-storage properties owned and operated by others, (iii) expanding and
repackaging our existing self-storage facilities, (iv) developing new
self-storage locations, and (v) participating in the growth of PS Business
Parks, Inc. ("PSB"). Major elements of these strategies are as follows:
29
o We will focus on enhancing the operating performance of our
self-storage properties, primarily through increases in revenues
achieved through the telephone reservation center and associated
marketing efforts, as well as management of expense growth. See
"Self-Storage Operations - Same Store Facilities" for further
discussion. We expect future increases in rental income to come
primarily from increases in rental rates, as opposed to
improvements in occupancies, although there can be no assurance.
o We will acquire facilities from third parties. During 2004 and
2005, we acquired interests in 77 self-storage facilities from
third parties at an aggregate cost of approximately $514 million.
In addition, between January 1, 2006 and March 15, 2006, we
acquired three additional self-storage facilities from third
parties (total net rentable square feet of 170,000) at an
aggregate cost of approximately $20 million and we currently are
under contract to purchase seven self-storage facilities (total
net rentable square feet of 574,000) at an aggregate cost of
approximately $69 million. We believe that our national telephone
reservation system and our marketing and promotional activities
present an opportunity to increase revenues at these facilities
through higher occupancies, as well as cost efficiencies through
greater critical mass.
o We will look to expand and further invest into our existing
self-storage locations by (i) improving their visual and
structural appeal, (ii) expanding our facilities' density, at a
per-square foot cost that is favorable compared to a ground-up
development, to take advantage of increases in local demand since
the facilities were developed, and (iii) converting existing
vacant space previously used by our containerized storage
operations into traditional self-storage space. During 2003, 2004,
and 2005, we have invested a total of approximately $96 million in
such expansion, conversion, and repackaging activities. At
December 31, 2005, we have a pipeline of 58 such projects to
expand or repackage our existing facilities, and to convert
substantially all of the remaining vacant space previously used by
our containerized storage operations, for an aggregate of
approximately $262 million, which will add approximately 3,573,000
net rentable square feet. Completion of these projects is subject
to contingencies, including obtaining governmental agency
approvals. We continue to evaluate our existing real estate
portfolio to identify additional expansion and repackaging
opportunities.
o In 2004 and 2005, our rate of development of new self-storage
facilities has declined due to increases in construction cost,
increases in competition with retail, condominium, and apartment
operators for quality self-storage sites in urban locations, and
more difficult zoning and permitting requirements. We will,
however, continue to seek favorable sites and markets for
development. During the five years ending December 31, 2005, the
Company and the Consolidated Development Joint Venture developed
and opened a total of 70 storage facilities with total costs of
approximately $547 million. In 2005, we opened six facilities with
an aggregate cost of $37 million. At December 31, 2005, we have a
development pipeline which includes four self-storage facilities
that are expected to cost an aggregate of approximately $61
million, which we expect will open over the next 24 months.
o Through our investment in PSB, we will continue to participate in
the potential growth of this company's investment in approximately
17.6 million net rentable square feet of commercial space at
December 31, 2005.
The acquisition of interests in facilities that we have an ownership
interest in and operate has historically comprised a significant component of
our growth. The pool of such available acquisitions has continued to decrease as
we have acquired such remaining interests over the years, including $157 million
in such acquisitions in 2005. The potential remaining acquisition opportunities
principally include the remaining 59% that we do not own in the 36 properties
owned by the "Other Investments" in Note 5 to the consolidated financial
statements for the year ended December 31, 2005 with a book value of
approximately $37 million as well as the "Other partnership interests" in Note 9
to the consolidated financial statements for the year ended December 31, 2005
with a book value of approximately $23 million. Accordingly, we do not expect
such acquisitions to comprise a significant component of our growth going
forward.
30
We have entered into an agreement to acquire Shurgard Storage Centers,
Inc. ("Shurgard"), a publicly held REIT that has interests in approximately 646
self-storage facilities located in the United States and Europe. Under the
agreement, and based upon our December 31, 2005 balance sheet and Shurgard's
September 30, 2005 balance sheet included in its related Form 10-Q, i) we would
issue 0.82 shares of our common stock for each share of Shurgard common stock
which would increase our common shares outstanding from 128,089,563 to
approximately 166,460,200 shares, ii) we would assume Shurgard debt which totals
approximately $1.8 billion at September 30, 2005, increasing our debt
outstanding (assuming no prepayment) from $150 million to approximately $2.0
billion, and iii) $136 million of Shurgard preferred stock would be redeemed.
The transaction is targeted to close by the end of the second quarter of 2006.
Completion of the transaction is not assured and is subject to risks,
including that shareholders of either Public Storage or Shurgard do not approve
the transaction or that the other closing conditions are not satisfied. In
addition, Shurgard may under limited circumstances terminate the agreement to
take a superior proposal. Public Storage and Shurgard are not aware of any
significant governmental approvals that are required for consummation of the
merger. If any approval or action is required, it is presently contemplated that
Public Storage and Shurgard would use their reasonable best efforts to obtain
such approval. There can be no assurance that any approvals, if required, will
be obtained.
The foregoing description of the terms of our agreement to acquire
Shurgard does not purport to be complete, and is qualified in its entirety by
reference to the full text of the merger agreement, a copy of which is filed
with our current report on Form 8-K dated March 7, 2006.
CRITICAL ACCOUNTING POLICIES
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" discusses our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of financial statements and
related disclosures in conformity with generally accepted accounting principles
and our discussion and analysis of our financial condition and results of
operations requires management to make judgments, assumptions and estimates that
affect the amounts reported in our consolidated financial statements and
accompanying notes. Note 2 to the consolidated financial statements in Item 8 of
this Form 10-K summarizes the significant accounting policies and methods used
in the preparation of our consolidated financial statements and related
disclosures.
Management believes the following are critical accounting policies
whose application has a material impact on the Company's financial presentation.
That is, they are both important to the portrayal of our financial condition and
results, and they require management to make judgments and estimates about
matters that are inherently uncertain.
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 Real Estate Investment Trust ("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 income tax on the share of our
taxable income that is distributed to our shareholders.
We therefore do not estimate or accrue any federal income tax expense.
This estimate could be incorrect, because due to 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 be assured
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
have 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 qualification was lost.
There can be no assurance that we would be entitled to any statutory relief.
31
IMPAIRMENT OF LONG-LIVED ASSETS: Substantially all of our assets
consist of long-lived assets, including real estate, goodwill, and other
intangible assets. We evaluate our goodwill for impairment on an annual basis,
and on a quarterly basis evaluate other long-lived assets for impairment. As
described in Note 2 to the consolidated financial statements, the evaluation of
goodwill for impairment entails valuation of the reporting unit to which
goodwill is allocated, which involves significant judgment in the area of
projecting earnings, determining appropriate price-earnings multiples, and
discount rates. In addition, the evaluation of other long-lived assets for
impairment requires determining whether indicators of impairment exist, which is
a subjective process. When any indicators of impairment are found, the
evaluation of such long-lived assets then entails projections of future
operating cash flows, which also involves significant judgment. We identified
impairment charges in the years ended December 31, 2003 and 2004, related to our
plan to close and consolidate certain containerized storage facilities - see
Note 3 to the consolidated financial statements. Future events, or facts and
circumstances that currently exist, that we have not yet identified, could cause
us to conclude in the future that other 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 AND UNPAID TENANT CLAIM LIABILITIES:
As described in Notes 2 and 16 to the consolidated financial statements, we
retain certain risks with respect to property perils, legal liability, and other
such risks. In addition, a wholly-owned subsidiary of the Company reinsures
policies against claims for losses to goods stored by tenants in our
self-storage facilities. In connection with these risks, we accrue losses based
upon the estimated level of losses incurred using certain actuarial assumptions
followed in the insurance industry and based on recommendations from an
independent actuary that is a member of the American Academy of Actuaries. While
we believe that the amounts of the accrued losses are adequate, the ultimate
liability may be in excess of or less than the amounts recorded.
ACCRUALS FOR CONTINGENCIES: We are exposed to business and legal
liability risks with respect to events that have occurred, but in accordance
with accounting principles generally accepted in the United States, we have not
accrued for such potential liabilities because the loss is either not probable
or not estimable or because we are 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, of
which we are aware, are described in Note 16 to the consolidated financial
statements.
ACCRUALS FOR OPERATING EXPENSES: We accrue for property tax expense and
certain other operating expenses based upon estimates and historical trends and
current and anticipated local and state government rules and regulations. If
these estimates and assumptions are incorrect, our expenses could be misstated.
Cost of operations, interest expense, general and administrative expense, as
well as television, yellow page, and other advertising expenditures are expensed
as incurred.
32
RESULTS OF OPERATIONS
- ---------------------
NET INCOME: Net income for the year ended December 31, 2005 was
$456,393,000 compared to $366,213,000 for the same period in 2004, representing
an increase of $90,180,000, or 25%. This increase is primarily due to improved
net operating income (before depreciation) from our Same Store, newly developed
and acquired self-storage facilities, reduced minority interest in income,
increased gains on the disposition of real estate assets and higher interest
income. These items were partially offset by increases in depreciation
associated with acquisition and development activities, general and
administrative expense, and interest expense.
Net income for the year ended December 31, 2004 was $366,213,000
compared to $336,653,000 for the same period in 2003, representing an increase
of $29,560,000 or 9%. This increase is primarily due to improved net operating
income (before depreciation) from our Same Store self-storage facilities,
acquired and newly developed self-storage facilities, combined with a decrease
in income allocable to minority interests based upon ongoing distributions as a
result of our restructuring of $200 million of our Series N preferred
partnership units. These factors are partially offset by an increase in the
allocation of income to minority interest of $10,063,000 attributable to the
restructuring of preferred partnership interests, increased general and
administrative expense attributable primarily to increased stock-based
compensation expense and reduced gains from the sale of discontinued real estate
facilities.
ALLOCATIONS OF INCOME AMONG SHAREHOLDERS: In computing the net income
allocable to common shareholders for each period, we have deducted from net
income (i) distributions paid to the holders of the Equity Stock, Series A
totaling $21,443,000 in 2005, and $21,501,000 in each of 2004, and 2003, (ii)
distributions paid to our preferred shareholders totaling $173,017,000 in 2005,
$157,925,000 in 2004, and $146,196,000 in 2003, and (iii) amounts allocated to
preferred shareholders in connection with preferred stock redemption activities
as described below, totaling $7,538,000 in 2005, $8,724,000 in 2004 and
$7,120,000 in 2003.
NET INCOME PER SHARE: Net income was $1.97 per diluted common share for
2005 compared to $1.38 per diluted common share for 2004. This increase was
attributable to the factors denoted above with respect to net income offset
partially by an increase in income allocated to preferred shareholders, as
described above, and an increase in diluted shares outstanding from 128,681,000
in 2004 to 128,819,000 in 2005. The increase in shares outstanding was due
primarily to the issuance of shares in connection with the exercise of employee
stock options.
Net income was $1.38 per common share, on a diluted basis, for 2004
compared to $1.28 per common share for 2003. This increase was attributable to
the factors denoted above with respect to net income offset partially by an
increase in income allocated to preferred shareholders, as described above, and
an increase in diluted shares outstanding from 126,517,000 in 2003 to
128,681,000 in 2004. The increase in shares outstanding was due primarily to the
issuance of shares in connection with the exercise of employee stock options.
As described more fully under "Liquidity and Capital Resources" below,
we have approximately $653,750,000 in higher coupon preferred stock that becomes
available for redemption during 2006. While there is no assurance that we will
be able to raise the necessary capital and at appropriate rates to redeem these
securities, if we do redeem these securities, we expect allocations to our
preferred shareholders based upon distributions paid to decrease. However,
during 2006 there would be an additional allocation to the preferred
shareholders of approximately $22 million ($0.17 per common share, based upon
weighted average shares during 2005) if these redemptions are completed.
33
Real Estate Operations
- ----------------------
Self-Storage Operations: Our self-storage operations are by far the
largest component of our operating activities, representing approximately 90% of
our revenues generated during 2005. Rental income with respect to our
self-storage operations has grown from $862,809,000 in 2004 to $952,284,000 in
2005, representing an increase of $89,475,000, or approximately 10%. The
year-over-year improvements in rental income are due to improvements in the
performance of those facilities that we owned throughout each of the three
years, and the addition of new facilities to our portfolio, either through our
acquisition or development activities.
To enhance year-over-year comparisons, the following table summarizes,
and the ensuing discussion describes, the self-storage operating results.
Self - storage operations summary: Year Ended December 31, Year Ended December 31,
- ---------------------------------- ------------------------------------- ---------------------------------------
Percentage Percentage
2005 2004 Change 2004 2003 Change
------------ ------------- ---------- ----------- ----------- ----------
(Dollar amounts in thousands)
Rental income (a):
- ------------------
Same Store Facilities (b)................... $ 811,040 $ 773,185 4.9% $ 773,185 $ 734,837 5.2%
Acquired Facilities (c)..................... 39,691 4,705 743.6% 4,705 - -
Expansion Facilities (d).................... 44,280 41,695 6.2% 41,695 37,557 11.0%
Developed Facilities (e).................... 57,273 43,224 32.5% 43,224 25,527 69.3%
------------ ------------- ---------- ----------- ----------- ----------
Total rental income....................... 952,284 862,809 10.4% 862,809 797,921 8.1%
------------ ------------- ---------- ----------- ----------- ----------
Cost of operations (excluding depreciation)(f):
- ------------------------------------------------
Same Store Facilities....................... 267,969 266,544 0.5% 266,544 254,790 4.6%
Acquired Facilities......................... 16,780 1,606 944.8% 1,606 - -
Expansion Facilities........................ 15,332 14,430 6.3% 14,430 12,660 14.0%
Developed Facilities........................ 20,838 18,100 15.1% 18,100 13,272 36.4%
------------ ------------- ---------- ----------- ----------- ----------
Total cost of operations.................... 320,919 300,680 6.7% 300,680 280,722 7.1%
------------ ------------- ---------- ----------- ----------- ----------
Net operating income before depreciation (g):
- ---------------------------------------------
Same Store Facilities....................... 543,071 506,641 7.2% 506,641 480,047 5.5%
Acquired Facilities......................... 22,911 3,099 639.3% 3,099 - -
Expansion Facilities........................ 28,948 27,265 6.2% 27,265 24,897 9.5%
Developed Facilities........................ 36,435 25,124 45.0% 25,124 12,255 105.0%
------------ ------------- ---------- ----------- ----------- ----------
Total net operating income before depreciation 631,365 562,129 12.3% 562,129 517,199 8.7%
Depreciation.................................. (191,267) (176,403) 8.4% (176,403) (176,847) (0.3)%
------------ ------------- ---------- ----------- ----------- ----------
Net operating income........................ $ 440,098 $ 385,726 14.1% $ 385,726 $ 340,352 13.3%
============ ============== ========== ============ ============ ==========
Number of self-storage facilities (at end of
period)........................................ 1,463 1,425 2.7% 1,425 1,373 3.8%
Net rentable square feet (in thousands, at end of
period)(h): ................................ 89,321 85,447 4.5% 85,447 81,121 5.3%
(a) Rental income includes late charges and administrative fees and is net of
promotional discounts given. Rental income excludes retail sales, truck
rental income and tenant reinsurance revenues generated at these
facilities. Such ancillary revenues are reflected as a component of
"Ancillary Operations" on our consolidated statements of income.
(b) The Same Store Facilities include 1,260 facilities containing 73,311,000
net rentable square feet that have been owned prior to January 1, 2003, and
operated at a mature, stabilized occupancy level since January 1, 2003.
(c) The Acquired Facilities include 77 facilities containing 5,511,000 net
rentable square feet that were acquired after January 1, 2003.
(d) The Expansion Facilities include 56 facilities containing 4,944,000 net
rentable square feet of self-storage space; these facilities were owned
since January 1, 2003, however, operating results are not comparable
throughout the periods presented due primarily to expansions in their net
rentable square feet (described below).
(e) The Developed Facilities include 70 facilities containing 5,555,000 net
rentable square feet of self-storage space. These facilities were developed
and opened since January 1, 2001 at a total cost of $546.6 million.
34
(f) Cost of operations includes all costs, both direct and indirect costs,
incurred in the operating activities of the facilities. Cost of operations
excludes, costs associated with retail sales, truck rentals, and tenant
reinsurance activities; such costs are reflected under "Ancillary
Operations" on our income statement. Cost of operations before depreciation
is included herein because we believe it provides an important measure for
evaluating our ongoing operations.
(g) Net operating income before depreciation is included herein because we
believe it provides an important measure for evaluating our ongoing
operations.
(h) Square footages do not include 544,000 net rentable square feet of
industrial space initially developed for containerized storage activities.
This space is being converted into 553,000 net rentable square feet of
self-storage space; see "Development Pipeline Summary" below.
SELF-STORAGE OPERATIONS - SAME STORE FACILITIES
At December 31, 2005, we owned 1,260 self-storage facilities that we
have operated at a stabilized level of operations throughout the three-year
period. These Same Store Facilities contain approximately 73.3 million net
rentable square feet, representing approximately 82% of the aggregate net
rentable square feet of our consolidated self-storage portfolio. Revenues and
operating expenses with respect to this group of properties are set forth in the
above Self-Storage Operations table under the caption, "Same Store Facilities."
The following table sets forth additional operating data with respect to the
Same Store Facilities of facilities:
SAME STORE FACILITIES
- ---------------------
Year Ended December 31, Year Ended December 31,
------------------------------------- --------------------------------------
Percentage Percentage
2005 2004 Change 2004 2003 Change
----------- ------------ ----------- ------------- ------------ -----------
(Dollar amounts in thousands, except rents per square foot)
Rental income.................................. $ 775,012 $ 740,619 4.6% $ 740,619 $ 705,785 4.9%
Late charges and administrative fees collected. 36,028 32,566 10.6% 32,566 29,052 12.1%
----------- ------------ ----------- ------------- ------------ -----------
Total rental income......................... 811,040 773,185 4.9% 773,185 734,837 5.2%
----------- ------------ ----------- ------------- ------------ -----------
Cost of operations (excluding depreciation) (a):
Payroll expense........................... 81,981 83,434 (1.7)% 83,434 79,252 5.3%
Property taxes............................ 73,547 71,393 3.0% 71,393 70,229 1.7%
Repairs and maintenance................... 25,840 25,821 0.1% 25,821 24,091 7.2%
Advertising and promotion................. 23,518 22,022 6.8% 22,022 21,136 4.2%
Utilities................................. 16,972 15,798 7.4% 15,798 14,938 5.8%
Property insurance........................ 8,067 8,960 (10.0)% 8,960 8,850 1.2%
Telephone reservation center.............. 7,884 10,599 (25.6)% 10,599 10,833 (2.2)%
Other cost of management.................. 30,160 28,517 5.8% 28,517 25,461 12.0%
----------- ------------ ----------- ------------- ------------ -----------
Total cost of operations.................... 267,969 266,544 0.5% 266,544 254,790 4.6%
----------- ------------ ----------- ------------- ------------ -----------
Net operating income before depreciation (a)... 543,071 506,641 7.2% 506,641 480,047 5.5%
Depreciation................................... (154,653) (151,966) 1.8% (151,966) (157,653) (3.6)%
----------- ------------ ----------- ------------- ------------ -----------
Net operating income.......................... $ 388,418 $ 354,675 9.5% $ 354,675 $ 322,394 10.0%
============ ============ =========== ============= ============ ===========
Gross margin (before depreciation)............. 67.0% 65.5% 2.3% 65.5% 65.3% 0.3%
Weighted average for the fiscal year:
Square foot occupancy (b)................... 91.0% 91.0% 0.0% 91.0% 89.2% 2.0%
Realized annual rent per occupied square
foot (c).................................... $11.62 $11.10 4.7% $11.10 $10.79 2.9%
REVPAF (d).................................. $10.57 $10.10 4.7% $10.10 $9.63 4.9%
Weighted average at December 31:
Square foot occupancy....................... 89.8% 90.1% (0.3)% 90.1% 89.7% 0.4%
In place annual rent per occupied square
foot (e).................................... $12.84 $12.21 5.2% $12.21 $11.80 3.5%
Total net rentable square feet (in thousands).. 73,311 73,311 73,311 73,311
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
35
(b) Square foot occupancies represent weighted average occupancy levels over
the entire fiscal year.
(c) Realized annual rent per occupied square foot is computed by dividing
Rental income, net of discounts by the weighted average occupied square
footage for the year. Realized rents per square foot take into
consideration promotional discounts, credit card fees and other costs that
reduce rental income from the contractual amounts due.
(d) Annualized revenue per available square foot ("REVPAF") represents Rental
income, net of discounts divided by total net rentable square feet.
(e) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
Rental income increased approximately 4.6% in 2005 as compared to 2004.
This increase was primarily attributable to higher average realized annual
rental rates per occupied square foot, which were 4.7% higher in 2005 as
compared to 2004. Our occupancy levels remained flat on a year-over-year basis
at approximately 91.0% for each period.
Rental income increased by 4.9% in 2004 as compared to 2003. This
increase was primarily attributable to a 2.9% increase in realized annual rent
per occupied square foot combined with a 2.0% increase in weighted average
square foot occupancy in 2004 as compared to 2003.
Throughout 2005, 2004 and 2003, we continued advertising through the
use of television commercials and we offered various promotional discounts in
order to improve both our occupancy levels and rental rates. We believe that
continued growth in rental income for these Same Store Facilities will come
primarily from continued increases in rental rates charged to our tenants as
opposed to improvements in occupancy levels. We experience seasonal fluctuations
in the occupancy levels of self-storage facilities with occupancies generally
higher in the summer months than in the winter months. We believe that these
fluctuations result in part from increased moving activity during the summer.
Our primary goal is to continue to grow rental income in a consistent
and sustainable manner. Growth in rental income will depend upon various
factors, including our ability to (i) maintain high occupancy levels, (ii)
increase rental rates charged to both new and existing customers, and (iii)
reduce the amount of promotional discounts to attract new tenants. In this
regard, we are continuously evaluating call volume, reservation activity and
move-in/move-out rates relative to our marketing activities and rental rates.
When warranted we will adjust our pricing, promotional discounts, and media
strategies to accommodate changing conditions in each market in which we
operate.
We believe that our Same Store Facilities are well positioned for
continued rental income growth going into 2006. At December 31, 2005, our
existing tenants were paying rental rates that were 5.2% higher than one year
earlier. This improvement, however, was partially offset by a slight reduction
in occupancy of 0.3%.
There can be no assurance that we will achieve our goal of sustainable
growth in our rental income, while sustaining our occupancy levels.
Cost of operations (excluding depreciation) increased by 0.5% in 2005
as compared to 2004. This increase was modest relative to increases we have
experienced over the last several years, due to reductions in telephone
reservation center costs and payroll expense described below. In 2005,
depreciation expense increased 1.8%, due primarily to the impact of additional
capital expenditures. Cost of operations increased by 4.6% in 2004 as compared
to 2003. This increase was attributable primarily to an increase in direct
property payroll due to higher incentives and other compensation to property
operating and management personnel, as well as an increase in other cost of
management due primarily to increased recruiting and training expenses and
information technology costs. In 2004, depreciation expense declined 3.6%, due
to assets becoming fully depreciated relative to new capital expenditures.
36
The underlying compensation to our personnel has increased in 2003,
2004 and 2005, as our field organization has focused upon improving customer
service and productivity. However, over the last few years we have bolstered our
safety programs and improved our workers compensation claims management skills.
These efforts are having a positive impact on reducing workers compensation
claims, and have reduced the level of liability for future claims during 2005.
This resulted in a significant reduction in workers compensation expense in
2005, resulting in a decrease in overall payroll expense in 2005. While we
believe that there will be additional workers compensation expense reductions to
be achieved in 2006, principally through reductions in the ongoing level of
claims incurred, the level of reduction will be lower than that achieved in
2005.
Advertising and promotion is comprised principally of media (television
and radio), yellow page, and internet advertising. We experienced an increase of
4.2% in 2004 and 6.8% in 2005 in advertising and promotion expense. Yellow page
advertising has stayed relatively stable in each of the periods. Our internet
advertising expenditures, though still a relatively small portion of our overall
expenditures, have grown from virtually none in 2003 to $701,000 in 2004 and
$1,977,000 in 2005. Media advertising, principally television, has increased
from $9,118,000 in 2003 to $10,294,000 in 2004 and $10,912,000 in 2005. We
expect that internet advertising will continue to grow as that marketing channel
becomes a more important source of new tenants, and that yellow page advertising
will remain relatively stable. Future media advertising expenditures are not
determinable at this time, and will be driven in part by demand for our
self-storage spaces as well as our evaluation of the most effective mix of
yellow page, media, and internet advertising.
Repairs and maintenance has increased throughout 2003, 2004, and 2005,
as we have endeavored to improve the curb appeal and "rent ready" condition of
our facilities. Repairs and maintenance also includes snow removal costs, which
declined in 2004 as compared to 2003, but increased in 2005 as compared to 2004.
We expect to see a moderate increase in repairs and maintenance expenditures in
2006.
Telephone reservation center costs were $10,833,000 in 2003,
$10,599,000 in 2004, and $7,884,000 in 2005. These declines have resulted from
reduced call volume, as well as improvements in staffing efficiencies that have
occurred throughout 2004 and 2005. We believe that the 2005 expense represents
the stabilized level of expenditures for our telephone reservation center given
the current number of self-storage facilities in our portfolio and the related
call volume.
Property insurance expense was relatively flat in 2004 as compared to
2003; however, it declined 10% in 2005 as compared to 2004. This reduction was
due to improved cost controls as well as a somewhat softer insurance market
allowing us to get improved premiums on our policies. We expect that property
insurance will increase in 2006 as a result of the adverse impact that the
recent hurricanes had on the insurance industry.
Overall, our operating expense growth was more moderate in 2005 than we
anticipated. We believe this will change in 2006 and return to a 3% to 5%
year-over-year growth, excluding advertising expenditures.
37
The following table summarizes selected quarterly financial data with
respect to the Same Store Facilities:
For the Quarter Ended
-------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Entire Year
---------------- --------------- ---------------- --------------- --------------
(Amounts in thousands, except for per square foot amount)
Total rental income:
2005 $ 196,373 $ 201,522 $ 206,857 $ 206,288 $ 811,040
2004 $ 187,227 $ 192,376 $ 197,162 $ 196,420 $ 773,185
2003 $ 175,802 $ 181,971 $ 189,603 $ 187,461 $ 734,837
Total cost of operations (excluding depreciation):
2005 $ 69,164 $ 66,837 $ 66,927 $ 65,041 $ 267,969
2004 $ 67,448 $ 66,135 $ 65,616 $ 67,345 $ 266,544
2003 $ 59,451 $ 63,469 $ 64,713 $ 67,157 $ 254,790
Media advertising expense:
2005 $ 3,522 $ 2,940 $ 2,309 $ 2,141 $ 10,912
2004 $ 3,290 $ 1,956 $ 1,988 $ 3,060 $ 10,294
2003 $ 1,667 $ 2,946 $ 3,342 $ 1,163 $ 9,118
REVPAF:
2005 $ 10.25 $ 10.51 $ 10.77 $ 10.75 $ 10.57
2004 $ 9.77 $ 10.06 $ 10.31 $ 10.27 $ 10.10
2003 $ 9.22 $ 9.53 $ 9.92 $ 9.83 $ 9.63
Weighted average realized annual rent per occupied square foot:
2005 $ 11.41 $ 11.41 $ 11.74 $ 11.88 $ 11.62
2004 $ 10.90 $ 10.99 $ 11.22 $ 11.31 $ 11.10
2003 $ 10.88 $ 10.70 $ 10.79 $ 10.83 $ 10.79
Weighted average occupancy levels for the period:
2005 89.9% 92.1% 91.7% 90.5% 91.0%
2004 89.7% 91.5% 91.9% 90.8% 91.0%
2003 84.7% 89.1% 92.0% 90.8% 89.2%
38
Analysis of Regional Trends
- ---------------------------
The following table sets forth regional trends in our Same Store
Facilities:
Same Store Facilities Operating Trends by Region
- ---------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
------------------------------------- -------------------------------------
2005 2004 Change 2004 2003 Change
------------ ----------- ---------- ------------ ------------ --------
(Dollar amounts in thousands, except rents per square foot)
Rental income:
Southern California (126
facilities)...................... $ 133,615 $ 125,380 6.6% $ 125,380 $ 119,090 5.3%
Northern California (131
facilities)...................... 101,428 97,702 3.8% 97,702 94,533 3.4%
Texas (150 facilities).......... 72,480 70,775 2.4% 70,775 68,140 3.9%
Florida (126 facilities)........ 79,714 72,247 10.3% 72,247 67,225 7.5%
Illinois (88 facilities)........ 59,323 57,549 3.1% 57,549 55,304 4.1%
Georgia (58 facilities)......... 27,507 25,585 7.5% 25,585 24,356 5.0%
All other states (581 facilities) 336,973 323,947 4.0% 323,947 306,189 5.8%
------------ ----------- ---------- ------------ ------------ --------
Total rental income................. 811,040 773,185 4.9% 773,185 734,837 5.2%
Cost of operations (excluding depreciation expense) (a):
Southern California.............. 29,076 29,605 (1.8)% 29,605 28,085 5.4%
Northern California.............. 26,143 25,580 2.2% 25,580 25,301 1.1%
Texas............................ 31,211 31,232 (0.1)% 31,232 31,079 0.5%
Florida.......................... 26,947 28,149 (4.3)% 28,149 26,310 7.0%
Illinois......................... 24,288 25,348 (4.2)% 25,348 24,324 4.2%
Georgia.......................... 9,511 9,455 0.6% 9,455 9,017 4.9%
All other states................. 120,793 117,175 3.1% 117,175 110,674 5.9%
------------ ----------- ---------- ------------ ------------ --------
Total cost of operations............ 267,969 266,544 0.5% 266,544 254,790 4.6%
Net operating income before depreciation (a):
Southern California.............. 104,539 95,775 9.2% 95,775 91,005 5.2%
Northern California.............. 75,285 72,122 4.4% 72,122 69,232 4.2%
Texas............................ 41,269 39,543 4.4% 39,543 37,061 6.7%
Florida.......................... 52,767 44,098 19.7% 44,098 40,915 7.8%
Illinois......................... 35,035 32,201 8.8% 32,201 30,980 3.9%
Georgia.......................... 17,996 16,130 11.6% 16,130 15,339 5.2%
All other states................. 216,180 206,772 4.5% 206,772 195,515 5.8%
------------ ----------- ---------- ------------ ------------ --------
Total net operating income.......... $ 543,071 $ 506,641 7.2% $ 506,641 $ 480,047 5.5%
Weighted average occupancy (b):
Southern California.............. 92.3% 92.1% 0.2% 92.1% 90.7% 1.5%
Northern California.............. 90.5% 89.5% 1.1% 89.5% 88.6% 1.0%
Texas............................ 90.0% 90.1% (0.1)% 90.1% 89.5% 0.7%
Florida.......................... 93.2% 92.3% 1.0% 92.3% 90.2% 2.3%
Illinois......................... 89.5% 90.0% (0.6)% 90.0% 88.1% 2.2%
Georgia.......................... 92.4% 91.5% 1.0% 91.5% 90.1% 1.6%
All other states................. 90.8% 91.1% (0.3)% 91.1% 88.6% 2.8%
------------ ----------- ---------- ------------ ------------ --------
Total weighted average occupancy.... 91.0% 91.0% 0.0% 91.0% 89.2% 2.0%
REVPAF (c):
Southern California.............. $ 16.31 $ 15.34 6.3% $ 15.34 $ 14.62 4.9%
Northern California.............. 13.74 13.27 3.5% 13.27 12.89 2.9%
Texas............................ 7.42 7.26 2.2% 7.26 7.00 3.7%
Florida.......................... 10.59 9.59 10.4% 9.59 8.89 7.9%
Illinois......................... 10.55 10.30 2.4% 10.30 9.93 3.7%
Georgia.......................... 7.77 7.23 7.5% 7.23 6.90 4.8%
All other states................. 9.69 9.34 3.7% 9.34 8.86 5.4%
------------ ----------- ---------- ------------ ------------ --------
Total REVPAF:....................... $ 10.57 $ 10.10 4.7% $ 10.10 $ 9.63 4.9%
39
Same Store Facilities Operating Trends by Region (Continued)
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
------------------------------------- -------------------------------------
2005 2004 Change 2004 2003 Change
------------ ----------- ---------- ------------ ------------ --------
Realized annual rent per occupied square foot (d):
Southern California.............. $ 17.68 $ 16.66 6.1% $ 16.66 $ 16.12 3.3%
Northern California.............. 15.18 14.82 2.4% 14.82 14.55 1.9%
Texas............................ 8.25 8.06 2.4% 8.06 7.82 3.1%
Florida.......................... 11.36 10.39 9.3% 10.39 9.86 5.4%
Illinois......................... 11.79 11.44 3.1% 11.44 11.28 1.4%
Georgia.......................... 8.41 7.91 6.3% 7.91 7.66 3.3%
All other states................. 10.67 10.25 4.1% 10.25 10.00 2.5%
------------ ----------- ---------- ------------ ------------ --------
Total realized rent per square foot:... $ 11.62 $ 11.10 4.7% $ 11.10 $ 10.79 2.9%
In place annual rent per occupied square foot at December 31 (e):
Southern California.............. $ 19.44 $ 18.25 6.5% $ 18.25 $ 17.73 2.9%
Northern California.............. 16.78 16.05 4.5% 16.05 15.79 1.6%
Texas............................ 9.05 8.72 3.8% 8.72 8.60 1.4%
Florida.......................... 12.66 11.64 8.8% 11.64 11.06 5.2%
Illinois......................... 12.92 12.55 2.9% 12.55 12.21 2.8%
Georgia.......................... 9.49 8.86 7.1% 8.86 8.47 4.6%
All other states................. 11.83 11.30 4.7% 11.30 10.87 4.0%
------------ ----------- ---------- ------------ ------------ --------
Total in place rent per occupied
square foot:...................... $ 12.84 $ 12.21 5.2% $ 12.21 $ 11.80 3.5%
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
(b) Square foot occupancies represent weighted average occupancy levels over
the entire fiscal year.
(c) Annualized revenue per available square foot ("REVPAF") represents Rental
income, net of discounts divided by total net rentable square feet.
(d) Realized annual rent per occupied square foot is computed by dividing
Rental income, net of discounts by the weighted average occupied square
footage for the year. Realized rents per square foot take into
consideration promotional discounts, credit card fees and other costs that
reduce rental income from the contractual amounts due.
(e) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
The Southern California Market consists principally of the greater Los
Angeles area and San Diego, and has historically been a source of strong growth
due to its diverse economy and continued population growth. In addition,
barriers to entry in the form of difficult permitting requirements tend to
reduce the potential for increased competition in the infill locations where we
focus our operations.
The Northern California market consists principally of San Francisco
and related peripheral areas. While this area has a vibrant economy and
relatively strong population growth, it has been subject to general economic
conditions, principally issues associated with the technology sector. In
addition, there has been increased competition in the areas that we do business,
principally in the peripheral areas near San Francisco, due to new supply. As a
result, revenue growth in this area has been average relative to our other
markets.
The Texas market principally includes Dallas, Houston and San Antonio.
This market has historically been subject to volatility due to minimal
regulatory restraint upon building, which results in cycles of overbuilding and
absorption. For the last few years, we have been in a period of increased supply
and competition in the areas we operate, and as a result revenue growth has been
below expectations.
40
The Florida market principally includes Miami, Orlando, Tampa, and West
Palm Beach. These markets have been our strongest in terms of revenue growth in
2005, due in part to increased moving and storage demand resulting from
hurricane damage. In addition, over the longer term we believe that this market
benefits from continued strong population growth and barriers to entry.
Accordingly, we expect this market to continue to perform at the upper end
relative to our other markets.
The Illinois market is composed principally of Chicago. Revenue growth
has been weak in Chicago due, we believe, to increased competition from building
that is comprised principally of conversions of industrial type facilities into
self-storage facilities, as well as weaker population growth.
Georgia, which includes principally Atlanta, has been benefiting from a
reduction in new supply relative to population growth in the last few years and,
as a result, revenue growth has been favorable in the last three years. We
believe that these conditions should continue and expect Atlanta to be one of
our strongest markets in 2006.
SELF-STORAGE OPERATIONS - ACQUIRED FACILITIES
During 2004 and 2005, we acquired 77 self-storage facilities containing
5,511,000 net rentable square feet (no facilities were acquired during 2003).
The following table summarizes operating data with respect to these facilities.
ACQUIRED SELF-STORAGE FACILITIES
- -----------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------
2005 2004 Change
----------- ------------ -------------
(Amounts in thousands, except per
square foot amounts and facility count)
Rental income:
Self-storage facilities acquired in 2005...... $ 9,285 $ - $ 9,285
Self-storage facilities acquired in 2004...... 30,406 4,705 25,701
----------- ------------ -------------
Total rental income........................... 39,691 4,705 34,986
----------- ------------ -------------
Cost of operations (excluding depreciation) (a):
Self-storage facilities acquired in 2005...... 4,148 - 4,148
Self-storage facilities acquired in 2004...... 12,632 1,606 11,026
----------- ------------ -------------
Total cost of operations...................... 16,780 1,606 15,174
----------- ------------ -------------
Net operating income before depreciation (a):
Self-storage facilities acquired in 2005...... 5,137 - 5,137
Self-storage facilities acquired in 2004...... 17,774 3,099 14,675
----------- ------------ -------------
Total net operating income before depreciation 22,911 3,099 19,812
Depreciation..................................... (10,061) (841) (9,220)
----------- ------------ -------------
Net operating income.......................... $ 12,850 $ 2,258 $ 10,592
=========== ============ =============
Weighted average square foot occupancy during the period:
Self-storage facilities acquired in 2005...... 86.8% - -
Self-storage facilities acquired in 2004...... 87.0% 80.4% 8.2%
----------- ------------ -------------
87.0% 80.4% 8.2%
=========== ============ =============
Weighted average realized annual rent per occupied square foot for the year (b):
Self-storage facilities acquired in 2005...... $10.17 - -
Self-storage facilities acquired in 2004...... 10.80 9.51 13.6%
----------- ------------ -------------
$10.65 $9.51 12.0%
=========== ============ =============
In place annual rent per occupied square foot at December 31(c):
Self-storage facilities acquired in 2005...... $12.00 - -
Self-storage facilities acquired in 2004...... 12.14 11.47 5.8%
----------- ------------ -------------
$12.08 $11.47 5.3%
=========== ============ =============
41
ACQUIRED SELF-STORAGE FACILITIES (Continued)
- -----------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------
2005 2004 Change
----------- ------------ -------------
(Amounts in thousands, except per
square foot amounts and facility count)
Number of Facilities:
2005........................................ 32 - 32
2004........................................ 45 45 -
----------- ------------ -------------
77 45 32
=========== ============ =============
Net rentable square feet at December 31:
Self-storage facilities acquired in 2005...... 2,390 - 2,390
Self-storage facilities acquired in 2004 (d).. 3,121 3,109 12
----------- ------------ -------------
5,511 3,109 2,402
=========== ============ =============
Cumulative acquisition cost at December 31:
Self-storage facilities acquired in 2005......... $ 254,549 $ - $ 254,549
Self-storage facilities acquired in 2004 (d)... 260,801 259,487 1,314
----------- ------------ -------------
$ 515,350 $ 259,487 $ 255,863
=========== ============ =============
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
(b) Realized annual rent per occupied square foot is computed by dividing
rental income, net of discounts by the weighted average occupied square
footage for the year. Realized rents per square foot take into
consideration promotional discounts, credit card fees and other costs that
reduce rental income from the contractual amounts due.
(c) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
(d) During 2005, we expanded one of the 2004 acquisitions, adding 12,000 net
rentable square feet at a cost of $1,314,000.
The 2004 and 2005 acquisitions were acquired at various dates
throughout each respective year. Accordingly, rental income, cost of operations,
net operating income and weighted average square foot occupancy levels represent
the operating results for the partial period that we owned the facilities during
the year acquired.
During 2004, we acquired a total of 45 self-storage facilities for an
aggregate cost of approximately $259,487,000. These facilities contain in the
aggregate approximately 3,121,000 net rentable square feet and are located
principally in the Buffalo, Dallas, Miami, Milwaukee, and Minneapolis
metropolitan areas.
During 2005, we acquired a total of 32 self-storage facilities,
principally in single-property transactions, for an aggregate cost of
$254,549,000. These facilities contain in the aggregate approximately 2,390,000
net rentable square feet and are located principally in the Atlanta, Chicago,
Miami, and New York metropolitan areas.
We believe our presence in and knowledge of substantially all of the
major markets in the United States enhances our ability to identify attractive
acquisition opportunities and capitalize on the overall fragmentation in the
storage industry. Our 2004 and 2005 acquisitions consist of facilities that have
been operating for a number of years as well as newly constructed facilities
that were in the process of filling up to stabilized occupancy levels. In either
case, we have been able to leverage off of our operating strategies and improve
the occupancy levels of the facilities, or with respect to the newly developed
facilities we have been able to accelerate the fill-up pace.
42
We expect that our 2004 and 2005 acquisitions will continue to provide
earnings growth during 2006 as these facilities continue to improve their
occupancy levels as well as realized rental rates. In addition, during 2006 we
expect to continue to acquire additional self-storage facilities. Between
January 1, 2006 and March 15, 2006, we acquired three self-storage facilities
from third parties with total net rentable square feet of 170,000, at an
aggregate cost of approximately $20.0 million, comprised of cash totaling $15.4
million and the assumption of debt totaling $4.6 million. At March 15, 2006, we
are under contract to purchase seven self-storage facilities (total approximate
net rentable square feet of 574,000) at an aggregate cost of approximately $69.4
million. We anticipate that these acquisitions will be funded entirely by us.
Each of these contracts is subject to significant contingencies, and there is no
assurance that any of these facilities will be acquired.
SELF-STORAGE OPERATIONS - EXPANSION FACILITIES
Our expansion facilities consist of 48 self-storage facilities that we
have owned for a number of years and have recently expanded the amount of square
footage available for rent combined with eight self-storage facilities located
in New Orleans that were heavily impacted by Hurricane Katrina during 2005. The
48 self-storage facilities are generally older facilities that are located in
prime locations where we have added additional space by either constructing new
buildings on available land at the existing site or by demolishing existing
single story buildings and rebuilding multi-story buildings in their place.
The operating results of these 48 expansion facilities and the eight
facilities located in New Orleans are not comparable on a year over year basis.
The operating results for these facilities are presented in the table below.
EXPANSION SELF-STORAGE FACILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
---------------------------------------- -------------------------------------
2005 2004 Change 2004 2003 Change
------------ ----------- ------------- ---------- ---------- ---------
(Amounts in thousands, except per square foot amounts)
Rental income:
New Orleans facilities ................... $ 4,778 $ 5,821 $ (1,043) $ 5,821 $ 5,386 $ 435
Other expansion facilities................ 39,502 35,874 3,628 35,874 32,171 3,703
------------ ----------- ------------- ---------- ---------- ---------
Total rental income..................... 44,280 41,695 2,585 41,695 37,557 4,138
------------ ----------- ------------- ---------- ---------- ---------
Cost of operations (excluding depreciation) (a):
New Orleans facilities.................... 1,773 1,808 (35) 1,808 1,657 151
Other expansion facilities................ 13,559 12,622 937 12,622 11,003 1,619
------------ ----------- ------------- ---------- ---------- ---------
Total cost of operations................ 15,332 14,430 902 14,430 12,660 1,770
------------ ----------- ------------- ---------- ---------- ---------
Net operating income before depreciation (a):
New Orleans facilities.................... 3,005 4,013 (1,008) 4,013 3,729 284
Other expansion facilities................ 25,943 23,252 2,691 23,252 21,168 2,084
------------ ----------- ------------- ---------- ---------- ---------
Total net operating income before depreciation 28,948 27,265 1,683 27,265 24,897 2,368
Depreciation................................ (11,187) (9,579) (1,608) (9,579) (8,669) (910)
------------ ----------- ------------- ---------- ---------- ---------
Net operating income...................... $ 17,761 $ 17,686 $ 75 $ 17,686 $ 16,228 $ 1,458
============ =========== ============= ========== ========== =========
Weighted average square foot occupancy during the
period:
New Orleans facilities (b)................ 90.7% 90.9% (0.2)% 90.9% 89.0% 2.1%
Other expansion facilities................ 83.8% 84.5% (0.8)% 84.5% 81.9% 3.2%
------------ ----------- ------------- ---------- ---------- ---------
84.5% 85.3% (0.9)% 85.3% 82.9% 2.9%
------------ ----------- ------------- ---------- ---------- ---------
Weighted average realized rent per occupied square
foot during the period (c):
New Orleans facilities (b) ............... $10.97 $11.65 (5.8)% $11.65 $11.02 5.7%
Other expansion facilities................ 11.69 11.55 1.2% 11.55 11.82 (2.3)%
------------ ----------- ------------- ---------- ---------- ---------
$11.61 $11.56 0.4% $11.56 $11.71 (1.3)%
------------ ----------- ------------- ---------- ---------- ---------
In place annual rent per occupied square foot at
December 31 (d):
New Orleans facilities (b) ............... $13.25 $12.86 3.0% $12.86 $12.29 4.6%
Other expansion facilities................ 13.17 12.59 4.6% 12.59 12.80 (1.6)%
------------ ----------- ------------- ---------- ---------- ---------
$13.17 $12.62 4.4% $12.62 $12.72 (0.8)%
------------ ----------- ------------- ---------- ---------- ---------
Net rentable square feet (in thousands, at end
of period): (e)
New Orleans facilities.................... 524 524 - 524 524 -
Other expansion facilities................ 4,420 3,699 721 3,699 3,383 316
------------ ----------- ------------- ---------- ---------- ---------
4,944 4,223 721 4,223 3,907 316
============ =========== ============= ========== ========== =========
43
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
(b) Occupied and available square footage excludes the impact of units taken
offline due to hurricane damage, where such amounts are factored in to the
computations of weighted average square foot occupancy, weighted average
realized rent per occupied square foot, and in place annual rent per
occupied square foot.
(c) Realized annual rent per occupied square foot is computed by dividing
Rental income, net of discounts by the weighted average occupied square
footage for the year. Realized rents per square foot take into
consideration promotional discounts, credit card fees and other costs that
reduce rental income from the contractual amounts due.
(d) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
(e) Square footage excludes 371,000 net rentable containerized storage space
initially developed for the containerized storage business at December 31,
2005, but includes square footage taken offline due to hurricane damage.
All of the New Orleans facilities were closed for operations for
several weeks following the hurricane; however, all but three of these
facilities have since reopened. The five that are operating are not operating at
full capacity, as many units are unavailable for lease due to damage. Two of the
three facilities that remain closed will not be able to reopen at all without
substantial restoration and repair work.
For the years ended December 31, 2005, 2004 and 2003, net operating
income (before depreciation) for these eight facilities was $3,005,000,
$4,013,000 and $3,729,000, respectively. With respect to the two facilities that
have been significantly damaged and should remain inoperable for the foreseeable
future, net operating income (before depreciation) for the years ended December
31, 2005, 2004 and 2003, was $503,000, $954,000 and $840,000, respectively.
Notwithstanding that five of our facilities in New Orleans are
currently operating, we believe that the indirect economic effects of the
hurricane on the city may have a negative impact on our facilities' operating
results, and these effects are expected to continue for an indeterminate time
period.
We expect that the Expansion Facilities, other than the New Orleans
facilities, will continue to provide growth to our earnings into 2005 as we
continue to rent the newly added vacant space. The weighted average occupancy
level of these facilities was 83.8%, 84.5%, and 81.9% for each of the three
years ended December 31, 2005, 2004 and 2003 respectively.
We expect that we will continue to repackage additional facilities
during 2006. At December 31, 2005, we have seven projects with an aggregate cost
of $21.7 million to convert the containerized storage space into self-storage
space, and 51 other expansion and repackaging projects to enhance the visual
appeal of our facilities or increase their net rentable space at an aggregate
cost of $240.3 million. These activities will increase our self-storage space by
an aggregate of 3,573,000 net rentable square feet and will result in short-term
dilution to earnings. However, we believe that expansion of our existing
self-storage facilities in markets that have unmet storage demand, and improving
our existing facilities' competitive position through enhancing their visual and
structural appeal, provide an important means to improve the Company's earnings.
Further, the construction cost for these expansions is generally lower on a
per-square foot basis than the development of a new facility, resulting in a
higher yield potential. There can be no assurance about the future level of such
expansion and enhancement opportunities, and these projects are subject to
contingencies.
SELF-STORAGE OPERATIONS - DEVELOPED FACILITIES
We have 53 newly developed self-storage facilities, and 17 facilities
that were developed to contain both self-storage and containerized storage at
the same location ("Combination Facilities") that have not been operating at a
stabilized level of operations since January 1, 2003. At December 31, 2005,
these newly developed facilities have an aggregate of 5,555,000 net rentable
square feet of self-storage space, and 173,000 net rentable square feet of
industrial space developed originally for our containerized storage business.
Aggregate development cost for these 70 facilities was approximately $546.6
million at December 31, 2005. The operating results of the self-storage
facilities and Combination Facilities are reflected in the Self-Storage
Operations table under the caption, "Developed Facilities." These facilities are
not included in the "Same Store" portfolio because their operations have not
been stabilized.
44
The following table sets forth the operating results and selected
operating data with respect to the Developed Facilities:
DEVELOPED SELF-STORAGE FACILITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
--------------------------------------- --------------------------------------
2005 2004 Change 2004 2003 Change
------------ ------------- ------------ ----------- ------------ -----------
(Amounts in thousands, except per square foot amounts and facility count)
Rental income:
Self-storage facilities opened in 2005....... $ 464 $ - $ 464 $ - $ - $ -
Self-storage facilities opened in 2004....... 5,336 1,234 4,102 1,234 - 1,234
Self-storage facilities opened in 2003....... 12,789 8,705 4,084 8,705 1,566 7,139
Self-storage facilities opened in 2002 and 2001 21,745 19,050 2,695 19,050 13,316 5,734
Combination facilities....................... 16,939 14,235 2,704 14,235 10,645 3,590
------------ ------------- ------------ ----------- ------------ -----------
Total rental income....................... 57,273 43,224 14,049 43,224 25,527 17,697
------------ ------------- ------------ ----------- ------------ -----------
Cost of operations (excluding depreciation)(a):
Self-storage facilities opened in 2005....... $ 568 $ - $ 568 $ - $ - $ -
Self-storage facilities opened in 2004....... 2,068 1,149 919 1,149 - 1,149
Self-storage facilities opened in 2003....... 4,071 3,788 283 3,788 1,347 2,441
Self-storage facilities opened in 2002 and 2001 7,806 7,464 342 7,464 7,049 415
Combination facilities....................... 6,325 5,699 626 5,699 4,876 823
------------ ------------- ------------ ----------- ------------ -----------
Total cost of operations.................. 20,838 18,100 2,738 18,100 13,272 4,828
------------ ------------- ------------ ----------- ------------ -----------
Net operating income before depreciation (a):
Self-storage facilities opened in 2005....... $ (104) $ - $ (104) $ - $ - $ -
Self-storage facilities opened in 2004....... 3,268 85 3,183 85 - 85
Self-storage facilities opened in 2003....... 8,718 4,917 3,801 4,917 219 4,698
Self-storage facilities opened in 2002 and 2001 13,939 11,586 2,353 11,586 6,267 5,319
Combination facilities....................... 10,614 8,536 2,078 8,536 5,769 2,767
------------ ------------- ------------ ----------- ------------ -----------
Net operating income before depreciation.... 36,435 25,124 11,311 25,124 12,255 12,869
Depreciation.................................. (15,366) (14,017) (1,349) (14,017) (10,525) (3,492)
------------ ------------- ------------ ----------- ------------ -----------
Net operating income........................ $ 21,069 $ 11,107 $ 9,962 $ 11,107 $ 1,730 $ 9,377
============ ============= ============ =========== ============ ===========
Weighted average square foot occupancy during the
period:
Self-storage facilities opened in 2005....... 26.9% - - - - -
Self-storage facilities opened in 2004....... 74.2% 35.2% 110.8% 35.2% - -
Self-storage facilities opened in 2003....... 89.0% 64.8% 37.3% 64.8% 24.4% 165.6%
Self-storage facilities opened in 2002 and 2001 92.3% 91.0% 1.4% 91.0% 67.4% 35.0%
Combination facilities....................... 77.0% 81.2% (5.2)% 81.2% 77.9% 4.2%
------------ ------------- ------------ ----------- ------------ -----------
82.5% 79.4% 3.9% 79.4% 66.2% 19.9%
============ ============= ============ =========== ============ ===========
Weighted average realized rent per occupied square
foot during the period (b):
Self-storage facilities opened in 2005....... $8.47 $ - - $ - $ - -
Self-storage facilities opened in 2004....... 14.12 10.97 28.7% 10.97 - -
Self-storage facilities opened in 2003....... 13.77 11.96 15.1% 11.96 8.85 35.2%
Self-storage facilities opened in 2002 and 2001 13.02 11.68 11.5% 11.68 11.17 4.6%
Combination facilities....................... 12.80 12.47 2.6% 12.47 12.35 0.9%
------------ ------------- ------------ ----------- ------------ -----------
$13.13 $11.97 9.8% $11.97 $11.45 4.5%
============ ============= ============ =========== ============ ===========
In place annual rent per occupied square foot at
December 31 (c):
Self-storage facilities opened in 2005....... $12.90 $ - - $ - $ - -
Self-storage facilities opened in 2004....... 16.78 16.02 4.7% 16.02 - -
Self-storage facilities opened in 2003....... 15.63 14.47 8.0% 14.47 13.66 5.9%
Self-storage facilities opened in 2002 and 2001 14.56 13.32 9.3% 13.32 12.33 8.0%
Combination facilities....................... 14.09 13.68 3.0% 13.68 13.59 0.7%
------------ ------------- ------------ ----------- ------------ -----------
$14.77 $13.83 6.8% $13.83 $12.95 6.8%
============ ============= ============ =========== ============ ===========
45
DEVELOPED SELF-STORAGE FACILITIES (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
--------------------------------------- --------------------------------------
2005 2004 Change 2004 2003 Change
------------ ------------- ------------ ----------- ------------ -----------
(Amounts in thousands, except per square foot amounts and facility count)
Number of facilities:
Self-storage facilities opened in 2005....... 6 - 6 - - -
Self-storage facilities opened in 2004....... 7 7 - 7 - 7
Self-storage facilities opened in 2003....... 14 14 - 14 14 -
Self-storage facilities opened in 2002 and 2001 26 26 - 26 26 -
Combination facilities....................... 17 17 - 17 17 -
------------ ------------- ------------ ----------- ------------ -----------
70 64 6 64 57 7
============ ============= ============ =========== ============ ===========
Square Footage:
Self-storage facilities opened in 2005....... 463 - 463 - - -
Self-storage facilities opened in 2004....... 505 505 - 505 - 505
Self-storage facilities opened in 2003....... 994 994 - 994 994 -
Self-storage facilities opened in 2002 and 2001 1,747 1,747 - 1,747 1,714 33
Combination facilities (d)................... 1,846 1,558 288 1,558 1,195 363
------------ ------------- ------------ ----------- ------------ -----------
5,555 4,804 751 4,804 3,903 901
============ ============= ============ =========== ============ ===========
Cumulative development cost:
Self-storage facilities opened in 2005....... $ 37,073 $ - $ 37,073 $ - $ - $ -
Self-storage facilities opened in 2004....... 60,579 60,579 - 60,579 - 60,579
Self-storage facilities opened in 2003....... 107,322 107,322 - 107,322 105,026 2,296
Self-storage facilities opened in 2002 and 2001 164,789 164,789 - 164,789 161,675 3,114
Combination facilities (d).................. 176,874 168,334 8,540 168,334 158,167 10,167
------------ ------------- ------------ ----------- ------------ -----------
$ 546,637 $ 501,024 $ 45,613 $ 501,024 $ 424,868 $ 76,156
============ ============= ============ =========== ============ ===========
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
(b) Realized annual rent per occupied square foot is computed by dividing
Rental income, net of discounts by the weighted average occupied square
footage for the year. Realized rents per square foot take into
consideration promotional discounts, credit card fees and other costs
that reduce rental income from the contractual amounts due.
(c) In place annual rent per occupied square foot represents contractual rents
per occupied square foot without reductions for promotional discounts.
(d) Square footages exclude industrial space developed for containerized
storage activities totaling 173,000 net rentable square feet at December
31, 2005. During 2003, 2004 and 2005, we have converted industrial space no
longer used by the discontinued containerized storage business into
1,483,000 net rentable square feet of traditional self-storage space, at an
aggregate cost of $23,207,000.
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 facility first opens for operation the facility is
entirely vacant generating no rental income. Historically, we estimated that on
average it takes approximately 24 - 36 months for a newly developed facility to
fill up and reach a targeted occupancy level of approximately 90%.
As these facilities approach the targeted occupancy level of
approximately 90%, rates are increased, resulting in further improvement in net
operating income as the existing tenants, which moved in at lower rates, have
their rates increased or are replaced by tenants at higher rates. This process
of reaching stabilized rental rates can take approximately another 12 to 24
months following the time when the facilities reach a stabilized occupancy
level. In addition, move-in discounts have a more pronounced effect upon
realized rental rates for the newly developed facilities, because such
facilities tend to have a higher ratio of newer tenants.
Property operating expenses are substantially fixed, consisting
primarily of payroll, property taxes, utilities, and marketing costs. 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% to 35%. 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.
46
During construction of the self-storage 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 operations interest is no longer capitalized.
The yield on cost for these facilities for the year ended December 31,
2005, based on net operating income before depreciation, was approximately 6.7%,
which is lower than our ultimate yield expectations. We expect these yields to
increase as these facilities reach stabilization of both occupancy levels and
realized rents. Properties that were developed before 2005 have contributed
greatly to our earnings growth with net operating income before depreciation
increasing by approximately $11.4 million in 2005 as compared to 2004. This
growth was primarily due to higher occupancy levels in 2005 as compared to 2004.
We expect that these facilities will continue to provide growth, however, at a
growth rate that is much lower than experienced in 2005 as occupancy levels
become more stabilized.
With respect to our Combination Facilities, we have been steadily
converting these facilities into entirely self-storage facilities by converting
the industrial space once used by our containerized storage operations into
self-storage space. As of December 31, 2005, 14 of the 17 Combination Facilities
have been converted into entirely self-storage. We expect to convert the
remaining three facilities over the next two years. Weighted average occupancy
levels for the Combination Facilities was 77.9% in 2003, 81.2% in 2004, and
77.0% in 2005. The drop in occupancy in 2005 is due principally to the addition
of more space during 2005.
Development of self-storage facilities causes short-term earnings
dilution because, as mentioned above, of the extended time to stabilize a
self-storage facility. We believe that development of self-storage facilities is
favorable, despite the short-term earnings dilution, because it is advantageous
for us to continue to expand our asset base and benefit from the resulting
increased critical mass, with facilities that will improve our portfolio's
overall average construction and location quality.
However, the development environment has changed in the last few years
due to increases in construction costs, increases in competition with retail,
condominium, and apartment operators for quality construction sites in urban
locations, and more difficult zoning and permitting requirements, which has
reduced the number of attractive sites available for development and reduced our
development of facilities. It is unclear when, or if, these conditions will
improve.
We expect that over at least the next 12 months, the Developed
Self-Storage Facilities will continue to have a negative impact to our earnings.
Furthermore, the 4 newly developed 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 24 months will also
negatively impact our earnings until they reach a stabilized occupancy level.
Commercial Property Operations: Commercial property operations included
in our consolidated financial statements include commercial space owned by the
Company and entities consolidated by the Company. We have a much larger interest
in commercial properties through our ownership interest in PSB. Our investment
in PSB is accounted for on the equity method of accounting, and accordingly our
share of PSB's earnings is reflected as "Equity in earnings of real estate
entities", see below.
Our commercial operations are comprised of 1,296,000 net rentable
square feet of commercial space, operated principally at certain of the
self-storage facilities.
As noted below, we sold a commercial facility during 2004. The
operating results for this facility prior to its disposition are included in
"discontinued operations" below.
47
The results of our commercial operations are provided in the table
below:
COMMERCIAL PROPERTY OPERATIONS
(excluding discontinued operations):
- ------------------------------------
Year Ended Year Ended
December 31, December 31,
------------------------- ----------------------
2005 2004 Change 2004 2003 Change
------------- ------------ ---------- ------------ ----------- ----------
(Dollar amounts in thousands)
Rental income ............... $ 11,560 $ 10,750 $ 810 $ 10,750 $ 11,001 $ (251)
Cost of operations (excluding
depreciation) (a)......... 4,448 4,328 120 4,328 4,583 (255)
------------- ------------ ---------- ------------ ----------- ----------
Net operating income before
depreciation (a)............ 7,112 6,422 690 6,422 6,418 4
Depreciation expense.......... (2,322) (2,114) (208) (2,114) (2,436) 322
------------- ------------ ---------- ------------ ----------- ----------
Net operating income....... $ 4,790 $ 4,308 $ 482 $ 4,308 $ 3,982 $ 326
============= ============ ========== ============ =========== ==========
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
Our commercial property operations consist primarily of facilities that
are at a stabilized level of operations, and generally reflect the conditions in
the markets in which they operate. We do not expect any significant growth in
net operating income from this segment of our business for 2006.
CONTAINERIZED STORAGE OPERATIONS: Commencing in 2002, we significantly
curtailed the scope and number of facilities of our containerized storage
operations, and continue to evaluate additional facilities for closure. At
December 31, 2005, we operated 12 containerized storage facilities located in
major markets in which we have significant traditional self-storage market
presence. The operations with respect to the facilities that were closed or
consolidated in 2003, 2004, and 2005 (the "Closed Facilities"), including
historical operating results for previous periods, are not included in the table
below and instead are included in "Discontinued Operations " on our income
statement. The following table sets forth the operations of these 12 facilities:
CONTAINERIZED STORAGE
(excluding discontinued operations):
- ------------------------------------
Year Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2005 2004 Change 2004 2003 Change
------------ ------------ ----------- ------------- ----------- -----------
(Dollar amounts in thousands)
Rental and other income ............ $16,497 $ 19,355 $ (2,858) $ 19,355 $ 23,991 $ (4,636)
Cost of operations (excluding
depreciation) (a):
Direct operating costs.......... 11,286 10,448 838 10,448 12,796 (2,348)
Facility lease expense.......... 1,600 1,326 274 1,326 1,143 183
------------ ------------ ----------- ------------- ----------- -----------
Total cost of operations..... 12,886 11,774 1,112 11,774 13,939 (2,165)
------------ ------------ ----------- ------------- ----------- -----------
Net operating income prior to
depreciation (a).............. 3,611 7,581 (3,970) 7,581 10,052 (2,471)
Depreciation expense (b)............ (2,808) (4,546) 1,738 (4,546) (4,780) 234
------------ ------------ ----------- ------------- ----------- -----------
Net operating income ............... $ 803 $ 3,035 $ (2,232) $ 3,035 $ 5,272 $ (2,237)
============ ============ =========== ============= =========== ===========
(a) Cost of operations before depreciation and net operating income before
depreciation are included herein because we believe they provide important
measures for evaluating our ongoing operations.
(b) Depreciation expense principally relates to the depreciation related to the
containers, however, depreciation expense for 2005, 2004 and 2003 includes
$1,048,000, $1,020,000, and $1,218,000, respectively, related to real
estate facilities.
48
Rental and other income includes monthly rental charges to customers
for storage of the containers and certain non-core services, which were
eliminated. Rental and other income decreased to $16,497,000 for the year ended
December 31, 2005 from $19,355,000 for the same period in 2004 and $23,991,000
for 2003, primarily as a result of the termination of these non-core services.
At December 31, 2005, there were approximately 21,354 occupied containers at the
12 facilities.
Direct operating costs principally includes payroll, equipment lease
expense, utilities and vehicle expenses (fuel and insurance). The reduction in
direct operating costs during 2004, when compared to 2003, is due primarily to
the aforementioned termination of non-core services. Cost of operations
increased in 2005, as compared to 2004, due principally to increases in yellow
page and media advertising expense totaling $3,147,000 in 2005 and $800,000 in
2004, partially offset by a decrease in expenses attributable to the termination
of the non-core services in 2005 compared to 2004. Future yellow page and media
advertising may change in response to demand, occupancy levels, and our
determination of the most appropriate marketing mix for this product.
There can be no assurance as to the ultimate level of the containerized
storage business's expansion, level of gross rentals, level of occupancy or
profitability. We continue to evaluate the business operations, and additional
facilities may be closed.
See "Discontinued Operations" below for a discussion of operating
results of the Closed Facilities.
ANCILLARY OPERATIONS: Our Ancillary operations include the operating
results of our tenant insurance, truck rental, merchandise, and third-party
property management operations. The following table sets forth our ancillary
operations:
Year Ended December 31, Year Ended December 31,
-------------------------- -----------------------------
2005 2004 Change 2004 2003 Change
----------- ------------ ----------- ----------- ---------- ----------
(Dollar amounts in thousands)
Revenues:
Tenant reinsurance premiums..... $ 24,889 $ 24,243 $ 646 $ 24,243 $ 22,464 $ 1,779
Merchandise sales............... 22,464 21,336 1,128 21,336 20,498 838
Truck rentals................... 13,853 12,646 1,207 12,646 12,725 (79)
Property management............. 2,967 2,771 196 2,771 2,819 (48)
----------- ------------ ----------- ----------- ---------- ----------
Total revenues............... 64,173 60,996 3,177 60,996 58,506 2,490
----------- ------------ ----------- ----------- ---------- ----------
Cost of operations:
Tenant reinsurance.............. 8,234 13,508 (5,274) 13,508 11,987 1,521
Merchandise sales............... 18,773 18,901 (128) 18,901 17,587 1,314
Truck rentals................... 12,733 12,421 312 12,421 11,659 762
Property management............. 638 657 (19) 657 705 (48)
----------- ------------ ----------- ----------- ---------- ----------
Total cost of operations..... 40,378 45,487 (5,109) 45,487 41,938 3,549
----------- ------------ ----------- ----------- ---------- ----------
Net operating income:
Tenant reinsurance.............. 16,655 10,735 5,920 10,735 10,477 258
Merchandise sales............... 3,691 2,435 1,256 2,435 2,911 (476)
Truck rentals................... 1,120 225 895 225 1,066 (841)
Property management............. 2,329 2,114 215 2,114 2,114 -
----------- ------------ ----------- ----------- ---------- ----------
Total net operating income... $ 23,795 $ 15,509 $ 8,286 $ 15,509 $ 16,568 $(1,059)
=========== =========== =========== =========== ========== ==========
Tenant reinsurance operations
-----------------------------
On December 31, 2001, we acquired PSIC from a related party. PS
Insurance reinsures policies against losses to goods stored by tenants in our
self-storage facilities. Revenues are comprised of fees charged to tenants
electing such policies. Cost of operations primarily includes claims paid that
are not covered by our outside third-party insurers (described below), as well
as claims adjusting expenses.
Throughout 2003, 2004, and 2005, we had outside third-party insurance
coverage for claims paid exceeding $500,000 resulting from any individual event,
to a limit of $10,000,000. Effective January 1, 2006, such coverage was revised
to cover claims paid exceeding $1,500,000 resulting from any individual event,
to a limit of $9,000,000.
49
The decrease in cost of operations for 2005 as compared to 2004 is due
principally to improved claims handling and claims management. In addition, in
2004, we recorded an estimated loss of approximately $1,500,000 with respect to
potential tenant insured losses as a result of several hurricanes affecting the
southeastern United States. During 2005, we determined that this accrual was too
high based upon claims history, and accordingly we reduced the estimated
liability by approximately $500,000 and reduced cost of operations in 2005 by a
corresponding amount. Similarly in 2005, we recorded estimated losses of
approximately $1 million relating to potential tenant insured claims for losses
incurred as a result of hurricanes occurring in 2005. Other amounts included in
cost of operations for claims losses during 2003, 2004, and 2005 are isolated to
events affecting specific properties or tenants, rather than catastrophic
events.
The future level of tenant reinsurance revenues is largely dependent
upon the number of new tenants electing to purchase policies, premiums charged
for such insurance, and existing tenant retention to continue participating in
the insurance program. For the years ended December 31, 2005, 2004, and 2003,
approximately 32%, 35%, and 37%, respectively, of our self-storage tenant base
had such policies.
The future cost of operations will be dependent primarily upon the
level of losses incurred, including the level of catastrophic events, such as
hurricanes, that occur and affect our properties. The aforementioned increase in
the deductible of $1,500,000 per event could result in higher loss expense in
2006, depending upon the number of catastrophic losses that occur.
Merchandise and truck rental operations
---------------------------------------
Through a taxable REIT subsidiary, all of our self-storage facilities
sell locks, boxes, and packing supplies to our tenants as well as the general
public. Revenues and cost of operations for these activities are included in the
table above as "Merchandise Sales." In addition, at selected locations, our
subsidiary maintains trucks on site for rent to our self-storage customers and
the general public on a short-term basis for local use. In addition, we also act
as an agent for a national truck rental company to provide their rental trucks
to customers for long-distance use. The revenues and cost of operations for
these activities are included in the table above as "Truck rentals."
These activities generally serve as an adjunct to our self-storage
operations providing our tenants with goods and services that they need in
connection with moving and storing their goods.
The revenues and expenses of these activities have remained relatively
stable through the three years ended December 31, 2005, 2004, and 2003. The
primary factors impacting the level of operations of these activities is the
level of customer and tenant traffic at our self-storage facilities, including
the level of move-ins.
Property management operations
------------------------------
We manage 27 self-storage facilities on behalf of third-party owners
and 38 self-storage facilities that are owned by the Unconsolidated Entities,
affiliates of the Company. Under the supervision of the property owners, we
coordinate rental policies, rent collections, marketing activities, the purchase
of equipment and supplies, maintenance activities, and the selection and
engagement of vendors, suppliers, and independent contractors. We also assist
and advise the property owners in establishing policies for the hire, discharge,
and supervision of employees for the operation of these facilities.
Our operating income from these activities is generally dependent upon
the revenues earned at the managed facilities, because our management fee is
based upon revenues. Management contracts with the third-party owners can be
terminated by either party upon 60 days written notice.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our
ownership of equity interests in PSB, we had general and limited partnership
interests in eight limited partnerships at December 31, 2005 (PSB and the
limited partnerships are collectively referred to as the "Unconsolidated
Entities"). Due to our limited ownership interest and limited 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.
50
Equity in earnings of real estate entities for the year ended December
31, 2005 consists of our pro-rata share of the Unconsolidated Entities based
upon our ownership interest for the period. The following table sets forth the
significant components of equity in earnings of real estate entities:
Historical summary: Year Ended December 31, Year Ended December 31,
- ------------------- -------------------------- --------------------------
2005 2004 Change 2004 2003 Change
------------ ----------- ----------- ----------- ---------- ----------
(Amounts in thousands)
Property operations:
PSB $ 68,768 $ 68,545 $ 223 $ 68,545 $ 64,242 $ 4,303
Acquisition Joint Venture.............. 277 23 254 23 - 23
Other Investments (a).................. 7,903 6,587 1,316 6,587 6,288 299
------------ ----------- ----------- ----------- ---------- ----------
76,948 75,155 1,793 75,155 70,530 4,625
------------ ----------- ----------- ----------- ---------- ----------
Depreciation:
PSB.................................... (33,593) (32,063) (1,530) (32,063) (26,048) (6,015)
Acquisition Joint Venture.............. (269) (96) (173) (96) - (96)
Other Investments (a).................. (1,563) (1,561) (2) (1,561) (1,705) 144
------------ ----------- ----------- ----------- ---------- ----------
(35,425) (33,720) (1,705) (33,720) (27,753) (5,967)
------------ ----------- ----------- ----------- ---------- ----------
Other: (b)
PSB (c)................................ (16,418) (19,587) 3,169 (19,587) (18,507) (1,080)
Other Investments (a).................. (222) 716 (938) 716 696 20
------------ ----------- ----------- ----------- ---------- ----------
(16,640) (18,871) 2,231 (18,871) (17,811) (1,060)
------------ ----------- ----------- ----------- ---------- ----------
Total equity in earnings of real estate entities:
PSB.................................... 18,757 16,895 1,862 16,895 19,687 (2,792)
Acquisition Joint Venture.............. 8 (73) 81 (73) - (73)
Other Investments (a).................. 6,118 5,742 376 5,742 5,279 463
------------ ----------- ----------- ----------- ---------- ----------
$ 24,883 $ 22,564 $ 2,319 $ 22,564 $ 24,966 $ (2,402)
============ =========== =========== ============ ========== ==========
(a) Amounts include equity in earnings recorded for investments that have been
held consistently throughout the three years ended December 31, 2005.
(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) Equity in earnings includes our pro-rata share of gain on disposition of
real estate investments, impairment charges on real estate assets, and EITF
Topic D-42 charges totaling $7,727,000, $4,544,000 and $187,000,
respectively, during 2005, 2004 and 2003.
The increase in equity in earnings for the year ended December 31, 2005
as compared to 2004, and the decrease in equity in earnings in 2004 as compared
to 2003, is due to our pro-rata share of changes in PSB's operating results.
PSB's earnings increased in the year ended December 31, 2005 as compared to
2004, due to increased "same park" operating results, an increased gain on sale
of real estate, and reduced EITF Topic D-42 charges associated with redemptions
of preferred securities, offset partially by higher depreciation expense
associated with property acquisitions. PSB's earnings decreased in the year
ended December 31, 2004 as compared to 2003, due to impairment charges,
increased EITF Topic D-42 charges associated with redemptions of preferred
securities, and increased depreciation expense associated with significant
property acquisitions.
Equity in earnings of PSB represents our pro-rata share (approximately
44% throughout 2005, 2004, and 2003) of the earnings of PS Business Parks, Inc.,
a publicly traded real estate investment trust (American Stock Exchange symbol
"PSB") organized by the Company on January 2, 1997. As of December 31, 2005, we
owned 5,418,273 common shares and 7,305,355 operating partnership units (units
which are convertible into common shares on a one-for-one basis) in PSB. At
December 31, 2005, PSB owned and operated 17.6 million net rentable square feet
of commercial space located in eight states.
Accordingly, our future equity income from PSB will be dependent
entirely upon PSB's operating results. PSB's filings and selected financial
information can be accessed through the SEC, and on its website,
www.psbusinessparks.com.
51
In January 2004, we entered into a joint venture partnership with an
institutional investor for the purpose of acquiring up to $125.0 million of
existing self-storage properties in the United States from third parties (the
"Acquisition Joint Venture"). The Acquisition Joint Venture is funded entirely
with equity consisting of 30% from us and 70% from the institutional investor.
As described more fully in Note 2 to the Consolidated Financial Statements for
the year ended December 31, 2005, our pro-rata share of earnings with respect to
two of the facilities acquired directly by the Acquisition Joint Venture are
reflected in Equity in Earnings in the table above. These two facilities were
acquired by the Acquisition Joint Venture directly from third parties at an
aggregate cost of $9,086,000. Our investment with respect to these two
facilities was approximately $2,930,000. Our future equity in earnings with
respect to the Acquisition Joint Venture will be dependent upon the level of
earnings generated by these two properties owned by the Acquisition Joint
Venture.
The "Other Investments" includes our equity in earnings with respect to
our pro-rata share of earnings with respect to seven limited partnerships, for
which we held an approximately consistent level of equity interest during the
three years ended December 31, 2005. These limited partnerships were formed by
the Company during the 1980's. The Company is the general partner in each
limited partnership, and manages each of these facilities for a management fee
that is included in "Ancillary Operations." The limited partners consist of
numerous individual investors, including the Company, which throughout the
1990's acquired units of limited partnership interests in these limited
partnerships in various transactions.
Our future earnings with respect to the "Other Investments" will be
dependent upon the operating results of the 36 self-storage facilities that
these entities own. The operating characteristics of these facilities are
similar to those of our self-storage facilities, and are subject to the same
operational issues as the Same Store Facilities as discussed above with respect
to Self-Storage Operations. See Note 5 to the consolidated financial statements
for the operating results of these entities for the years ended December 31,
2005 and 2004.
OTHER INCOME AND EXPENSE ITEMS
- ------------------------------
INTEREST AND OTHER INCOME: Interest and other income increased in 2005
as compared to 2004, and in 2004 compared to 2003, due primarily to higher
interest income attributable to higher average cash balances and higher average
interest rates on short-term cash investments.
As discussed more fully in "Liquidity and Capital Resources" below, at
December 31, 2005, we had cash balances totaling approximately $493.5 million.
In addition, during the first quarter of 2006, we issued approximately $105.0
million of our 6.95% Series H Cumulative Preferred Stock. The net proceeds from
this issuance and our December 31, 2005 cash balances will be used primarily to
fund future development, acquisition, and preferred redemption activities (see
also "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources"). In the interim, the net proceeds
from our cash balances is expected to earn interest income (currently at
approximately 4.0% at December 31, 2005) relative to the corresponding divided
requirement (approximately 6.95% with respect to our Series H Cumulative
Preferred Stock). This difference will result in an estimated reduction to
earnings per common share. In addition, we may issue additional preferred stock
during the early part of 2006, raising the necessary funds in anticipation of
the potential redemption of approximately $653,750,000 in higher-rate preferred
stock that becomes available for redemption in September and October 2006. These
issuances similarly will have a negative impact on earnings per share until the
proceeds are utilized.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
was $196,397,000 in 2005, $183,063,000 in 2004, and $184,063,000 in 2003.
Included in depreciation expense with respect to our real estate facilities was
$185,989,000 in 2005, $168,915,000 in 2004, and $171,032,000 in 2003. The
increase from 2004 to 2005 is due to the acquisition and development of
additional real estate facilities. The decrease in depreciation and amortization
with respect to real estate facilities for 2004 as compared to 2003 is due
primarily to a reduction in depreciation with respect to maintenance capital
expenditures, offset partially by an increase in depreciation with respect to
newly developed and acquired facilities.
52
Depreciation and amortization during 2005 with respect to real estate
facilities acquired or developed during 2005 amounted to $3,177,000, which was
for a partial period for the time they were acquired until December 31, 2005,
and we expect the annual depreciation expense with respect to these facilities
for 2006 and forward will approximate $8,342,000.
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense
was $21,115,000 in 2005, $18,813,000 in 2004, and $17,127,000 in 2003. General
and administrative costs for each year principally consist of state income
taxes, investor relation expenses, and corporate and executive salaries,
including employee stock based compensation expense. In addition, general and
administrative expense includes expenses that vary depending upon our activity
levels in certain areas, such as overhead associated with the acquisition and
development of real estate facilities, employee severance, and product research
and development expenditures.
The increase in general and administrative expense from 2004 to 2005 is
primarily due to higher employee stock-based compensation expense relating to
our stock option and restricted stock plans which resulted in expenses of
$4,758,000 in 2005 as compared to $2,963,000 in 2004. The increase in general
and administrative expense from 2003 to 2004 is also primarily due to higher
employee stock-based compensation expense which for 2003 amounted to $2,685,000
for 2003.
Total restricted stock and stock option expense, exclusive of payroll
taxes on the exercise of options, should approximate $4.9 million based upon
options and restricted stock outstanding at December 31, 2005. Grants of
restricted stock units and stock options after December 31, 2005 could further
increase our future stock-based compensation expense.
INTEREST EXPENSE: Interest expense was $8,216,000 in 2005, $760,000 in
2004, and $1,121,000 in 2003. The increase in interest expense in 2005 compared
to 2004 was caused by the assumption of mortgage notes payable in connection
with property acquisitions in the fourth quarter of 2004, interest expense with
respect to debt due a joint venture partner, interest expense paid to a related
party in 2005 and a decrease in capitalized interest due to lower average
in-process development balances.
During the later part of 2004, we assumed mortgage notes payable with
an aggregate principal balance of $94.7 million and having an average interest
rate of approximately 5.2% in connection with property acquisitions. We incurred
interest expense with respect to these mortgage notes of $879,000 in 2004 for
the partial period these notes became our liabilities. Interest expense with
respect to these mortgage notes totaled $4,739,000 in 2005, representing a
year-over-year increase of $3,860,000.
As described more fully in Note 2 to the Consolidated Financial
Statements, on December 31, 2004, we sold seven self-storage facilities to the
Acquisition Joint Venture for an aggregate of $23.0 million in cash. In January
2005, we sold an interest in three additional self-storage facilities to the
Acquisition Joint Venture for an aggregate of $27.4 million in cash. Our Joint
Venture Partner's equity interest in these ten facilities has been accounted for
as a financing arrangement and has been included on our consolidated balance
sheet at December 31, 2005 and 2004 as "Debt to joint venture partner." Our
partner's pro-rata share of net income with respect to these facilities has been
classified as interest expense, which for 2005 totaled $2,939,000 (none for
2004). Based upon the balance outstanding at December 31, 2005, interest expense
should be approximately $3,050,000 with respect to our Debt to Joint Venture
Partner.
As described more fully in Note 9 to the Consolidated Financial
Statements, during 2005 we incurred interest expense totaling $1,458,000 with
respect to debt due a related party. This debt was extinguished on November 17,
2005.
Capitalized interest expense totaled $2,820,000 in 2005, $3,617,000 in
2004, and $6,010,000 in 2003 in connection with our development activities.
Interest expense, including capitalized interest, was $11,036,000 in 2005,
$4,377,000 in 2004, and $7,131,000 in 2003.
53
Minority interest in income: Minority interest in income represents the
income that is allocable to equity interests in the Consolidated Entities, which
are not owned by the Company. The following table summarizes minority interest
in income for each of the three years ended December 31, 2005:
Minority interest in income for the year ended
--------------------------------------------------
December 31, December 31, December 31,
Description 2005 2004 2003
- -------------------------------------------- --------------- -------------- -------------
(in thousands)
Preferred partnership interests:
Ongoing distributions.................. $ 16,147 $ 22,423 $ 26,906
Redemptions of preferred units......... 874 10,063 -
Consolidated Development Joint Venture (a).. 4,229 5,652 4,211
Convertible Partnership Units (b)........... 469 328 305
Acquired minority interests (c)............. 1,197 4,048 4,838
Other minority interests (d)................ 9,735 7,399 7,443
--------------- ------------- -------------
Total minority interests in income............ $ 32,651 $ 49,913 $ 43,703
=============== ============= =============
(a) Included in minority interest in income is $2,051,000, $3,619,000, and
$3,362,000 in depreciation expense for the years ended December 31, 2005,
2004, and 2003, respectively.
(b) See Note 9 to the consolidated financial statements. Included in income
allocated to Convertible Partnership Units is $385,000, $333,000, and
$342,000, in depreciation expense for the years ended December 31, 2005,
2004, and 2003, respectively.
(c) These amounts reflect income allocated to minority interests that the
Company acquired as of December 31, 2005, and are therefore no longer
outstanding at December 31, 2005. Included in income allocated to the
Acquired minority interests is $295,000, $1,197,000, and $1,927,000, in
depreciation expense for the years ended December 31, 2005, 2004, and 2003,
respectively.
(d) Other minority interests reflect income allocated to minority interests
that were outstanding consistently throughout the three years ended
December 31, 2005. Included in income allocated to the Other minority
interests is $672,000, $897,000, and $697,000, in depreciation expense for
the years ended December 31, 2005, 2004, and 2003, respectively, as well as
gain on sale of assets totaling $251,000 in 2005 (none in 2004 or 2003).
Income has been allocated to our Preferred partnership interests based
upon (i) "Ongoing distributions", representing distributions paid during the
period and (ii) "Redemptions of preferred units" representing the differences
between the redemption amount and the carrying amount of preferred partnership
units that have been redeemed. The reduction in income allocated to preferred
partnership interests for ongoing distributions and for redemptions are due to
the following issuances and redemptions of our preferred units:
o In March 2005, we redeemed our 9.5% Series N Preferred Units
($40.0 million) and our 9.125% Series O Preferred Units ($45.0
million) for cash. We allocated $874,000 to the minority
interests, reflected as "allocations associated with redemptions"
with respect to these redemptions in accordance with EITF Topic
D-42, representing the excess of the stated amount of the
preferred units over their carrying amount. This reduced annual
ongoing distributions following the redemption by approximately
$7,906,000.
o In December 2004, we issued $25,000,000 of our 6.25% Series Z
Preferred Units in connection with a property portfolio
acquisition. This increased annual ongoing distributions following
issuance by approximately $1,563,000.
54
o On March 22, 2004, certain investors who held $200 million of our
9.5% Series N Cumulative Redeemable Perpetual Preferred Units
agreed, in exchange for a special distribution of $8,000,000, to a
reduction in the distribution rate on their preferred units from
9.50% per year to 6.40% per year, and an extension of the call
date for these securities to March 17, 2010. The investors also
received their distribution that accrued from January 1, 2004
through the effective date of the exchange. The $8,000,000 special
distribution, combined with $2,063,000, representing the excess of
the stated amount of the preferred units over their carrying
amount, is reflected above in "Redemptions." This transaction
reduced ongoing annual distributions after March 22, 2004 by
approximately $6.2 million.
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 included a third party institutional
investor and Mr. Hughes, the Company's Chairman, to develop approximately $100
million of self-storage facilities and to purchase $100 million of our Equity
Stock, Series AAA (see Note 9 to the Consolidated Financial Statements).
On August 5, 2005, we acquired the institutional investors interest in
PSAC Investors, LLC. As part of the acquisition, we also obtained and
subsequently exercised the right to acquire Mr. Hughes' interest in PSAC
Investors, LLC which we acquired November 17, 2005. As a result of these events:
(i) we ceased allocating income to minority interests with respect to the
Consolidated Development Joint Venture effective August 5, 2005, and (ii) Mr.
Hughes' interest in the Consolidated Development Joint Venture was classified as
debt on our balance sheet and income with respect to Mr. Hughes' interest in the
Consolidated Development Joint Venture for the period from August 5, 2005
through November 17, 2005, has been classified as interest expense on our income
statement.
The acquired minority interests reflect interests in the Consolidated
Entities, other than the Consolidated Development Joint Venture, that we
acquired throughout the three years ended December 31, 2005 and are therefore no
longer outstanding. There will be no further income allocated to these interests
in 2006 and beyond.
DISCONTINUED OPERATIONS: As described more fully in Note 3 to the
consolidated financial statements, between January 1, 2002 and December 31,
2004, we implemented a business plan that included the closure of all but 12 of
our containerized storage facilities. In 2003, we sold five self-storage
facilities exiting entirely the Knoxville, Tennessee and Perrysville, Ohio
markets. In 2004, we sold one of our commercial facilities located in West Palm
Beach, Florida. In 2005, in an eminent domain proceeding, one of our
self-storage facilities located in Portland, Oregon was condemned.
During 2003 and 2004, we recorded asset impairment charges totaling
$3,229,000 and $1,575,000, respectively, relating to assets used at the closed
containerized storage facilities.
In connection with the disposition of facilities; in 2003, we recorded
a net gain of approximately $5,121,000; in 2004, we recorded a net gain of
approximately $971,000; and in 2005, we recorded a net gain of $5,180,000. In
addition, during 2005, a gain on sale of containerized storage assets was
recorded in the amount of $1,143,000.
The historical operations of the aforementioned 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" on the consolidated
income statement. These amounts are set forth below:
55
Discontinued Operations:
- ------------------------
Year Ended December 31, Year Ended December 31,
-------------------------- ------------------------
2005 2004 Change 2004 2003 Change
------------ ---------- ------------ ----------- ----------- -----------
(Dollar amounts in thousand)
Rental income....................... $ 556 $ 8,456 $(7,900) $ 8,456 $ 22,030 $(13,574)
Cost of operations................... (414) (7,055) 6,641 (7,055) (16,062) 9,007
Depreciation and amortization ...... (88) (1,282) 1,194 (1,282) (3,940) 2,658
------------ ---------- ------------ ----------- ----------- -----------
Income before other items........... 54 119 (65) 119 2,028 (1,909)
Other items:
Asset impairment charges......... - (1,575) 1,575 (1,575) (3,229) 1,654
Lease termination costs.......... - (416) 416 (416) - (416)
Net gain on disposition of assets 6,323 971 5,352 971 5,121 (4,150)
------------ ---------- ------------ ----------- ----------- -----------
Total other items............. 6,323 (1,020) 7,343 (1,020) 1,892 (2,912)
------------ ---------- ------------ ----------- ----------- -----------
Net discontinued operations......... $ 6,377 $ (901) $7,278 $ (901) $ 3,920 $ (4,821)
============ ========== ============ =========== =========== ===========
CASUALTY LOSSES: During 2005, we incurred casualty losses totaling
$2,592,000 as a result of physical damage to our facilities caused by
hurricanes. These losses represent the excess of the aggregate net book values
of the assets damaged over the insurance proceeds that we expect to receive to
repair such damages totaling approximately $3.4 million. We estimate, however,
that the aggregate cost to repair damages to our facilities will be
approximately $10.7 million. Also included in the caption "Casualty loss" for
the year ended December 31, 2005 is estimated business interruption income
approximating $675,000, representing our estimated recovery from our insurers
for loss of business through December 31, 2005. We expect to record additional
recoveries from our insurers for loss of business through at least approximately
September 30, 2006 for the two New Orleans facilities denoted above which remain
heavily damaged and are expected to remain closed for an extended period of
time.
Included in the caption "casualty loss" for the year ended December 31,
2004 was $1,250,000, representing the net book value of assets damaged. We
expect to receive no insurance proceeds for our hurricane losses incurred in
2004.
GAIN ON DISPOSITION OF REAL ESTATE: During 2005, we recorded a net gain
on disposition of real estate assets of $3,099,000, as compared to a net gain of
$1,317,000 in 2004 and a net gain of $1,007,000 in 2003. The gain in 2005 is
composed of a gain on sale of a parcel of land and partial condemnations with
respect to four existing self-storage facilities. The gain in 2004 is composed
of a gain on sale of four parcels of land and partial condemnation with respect
to two existing self-storage facilities. The gain in 2003 is composed of a gain
on sale of investments of $316,000, and a gain on sale of seven parcels of land
and two self-storage facilities aggregating $691,000.
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. Cash and cash equivalents totaled
$493.5 million at December 31, 2005. We expect that these funds will be utilized
to fund our acquisition and development activities and partially fund the
redemptions of preferred securities that become callable at our option during
2006.
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 used to
make distributions 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 make both scheduled and optional
principal payments on debt and for reinvestment.
56
For the Year Ended December 31,
-----------------------------------------
2005 2004 2003
---------- ---------- -----------
(Amount in thousands)
Net cash provided by operating activities............................. $692,048 $616,664 $571,387
Allocable to minority interests (Preferred Units) -
ongoing distributions.............................................. (16,147) (22,423) (26,906)
Allocable to minority interests (Preferred Units) -
special distribution (a)........................................... - (8,000) -
Allocable to minority interests (common equity)....................... (18,177) (21,349) (23,469)
---------- ---------- -----------
Cash from operations allocable to our shareholders.................... 657,724 564,892 521,012
Capital improvements to maintain our facilities....................... (25,890) (35,868) (30,175)
---------- ---------- -----------
Remaining operating cash flow available for distributions to our 631,834 529,024 490,837
shareholders.......................................................
Distributions paid to:
Preferred shareholders............................................. (173,017) (157,925) (146,196)
Equity Stock, Series A shareholders................................ (21,443) (21,501) (21,501)
Common and Class B shareholders.................................... (244,200) (230,834) (225,864)
---------- ---------- -----------
Cash available for principal payments on debt and reinvestment........ $193,174 $118,764 $97,276
========== ========== ===========
(a) The $8.0 million special distribution was paid to a unitholder of our 9.5%
Series N Cumulative Redeemable Perpetual Preferred Units in conjunction
with a March 22, 2004 agreement that, among other things, lowered the
distribution rate from 9.5% to 6.4%.
Our financial profile is characterized by a low level of debt to total
capitalization and a conservative dividend payout ratio with respect to the
common stock. We expect to fund our growth strategies with cash on hand at
December 31, 2005, internally generated retained cash flows, proceeds from
issuing equity securities or as the case with the planned merger with Shurgard
Storage Centers, Inc. (see below) the issuance of our common stock for shares of
Shurgard. 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
those amounts with internally generated cash flows and proceeds from the
placement of permanent capital. At December 31, 2005, we had no outstanding
borrowings under our $200 million bank line of credit.
Over the past three years, we have funded substantially all of our
acquisition and development activities with permanent capital. 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 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
are "Baa2" by Moody's and "BBB+" by Standard & Poor's.
Our portfolio of real estate facilities remains substantially
unencumbered. At December 31, 2005, we had borrowings under mortgage notes
totaling $91.6 million (which encumbers 34 facilities with a book value of
$196.9 million) and unsecured debt in the amount of $22.4 million. We also have
Debt to Joint Venture Partner amounting to $35.7 million with respect to ten
real estate facilities with an aggregate book value of $48.6 million.
57
RECENT ISSUANCE OF PREFERRED STOCK AND PROJECTED REDEMPTION OF
PREFERRED SECURITIES: One of our financing objectives over the past several
years has been to reduce our average cost of capital with respect to our
preferred securities. Accordingly, we have redeemed higher rate preferred
securities outstanding and have financed the redemption with cash on-hand or
from the proceeds from the issuance of lower rate preferred securities.
We believe that our size and financial flexibility enables us to access
capital when appropriate. Since the beginning of 2003 through December 31, 2005,
we have raised approximately $1.4 billion of our Cumulative Preferred Stock, and
used approximately $601.1 million of these net proceeds in order to redeem
higher-coupon preferred securities.
On January 19, 2006, we redeemed our 8.6% Series Q Cumulative Preferred
Stock totaling $172.5 million. This redemption was funded with cash on hand. In
addition to the Series Q Preferred noted above, we currently have approximately
$653.8 million of additional preferred securities that become redeemable at our
option in 2006, as follows.
Earliest
Redemption Dividend Liquidation
Security Date Rate Value (000's)
- ------------------------------------- -------------- ------------ --------------
Series R Preferred Stock 9/28/06 8.000% $ 510,000
Series S Preferred Stock 10/31/06 7.875% 143,750
---------- ------------
Total securities available for
redemption through 12/31/06 7.974% $ 653,750
========== ============
From time-to-time, we may raise additional capital primarily through
the issuance of lower rate preferred securities, in advance of the redemption
dates to ensure that we have available funds to redeem these securities. The
timing and our ability to issue additional preferred securities are dependent on
many factors. There is no assurance that we will be able to raise the necessary
capital and at appropriate rates to redeem these securities.
Also in January 2006, we issued 4,200,00 depository shares, each
representing 1/1,000 of a share, of our 6.95% Cumulative preferred Stock, Series
H, raising net proceeds of approximately $101.5 million.
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 times 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 to our shareholders prior to filing of the Company's
tax return. We have satisfied the REIT distribution requirement since 1980.
Aggregate dividends paid during 2005 totaled $173.0 million to the
holders of our Cumulative Preferred Stock, $244.2 million to the holders of our
Common Stock and $21.4 million to the holders of our Equity Stock, Series A.
Although we have not finalized the calculation of our 2005 taxable income, we
believe that the aggregate dividends paid in 2005 to our shareholders enabled us
to continue to meet our REIT distribution requirements. We estimate that the
distribution requirements for fiscal 2006 with respect to our Cumulative
Preferred Stock outstanding at March 15, 2006, and assuming the redemption of
the preferred securities mentioned above, will be approximately $172.3 million.
During 2005, we paid distributions totaling $16.1 million with respect
to our Preferred Partnership Units. We estimate the 2006 distribution
requirements with respect to the preferred partnership units outstanding at
December 31, 2005, to be approximately $14.4 million.
58
For 2006, distributions with respect to the Common Stock and Equity
Stock, Series A will be determined based upon our REIT distribution requirements
after taking into consideration distributions to the preferred shareholders. We
anticipate that, at a minimum, quarterly distributions per common share will
remain at $0.50 per common share. For the first quarter of 2006, a quarterly
distribution of $0.50 per common share has been declared by our Board of
Directors.
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 non-cumulative, and have no preference over our
Common Stock either as to dividends or in liquidation.
CAPITAL IMPROVEMENT REQUIREMENTS: During 2006, we have budgeted
approximately $35 million for capital improvements. Capital improvements include
major repairs or replacements to the facilities, which keep the facilities in
good operating condition and maintain their visual appeal. Capital improvements
do not include costs relating to the development or expansion of facilities.
DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our Notes Payable and Debt to Joint Venture
Partner. Except for the Debt to Joint Venture Partner all such debt is fixed
rate. At December 31, 2005, we had total outstanding debt of approximately
$149.6 million. See Notes 7 & 8 to the consolidated financial statements for
approximate principal maturities of such borrowings. We anticipate that our
retained operating cash flow will continue to be sufficient to enable us to make
scheduled principal payments. It is our current intent to fully amortize our
debt as opposed to refinance debt maturities with additional debt.
ACQUISITION AND DEVELOPMENT OF FACILITIES: During 2006, we will
continue to seek to acquire additional self-storage facilities from third
parties; however, it is difficult to estimate the amount of third party
acquisitions we will undertake. For 2006, we do not anticipate that our
Acquisition Joint Venture will fund additional acquisitions from third parties,
and we expect that additional acquisitions and development will be funded
entirely by the Company.
Between January 1, 2006 and March 15, 2006, we acquired three
additional self-storage facilities from third parties (total net rentable square
feet of 170,000) at an aggregate cost of approximately $20.0 million comprised
of cash totaling $15.4 million and the assumption of debt totaling $4.6 million.
These acquisitions were funded entirely by us.
As of March 15, 2006, we are under contract to purchase seven
self-storage facilities (total approximate net rentable square feet of 574,000)
at an aggregate cost of approximately $69.4 million. We anticipate that these
acquisitions will be funded entirely by us. Each of these contracts is subject
to significant contingencies, and there is no assurance that any of these
facilities will be acquired.
We currently have a development "pipeline" of 62 self-storage
facilities and expansions to existing self-storage facilities with an aggregate
estimated cost of approximately $323.2 million (unaudited). Approximately $46.1
million of development cost has been incurred as of December 31, 2005. 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 $277.1 million will be
incurred over the next 24 months. The following table sets forth certain
information with respect to our development pipeline.
59
Development Pipeline Summary
Number Net Total Costs incurred
of rentable estimated through Costs to
projects sq. ft. development 12/31/05 complete
costs
------------ ---------- ------------ -------------- -------------
(Amounts in thousands)
FACILITIES CURRENTLY UNDER CONSTRUCTION:
Self-storage facilities 3 281 $ 54,698 $ 35,050 $ 19,648
Expansions to existing self-storage
facilities 9 239 16,456 7,001 9,455
------------ ---------- ------------ -------------- -------------
12 520 71,154 42,051 29,103
FACILITIES AWAITING CONSTRUCTION, WHERE LAND IS ACQUIRED:
Self-storage facilities 1 57 6,458 2,163 4,295
Expansions to existing self-storage
facilities 49 3,334 245,572 1,854 243,718
------------ ---------- ------------ -------------- -------------
50 3,391 252,030 4,017 248,013
TOTAL DEVELOPMENT PIPELINE 62 3,911 $ 323,184 $ 46,068 $ 277,116
============ ========== =========== ============== =============
STOCK REPURCHASE PROGRAM: Our Board of Directors has 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. During 2004, we
repurchased 445,700 shares for approximately $20.3 million. During 2005, we
repurchased 84,000 shares for approximately $5.0 million. From the inception of
the repurchase program through December 31, 2005, we have repurchased a total of
22,201,720 shares of common stock at an aggregate cost of approximately $567.2
million.
PLANNED MERGER WITH SHURGARD STORAGE CENTERS, INC.: We have entered
into an agreement to acquire Shurgard, a publicly held REIT that has interests
in approximately 646 self-storage facilities located in the United States and
Europe. Under the agreement, and based upon our December 31, 2005 balance sheet
and Shurgard's September 30, 2005 balance sheet included in its related Form
10-Q, i) we would issue 0.82 shares of our common stock for each share of
Shurgard common stock which would increase our common shares outstanding from
128,089,563 to approximately 166,460,200 shares, ii) we would assume Shurgard
debt which totals approximately $1.8 billion at September 30, 2005, increasing
our debt outstanding (assuming no prepayment) from $150 million to approximately
$2.0 billion, and iii) $136 million of Shurgard preferred stock would be
redeemed. The transaction is targeted to close by the end of the second quarter
of 2006.
Completion of the transaction is not assured and is subject to risks,
including that shareholders of either Public Storage or Shurgard do not approve
the transaction or that the other closing conditions are not satisfied. In
addition, Shurgard may under limited circumstances terminate the agreement to
take a superior proposal. Public Storage and Shurgard are not aware of any
significant governmental approvals that are required for consummation of the
merger. If any approval or action is required, it is presently contemplated that
Public Storage and Shurgard would use their reasonable best efforts to obtain
such approval. There can be no assurance that any approvals, if required, will
be obtained.
We would also be acquiring Shurgard's international operations in
Europe, which consist principally of facilities that have been completed in the
last few years and are in various stages of fill-up. Shurgard's international
operations have not been profitable, and there is no assurance they will
ultimately be profitable. We have limited experience in international
operations, which may adversely impact our ability to operate profitably in
Europe. In connection with the proposed acquisition of Shurgard's European
operations, we will be evaluating various strategic alternatives, including, but
not limited to, public or private offerings of securities, one or more possible
joint ventures, and possible asset acquisitions and/or sales.
60
Shurgard's outstanding borrowings on its lines of credit ($569 million
at September 30, 2005) would become payable immediately upon completion of the
merger. In addition, there would be additional cash costs related to the merger,
cash requirements for the redemption of $136 million of Shurgard's preferred
stock on the merger date, and additional possible cash requirements following
the merger. Our current cash on hand and available borrowing capacity on our
existing line of credit will be insufficient to fund these immediate capital
requirements. We are currently evaluating several financing alternatives,
including, but not limited to, expanding the borrowing capacity of our line of
credit, obtaining short-term bridge financing, and raising additional capital
through the issuance of preferred or common securities. We would generally look
to repay incremental borrowings, including principal payments with respect to
the debt assumed as a result of the merger, with retained operating cash and
capital raised through the issuance of either preferred or common securities.
The foregoing description of the terms of our agreement to acquire
Shurgard does not purport to be complete, and is qualified in its entirety by
reference to the full text of the merger agreement, a copy of which is filed
with our current report on Form 8-K dated March 7, 2006.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
To limit our exposure to market risk, we principally finance our
operations and growth with permanent equity capital consisting either of common
stock, preferred stock or retained operating cash flow. At December 31, 2005,
our debt, including preferred stock called for redemption, as a percentage of
total shareholders' equity (based on book values) was 6.7%.
Our preferred stock is not redeemable at the option of the holders.
Except under certain conditions relating to the Company's qualification as a
REIT, the Preferred Stock is not redeemable by the Company prior to the
following dates: Series R - September 28, 2006, Series S - October 31, 2006,
Series T - January 18, 2007, Series U - February 19, 2007, Series V - September
30, 2007, Series W - October 6, 2008, Series X - November 13, 2008, Series Y -
January 2, 2009, Series Z - March 5, 2009, Series A - March 31, 2009, Series B -
June 30, 2009, Series C - September 13, 2009, Series D - February 28, 2010,
Series E - April 27, 2010, Series F - August 23, 2010, Series G - December 12,
2010 and Series H - January 19, 2011. On or after the respective dates, each of
the series of Preferred Stock will be redeemable at the option of the Company,
in whole or in part, at $25 per depositary share (or share in the case of the
Series Y), plus accrued and unpaid dividends through the redemption date.
Our market risk sensitive instruments include notes payable, which
totaled $113,950,000 at December 31, 2005. All of our notes payable bear
interest at fixed rates. See Note 7 to the consolidated financial statements for
terms, valuations and approximate principal maturities of the notes payable as
of December 31, 2005.
As mentioned in "Management's Discussion and Analysis of Results of
Operations - Liquidity and Capital Resources" above, we have entered into an
agreement to acquire Shurgard. This transaction, if completed, would result in
our assumption of the following areas of market risk:
o FOREIGN CURRENCY RISK: Shurgard has a significant amount of debt
in its European operations, and a significant investment in its
European operations. As a result, changes in foreign currency
rates could have a significant impact on their results of
operations and liquidity.
o INTEREST RATE RISK: $569 million (at September 30, 2005) of
Shurgard's debt represents line of credit borrowings that would
become payable immediately upon completion of the merger. In
addition, there would be additional cash costs related to the
merger, cash requirements for the redemption of $136 million of
Shurgard's preferred stock on the merger date, and additional
possible cash requirements following the merger. Accordingly, our
short-term borrowings could increase, which may be at variable
rates of interest. As a result, changes in interest rates could in
the future have a significant impact upon our level of interest
expense.
61
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements of the Company at December 31, 2005 and
December 31, 2004 and for each of the three years in the period ended December
31, 2005 and the report of Ernst & Young LLP, Independent Registered Public
Accountants, thereon and the related financial statement schedule, are included
elsewhere herein. Reference is made to the Index to Financial Statements and
Schedules in Item 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
-----------------------
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE 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 Rules 13a-15(e) of the Exchange Act.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures in
reaching that level of reasonable assurance. 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.
As of December 31, 2005, 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 (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Act of 1934 as amended). Based on
that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective as of December 31, 2005.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f). Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee on Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the framework in Internal
Control-Integrated Framework, our management concluded that our internal control
over financial reporting was effective as of December 31, 2005.
Our management's assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2005 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated
in their report which is included herein.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter to which this report relates that have
materially affected, or are reasonable likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
-----------------
Not Applicable.
62
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Public Storage, Inc.:
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Public
Storage, Inc. maintained effective internal control over financial reporting as
of December 31, 2005, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Public Storage,
Inc.'s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, management's assessment that Public Storage, Inc. maintained
effective internal control over financial reporting as of December 31, 2005, is
fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, Public Storage, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2005,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Public Storage, Inc. as of December 31, 2005 and 2004, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2005 of Public Storage, Inc.
and our report dated March 10, 2006 expressed an unqualified opinion thereon.
Ernst & Young LLP
Los Angeles, CA
March 10, 2006
63
PART III
ITEM 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
BOARD OF DIRECTORS. The following is biographical information
concerning the current directors of Public Storage:
B. Wayne Hughes, age 72, has been a director of the Company since its
organization in 1980 and was President and Co-Chief Executive Officer from 1980
until November 1991 when he became Chairman of the Board and sole Chief
Executive Officer. Mr. Hughes retired as Chief Executive Officer in November
2002 and remains Chairman of the Board. Mr. Hughes is currently engaged in the
acquisition and operation of commercial properties in California and in the
acquisition and operation of self-storage facilities in Canada. Mr. Hughes has
been active in the real estate investment field for over 30 years. He is the
father of B. Wayne Hughes, Jr., a member of the Company's Board.
Ronald L. Havner, Jr., age 48, has been the Vice-Chairman, Chief
Executive Officer and a director of the Company since November 2002 and
President since July 1, 2005. Mr. Havner joined the Company in 1986 and has held
a variety of positions, including Chairman of the Company's affiliate, PS
Business Parks, Inc. (PSB), since March 1998 and was Chief Executive Officer of
PSB from March 1998 until August 2003. He is also a member of the Board of
Governors of the National Association of Real Estate Investment Trusts, Inc.
(NAREIT) and a director of Business Machine Security, Inc., The Mobile Storage
Group and Union BanCal Corporation.
Harvey Lenkin, age 69, retired as President and Chief Operating Officer
of the Company on June 30, 2005. Mr. Lenkin was employed by the Company or its
predecessor for 27 years and has been a member of the Board of Directors since
1991. He has been a director of the Company's affiliate, PS Business Parks,
Inc., since March 1998 and was President of PSB from 1990 until March 1998. He
is also a director of Paladin Realty Income Properties I, Inc. and a director of
Huntington Memorial Hospital, Pasadena, California and a former member of the
Executive Committee of the Board of Governors of NAREIT.
Robert J. Abernethy, age 66, Chairman of the Audit Committee and a
member of the Compensation Committee, has been President of American Standard
Development Company and of Self-Storage Management Company, which develop and
operate self-storage facilities, since 1976 and 1977, respectively. Mr.
Abernethy was controller of a division of Hughes Aircraft from 1972 to 1974. He
has been a director of the Company since its organization. He is a member of the
board of trustees of Johns Hopkins University, a director of the Los Angeles
Music Center, a member of the Board of Overseers of the Los Angeles
Philharmonic, a trustee of Loyola Marymount University, a director of the
Pacific Council on International Policy, a director of the Atlantic Council, a
member of the Council on Foreign Relations and a former California
Transportation Commissioner. Mr. Abernethy is a former member of the board of
directors of the Los Angeles County Metropolitan Transportation Authority and of
the Metropolitan Water District of Southern California, a former member of the
California State Board of Education, a former member of the California State
Arts Council, a former Planning Commissioner, a former Telecommunications
Commissioner and the former Vice-Chairman of the Economic Development Commission
of the City of Los Angeles. He received an M.B.A. from the Harvard University
Graduate School of Business.
Dann V. Angeloff, age 70, Chairman of the Nominating/Corporate
Governance Committee and a member of the Compensation Committee, has been
President of the Angeloff Company, a corporate financial advisory firm, since
1976. Mr. Angeloff is currently the general partner of a limited partnership
that in 1974 purchased a self-storage facility operated by the Company. Mr.
Angeloff has been a director of the Company since its organization. He is a
director of Bjurman, Barry Fund, Inc., Nicholas/Applegate Fund, ReadyPac Foods,
Retirement Capital Group and SoftBrands, Inc.
64
William C. Baker, age 72, a member of Nominating/Corporate Governance
Committee, became a director of the Company in November 1991. Mr. Baker was
Chairman and Chief Executive Officer of Callaway Golf Company from August 2004
until August 2005. From August 1998 through April 2000, he was President and
Treasurer of Meditrust Operating Company, a real estate investment trust. From
April 1996 to December 1998, Mr. Baker was Chief Executive Officer of Santa
Anita Companies, which then operated the Santa Anita Racetrack. From April 1993
through May 1995, he was President of Red Robin International, Inc., an operator
and franchisor of casual dining restaurants in the United States and Canada.
From January 1992 through December 1995, Mr. Baker was Chairman and Chief
Executive Officer of Carolina Restaurant Enterprises, Inc., a franchisee of Red
Robin International, Inc. From 1991 to 1999, he was Chairman of the Board of
Coast Newport Properties, a real estate brokerage company. From 1976 to 1988,
Mr. Baker was a principal shareholder and Chairman and Chief Executive Officer
of Del Taco, Inc., an operator and franchisor of fast food restaurants in
California. He is a director of La Quinta, Inc., California Pizza Kitchen, Javo
Beverage Company and Callaway Golf Company.
John T. Evans, age 67, a member of the Audit Committee and of the
Nominating/Corporate Governance Committee, became a director of the Company in
August 2003. Mr. Evans has been a partner in the law firm of Osler, Hoskin &
Harcourt LLP, Toronto, Canada from April 1993 to the present and in the law firm
of Blake, Cassels & Graydon LLP, Toronto, Canada from April 1966 to April 1993.
Mr. Evans specializes in business law matters, securities, restructurings,
mergers and acquisitions and advising on corporate governance. Mr. Evans is a
director of Cara Operations Inc., Kubota Metal Corporation, and Toronto East
General Hospital. Until August 2003, Mr. Evans was a director of Canadian
Mini-Warehouse Properties Ltd., a Canadian corporation owned by B. Wayne Hughes
and members of his family.
Uri P. Harkham, age 57, a member of the Compensation Committee, became
a director of the Company in March 1993. Mr. Harkham has been the President and
Chief Executive Officer of the Jonathan Martin Fashion Group, which specializes
in designing, manufacturing and marketing women's clothing, since its
organization in 1976. Since 1978, Mr. Harkham has been the Chairman of the Board
of Harkham Properties, a real estate firm specializing in buying and managing
warehouses and retail and mixed-use real estate in California.
B. Wayne Hughes, Jr., age 46, became a director of the Company in
January 1998. He was employed by the Company from 1989 to 2002, serving as Vice
President - Acquisitions of the Company from 1992 to 2002. Mr. Hughes, Jr. is
currently Vice President of American Commercial Equities, LLC, a company engaged
in the acquisition and operation of commercial properties in California and is a
director of Canadian Mini-Ware Properties Ltd., a company engaged in the
acquisition, development and operation of self-storage facilities in Canada. He
is the son of B. Wayne Hughes.
Daniel C. Staton, age 53, Chairman of the Compensation Committee and a
member of the Audit Committee, became a director of the Company in March 1999 in
connection with the merger of Storage Trust Realty, a real estate investment
trust, with the Company. Mr. Staton was Chairman of the Board of Trustees of
Storage Trust Realty from February 1998 until March 1999 and a Trustee of
Storage Trust Realty from November 1994 until March 1999. He is President of
Walnut Capital Partners, an investment and venture capital company and the
Co-Chief Executive Officer of PMGI (formerly Media General, Inc.), a print and
electronic media company. Mr. Staton was the Chief Operating Officer and
Executive Vice President of Duke Realty Investments, Inc. from 1993 to 1997 and
a director of Duke Realty Investments, Inc. from 1993 until August 1999. From
1981 to 1993, Mr. Staton was a principal owner of Duke Associates, the
predecessor of Duke Realty Investments, Inc. Prior to joining Duke Associates in
1981, he was a partner and general manager of his own moving company, Gateway
Van & Storage, Inc. in St. Louis, Missouri. From 1986 to 1988, Mr. Staton served
as president of the Greater Cincinnati Chapter of the National Association of
Industrial and Office Parks.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT. The Audit
Committee of the Board of Directors is comprised of Robert J. Abernethy
(chairman), John T. Evans and Daniel C. Staton. The primary functions of the
Audit Committee are to assist the Board in fulfilling its responsibilities for
oversight of (1) the integrity of the Company's financial statements, (2)
compliance with legal and regulatory requirements, (3) the qualifications,
independence and performance of the independent registered public accounting
firm, and (4) the scope and results of internal audits, the Company's internal
controls over financial reporting and the performance of the Company's internal
audit function. Among other things, the Audit Committee appoints, evaluates and
determines the compensation of the independent registered public accounting
firm; reviews and approves the scope of the annual audit, the audit fee and the
financial statements; prepares the Audit Committee report for inclusion in the
annual proxy statement; and annually reviews its charter and performance.
65
The Audit Committee operates under a written charter adopted by the
Board of Directors, a copy of which is available at www.publicstorage.com. The
Board of Directors has determined that the Chairman of the Audit Committee,
Robert J. Abernethy and Audit Committee member Daniel C. Staton, each qualify as
an audit committee financial expert within the meaning of the rules of the
Securities and Exchange Commission. The Board has further determined that
Messrs. Abernethy and Staton are each independent within the meaning of Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act.
CODE OF ETHICS. The Board of Directors has adopted a Directors' Code of
Ethics as well as Business Conduct Standards applicable to directors, officers,
and employees. The Board has also adopted a Code of Ethics for its senior
financial officers, including the Company's principal executive officer,
principal financial officer and principal accounting officer, that has
additional requirements for those individuals. The code covers those persons
serving as the Company's principal executive officer, principal financial
officer and principal accounting officer, currently Ronald L. Havner, Jr. and
John Reyes. Copies of the Directors' Code of Ethics, the Business Conduct
Standards and the Code of Ethics for Senior Financial Officers are available on
our website at www.publicstorage.com/Corporateinformation/CorpGovernance.aspx.
Any amendments to or waivers of the code of ethics granted to the Company's
executive officers will be published promptly on our website or by other
appropriate means in accordance with applicable SEC and New York Stock Exchange
requirements.
SECTION 16(A) COMPLIANCE. Section 16(a) of the Securities Exchange Act
of 1934 requires the Company's directors and executive officers, and persons who
own more than 10% of any registered class of the Company's equity securities to
file with the Securities and Exchange Commission ("SEC") initial reports (on
Form 3) of ownership of the Company's equity securities and to file subsequent
reports (on Form 4 or Form 5) when there are changes in such ownership. The due
dates of such reports are established by statute and the rules of the SEC. Based
on a review of the reports submitted to the Company, the Company believes that,
with respect to reports filed during the fiscal year ended December 31, 2005,
all directors and officers made timely reports.
EXECUTIVE OFFICERS. The following is a biographical summary of the
current executive officers of the Company:
Ronald L. Havner, Jr., age 48, has been the Vice-Chairman, Chief
Executive Officer and a director of the Company since November 2002 and
President since July 1, 2005. Mr. Havner has been Chairman of the Company's
affiliate, PS Business Parks, Inc. (PSB), since March 1998 and was Chief
Executive Officer of PSB from March 1998 until August 2003. He is also a member
of the Board of Governors of the National Association of Real Estate Investment
Trusts, Inc. (NAREIT) and a director of Business Machine Security, Inc., The
Mobile Storage Group and Union BanCal Corporation.
John Reyes, age 45, a certified public accountant, joined the Company
in 1990 and was Controller of the Company from 1992 until December 1996 when he
became Chief Financial Officer. He became a Vice President of the Company in
November 1995 and a Senior Vice President of the Company in December 1996. From
1983 to 1990, Mr. Reyes was employed by Ernst & Young.
John S. Baumann, age 45, became Senior Vice President and Chief Legal
Officer of the Company in June 2003. From 1998 to 2002, Mr. Baumann was Senior
Vice President and General Counsel of Syncor International Corporation, an
international high technology health care services company. From 1995 to 1998,
he was Associate General Counsel of KPMG LLP, an international accounting, tax
and consulting firm.
John E. Graul, age 54, became Senior Vice President and President,
Self-Storage Operations, in February 2004, with overall responsibility for the
Company's national operations. From 1982 until joining the Company, Mr. Graul
was employed by McDonald's Corporation where he served in various management
positions, most recently as Vice President and General Manager - Pacific Sierra
Region.
66
David F. Doll, age 47, became Senior Vice President and President, Real
Estate Group, in February 2005, with responsibility for Company's real estate
activities, including property acquisitions, developments, and repackagings.
Before joining the Company, Mr. Doll was Senior Executive Vice President of
Development for Westfield Corporation, a major international owner and operator
of shopping malls, where he was employed since 1995.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table sets forth certain information concerning the
annual and long-term compensation paid to the Company's Chief Executive Officer,
and the four other most highly compensated persons who were executive officers
of the Company on December 31, 2005 (the "Named Executive Officers") for 2005,
2004 and 2003.
Long-Term
Annual Compensation Compensation Awards
l Restricted Securities
Name and Other Annual Stock Unit Underlying All Other
Principal Position Year Salary Bonus Compensation (1) Awards ($)(2) Options (#) Compensation (3)
- ------------------ ------ --------- ---------- ---------------- ------------- ----------- ----------------
Ronald L. Havner, Jr. 2005 $659,875 $715,000 -- 83,000 $8,400
(4) Vice-Chairman,
Chief Executive 2004 392,700 650,000 -- -- 166,000 6,150
Officer and President
2003 313,800 500,000 -- -- -- 6,000
John Reyes 2005 $318,750 350,000 -- -- -- $25,400
Senior Vice
President and Chief 2004 260,000 275,000 -- $476,500 100,000 15,150
Financial Officer
2003 238,800 250,500 -- -- -- 6,000
John S. Baumann 2005 $210,000 100,000 -- -- -- $16,900
Senior Vice
President and Chief 2004 210,000 160,000 -- $238,250 20,000 7,650
Legal Officer
2003 105,800(5) 70,000 -- -- 60,000 --
John E. Graul 2005 $250,000 240,000 -- $420,900 40,000 $22,650
Senior Vice
President and 2004 204,600(6) 200,000 140,600 (7) -- 50,000 --
President,
Self-Storage
Operations
David F. Doll 2005 $205,538(8) 240,000 $283,250 50,000 $9,500
Senior Vice President
President and President,
Real Estate Group
- ----------------
(1) In accordance with SEC rules, other compensation in the form of
perquisites and other personal benefits has been omitted in those
instances where the aggregate of such perquisites and other personal
benefits did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus for the named executive officer for such year.
67
(2) Represents the value of grants of restricted stock units made under the
2001 Stock Option and Incentive Plan (with the value of one restricted
stock unit deemed equivalent to the value of one share of Common Stock
and based on the closing price of the Common Stock on the New York Stock
Exchange on the date of grant). The restricted stock units set forth in
this table vest 20% on each of the first, second, third, fourth and fifth
anniversary of the date of grant. On each vesting date, the holder will
receive shares of Common Stock representing the applicable percentage of
the total number of restricted stock units granted. Holders of restricted
stock units receive payments equal to the dividends that would have been
paid on an equivalent number of shares of Common Stock. The grants of
restricted stock units do not entitle the holders to any voting rights.
As of December 31, 2005, the total holdings of restricted stock units of
the Named Executive Officers and the market value of such holdings (with
the value of one unit deemed equivalent to the value of one share of
Common Stock on the New York Stock Exchange based on the closing price on
December 30, 2005 of $67.72) were as follows: Mr. Reyes - 10,000
restricted stock units ($677,200), Mr. Baumann - 5,000 restricted stock
units ($338,600), Mr. Graul - 7,500 restricted stock units ($507,900),
Mr. Doll - 5,000 restricted stock units ($338,600).
(3) All Other Compensation consists solely of employer contributions to the
401(k) Plan (3% of the annual cash compensation up to a maximum of $8,400
in 2005) and dividend equivalent payments based on ownership of
restricted stock units in the case of Mr. Reyes of $17,000; Mr. Baumann
of $8,500; Mr. Graul of $14,250 and Mr. Doll of $9,500.
(4) Mr. Havner succeeded Mr. Hughes as Chief Executive Officer in November
2002. Compensation to Mr. Havner in this table does not include
compensation paid to Mr. Havner in 2003 and 2004 by PS Business Parks,
Inc., an affiliate of the Company.
(5) For the period June 30, 2003, the date Mr. Baumann joined the Company,
through December 31, 2003.
(6) For the period February 23, 2004, the date Mr. Graul joined the Company,
through December 31, 2004.
(7) Represents reimbursement of relocation expenses.
(8) For the period February 21, 2005, the date Mr. Doll joined the Company,
through December 31, 2005.
The following table sets forth certain information relating to options
to purchase shares of Common Stock granted to the Named Executive Officers
during 2005.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
- -----------------------------------------------------------------------------------------
Number of Percent of Potential Realizable Value
Securities Total Options at Assumed Annual Rates
Underlying Granted to Exercise of Share Price Appreciation
Options Employees in Price for Option Term
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5% 10%
--------------------------- -------------- --------------- ------------ ----------------- - -----------------------------
Ronald L. Havner, Jr. 83,000 28.82% $69.87 12/8/2015 $3,647,000 $9,242,000
John Reyes 0 -- -- -- -- --
John S. Baumann 0 -- -- -- -- --
John E. Graul 40,000 13.89% $56.12 3/3/2015 1,412,000 3,578,000
David F. Doll 50,000 17.36% $55.66 2/21/2015 1,750,000 4,435,000
Options granted to Mr. Havner become exercisable in three equal
installments beginning on the first anniversary of the date of grant. Options
granted in 2005 to Messrs. Doll and Graul become exercisable in five equal
installments beginning on the first anniversary of the date of grant.
The following table sets forth certain information concerning exercised
and unexercised options held by the Named Executive Officers at December 31,
2005.
68
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Shares Securities Underlying In-the-Money
Acquired on Value Unexercised Options Options at
Name Exercise(#) Realized($) at December 31, 2005 December 31, 2005 (1)
- ----------------------- ----------- ------------ ------------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ -------------- ------------- ---------------
Ronald L. Havner, Jr. -- -- 220,333 193,667 $6,927,538 $1,283,737
John Reyes -- -- 122,000 80,000 4,739,465 1,605,600
John S. Baumann -- -- 28,000 52,000 892,680 1,539,720
John E. Graul -- -- 10,000 80,000 197,400 1,253,600
David F. Doll -- -- -- 50,000 -- 603,000
- --------------
(1) Based on closing price of $67.72 per share of Common Stock on December
30, 2005, as reported by the New York Stock Exchange. On March 13, 2006,
the closing price per share of Common Stock as reported by the New York
Stock Exchange was $82.00.
69
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is composed entirely of
independent directors and has furnished the following report on executive
compensation for fiscal 2005.
EXECUTIVE COMPENSATION PHILOSOPHY. Public Storage pays its executive
officers compensation the Committee deems appropriate in view of the nature of
the Company's business, the performance of individual executive officers, and
the Company's objective of providing incentives to its executive officers to
achieve a level of individual and Company performance that will maximize the
value of shareholders' investment in Public Storage. To those ends, the Public
Storage compensation program consists of payment of a base salary and,
potentially, bonus compensation, and incentive awards of options to purchase
shares of Common Stock or of restricted stock or restricted stock units. Grants
of options and restricted stock units are made under the 2001 Stock Option and
Incentive Plan (the "2001 Plan").
CASH COMPENSATION. Base salary levels are based generally on market
compensation rates and each individual's role at Public Storage. The Committee
determines market compensation rates by reviewing public disclosures of
compensation paid to executive officers by other REITs of comparable size and
market capitalization. Some of the REITs whose executive compensation the
Committee considered in establishing the compensation it pays to executive
officers are included in the NAREIT Equity Index referred to below under the
caption "Stock Price Performance Graph." Generally, the Committee seeks to
compensate Public Storage executives at levels consistent with the middle of the
range of amounts paid by REITs deemed comparable by the Committee. Individual
salaries may vary based on the experience and contribution to overall corporate
performance by a particular executive officer.
The Committee bases its payment of base compensation and annual bonuses
on corporate, business unit and individual performance. In establishing base
compensation and individual bonuses, the Committee takes into account Public
Storage's overall profitability, internal revenue growth and revenue growth due
to acquisitions, and the executive officer's contribution to the Company's
growth and profitability, as well as compensation paid to executive officers,
including the chief executive officer, at REITs deemed comparable by the
Committee.
EQUITY-BASED COMPENSATION. The Committee believes that Public Storage
executive officers should have an incentive to improve the Company's performance
by having an ongoing stake in the success of the Company's business. The
Committee seeks to create this incentive by granting to appropriate executive
officers stock options that have an exercise price of not less than 100% of the
fair market value of the underlying stock on the date of grant, so that the
executive officer will not profit from the option unless the price of the Common
Stock increases. Options granted by the Committee also are designed to help the
Company retain executive officers because the options are not exercisable at the
time of grant, and achieve their maximum value only if the executive remains in
the Company's employ for a period of years.
The 2001 Plan also authorizes the Company to compensate its executive
officers and other employees with grants of restricted stock or restricted stock
units. Restricted stock and restricted stock units increase in value as the
value of the Common Stock increases, and vest over time provided that the
executive officer continues to be employed by Public Storage. Accordingly,
awards of restricted stock or restricted stock units serve the Committee's
objectives of retaining executive officers and other employees and motivating
them to advance the interests of Public Storage and its shareholders. No
restricted stock units were granted to Mr. Havner during 2005. Restricted stock
units were granted to other Named Executive Officers as reflected above in the
table captioned "Summary Compensation Table".
CEO COMPENSATION. In December 2004, following a review of compensation
of Chief Executive Officers at comparable REITs, the Committee set three year
compensation targets for Mr. Havner's base salary, bonus target and stock option
grants. The targets were conditioned on Mr. Havner's continued employment with
the Company and successful achievement of performance and other goals set
annually by the Committee. Accordingly, in November 2005, the Committee
increased Mr. Havner's base salary to $715,000. In early 2006, the Committee
70
awarded Mr. Havner a bonus for 2005 performance of $715,000. The Committee's
decision to increase Mr. Havner's base compensation and his 2005 bonus award
were based on the achievement of three goals related to (1) FFO (funds from
operations), (2) revenues, and (3) the Company's FAD (funds available for
distribution). The Committee noted that the Company's performance under Mr.
Havner's leadership during 2005 with respect to these three goals substantially
exceeded the targets set in early 2005.
Based on the same factors described above, the Committee also awarded
Mr. Havner an option to acquire 83,000 shares of common stock on December 8,
2005, at an exercise price of $69.87, the closing price for Public Storage
common stock on that date. Mr. Havner's options vest over three years and have a
ten year term. Under the compensation program put in place by the Committee in
2004, provided that Mr. Havner continues to be employed by the Company and meets
the performance and other goals set by the Committee, he will be eligible to
receive a 10% salary and bonus target increase in 2006 and to receive a stock
option award of 83,000 shares of common stock in December of 2006. In February
2006, the Committee set the performance targets for 2006 incentive compensation
for the CEO and the other Named Executive Officers as achievement of goals
related to (1) FFO (funds from operations), (2) revenues, and (3) the Company's
FAD (funds available for distribution).
CODE SECTION 162(m). Section 162(m) of the Code imposes a $1,000,000
limit on the annual deduction that may be claimed for compensation paid to each
of the chief executive officer and four other highest paid employees of a
publicly held corporation. Certain performance-based compensation awarded under
a plan approved by shareholders is excluded from that limitation. In 2005, the
Company's shareholders approved the Company's Performance-Based Plan, which is
designed to permit the Compensation Committee to make awards that will qualify
for deduction as performance-based compensation. The Committee intends to
structure awards to qualify for deductibility under Section 162(m) to the extent
consistent with business requirements.
COMPENSATION COMMITTEE
Daniel C. Staton (Chairman)
Robert J. Abernethy
Dann V. Angeloff
Uri P. Harkham
EMPLOYMENT AGREEMENTS AND TERMINATION PAYMENTS
B. Wayne Hughes. Pursuant to a consulting arrangement approved by the
Compensation Committee and by the disinterested directors in March 2004, B.
Wayne Hughes, Chairman of the Board and former Chief Executive Officer, (1)
agreed to be available for up to 50 partial days a year for consulting services,
(2) receives compensation of $60,000 per year and the use of a car, and (3) is
provided with an executive assistant and office at the Company's headquarters.
The consulting arrangement expires on December 31, 2013.
Harvey Lenkin. In August 2003, Harvey Lenkin entered into an employment
agreement with the Company that provided, among other terms, and that Mr. Lenkin
would continue to serve as President and Chief Operating Officer of Public
Storage until his retirement on June 30, 2005, with compensation at a rate of
$550,000 per year. Effective July 2, 2005 upon his retirement from the Company,
Mr. Lenkin entered into a consulting agreement with the Company that provides
for compensation of $12,500 per month. The agreement terminates on June 30,
2006, unless earlier terminated on sixty days prior notice by the Company. The
agreements were approved by the Compensation Committee and by the Board of
Directors (with Mr. Lenkin not participating).
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of Public Storage or an
affiliate is considered an Outside Director and receives the following
compensation:
71
o An annual retainer of $30,000 paid quarterly;
o Each member of the Audit, Compensation and Nominating/Corporate
Governance Committees of the Board is paid an annual fees of $5,000
paid quarterly, with the Chairman receiving an additional $2,500 per
year; and
o In addition, John T. Evans, received a fee of $25,000 for services as
chairman of a special committee in 2005, and the other members of the
special committee, Robert J. Abernethy and Daniel C. Staton, each
received $10,000.
The following table presents the compensation provided by the Company
to Outside Directors (which do not include B. Wayne Hughes and Ronald L. Havner,
Jr.) for fiscal year ended December 31, 2005.
Outside Director Compensation Table
Board/Committee
Annual Cash Meeting & Chairman Stock Underlying
Name Retainer Fees Total Options Granted
- ----------------------------- ---------------- --------------------- ----------------- ---------------------
Robert J. Abernethy $30,000 $22,500 $52,500 2,500
Dann V. Angeloff $30,000 $12,500 $42,500 2,500
William C. Baker $30,000 $5,000 $35,000 2,500
- -
John T. Evans $30,000 $35,000 $65,000 2,500
Uri P. Harkham $30,000 $5,000 $35,000 2,500
B. Wayne Hughes, Jr. $30,000 - $30,000 2,500
Harvey Lenkin (a) (b) $15,000 - $15,000 2,500
Daniel C. Staton $30,000 $22,500 $52,500 2,500
(a) Pro-rated for periods of service as an Outside Director.
(b) B. Wayne Hughes and Harvey Lenkin are also compensated under consulting
agreements with Public Storage. See "Employment Agreements and Termination
Payments" above.
The Company's policy is also to reimburse directors for reasonable
expenses.
DIRECTOR EQUITY AWARDS
Each of the Company's Outside Directors who receives directors' fees
also receives automatic grants of options under the 2001 Stock Option and
Incentive Plan (the "2001 Plan"). Ronald L. Havner, Jr. is eligible to receive
discretionary grants of options and restricted stock under the 2001 Plan in his
capacity as President & Chief Executive Officer of Public Storage. Under the
2001 Plan, each new Outside Director is, upon the date of his or her initial
election by the Board or the shareholders to serve as an Outside Director,
automatically granted a non-qualified option to purchase 15,000 shares of common
stock. After each annual meeting of shareholders, each Outside Director then
duly elected and serving (other than an Outside Director initially elected to
the Board at such annual meeting) is automatically granted, as of the date of
such annual meeting, a non-qualified option to purchase 2,500 shares of common
stock, so long as such person has attended, in person or by telephone, at least
75% of the meetings held by the Board of Directors and of any committee on which
the director served during the immediately preceding calendar year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Daniel C. Staton (Chairman),
Robert J. Abernethy, Dann V. Angeloff and Uri P. Harkham, none of whom has ever
been an employee of the Company. No member of the committee had any relationship
with us requiring disclosure under Item 404 of SEC Regulation S-K. No executive
72
officer of Public Storage serves on the compensation committee or board of
directors of any other entity which has an executive officer who also serves on
the Compensation Committee or Board of Directors of Public Storage at any time
during 2005.
Messrs. Hughes, Havner, Lenkin and Hughes, Jr., who are or were
officers of Public Storage, are members of the Board of Directors.
STOCK PRICE PERFORMANCE GRAPH
The graph set forth below compares the yearly change in the Company's
cumulative total shareholder return on its Common Stock for the five-year period
ended December 31, 2005 to the cumulative total return of the Standard and
Poor's 500 Stock Index ("S&P 500 Index") and the National Association of Real
Estate Investment Trusts Equity Index ("NAREIT Equity Index") for the same
period (total shareholder return equals price appreciation plus dividends). The
stock price performance graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 on December 31, 2000 and that all
dividends were reinvested. The stock price performance shown in the graph is not
necessarily indicative of future price performance.
[Graph Omitted]
- ---------------------------- --------------- --------------- --------------- ---------------- --------------- ---------------
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- ---------------------------- --------------- --------------- --------------- ---------------- --------------- ---------------
Public Storage, Inc. $ 100.00 $ 144.82 $ 147.57 $ 208.29 $ 277.44 $ 347.18
S&P 500 100.00 88.11 68.64 88.33 97.94 102.75
NAREIT Equity 100.00 113.93 118.29 162.21 213.43 239.39
73
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
and Related Shareholder Matters
-------------------------------
The following table sets forth information as of the dates indicated
with respect to persons known to the Company to be the beneficial owners of more
than 5% of the outstanding shares of the Common Stock ("Common Shares") or the
Depositary Shares:
Depositary Shares Each
Representing 1/1,000 of a
Common Shares Share of Equity Stock, Series A
Beneficially Owned Beneficially Owned
----------------------------- -------------------------------
Number Percent Number Percent
Name and Address of Shares of Class of Shares of Class
- ---------------------------------------- ------------- ---------- -------------- ------------
B. Wayne Hughes (1) 19,901,850 15.4% 55,685 .6%
B. Wayne Hughes, Jr. (1) 4,736,080 3.7% 39,089 .4%
Tamara Hughes Gustavson (1) 21,470,312 16.6% 1,201,354 13.7%
B. Wayne Hughes, Jr. and
Tamara Hughes Gustavson (1) 11,348 -- 43 --
------------- ---------- -------------- ------------
Total 46,119,590 35.7% 1,296,171 14.8%
701 Western Avenue
Glendale, California 91201
Cohen & Steers Capital Management, Inc. (3) (3) 826,200 9.4%
757 Third Avenue
New York, New York 10017 (2)
- ----------------
(1) This information is as of March 3, 2006. B. Wayne Hughes, B. Wayne Hughes,
Jr. and Tamara Hughes Gustavson have filed a joint Schedule 13D, as amended
most recently on November 1, 2002, reporting their collective ownership of
Common Shares and Depositary Shares and may constitute a "group" within the
meaning of section 13(d)(3) of the Securities Exchange Act of 1934,
although each of these persons disclaims beneficial ownership of the shares
owned by the others.
(2) This information is as of December 31, 2005 (except that the percent shown
is based on the Depositary Shares outstanding at March 3, 2006) and is
based on a Schedule 13G filed on February 14, 2006 by Cohen & Steers
Capital Management, Inc. ("CSCM"), an investment adviser registered under
the Investment Advisers Act of 1940. CSCM reports in this Schedule 13G that
it has sole voting power of 802,400 Depositary Shares and sole dispositive
power of 826,200 Depositary Shares.
(3) Less than 5%.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of February 28, 2006
concerning the beneficial ownership of the Common Shares and the Depositary
Shares of each director of the Company, the Company's Chief Executive Officer,
the other four most highly compensated persons who were executive officers of
the Company on December 31, 2005 and all directors and executive officers as a
group:
74
Common Shares: Depositary Shares Each Representing
Beneficially Owned (excluding options)(1) 1/1,000 of a Share of Equity Stock,
Shares Subject to Options(2) Series A Beneficially Owned
----------------------------------------- -----------------------------------------
Name Number of Shares Percent Number of Shares Percent
- --------------------------- ------------------ ------- ----------------- -----------
B. Wayne Hughes 19,901,850 15.4% 55,685 .6%
Ronald L. Havner, Jr. 20,300 * -- *
220,333(2) .2%
------- ---
240,633 .2%
Robert J. Abernethy 91,567 * 2,108 *
19,999(2) *
------- ---
111,566 *
Dann V. Angeloff 58,554(4) * 17,000 *
9,999(2) *
------- ---
68,553 *
William C. Baker 25,000 * 455 *
19,999(2) *
------- ---
44,999 *
John T. Evans 600 -- -- --
10,833(2) *
------- ---
11,433 --
Uri P. Harkham 53,329 * 3,402 *
12,499(2) *
------- ---
64,828 *
B. Wayne Hughes, Jr. 4,747,428(5) 3.7% 35,921(5) .4%
Harvey Lenkin 134,279(3) .1% 3,966(3) *
Daniel C. Staton 14,038 * 47 *
4,166(2) *
------- ---
18,204 *
John Reyes 27,669 * 1,905 *
122,000(2) .1%
------- ---
149,669 .1%
John S. Baumann 1,000 * -- --
28,000(2)
------- ---
29,000
John E. Graul 1,500 * -- --
28,000(2)
------- ---
29,500
David F. Doll 1,000 * -- --
10,000(2)
------- ---
11,000
25,078,114 (1)(3)(4)(5)(6) 19.4%
All Directors and Executive Officers 485,828 (2) .4%
as a Group ------- ---
(14 persons) 25,563,942 19.8% 120,489(1)(3)(5)(6) 1.4%
- ---------------
* Less than 0.1%
75
(1) Represents Common Shares or Depositary Shares, as applicable, beneficially
owned as of March 1, 2006. Except as otherwise indicated and subject to
applicable community property and similar statutes, the persons listed as
beneficial owners of the shares have sole voting and investment power with
respect to such shares. Includes shares credited to the accounts of the
executive officers of the Company that are held in the 401(k) Plan. Does
not include restricted stock units described in note (1) to the summary
compensation table under "Compensation - Compensation of Executive
Officers" unless such units would vest within 60 days of March 1, 2006.
(2) Represents options exercisable within 60 days of March 1, 2006 to purchase
Common Shares.
(3) Common Shares include 2,776 Common Shares held of record or beneficially by
Mr. Lenkin's spouse or a son as to which each has investment power.
Depositary Shares include 425 Depositary Shares held of record or
beneficially by Mr. Lenkin's spouse or a son as to which each has
investment power.
(4) Includes 2,000 Common Shares held by Mr. Angeloff's spouse as to which she
has investment power.
(5) Common Shares include 378,434 Common Shares, held of record or beneficially
by Mr. Hughes, Jr.'s spouse or their children as to which she has
investment power and 11,348 Common Shares held jointly by Mr. Hughes, Jr.
and Ms. Hughes Gustavson as to which they share investment power.
Depositary shares include 1,371 Depositary Shares held of record or
beneficially by Mr. Hughes, Jr.'s spouse or their children as to which she
has investment power and 43 Depositary Shares held jointly by Mr. Hughes,
Jr. and Ms. Hughes Gustavson as to which they share investment power.
(6) Includes shares held of record or beneficially by members of the immediate
family of executive officers of the Company and shares credited to the
accounts of the executive officers of the Company that are held in the
401(k) Plan.
The following table sets forth information as of December 31, 2005 on
the Company's equity compensation plans:
Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding for future issuance
outstanding options, options, warrants under equity
warrants and rights and rights compensation plans
--------------------- ------------------ --------------------
Equity compensation plans approved
by security holders (a).......... 1,644,807 (b) $ 43.84 2,181,000
Equity compensation plans not
approved by security holders (c). 78,169 23.41 831,671
(a) The Company's stock option and stock incentive plans are described more
fully in Note 13 to the consolidated financial statements. All plans other
than the 2000 and 2001 Non-Executive/Non-Director Plans, were approved by
the Company's shareholders.
(b) Includes 299,830 restricted stock units that, if and when vested, will be
settled in shares of common stock of the Company on a one for one basis.
(c) The outstanding options granted under plans not approved by the Company's
shareholders were granted under the Company's 2000 and 2001
Non-Executive/Non-Director Plan, which does not allow participation by the
Company's executive officers and directors. The principal terms of these
plans are as follows: (1) 2,500,000 shares of common stock were authorized
for grant, (2) this plan is administered by the Equity Awards Committee,
except that grants in excess of 100,000 shares to any one person requires
approval by the Executive Equity Awards Committee, (3) options are granted
at fair market value on the date of grant, (4) options have a ten year term
and (5) options vest over three years in equal installments, or as
indicated by the applicable grant agreement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
RELATIONSHIPS AND TRANSACTIONS WITH THE HUGHES FAMILY
The Hughes Family has ownership interests in, and operate approximately
44 self-storage facilities in Canada under the name "Public Storage" ("PS
Canada") pursuant to a license agreement with the Company. The Company does not
currently own any
76
interests in these facilities nor does it own any facilities in Canada. The
Hughes Family owns approximately 36% of our Common Stock outstanding at December
31, 2005. The Company has a right of first refusal to acquire the stock or
assets of the corporation that manages the 44 self-storage facilities in Canada,
if the Hughes Family or the corporation agrees to sell them. However, the
Company has no interest in the operations of this corporation, the Company has
no right to acquire this stock or assets unless the Hughes Family decides to
sell, the right of first refusal does not apply to the self-storage facilities,
and the Company receives no benefit from the profits and increases in value of
the Canadian self-storage facilities.
Prior to December 31, 2003, the Company's personnel were engaged in the
supervision and the operation of these Canadian self-storage facilities and
provided certain administrative services for the Canadian owners, and certain
other services, primarily tax services, with respect to certain other Hughes
Family interests. The sharing of personnel and systems with the Canadian
entities was substantially discontinued by December 31, 2003. In October 2005,
the Company's Board of Directors (with B. Wayne Hughes and B. Wayne Hughes Jr.
abstaining) approved the reimbursement of CAD $653,424 (plus CAD $52,274 in
interest accrued at 4%) representing the amount previously charged to the
Canadian entities for system development costs that the Company no longer
permits them to use. These amounts were reimbursed to PS Canada in November
2005.
The Company, through subsidiaries, continues to reinsure risks relating
to loss of goods stored by tenants in the self-storage facilities in Canada. The
Company had acquired the tenant insurance business on December 31, 2001 through
its acquisition of PSIC. During 2005, PSIC received $1,052,000 in reinsurance
premiums attributable to the Canadian Facilities. Since PSIC's right to provide
tenant reinsurance to the Canadian Facilities may be qualified, there is no
assurance that these premiums will continue.
In November 1999, the Company, through two wholly-owned entities, PS
Pennsylvania Trust and PS Texas Holdings, Ltd. (collectively, "PSA"), formed a
joint venture (the "Consolidated Development JV") that developed and owned
approximately $109 million of self-storage facilities and $100 million of shares
of the Company's Equity Stock, Series AAA. At August 5, 2005, the Consolidated
Development JV also owned 712,400 shares of the Company's Common Stock. The
partners of the Consolidated Development JV were PSA and a limited liability
company (referred to hereinafter as "PSAC"). The members of PSAC are a state
pension plan (the "Investor") and B. Wayne Hughes. The Consolidated Development
JV was capitalized with approximately $202 million; PSA contributed
approximately $104 million and had a 51% ownership interest and PSAC contributed
approximately $98 million and had a 49% ownership interest. The term of the
Consolidated Development JV was 15 years. The Investor, as a member of PSAC, had
the right at the end of the sixth year to cause an early termination of the
Consolidated Development JV and PSAC, which it exercised in 2005. Accordingly,
on August 5, 2005, we acquired the institutional investor's interest in PSAC for
approximately $41,420,000 in cash. This acquisition gave us a controlling
position in PSAC and the contractual right to acquire the remaining interest in
PSAC held by Mr. Hughes, which we exercised in November 2005. In accordance with
the preexisting agreements, we paid Mr. Hughes a total of $64,513,000 on
November 17, 2005 to acquire his interest. In addition, during 2005 Mr. Hughes
received a total of $4,756,000, representing his contractual interest in the
cash flow of the partnership from January 1, 2005 through the date we acquired
his interest.
The Company and Mr. Hughes are co-general partners in certain of
certain partnerships, some of which are consolidated with the Company and some
of which are unconsolidated. Mr. Hughes and his family also own limited
partnership interests in certain of these partnerships. The Company and Mr.
Hughes and his family receive distributions from these partnerships in
accordance with the terms of the partnership agreements.
MANAGEMENT AGREEMENT WITH PS BUSINESS PARKS, INC.
PSB manages certain of the commercial facilities that we own pursuant
to management agreements for a management fee equal to 5% of revenues. Public
Storage paid a total of $579,000 in management fees with respect to PSB's
property management services in 2005.
COST SHARING ARRANGEMENTS WITH PSB
Pursuant to a cost-sharing and administrative services agreement, PSB
reimburses us for certain administrative services. PSB's share of these costs
totaled approximately $340,000 for the year ended December 31, 2005.
77
Stor-RE and third party insurance carriers have provided PS Canada, the
Company, PSB, and other affiliates of the Company with liability and casualty
insurance coverage until March 31, 2004. PS Canada has a 2.2% interest, and PSB
has a 4.0% interest, in Stor-RE. PS Canada and PSB obtained their own liability
and casualty insurance covering occurrences after April 1, 2004. For occurrences
before April 1, 2004, STOR-Re continues to provide liability and casualty
insurance coverage consistent with the relevant agreements.
LEGAL PROCEEDINGs
In November 2002, a shareholder of the Company made a demand on the
Board of Directors that challenged the fairness of the Company's acquisition of
PS Insurance Company, Ltd. ("PSIC") and related matters. PSIC was previously
owned by the Hughes Family.
In June 2003, the Hughes Family filed a complaint (Gustavson, et al v.
Public Storage, Inc.) for declaratory relief asking the court to find that the
acquisition of PSIC and related matters were fair to the Company. The Company
filed an answer to the Hughes Family's complaint requesting a final judicial
determination of the Company's rights of recovery against the Hughes Family in
respect of PSIC. By order of the Superior Court, the matter was tried before
Justice Malcolm Lucas, a former chief justice of the California Supreme Court.
In October 2005, Judge Lucas rendered his decision, ruling against the Company
by finding that the PSIC transaction was just and reasonable as to the Company
and holding that the Hughes Family was not required to make any payment to the
Company. The Superior Court has formally entered judgment accordingly and this
lawsuit has been concluded.
At the end of December 2004, the same shareholder referred to above and
a second shareholder filed a shareholder's derivative complaint (Potter, et al
v. Hughes, et al) naming as defendants the Company's directors (and two former
directors) and certain officers of the Company. The matters alleged in the
Potter complaint relate to PSIC, the Hughes Family's Canadian self-storage
operations and the Company's 1995 reorganization. In June 2005, the court
granted the defendants' motion to dismiss the Potter complaint with leave to
amend the complaint. In July 2005, the plaintiffs filed an amended complaint,
and the defendants filed a motion to dismiss the amended complaint. The matter
is currently under submission. We believe the litigation will not have any
financially adverse effect on the Company (other than the costs and other
expenses relating to the lawsuit).
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
--------------------------------------
The following table shows the fees billed or expected to be billed to
the Company by Ernst & Young for audit and other services provided for fiscal
2005 and 2004:
2005 2004
------------ -----------
Audit Fees (a) $ 548,800 $ 581,300
Audit-Related Fees - -
Tax Fees (b) 688,600 546,300
All Other Fees - -
------------ -----------
Total $ 1,237,400 $ 1,127,600
- ---------------------------
(a) Audit Fees represent fees for professional services provided in connection
with the audits of the Company's annual financial statements and internal
control over financial reporting, review of the quarterly financial
statements included in the Company's quarterly reports on Form 10-Q and
services in connection with the Company's registration statements and
securities offerings.
(b) During 2005 tax fees included $644,800 for preparation of federal and state
income tax returns for the Company and its consolidated entities and
$43,800 for tax planning. During 2004, $12,200 of the tax services were for
tax planning, primarily related to acquisitions. All other 2004 tax fees
were for preparation of federal and state income tax returns.
The Audit Committee has adopted a pre-approval policy relating to any
services provided by the Company's independent registered public accounting
firm. Under this policy the Audit Committee of the Company pre-approved all
services performed by Ernst & Young LLP during 2005, including those listed
above. At this time, the Audit Committee has not delegated pre-approval
authority to any member or members of the Audit Committee.
78
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
------------------------------------------
a. 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Schedules hereof are filed as part of this
report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying Index
to Financial Statements and Schedules are filed as part of this
report.
3. Exhibits
See Index to Exhibits contained herein.
b. Exhibits:
See Index to Exhibits contained herein.
c. Financial Statement Schedules
Not applicable.
79
PUBLIC STORAGE, INC.
INDEX TO EXHIBITS(1)
(Items 15(a)(3) and 15(c))
3.1 Restated Articles of Incorporation of Storage Equities, Inc. Filed with
Registrant's Registration Statement on Form S-4 (SEC File No. 33-54557)
and incorporated herein by reference.
3.2 Certificate of Amendment of Articles of Incorporation of Storage
Equities, Inc. Filed with Registrant's Registration Statement on Form
S-3/A (SEC File No. 33-63947) and incorporated herein by reference.
3.3 Certificate of Amendment of Articles of Incorporation of Public
Storage, Inc. Filed with Registrant's Registration Statement on Form
S-3 (SEC File No. 333-18395) and incorporated herein by reference.
3.4 Certificate of Determination of Preferences of 10% Cumulative Preferred
Stock, Series A of Storage Equities, Inc. Filed with Registrant's
Registration Statement on Form S-4 (SEC File No. 33-54557) and
incorporated herein by reference.
3.5 Amendment to Certificate of Determination of Preferences of 10%
Cumulative Preferred Stock, Series A of Public Storage, Inc. Filed with
the Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2004 and incorporated herein by reference.
3.6 Certificate of Determination of Preferences of 9.20% Cumulative
Preferred Stock, Series B of Storage Equities, Inc. Filed with
Registrant's Registration Statement on Form S-4 (SEC File No. 33-54557)
and incorporated herein by reference.
3.7 Amendment to Certificate of Determination of Preferences of 9.20%
Cumulative Preferred Stock, Series B of Storage Equities, Inc. Filed
with Registrant's Registration Statement on Form S-4 (SEC File No.
33-56925) and incorporated herein by reference.
3.8 Amendment to Certificate of Determination of Preferences of 9.20%
Cumulative Preferred Stock, Series B of Public Storage, Inc. Filed with
the Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2004 and incorporated herein by reference.
3.9 Certificate of Determination of Preferences of 8.25% Convertible
Preferred Stock of Public Storage, Inc. Filed with Registrant's
Registration Statement on Form S-4 (SEC File No. 33-54557) and
incorporated herein by reference.
3.10 Certificate of Determination of Preferences of Adjustable Rate
Cumulative Preferred Stock, Series C of Storage Equities, Inc. Filed
with Registrant's Registration Statement on Form S-4 (SEC File No.
33-54557) and incorporated herein by reference.
3.11 Amendment to Certificate of Determination of Preferences of Adjustable
Rate Cumulative Preferred Stock, Series C of Public Storage, Inc. Filed
with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2004 and incorporated herein by reference.
3.12 Certificate of Determination of Preferences of 9.50% Cumulative
Preferred Stock, Series D of Storage Equities, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A relating to the 9.50%
Cumulative Preferred Stock, Series D and incorporated herein by
reference.
80
3.13 Amendment to Certificate of Determination of Preferences of 9.50%
Cumulative Preferred Stock, Series D of Public Storage, Inc. Filed with
Registrant's Annual Report on Form 10-K for the year ended December 31,
2004 and incorporated herein by reference.
3.14 Certificate of Determination of Preferences of 10% Cumulative Preferred
Stock, Series E of Storage Equities, Inc. Filed with Registrant's
Registration Statement on Form 8-A/A relating to the 10% Cumulative
Preferred Stock, Series E and incorporated herein by reference.
3.15 Amendment to Certificate of Determination of Preferences of 10%
Cumulative Preferred Stock, Series E of Public Storage, Inc. Filed with
Registrant's Current Report on Form 8-K dated April 25, 2005 and
incorporated herein by reference.
3.16 Certificate of Determination of Preferences of 9.75% Cumulative
Preferred Stock, Series F of Storage Equities, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A relating to the 9.75%
Cumulative Preferred Stock, Series F and incorporated herein by
reference.
3.17 Amendment to Certificate of Determination of Preferences of 9.750%
Cumulative Preferred Stock, Series F of Public Storage, Inc. Filed with
Registrant's Current Report on Form 8-K dated August 17, 2005 and
incorporated herein by reference.
3.18 Certificate of Determination of Preferences of 8-7/8% Cumulative
Preferred Stock, Series G of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.19 Certificate of Determination of Preferences of 8.45% Cumulative
Preferred Stock, Series H of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.20 Certificate of Determination of Preferences of Convertible Preferred
Stock, Series CC of Public Storage, Inc. Filed with Registrant's
Registration Statement on Form S-4 (SEC File No. 333-03749) and
incorporated herein by reference.
3.21 Certificate of Correction of Certificate of Determination of
Preferences of Convertible Participating Preferred Stock of Public
Storage, Inc. Filed with Registrant's Registration Statement on Form
S-4 (SEC File No. 333-08791) and incorporated herein by reference.
3.22 Certificate of Determination of Preferences of 8 5/8% Cumulative
Preferred Stock, Series I of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.23 Certificate of Determination of Equity Stock, Series A of Public
Storage, Inc. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997 and incorporated herein by
reference.
3.24 Certificate of Determination of Preferences of 8% Cumulative Preferred
Stock, Series J of Public Storage, Inc. Filed with Registrant's
Registration Statement on Form 8-A/A 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.
81
3.25 Certificate of Correction of Certificate of Determination of
Preferences of 8.25% Convertible Preferred Stock of Public Storage,
Inc. Filed with Registrant's Registration Statement on Form S-4 (SEC
File No. 333-61045) and incorporated herein by reference.
3.26 Certificate of Determination of Preferences of 8 1/4% Cumulative
Preferred Stock, Series K of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.27 Certificate of Determination of Preferences of 8 1/4% Cumulative
Preferred Stock, Series L of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.28 Certificate of Determination of Preferences of 8.75% Cumulative
Preferred Stock, Series M of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A 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.
3.29 Certificate of Determination of Equity Stock, Series AA of Public
Storage, Inc. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1999 and incorporated herein
by reference.
3.30 Certificate Decreasing Shares Constituting Equity Stock, Series A of
Public Storage, Inc. Filed with Registrant's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1999 and incorporated
herein by reference.
3.31 Certificate of Determination of Equity Stock, Series A of Public
Storage, Inc. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1999 and incorporated herein
by reference.
3.32 Certificate of Amendment of Certificate of Determination of Equity
Stock, Series A of Public Storage, Inc. 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 of Equity Stock, Series AAA of Public
Storage, Inc. Filed with Registrant's Current Report on Form 8-K dated
November 15, 1999 and incorporated herein by reference.
3.34 Certificate of Determination of Preferences of 9.5% Cumulative
Preferred Stock, Series N of Public Storage, Inc. Filed with
Registrant's Annual Report on Form 10-K for the year ended December 31,
1999 and incorporated herein by reference.
3.35 Certificate of Determination of Preferences of 9.125% Cumulative
Preferred Stock, Series O of Public Storage, Inc. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000 and incorporated herein by reference.
3.36 Certificate of Determination of Preferences of 8.75% Cumulative
Preferred Stock, Series P of Public Storage, Inc. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000 and incorporated herein by reference.
3.37 Certificate of Determination of Preferences of 8.600% Cumulative
Preferred Stock, Series Q of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A/A (No. 001-08389)
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.
82
3.38 Certificate of Amendment of Certificate of Determination of Equity
Stock, Series A of Public Storage, Inc. Filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2001 and incorporated herein by reference.
3.39 Certificate of Determination of Preferences of 8.000% Cumulative
Preferred Stock, Series R of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A 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.
3.40 Certificate of Determination of Preferences of 7.875% Cumulative
Preferred Stock, Series S of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A 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.
3.41 Certificate of Determination of Preferences of 7.625% Cumulative
Preferred Stock, Series T of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A 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.
3.42 Certificate of Determination of Preferences of 7.625% Cumulative
Preferred Stock, Series U of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to Depositary
Shares Each Representing 1/1,000 of a Share of 7.625% Cumulative
Preferred Stock, Series U and incorporated herein by reference.
3.43 Amendment to Certificate of Determination of Preferences of 7.625%
Cumulative Preferred Stock, Series T of Public Storage, Inc. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2002 and incorporated herein by reference.
3.44 Certificate of Determination of Preferences of 7.500% Cumulative
Preferred Stock, Series V of Public Storage, Inc. Filed with
Registrant's Registration Statement Form 8-A 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.
3.45 Certificate of Determination of Preferences of 6.500% Cumulative
Preferred Stock, Series W of Public Storage, Inc. Filed with
Registrant's Registration Statement Form 8-A relating to the Depositary
Shares Each Representing 1/1,000 of a Share of 6.500% Cumulative
Preferred Stock, Series W and incorporated herein by reference.
3.46 Certificate of Determination of Preferences 6.450% Cumulative Preferred
Stock, Series X of Public Storage, Inc. Filed with Registrant's
Registration Statement on Form 8-A relating to the Depositary Shares
Each Representing 1/1,000 of a Share of 6.450% Cumulative Preferred
Stock, Series X and incorporated herein by reference.
3.47 Certificate of Determination of Preferences of 6.85% Cumulative
Preferred Stock, Series Y of Public Storage, Inc. Filed with the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2004 and incorporated herein by reference.
3.48 Certificate of Determination of Preferences of 6.250% Cumulative
Preferred Stock, Series Z of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.250%
Cumulative Preferred Stock, Series Z and incorporated herein by
reference.
3.49 Certificate of Determination of Preferences of 6.125% Cumulative
Preferred Stock, Series A of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.125%
Cumulative Preferred Stock, Series A and incorporated herein by
reference.
83
3.50 Certificate of Determination of Preferences of 6.40% Cumulative
Preferred Stock, Series NN of Public Storage, Inc. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2004 and incorporated herein by reference.
3.51 Certificate of Determination of Preferences of 7.125% Cumulative
Preferred Stock, Series B of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 7.125%
Cumulative Preferred Stock, Series B and incorporated herein by
reference.
3.52 Certificate of Determination of Preferences of 6.60% Cumulative
Preferred Stock, Series C of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.60%
Cumulative Preferred Stock, Series C and incorporated herein by
reference.
3.53 Certificate of Determination of Preferences of 6.18% Cumulative
Preferred Stock, Series D of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.18%
Cumulative Preferred Stock, Series D and incorporated herein by
reference.
3.54 Certificate of Determination of Preferences of 6.75% Cumulative
Preferred Stock, Series E of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a share of 6.75%
Cumulative Preferred Stock, Series E and incorporated herein by
reference.
3.55 Certificate of Determination of Preferences of 6.45% Cumulative
Preferred Stock, Series F of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.45%
Cumulative Preferred Stock, Series F and incorporated herein by
reference.
3.56 Amendment to Certificate of Determination of Preferences 6.45%
Cumulative Preferred Stock, Series F of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.45%
Cumulative Preferred Stock, Series F and incorporated herein by
reference.
3.57 Certificate of Determination of Preferences of 7.00% Cumulative
Preferred Stock, Series G of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 7.00%
Cumulative Preferred Stock, Series G and incorporated herein by
reference.
3.58 Certificate of Determination of Preferences of 6.95% Cumulative
Preferred Stock, Series H of Public Storage, Inc. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.95%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
3.59 Amendment to Certificate of Determination of Determination of
Preferences of Cumulative Preferred Stock, Series G (8.875%), H
(8.45%), I (8.625%), J (8%), K (8.25%), L (8.25%), M (8.75%), N (9.5%),
O (9.125%) and P (8.75%) of Public Storage, Inc. Filed with
Registrant's Current Report on Form 8-K dated November 22, 2005 and
incorporated herein by reference.
3.60 Revised Bylaws of Storage Equities, Inc. Filed with Registrant's
Registration Statement on Form S-4/A (SEC File No. 33-64971) and
incorporated herein by reference.
84
3.61 Amendment to Bylaws of Public Storage, Inc. adopted on May 9, 1996.
Filed with Registrant's Registration Statement on Form S-4 (Sec File
No. 333-03749) and incorporated herein by reference.
3.62 Amendment to Bylaws of Public Storage, Inc. adopted on June 26, 1997.
Filed with Registrant's Registration Statement on Form S-3/A (SEC File
No. 333-41123) and incorporated herein by reference.
3.63 Amendment to Bylaws of Public Storage, Inc. adopted on January 6, 1998.
Filed with Registrant's Registration Statement on Form S-3/A (SEC File
No. 333-41123) and incorporated herein by reference.
3.64 Amendment to Bylaws of Public Storage, Inc. adopted on February 10,
1998. Filed with Registrant's Current Report on Form 8-K dated February
10, 1998 and incorporated herein by reference.
3.65 Amendment to Bylaws of Public Storage, Inc. adopted on March 4, 1999.
Filed with Registrant's Current Report on Form 8-K dated March 4, 1999
and incorporated herein by reference.
3.66 Amendment to Bylaws of Public Storage, Inc. adopted on May 6, 1999.
Filed with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999 and incorporated herein by reference.
3.67 Amendment to Bylaws of Public Storage, Inc. adopted on November 7,
2002. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2002 and incorporated herein by
reference.
3.68 Amendment to Bylaws of Public Storage, Inc. adopted on May 8, 2003.
Filed with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2003 and incorporated herein by reference.
3.69 Amendment to Bylaws of Public Storage, Inc. adopted on August 5, 2003.
Filed with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2003 and incorporated herein by reference.
3.70 Amendment to Bylaws of Public Storage, Inc. adopted on March 11, 2004.
Filed with Registrant's Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.
10.1 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.
10.2 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 (SEC File No. 001-11186) and incorporated
herein by reference.
10.3 Limited Partnership Agreement of PSAF Development Partners, L.P. Filed
with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997 and incorporated herein by reference.
10.4 Agreement of Limited Partnership of PS Business Parks, L.P. Filed with
PS Business Parks, Inc.'s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998 (SEC File No. 001-10709) and
incorporated herein by reference.
10.5 Amended and Restated Agreement of Limited Partnership of Storage Trust
Properties, L.P. (March 12, 1999). Filed with Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1999 and
incorporated herein by reference.
10.6 Limited Partnership Agreement of PSAC Development Partners, L.P. Filed
with Registrant's Current Report on Form 8-K dated November 15, 1999
and incorporated herein by reference.
85
10.7 Agreement of Limited Liability Company of PSAC Storage Investors,
L.L.C. Filed with Registrant's Current Report on Form 8-K dated
November 15, 1999 and incorporated herein by reference.
10.8 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. Filed with Registrant's Annual Report on
Form 10-K for the year ended December 31, 1999 and incorporated herein
by reference.
10.9 Amendment to Amended and Restated Agreement of Limited Partnership of
PSA Institutional Partners, L.P. Filed with Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2000 and
incorporated herein by reference.
10.10 Second Amendment to Amended and Restated Agreement of Limited
Partnership of PSA Institutional Partners, L.P. Filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2004 and incorporated herein by reference.
10.11 Third Amendment to Amended and Restated Agreement of Limited
Partnership of PSA Institutional Partners, L.P. Filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2004 and incorporated herein by reference.
10.12 Limited Partnership Agreement of PSAF Acquisition Partners, L.P. Filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by reference.
10.13 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.
10.14 Second Amendment to Credit Agreement by and among Registrant, Wells
Fargo Bank, National Association, as agent, and the financial
institutions party thereto dated as of March 25, 2004. Filed with
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2004 and incorporated herein by reference.
10.15 Note Purchase Agreement with respect to $100,000,000 of Senior Notes of
Storage Trust Properties, L.P. dated as of January 20, 1997. Filed with
Storage Trust Realty's Annual Report on Form 10-K for the year ended
December 31, 1996 (SEC File No. 001-13462) and incorporated herein by
reference.
10.16 Agreement and Plan of Merger by and among Storage Trust Realty,
Registrant and Newco Merger Subsidiary, Inc. dated as of November 12,
1998. Filed with Registrant's Registration Statement on Form S-4 (SEC
File No. 333-68543) and incorporated herein by reference.
10.17 Amendment No. 1 to Agreement and Plan of Merger by and 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 on Form S-4/A (SEC File No. 333-68543) and
incorporated herein by reference.
10.18 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 Registration Statement on Form 8-A/A 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.
86
10.19 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 Registration Statement on Form 8-A/A 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.
10.20 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 Registration Statement on Form 8-A/A 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.
10.21 10.11 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 Registration Statement on Form 8-A/A 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.
10.22 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
Registration Statement on Form 8-A/A 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.
10.23 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
Registration Statement on Form 8-A/A 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 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
Registration Statement on Form 8-A/A 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.
10.25 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 Registration Statement on Form
8-A/A relating to the Depositary Shares Each Representing 1/1,000 of a
Share of Equity Stock, Series A and incorporated herein by reference.
10.26 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
Registration Statement on Form 8-A/A (SEC File No. 0010-08389) 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.
10.27 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
Registration Statement on Form 8-A 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.
87
10.28 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
Registration Statement on Form 8-A 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.
10.29 Deposit Agreement dated as of January 18, 2002 among Registrant,
Equiserve Trust Company, N.A. 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 Registration Statement on Form 8-A 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.
10.30 Deposit Agreement dated as of February 19, 2002 among Registrant,
Equiserve Trust Company, N.A. 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 Registration Statement on Form 8-A 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.
10.31 Deposit Agreement dated as of September 30, 2002 among Registrant,
Equiserve Trust Company, N.A. 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 Registration Statement on Form 8-A 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.
10.32 Deposit Agreement dated as of October 6, 2003 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.500% Cumulative Preferred Stock, Series W.
Filed with Registrant's Registration Statement on Form 8-A relating to
the Depositary Shares Each Representing 1/1,000 of a Share of 6.500%
Cumulative Preferred Stock, Series W and incorporated herein by
reference.
10.33 Deposit Agreement dated as of November 13, 2003 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.450% Cumulative Preferred Stock, Series X.
Filed with Registrant's Registration Statement on Form 8-A relating to
the Depositary Shares Each Representing 1/1,000 of a Share of 6.450%
Cumulative Preferred Stock, Series X and incorporated herein by
reference.
10.34 Deposit Agreement dated as of March 5, 2004 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.250% Cumulative Preferred Stock, Series Z.
Filed with Registrant's Registration Statement on Form 8-A relating to
the Depositary Shares Each Representing 1/1,000 of a Share of 6.250%
Cumulative Preferred Stock, Series Z and incorporated herein by
reference.
10.35 Deposit Agreement dated as of March 31, 2004 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.125% Cumulative Preferred Stock, Series A.
Filed with Registrant's Registration Statement on Form 8-A relating to
the Depositary Shares Each Representing 1/1,000 of a Share of 6.125%
Cumulative Preferred Stock, Series A and incorporated herein by
reference.
10.36 Deposit Agreement dated as of June 30, 2004 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 7.125% Cumulative Preferred Stock, Series B.
Filed with Registrant's Registration Statement on Form 8-A relating to
the Depositary Shares Each Representing 1/1,000 of a Share of 7.125%
Cumulative Preferred Stock, Series B and incorporated herein by
reference.
88
10.37 Deposit Agreement dated as of September 13, 2004 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.60% Cumulative Preferred Stock, Series C. Filed
with Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.60%
Cumulative Preferred Stock, Series C and incorporated herein by
reference.
10.38 Deposit Agreement dated as of February 28, 2005 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.18% Cumulative Preferred Stock, Series D. Filed
with Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.18%
Cumulative Preferred Stock, Series D and incorporated herein by
reference.
10.39 Deposit Agreement dated as of April 27, 2005 among Registrant,
Equiserve, Inc., Equiserve Trust Company, N.A. and the holders of the
depositary receipts evidencing the Depositary Shares Each Representing
1/1,000 of a Share of 6.75% Cumulative Preferred Stock, Series E. Filed
with Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 6.75%
Cumulative Preferred Stock, Series E and incorporated herein by
reference.
10.40 Deposit Agreement dated as of August 23, 2005 among Registrant,
Computershare Shareholder Services, Inc., Equiserve Trust Company, N.A.
and the holders of depositary receipts evidencing Depositary Shares
Each Representing 1/1,000 of a Share of 6.45% Cumulative Preferred
Stock, Series F. Filed with Registrant's Registration Statement on Form
8-A relating to Depositary Shares Each Representing 1/1,000 of a Share
of 6.45% Cumulative Preferred Stock, Series F and incorporated herein
by reference.
10.41 Deposit Agreement dated as of October 3, 2005 among Registrant,
Computershare Shareholder Services, Inc., Equiserve Trust Company, N.A.
and the holders of depositary receipts evidencing additional Depositary
Shares Each Representing 1/1,000 of a Share of 6.45% Cumulative
Preferred Stock, Series F. Filed with Registrant's Registration
Statement on Form 8-A relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 6.45% Cumulative Preferred Stock,
Series F and incorporated herein by reference.
10.42 Deposit Agreement dated December 12, 2005 among Registrant and
Computershare Shareholder Services, Inc., Equiserve Trust Company, N.A.
and the holders of the depositary receipts evidencing the Depositary
Shares Each Representing 1/1,000 of a share of 7.00% Cumulative
Preferred Stock, Series G. Filed with Registrant's Registration
Statement on Form 8-A relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 7.00% Cumulative Preferred Stock,
Series G and incorporated herein by reference.
10.43 Deposit Agreement dated January 19, 2006 among Registrant and
Computershare Trust Company N.A. and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a share of 6.95% Cumulative Preferred Stock, Series H. Filed with
Registrant's Registration Statement on Form 8-A relating to the
Depositary Shares Each Representing 1/1,000 of a share of 6.95%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
10.44 Intentionally omitted.
10.45* 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.
10.46* 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.
10.47* 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.
10.48* Registrant's 2000 Non-Executive/Non-Director Stock Option and Incentive
Plan. Filed with Registrant's Registration Statement on Form S-8 (SEC
File No. 333-52400) and incorporated herein by reference.
89
10.49* Registrant's 2001 Non-Executive/Non-Director Stock Option and Incentive
Plan. Filed with Registrant's Registration Statement on Form S-8 (SEC
File No. 333-59218) and incorporated herein by reference.
10.50* Registrant's 2001 Stock Option and Incentive Plan. Filed with
Registrant's Registration Statement on Form S-8 (SEC File No.
333-59218) and incorporated herein by reference.
10.51* Form of 2001 Stock Option and Incentive Plan Non-qualified Stock Option
Agreement. Filed with Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2004 and incorporated herein
by reference.
10.52* Form of Restricted Stock Unit Agreement. Filed with the Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2004 and incorporated herein by reference.
10.53* Form of 2001 Stock Option and Incentive Plan Stock Option Agreement.
Filed with Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2004 and incorporated herein by reference.
10.54* Public Storage, Inc. Performance Based Compensation Plan for Covered
Employees. Filed with Registrant's Current Report on Form 8-K dated May
11, 2005 and incorporated herein by reference.
10.55* 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 (SEC File No. 001-13462) and incorporated herein by reference.
10.56* Storage Trust Realty Retention Bonus Plan effective as of November 12,
1998. Filed with Registrant's Registration Statement on Form S-4 (SEC
File No. 333-68543) and incorporated herein by reference.
10.57* Form of Indemnity Agreement. Filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 2004 and incorporated
herein by reference.
10.58* 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.
10.59* Employment Agreement between Registrant and Harvey Lenkin dated as of
August 5, 2003. Filed with Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2003 and incorporated herein by
reference.
10.60* Consulting Agreement between Registrant and Harvey Lenkin dated as of
June 30, 2005. Filed with Registrant's Current Report on Form 8-K dated
July 1, 2005 and incorporated herein by reference.
10.61 Merger Agreement, dated as of March 6, 2006, by and among Shurgard
Storage Centers, Inc., ASKL Sub LLC and Public Storage, Inc. Filed with
Registrant's Current Report on Form 8-K dated March 6, 2006 and
incorporated herein by reference.
10.62 Voting Agreement, dated as of March 6, 2006, by and among Charles K.
Barbo and Public Storage, Inc.. Filed with Registrant's Current Report
on Form 8-K dated March 6, 2006 and incorporated herein by reference.
90
11 Statement Re: Computation of Earnings per Share. Filed herewith.
12 Statement Re: Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
14 Code of Ethics for Senior Financial Officers. Filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31,
2003 and incorporated herein by reference.
21 Subsidiaries of the Registrant. Filed herewith.
23 Consent of Independent Auditors. Filed herewith.
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Filed herewith.
* Compensatory benefit plan or arrangement or management contract.
(1) SEC File No. 001-08389 unless otherwise indicated.
91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE, INC.
Date: March 15, 2006 By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr., Vice-Chairman of
the Board, Chief Executive Officer and
President
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ------------------------------- ------------------------------------------------------ --------------
/s/ Ronald L. Havner, Jr. Vice-Chairman of the Board, Chief March 15, 2006
- -------------------------------
Ronald L. Havner, Jr. Executive Officer, President and Director
(principal executive officer)
/s/ John Reyes Senior Vice President and March 15, 2006
- -------------------------------
John Reyes Chief Financial Officer
(principal financial officer and principal accounting
officer)
/s/ B. Wayne Hughes Chairman of the Board March 15, 2006
- -------------------------------
B. Wayne Hughes
/s/ Harvey Lenkin Director March 15, 2006
- -------------------------------
Harvey Lenkin
/s/ B. Wayne Hughes, Jr. Director March 15, 2006
- -------------------------------
B. Wayne Hughes, Jr.
/s/ Robert J. Abernethy Director March 15, 2006
- -------------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director March 15, 2006
- -------------------------------
Dann V. Angeloff
/s/ William C. Baker Director March 15, 2006
- -------------------------------
William C. Baker
/s/ John T. Evans Director March 15, 2006
- -------------------------------
John T. Evans
/s/ Uri P. Harkham Director March 15, 2006
- -------------------------------
Uri P. Harkham
/s/ Daniel C. Staton Director March 15, 2006
- -------------------------------
Daniel C. Staton
92
PUBLIC STORAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
(Item 15 (a))
Page References
---------------
Report of Independent Registered Public Accounting Firm.......... F-1
Consolidated balance sheets as of
December 31, 2005 and 2004....................................... F-2
For each of the three years in the period ended
December 31, 2005:
Consolidated statements of income................................ F-3
Consolidated statements of shareholders' equity ................. F-4
Consolidated statements of cash flows............................ F-5 - F-6
Notes to consolidated financial statements....................... F-7 - F-41
Schedule:
III - Real estate and accumulated depreciation................... F-42 - F-88
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
The Board of Directors and Shareholders
Public Storage, Inc.
We have audited the accompanying consolidated balance sheets of Public Storage,
Inc. as of December 31, 2005 and 2004, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 2005. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Public
Storage, Inc. at December 31, 2005 and 2004, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2005, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Public Storage,
Inc.'s internal control over financial reporting as of December 31, 2005, based
on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 10, 2006 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Los Angeles, California
March 10, 2006
F-1
PUBLIC STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2005 and 2004
(amounts in thousands, except share data)
December 31, December 31,
2005 2004
----------------- ------------------
ASSETS
Cash and cash equivalents.................................................... $ 493,501 $ 366,255
Real estate facilities, at cost:
Land...................................................................... 1,540,357 1,431,148
Buildings................................................................. 4,390,127 4,079,602
----------------- ------------------
5,930,484 5,510,750
Accumulated depreciation.................................................. (1,500,128) (1,320,200)
----------------- ------------------
4,430,356 4,190,550
Construction in process................................................... 54,472 56,160
----------------- ------------------
4,484,828 4,246,710
Investment in real estate entities........................................... 328,555 341,304
Goodwill..................................................................... 78,204 78,204
Intangible assets, net....................................................... 98,081 104,685
Other assets................................................................. 69,317 67,632
----------------- ------------------
Total assets................................................... $ 5,552,486 $ 5,204,790
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable................................................................ $ 113,950 $ 129,519
Debt to joint venture partner................................................ 35,697 16,095
Preferred stock called for redemption........................................ 172,500 54,875
Accrued and other liabilities................................................ 159,360 145,431
----------------- ------------------
Total liabilities................................................... 481,507 345,920
Minority interest:
Preferred partnership interests........................................... 225,000 310,000
Other partnership interests............................................... 28,970 118,903
Commitments and contingencies (Note 16)...................................... - -
Shareholders' equity:
Cumulative Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
1,698,336 shares issued (in series) and outstanding, (3,980,186 at
December 31, 2004) at liquidation preference............................ 2,498,400 2,102,150
Common Stock, $0.10 par value, 200,000,000 shares authorized, 128,089,563
shares issued and outstanding (128,526,450 at December 31, 2004)........ 12,809 12,853
Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
8,744.193 shares issued and outstanding
(8,776.102 at December 31, 2004)......................................... - -
Paid-in capital........................................................... 2,430,671 2,457,568
Cumulative net income..................................................... 3,189,266 2,732,873
Cumulative distributions paid............................................. (3,314,137) (2,875,477)
----------------- ------------------
Total shareholders' equity.......................................... 4,817,009 4,429,967
----------------- ------------------
Total liabilities and shareholders' equity..................... $ 5,552,486 $ 5,204,790
================= ==================
See accompanying notes.
F-2
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME
For each of the three years in the period ended December 31, 2005
(amounts in thousands, except per share data)
2005 2004 2003
-------------- -------------- --------------
Revenues:
Rental income:
Self-storage facilities................................... $ 952,284 $ 862,809 $ 797,921
Commercial properties..................................... 11,560 10,750 11,001
Containerized storage facilities.......................... 16,497 19,355 23,991
Ancillary operations......................................... 64,173 60,996 58,506
Interest and other income.................................... 16,447 5,391 2,537
-------------- -------------- --------------
1,060,961 959,301 893,956
-------------- -------------- --------------
Expenses:
Cost of operations (excluding depreciation and amortization below):
Storage facilities........................................ 320,919 300,680 280,722
Commercial properties..................................... 4,448 4,328 4,583
Containerized storage facilities.......................... 12,886 11,774 13,939
Ancillary operations...................................... 40,378 45,487 41,938
Depreciation and amortization................................. 196,397 183,063 184,063
General and administrative.................................... 21,115 18,813 17,127
Interest expense, including interest paid to related party
(Note 9)...................................................... 8,216 760 1,121
-------------- -------------- --------------
604,359 564,905 543,493
-------------- -------------- --------------
Income from continuing operations before equity in earnings of real estate
entities, casualty loss, gain on disposition of
real estate and real estate investments, and minority interest
in income.................................................... 456,602 394,396 350,463
Equity in earnings of real estate entities (Note 5)............. 24,883 22,564 24,966
Casualty loss .................................................. (1,917) (1,250) -
Gain on disposition of real estate and real estate investments.. 3,099 1,317 1,007
Minority interest in income:
Preferred partnership interests:
Based on ongoing distributions paid........................ (16,147) (22,423) (26,906)
Special distribution and restructuring allocation (Note 9). (874) (10,063) -
Other partnership interests................................... (15,630) (17,427) (16,797)
-------------- -------------- --------------
Income from continuing operations............................... 450,016 367,114 332,733
Discontinued operations (Note 3)................................ 6,377 (901) 3,920
-------------- -------------- --------------
Net income...................................................... $ 456,393 $ 366,213 $ 336,653
============== ============== ==============
Net income allocation:
- ----------------------
Allocable to preferred shareholders:
Based on distributions paid................................ $ 173,017 $ 157,925 $ 146,196
Based on redemptions of preferred stock (Note 2)........... 7,538 8,724 7,120
Allocable to Equity Stock, Series A.......................... 21,443 21,501 21,501
Allocable to common shareholders............................. 254,395 178,063 161,836
-------------- -------------- --------------
$ 456,393 $ 366,213 $ 336,653
============== ============== ==============
Net income per common share - basic
Continuing operations........................................ $ 1.93 $ 1.40 $ 1.26
Discontinued operations...................................... 0.05 (0.01) 0.03
-------------- -------------- --------------
$ 1.98 $ 1.39 $ 1.29
============== ============== ==============
Net income per common share - diluted
Continuing operations........................................ $ 1.92 $ 1.39 $ 1.25
Discontinued operations...................................... 0.05 (0.01) 0.03
-------------- -------------- --------------
$ 1.97 $ 1.38 $ 1.28
============== ============== ==============
Net income per depositary share of Equity Stock, Series A (basic
and diluted) ................................................ $ 2.45 $ 2.45 $ 2.45
============== ============== ==============
Basic weighted average common shares outstanding................ 128,159 127,836 125,181
============== ============== ==============
Diluted weighted average common shares outstanding.............. 128,819 128,681 126,517
============== ============== ==============
Weighted average shares of Equity Stock, Series A (basic and
diluted) .................................................... 8,752 8,776 8,776
============== ============== ==============
See accompanying notes.
F-3
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 2005
(Amounts in thousands, except share and per share amounts)
Cumulative Class B
Preferred Common Common Paid-in
Stock Stock Stock Capital
------------- ----------- ---------- -------------
Balances at December 31, 2002...................................... $ 1,817,025 $ 11,699 $ 700 $ 2,371,194
Issuance of Cumulative Preferred Stock; Series W (5,300 shares)
and Series X (4,800 shares)................................... 252,500 - - (8,354)
Redemption of Cumulative Preferred Stock; Series B (2,300,000
shares), Series C (1,200,000 shares) and Series K (4,600
shares)....................................................... (202,500) - - (35)
Conversion of Class B Common Stock (7,000,000 shares) (Note 10) - 700 (700) -
Issuance of Common Stock (3,170,279 shares) (Note 10)........... - 317 - 81,281
Repurchase of Common Stock (175,000 shares) (Note 10)........... - (17) - (5,984)
Stock option and restricted stock expense (Note 12)............. - - - 530
Net income...................................................... - - - -
Distributions to shareholders:
Cumulative Preferred Stock.................................... - - - -
Equity Stock, Series A........................................ - - - -
Common Stock ($1.80 per share)................................ - - - -
------------- ----------- ---------- -------------
Balances at December 31, 2003...................................... 1,867,025 12,699 - 2,438,632
Issuance of Cumulative Preferred Stock; Series Y (1,600,000
shares), Series Z (4,500 shares), Series A (4,600 shares),
Series B (4,350 shares), and Series C (4,600 shares) ......... 491,250 - - (15,016)
Redemption of Cumulative Preferred Stock; Series L (4,600
shares), Series M (2,250 shares), Series D (1,200,000 shares),
and Series E (2,195,000 shares)............................... (256,125) - - (81)
Restructuring of Series N preferred partnership units (Note 9).. - - - 2,063
Issuance of common stock (1,985,416 shares) (Note 10) 199 49,730
Repurchase of common stock (445,700 shares) (Note 10)........... - (45) - (20,250)
Stock option and restricted stock expense (Note 12)............. - - - 2,490
Net income...................................................... - - - -
Distributions to shareholders:
Cumulative Preferred Stock.................................... - - - -
Equity Stock, Series A........................................ - - - -
Common Stock ($1.80 per share)................................ - - - -
------------- ----------- ---------- -------------
Balances at December 31, 2004...................................... 2,102,150 12,853 - 2,457,568
Issuance of Cumulative Preferred Stock; Series D (5,400 shares),
Series E (5,650 shares), Series F (10,000 shares) and Series G
(4,000 shares) ............................................... 626,250 - - (19,665)
Redemption of Cumulative Preferred Stock; Series F (2,300,000
shares) and Series Q (6,900 shares)............................ (230,000) - - (34)
Repurchase of preferred partnership units, Series N and O
(Note 9) ...................................................... - - - 874
Issuance of common stock (282,998 shares) (Note 10) ............ 28 - 7,483
Repurchase of common stock (84,000 shares) (Note 10)............ - (8) - (4,982)
Stock distribution from unconsolidated real estate entities
(635,885 common shares and 31,909 Equity Stock, Series A,
depositary shares)(Note 5).................................... - (64) - (14,456)
Stock option and restricted stock expense (Note 12)............. - - - 3,883
Net income...................................................... - - - -
Distributions to shareholders:
Cumulative Preferred Stock.................................... - - - -
Equity Stock, Series A........................................ - - - -
Common Stock ($1.90 per share)................................ - - - -
------------- ----------- ---------- -------------
Balances at December 31, 2005...................................... $ 2,498,400 $ 12,809 $ - $ 2,430,671
============= =========== ========== =============
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 2005
(Amounts in thousands, except share and per share amounts)
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
----------- --------------- ---------------
Balances at December 31, 2002...................................... $ 2,030,007 $ (2,071,656) $ 4,158,969
Issuance of Cumulative Preferred Stock; Series W (5,300 shares)
and Series X (4,800 shares)................................... - - 244,146
Redemption of Cumulative Preferred Stock; Series B (2,300,000
shares), Series C (1,200,000 shares) and Series K (4,600
shares)....................................................... - - (202,535)
Conversion of Class B Common Stock (7,000,000 shares) (Note 10) - - -
Issuance of Common Stock (3,170,279 shares) (Note 10)........... - - 81,598
Repurchase of Common Stock (175,000 shares) (Note 10)........... - - (6,001)
Stock option and restricted stock expense (Note 12)............. - - 530
Net income...................................................... 336,653 - 336,653
Distributions to shareholders:
Cumulative Preferred Stock.................................... - (146,196) (146,196)
Equity Stock, Series A........................................ - (21,501) (21,501)
Common Stock ($1.80 per share)................................ - (225,864) (225,864)
----------- --------------- ---------------
Balances at December 31, 2003...................................... 2,366,660 (2,465,217) 4,219,799
Issuance of Cumulative Preferred Stock; Series Y (1,600,000
shares), Series Z (4,500 shares), Series A (4,600 shares),
Series B (4,350 shares), and Series C (4,600 shares) ......... - - 476,234
Redemption of Cumulative Preferred Stock; Series L (4,600
shares), Series M (2,250 shares), Series D (1,200,000 shares),
and Series E (2,195,000 shares)............................... - - (256,206)
Restructuring of Series N preferred partnership units (Note 9).. - - 2,063
Issuance of common stock (1,985,416 shares) (Note 10) 49,929
Repurchase of common stock (445,700 shares) (Note 10)........... - - (20,295)
Stock option and restricted stock expense (Note 12)............. - - 2,490
Net income...................................................... 366,213 - 366,213
Distributions to shareholders:
Cumulative Preferred Stock.................................... - (157,925) (157,925)
Equity Stock, Series A........................................ - (21,501) (21,501)
Common Stock ($1.80 per share)................................ - (230,834) (230,834)
----------- --------------- ---------------
Balances at December 31, 2004...................................... 2,732,873 (2,875,477) 4,429,967
Issuance of Cumulative Preferred Stock; Series D (5,400 shares),
Series E (5,650 shares), Series F (10,000 shares) and Series G
(4,000 shares) ............................................... - - 606,585
Redemption of Cumulative Preferred Stock; Series F (2,300,000
shares) and Series Q (6,900 shares)............................ - - (230,034)
Repurchase of preferred partnership units, Series N and O
(Note 9) ...................................................... - - 874
Issuance of common stock (282,998 shares) (Note 10) ............ - - 7,511
Repurchase of common stock (84,000 shares) (Note 10)............ - - (4,990)
Stock distribution from unconsolidated real estate entities
(635,885 common shares and 31,909 Equity Stock, Series A,
depositary shares)(Note 5).................................... - - (14,520)
Stock option and restricted stock expense (Note 12)............. - - 3,883
Net income...................................................... 456,393 - 456,393
Distributions to shareholders:
Cumulative Preferred Stock.................................... - (173,017) (173,017)
Equity Stock, Series A........................................ - (21,443) (21,443)
Common Stock ($1.90 per share)................................ - (244,200) (244,200)
----------- --------------- ---------------
Balances at December 31, 2005...................................... $ 3,189,266 $ (3,314,137) $ 4,817,009
=========== =============== ===============
See accompanying notes.
F-4
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 2005
(amounts in thousands)
2005 2004 2003
------------- ------------- ------------
Cash flows from operating activities:
Net income............................................................... $ 456,393 $ 366,213 $ 336,653
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of note premium (Note 7)................................... (1,026) - -
Excess of effective interest over cash interest paid on debt to joint
venture partner (Note 8) ............................................ 405 - -
Gain on sale of real estate assets..................................... (8,279) (2,288) (6,128)
Casualty loss (Note 2).................................................. 2,592 1,250 -
Depreciation and amortization........................................... 196,397 183,063 184,063
Equity in earnings of Real Estate Entities.............................. (24,883) (22,564) (24,966)
Distributions received from the Real Estate Entities (Note 5)........... 23,112 20,961 17,754
Non cash portion of stock-based compensation expense.................... 3,883 2,490 530
Minority interest in income............................................. 32,651 49,913 43,703
Depreciation, impairment losses, and gain on sale of non-real estate
assets associated with discontinued operations (Note 3).............. (1,055) 2,857 7,169
Other operating activities.............................................. 11,858 14,769 12,609
------------- ------------- ------------
Total adjustments.................................................... 235,655 250,451 234,734
------------- ------------- ------------
Net cash provided by operating activities............................ 692,048 616,664 571,387
------------- ------------- ------------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable................ - 18 23,814
Repayment/(issuance) of notes receivable to affiliates.................. - 100,000 (100,000)
Capital improvements to real estate facilities ......................... (25,890) (35,868) (30,175)
Construction in process................................................. (86,248) (71,602) (102,428)
Acquisition of minority interests (Note 9).............................. (92,815) (24,851) (9,867)
Acquisition of real estate facilities................................... (254,549) (139,794) -
Investments in real estate entities..................................... - (3,005) (340)
Proceeds from the sale of real estate and real estate investments....... 14,755 12,648 34,883
Maturity of held to maturity debt securities (Note 2) ................. 7,452 20,729 10,205
Acquisition of held to maturity debt securities (Note 2)................ (6,361) (13,663) (21,940)
Other investing activities.............................................. - (2,250) (9,285)
------------- ------------- ------------
Net cash used in investing activities................................ (443,656) (157,638) (205,133)
------------- ------------- ------------
Cash flows from financing activities:
Principal payments on notes payable and revolving line of credit........ (14,543) (41,204) (39,837)
Repayment of debt to related party (Note 9) ............................ (64,513) - -
Net proceeds from the issuance of common stock.......................... 7,511 49,929 68,618
Net proceeds from the issuance of cumulative preferred stock............ 606,585 476,234 244,146
Repurchase of common stock.............................................. (4,990) (20,295) (6,001)
Redemption of cumulative preferred stock................................ (112,409) (316,331) (87,535)
Redemption of preferred partnership interest............................ (85,000) - -
Distributions paid to shareholders...................................... (438,660) (410,260) (393,561)
Distributions paid to holders of preferred partnership interests
(Note 9)............................................................. (16,147) (30,423) (26,906)
Distributions paid to minority interests, net of reinvestments.......... (18,177) (21,349) (23,469)
Net proceeds from financing through acquisition joint venture (Note 8).. 19,197 16,095 -
------------- ------------- ------------
Net cash used in financing activities................................ (121,146) (297,604) (264,545)
------------- ------------- ------------
Net increase in cash and cash equivalents................................... 127,246 161,422 101,709
Cash and cash equivalents at the beginning of the year...................... 366,255 204,833 103,124
------------- ------------- ------------
Cash and cash equivalents at the end of the year............................ $ 493,501 $ 366,255 $ 204,833
============= ============= ============
See accompanying notes.
F-5
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 2005
(amounts in thousands)
(Continued)
2005 2004 2003
------------- ------------- ------------
Supplemental schedule of non cash investing and financing activities:
Retirement of Common Stock and Equity Stock, Series A, received as a
distribution from affiliated entities (Note 5):
Common Stock....................................................... $ (64) $ - $ -
Paid-in capital.................................................... (14,456)
Investment in real estate entities................................. 14,520 - -
Acquisition of minority interest in Consolidated Joint Venture in exchange
for debt (Note 9):
Minority interest - Other partnership interests.................... (62,013) - -
Real estate facilities............................................. (2,500) - -
Debt to related party.............................................. 64,513 - -
Acquisition of real estate facilities in exchange for minority interests and
assumption of mortgage notes payable:
Real estate facilities.............................................. - (119,693) -
Mortgage notes payable.............................................. - 94,693 -
Preferred partnership interests..................................... - 25,000 -
Acquisition of minority interest in exchange for common stock (Note 9):
Real estate facilities.............................................. - - (16,687)
Minority interest................................................... - - (6,690)
Issuance of Common Stock to acquire minority interests.............. - - 13,510
Exchange of Common Stock for Common Stock, Series B:
Reduction in Common Stock, Series B (7,000,000 shares).............. - - (700)
Increase in Common Stock (7,000,000 shares)......................... - - 700
See accompanying notes.
F-6
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
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,
generally on a month-to-month basis, for personal and business use. In
addition, we have (i) interests in commercial properties, containing
commercial and industrial rental space, (ii) interests in facilities that
lease storage containers, and (iii) ancillary operations comprised
principally of reinsurance of policies against losses to goods stored by
our self-storage tenants, retail sales and truck rentals at our
self-storage locations.
Any references to the number of properties and square footage is
unaudited.
At December 31, 2005, we had direct and indirect equity interests
in 1,501 self-storage facilities located in 37 states and operating under
the "Public Storage" name. We also have direct and indirect equity
interests in approximately 19 million net rentable square feet of
commercial space located in 10 states.
2. Summary of significant accounting policies
------------------------------------------
Consolidation policy and basis of presentation
Entities in which we have an interest are first evaluated to
determine whether, in accordance with the provisions of the Financial
Accounting Standards Board's Interpretation No. 46R, "Consolidation of
Variable Interest Entities," they represent Variable Interest Entities.
Variable Interest Entities in which we are primary beneficiary are
consolidated. No entities were determined to be variable interest entities
during the three years ended December 31, 2005. Entities that are not
Variable Interest Entities that we control, determined based our ownership
of a voting interest excess of 50% are consolidated.
We control 34 such entities and, accordingly, the consolidated
financial statements include the accounts of these entities (the
"Consolidated Entities") as well as those of the Company. All siginificant
intercompany balances and transactions have been eliminated. Collectively,
the Company and the Consolidated Entities own a total of 1,470 real estate
facilities, consisting of 1,463 self-storage facilities, three industrial
facilities used by the containerized storage operations and four commercial
properties.
At December 31, 2005, we had equity investments in eight limited
partnerships in which we do not have a controlling interest. These limited
partnerships collectively own 38 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 17.6 million
net rentable square feet of commercial space as of December 31, 2005. We do
not control these entities; accordingly, our investments in these limited
partnerships and PSB (collectively the "Unconsolidated Entities") are
accounted for using the equity method.
Certain amounts previously reported have been reclassified to
conform to the December 31, 2005 presentation. In previous presentations,
net income from our truck rental, merchandise sales, and property
management operations were included on a net basis in "Interest and other
income" in our consolidated statements of income. In our current
presentation, revenues with respect to each of these operations, along with
revenues from our tenant reinsurance operations, are included under the
caption "Revenues: Ancillary operations" and the related cost of operations
are included in "Expenses: Cost of operations - Ancillary operations" on
our consolidated statements of income. Certain reclassifications have also
been made from previous presentations as a result of discontinued
operations (See Note 3).
F-7
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Use of estimates
----------------
The preparation of the consolidated financial statements in
conformity with United States generally accepted accounting principles
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 we intend to continue to qualify the Company as a REIT, as defined in
Section 856 of the Internal Revenue Code. As a REIT, we are generally not
taxed on that portion of our taxable income that is distributed to our
shareholders, provided that we meet certain tests. We believe we have met
these tests during 2005 and, accordingly, no provision for income taxes has
been made in the accompanying consolidated financial statements.
Financial instruments
---------------------
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 financial instruments such as short-term treasury securities
or investment grade short-term commercial paper to be cash equivalents.
Due to the short period to maturity of our cash and cash
equivalents, accounts receivable, other financial instruments included in
other assets, and accrued and other liabilities, the carrying values as
presented on the consolidated balance sheets are reasonable estimates of
fair value. The approximate fair value of notes payable is presented in
Note 7 below.
Financial assets that are exposed to credit risk consist primarily
of cash and cash equivalents and accounts receivable. Cash and cash
equivalents, which consist of short-term investments, including commercial
paper, are only invested in entities with an investment grade rating.
Accounts receivable are not a significant portion of total assets and are
comprised of a large number of individual customers.
Included in cash and cash equivalents at December 31, 2005 is
$18,962,000 ($1,984,000 at December 31, 2004) held by our captive insurance
entities. Insurance and other regulations place significant restrictions on
our ability to withdraw these funds for purposes other than insurance
activities. Other assets at December 31, 2005 include investments totaling
$19,838,000 ($20,929,000 at December 31, 2004) in held to maturity Federal
government agency securities stated at amortized cost, which approximates
fair value.
Real Estate Facilities
----------------------
Real estate facilities are recorded at cost. Costs associated with
the acquisition, development, construction, renovation, and improvement of
properties are capitalized. Interest, property taxes, and other costs
associated with development incurred during the construction period are
capitalized as building cost. Expenditures for repairs and maintenance
expense are charged to expense when 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.
F-8
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Accounting for Acquisition Joint Venture
----------------------------------------
In January 2004, we entered into a joint venture partnership with
an institutional investor for the purpose of acquiring up to $125.0 million
of existing self-storage properties in the United States from third parties
(the "Acquisition Joint Venture"). The Acquisition Joint Venture is funded
entirely with equity consisting of 30% from the Company and 70% from the
institutional investor. For a six-month period beginning 54 months after
formation, we have the right to acquire our partner's interest based upon
the market value of the properties. If we do not exercise our option, our
partner can elect to purchase our interest in the properties during a
six-month period commencing upon expiration of our six-month option period.
If our partner fails to exercise its option, the Acquisition Joint Venture
will be liquidated and the proceeds will be distributed to the partners
according to the joint venture agreement.
We have determined that the Acquisition Joint Venture is not a
variable interest entity, and we do not control this entity. Therefore, we
do not consolidate the accounts of the Acquisition Joint Venture on our
consolidated financial statements.
During the year ended December 31, 2004, the Acquisition Joint
Venture acquired two facilities directly from third parties at an aggregate
cost of $9,086,000. We account for our investment with respect to these
facilities using the equity method, with our pro rata share of the income
from these facilities recorded as "Equity in earnings of real estate
entities" on our consolidated statements of income. See Note 5 for further
discussion of these amounts.
In December 2004, we sold seven facilities to the Acquisition
Joint Venture for an aggregate of $22,993,000. During the first quarter of
2005, we sold an interest in three additional facilities to the Acquisition
Joint Venture for an aggregate of $27,424,000. Due to our continuing
interest in these facilities and the likelihood that we will exercise our
option to acquire our partner's interest, we have accounted for our
partner's investment ($35,697,000 and $16,095,000 at December 31, 2005 and
2004, respectively) in these transactions to be, in substance, debt
financing. Accordingly, our partner's investment with respect to these ten
facilities is accounted for as a liability on our consolidated balance
sheet under the caption "Debt to joint venture partner," with our partner's
share of operations with respect to these ten facilities accounted for as
interest expense on our consolidated statements of income. Quarterly we
review the fair value of this liability and to the extent fair value
exceeds the carrying value of the liability an adjustment will be made to
increase the liability to fair value; no adjustments were necessary in 2005
or 2004 (See Note 8).
Evaluation of asset impairment
------------------------------
We evaluate impairment of goodwill annually through a two-step
process. In the first step, if the fair value of the reporting unit to
which the goodwill applies is equal to or greater than the carrying amount
of the assets of the reporting unit, including the goodwill, the goodwill
is considered unimpaired and the second step is unnecessary. If, however,
the fair value of the reporting unit including goodwill is less than the
carrying amount, the second step is performed. In this test, we compute the
implied fair value of the goodwill based upon the allocations that would be
made to the goodwill, other assets and liabilities of the reporting unit if
a business combination transaction were consummated at the fair value of
the reporting unit. An impairment loss is recorded to the extent that the
implied fair value of the goodwill is less than the goodwill's carrying
amount. No impairments of our goodwill were identified in our annual
evaluations at December 31, 2003, 2004, and 2005.
F-9
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
We evaluate impairment of long-lived assets on a quarterly basis.
We first evaluate these assets for indicators of impairment such as a) a
significant decrease in the market price of a long-lived asset, b) a
significant adverse change in the extent or manner in which a long-lived
asset is being used or in its physical condition, c) a significant adverse
change in legal factors or the business climate that could affect the value
of the long-lived asset, d) an accumulation of costs significantly in
excess of the amount originally projected for the acquisition or
construction of the long-lived asset, or e) a current-period operating or
cash flow loss combined with a history of operating or cash flow losses or
a projection or forecast that demonstrates continuing losses associated
with the use of the long-lived asset. When any such indicators of
impairment are noted, we compare the carrying value of these assets to the
future estimated undiscounted cash flows attributable to these 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.
Any long-lived assets which we expect to sell or otherwise dispose
of prior to its previously estimated useful life is stated at what we
estimate to be the lower of its estimated net realizable value (less cost
to sell) or its carrying value. During 2004 and 2003 we recorded impairment
charges related to containers, trucks, and other equipment in our
containerized storage segment identified for closure (see Note 3). These
impairment charges were based upon the differential between book value and
the estimated net realizable value, which was based upon prices for similar
assets, and were equal to the net proceeds ultimately received. No
additional impairments were identified from our evaluations, except as
noted under "Accounting for casualty losses" below.
Accounting for casualty losses
------------------------------
Our policy is to record casualty losses or gains in the period the
casualty occurs equal to the differential between (a) the book value of
assets destroyed and (b) insurance proceeds, if any, that we expect to
receive in accordance with our insurance contracts. Potential insurance
proceeds that are subject to uncertainties, such as interpretation of
deductible provisions of the governing agreements or the estimation of
costs of restoration, are treated as a contingent proceeds in accordance
with Statement of Financial Accounting Standards No. 5 ("SFAS 5"), and not
recorded until the uncertainties are satisfied.
During 2005, we incurred casualty losses totaling $2,592,000 as a
result of physical damage to our facilities caused by hurricanes. These
losses represent the excess of the aggregate net book values of the assets
damaged ($5,987,000) over the insurance proceeds that we expect to receive
of approximately $3,395,000. We estimate, however, that the aggregate cost
to repair damages to our facilities will be approximately $10.7 million.
Also included in the caption "Casualty loss" for the year ended December
31, 2005 is estimated business interruption income of approximating
$675,000, representing our estimated recovery from our insurers for loss of
business through December 31, 2005.
Included in the caption "Casualty loss" for the year ended
December 31, 2004 was $1,250,000, representing the excess the net book
value of assets damaged. We expect to receive no insurance proceeds for our
hurricane losses incurred in 2004.
Accounting for stock-based compensation
---------------------------------------
We utilize the Fair Value Method (as defined in Note 12) of
accounting for our employee stock options issued after December 31, 2001,
and utilize the APB 25 Method (as defined in Note 12) for employee stock
options issued prior to January 1, 2002. Restricted stock unit expense is
recorded over the relevant vesting period. See Note 12 for a full
discussion of our accounting with respect to employee stock options and
restricted stock units.
Other assets
------------
Other assets primarily consists of prepaid expenses, investments
in held to maturity debt securities (described below), accounts receivable,
assets associated with our containerized storage business, merchandise
inventory and rental trucks.
F-10
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
As discussed in Note 3, during 2004 and 2003 asset impairment
charges amounting to $1,575,000 and $2,479,000, respectively, were recorded
with respect to containers and equipment utilized in the discontinued
containerized storage operations. No asset impairment charges were recorded
during the year ended December 31, 2005.
Included in depreciation and amortization expense for 2005, 2004
and 2003 is $3,804,000, $7,544,000, and $6,427,000 respectively, related to
depreciation of other assets. Included in discontinued operations for 2005,
2004, and 2003, respectively, is depreciation expense of $29,000, $726,000,
and $2,644,000 respectively, related to containers and equipment used in
the operations of the containerized storage business that have now been
discontinued.
Other assets at December 31, 2005 also includes investments
totaling $19,838,000 ($20,929,000 at December 31, 2004) in held to maturity
debt securities stated at amortized cost, which approximates fair value.
Accrued and other liabilities
-----------------------------
Accrued and other liabilities consist primarily of real and
personal property tax accruals, prepayments of rents, trade payables,
losses and loss adjustment liabilities from our insurance programs
(described below), and accrued interest. Prepaid rent totals $26,145,000
and $26,289,000 at December 31, 2005 and 2004, respectively.
STOR-Re Mutual Insurance Company, Inc. ("STOR-Re"), which is
consolidated with the Company, was formed in 1994 as an association captive
insurance company owned by the Company and affiliates of the Company.
STOR-Re provides limited property and liability insurance to the Company
and its affiliates for losses incurred during policy periods prior to April
1, 2004, and was succeeded by PS Insurance Company Hawaii, Ltd. ("PSIC-H"),
a wholly owned subsidiary of the Company with respect to these insurance
activities for policy periods following March 31, 2004. We also utilize
other insurance carriers to provide property and liability insurance
coverage in excess of STOR-Re's and PSIC-H's limitations which are
described in Note 16. STOR-Re and PSIC-H accrue liabilities for covered
losses and loss adjustment expense, which at December 31, 2005 totaled
$32,797,000 ($34,192,000 at December 31, 2004) with respect to insurance
provided to the Company and its affiliates.
Liabilities for losses and loss adjustment expenses include an
amount we determine from loss reports and individual cases and an amount,
based on recommendations from an independent actuary that is a member of
the American Academy of Actuaries 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. While we
believe that the amount is adequate, the ultimate loss 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.
PS Insurance Company, Ltd ("PSIC"), a wholly-owned subsidiary of
the Company, reinsured policies against claims for losses to goods stored
by tenants in our self-storage facilities for policy periods prior to March
31, 2004. PSIC-H succeeded PSIC with respect to these tenant insurance
activities effective April 1, 2004. Prior to January 1, 2006 both of these
entities utilize third-party insurance coverage for losses from any
individual event that exceeds a loss of $500,000, to a maximum of
$10,000,000. Commencing January 1, 2006, PSIC-H will cover losses up to
F-11
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
$1,500,000 with third party insurers covering the next $9,000,000 from any
individual event. Losses below the third-party insurers' deductible amounts
are accrued as cost of operations for the tenant insurance operations.
Losses exceeding the third-party insurers limit are the responsibility of
PSIC-H.
Included in cost of operations - ancillary operations for the
years ended December 31, 2005 and 2004 are approximately $1.1 million and
$1.5 million, respectively in estimated losses for tenant claims as a
result of damage sustained from hurricanes. The accrued liability for
losses and loss adjustment expense with respect to tenant insurance
activities totaled $4,773,000 at December 31, 2005 and $6,622,000 at
December 31, 2004 including the unpaid portion of the aforementioned
estimated losses from tenant claims.
Intangible assets and goodwill
------------------------------
Intangible assets consist of property management contracts
($165,000,000) that were acquired in 1995 and are net of accumulated
amortization of $66,919,000 ($60,315,000 at December 31, 2004). Included in
depreciation and amortization expense for each of the years ended December
31, 2005, 2004 and 2003 is $6,604,000 with respect to the amortization of
property management contracts. These assets have a defined life and are
amortized on a straight-line basis over a 25 year period. We expect
amortization expense with respect to property management contracts to be
$6,604,000 per year in each of the five years following the year ended
December 31, 2005.
Goodwill ($94,719,000) represents the excess of acquisition cost
over the fair value of net tangible and identifiable intangible assets
acquired in business combinations. Each business combination from which our
Goodwill arose was for the acquisition of single businesses and
accordingly, the allocation of our goodwill to our business segments is
based directly on such acquisitions. Goodwill is net of accumulated
amortization of $16,515,000 at December 31, 2005 and December 31, 2004. Our
goodwill has an indeterminate life and, in accordance with the provisions
of Statement of Financial Accounting Standards No. 142, amortization of
goodwill ceased effective January 1, 2002.
Revenue and expense recognition
-------------------------------
Rental income, which is generally earned pursuant to
month-to-month leases for storage space, is recognized as earned.
Promotional discounts are recognized as a reduction to rental income over
the promotional period, which is generally during the first month of
occupancy. Late charges and administrative fees are recognized as income
when collected. Tenant reinsurance premiums are recognized as premium
revenue when collected. Revenues from merchandise sales and truck rentals
are recognized when earned. Interest income is 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 real estate
entities.
We accrue for property tax expense based upon estimates and
historical trends. If these estimates are incorrect, the timing of expense
recognition could be affected.
Cost of operations, general and administrative expense, interest
expense, and advertising expenditures are expensed as incurred. Advertising
expense totaled $31,743,000, $26,995,000, and $25,231,000 for the years
ended December 31, 2005, 2004, and 2003, respectively.
Environmental costs
-------------------
Our policy is to accrue environmental assessments and estimated
remediation cost when it is probable that such efforts will be required and
the related costs 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.
F-12
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Net income per common share
---------------------------
Distributions paid to the holders of our Cumulative Preferred
Stock totaling $173,017,000, $157,925,000 and $146,196,000 for the years
ended December 31, 2005, 2004 and 2003, respectively, have been deducted
from net income to arrive at net income allocable to our common
shareholders.
Emerging Issues Task Force ("EITF") Topic D-42, "The Effect on the
Calculation of Earnings per Share for the Redemption or the Induced
Conversion of Preferred Stock" provides, among other things, that any
excess of the fair value of the consideration transferred to the holders of
preferred stock redeemed over the carrying amount of the preferred stock
should be subtracted from net earnings to determine net earnings available
to common stockholders in the calculation of earnings per share. At the
July 31, 2003 meeting of the EITF, the Securities and Exchange Commission
("SEC") Observer clarified that for purposes of applying EITF Topic D-42,
the carrying amount of the preferred stock should be reduced by the
issuance costs of the preferred stock, regardless of where in the
stockholders' equity section those costs were initially classified at the
time issuance.
In conformity with the SEC Observer's clarification, an additional
$7,538,000 ($0.06 per diluted share), $8,724,000 ($0.07 per diluted share)
and $7,120,000 ($0.06 per diluted share) was allocated to our preferred
stockholders in connection with the redemption of such securities for the
years ended December 31, 2005, 2004 and 2003, respectively.
Net income allocated to our common shareholders has been further
allocated between 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 which earnings per share for each class of
common stock is determined according to dividends declared (or accumulated)
and participation rights in undistributed earnings. Using the two-class
method, the Equity Stock, Series A was allocated net income of $21,443,000
for the year ended December 31, 2005 and $21,501,000 for each of the years
ended 2004 and 2003. The remaining net income of $254,395,000, $178,063,000
and $161,836,000 for the years ended December 31, 2005, 2004, and 2003,
respectively, was allocated to our regular common stockholders.
Basic net income per share is computed using the weighted average
common shares outstanding (prior to the dilutive impact of stock options
and restricted stock units outstanding). Diluted net income per common
share is computed using the weighted average common shares outstanding
(adjusted for the dilutive impact of stock options and restricted stock
units outstanding, computed using the treasury stock method, that totaled
660,000 in 2005, 845,000 in 2004 and 1,336,000 in 2003).
3. Discontinued Operations
-----------------------
We segregate all of our disposed components that have operations
that (i) can be distinguished from the rest of the Company and (ii) will be
eliminated from the ongoing operations of the Company in a disposal
transaction.
Since January 1, 2002, we have closed a total of 43 containerized
storage facilities that were determined to be non-strategic (the "Closed
Facilities."). As the decision was made to close each facility, the related
assets were deemed not recoverable from operations and therefore asset
F-13
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
impairment charges for the excess of these assets' net book value over
their fair value (less costs to sell), determined based upon the values of
similar assets, were recorded. These asset impairment charges totaled
$1,575,000 and $3,229,000 (including $750,000 with respect to a real estate
facility previously utilized by one of the Closed Facilities) for the years
ended December 31, 2004 and 2003, respectively. A loss on sale in the
amount of $355,000 was also recorded in 2003 in connection with the sale of
the real estate facility previously utilized by the Closed Facilities.
Amounts for 2004 also include $416,000 in lease termination costs.
During 2005, we sold the non-real estate assets of six of the
Closed Facilities, resulting in a gain of approximately $1,143,000.
During 2005, in an eminent domain proceeding, one of our
self-storage facilities located in the Portland, Oregon market was entirely
condemned. We received the condemnation proceeds, totaling $6,590,000, and
recorded a gain of $5,180,000. During 2003, we sold five self-storage
facilities and recorded an aggregate gain on sale of $5,476,000. The
historical operations of these six facilities are reported as discontinued
operations in the table below as the "Sold Self-Storage Facilities."
During 2004, we sold a commercial property to a third party and
recorded a gain on sale of $971,000. The historical operating results of
this facility are reported as discontinued operations in the table below as
the "Sold Commercial Facility."
The following table summarizes the historical operations of the
Closed Facilities, the Sold Self-Storage Facilities, and the Sold
Commercial Facility:
DISCONTINUED OPERATIONS:
- ------------------------
Year Ended December 31,
-------------------------------------
2005 2004 2003
---------- ----------- -----------
(Amounts in thousands)
Rental income:
Closed Facilities............... $ 95 $ 7,488 $ 19,347
Sold Self-Storage Facilities.... 461 654 2,242
Sold Commercial Facility........ - 314 441
---------- ----------- -----------
Total rental income............... 556 8,456 22,030
---------- ----------- -----------
Cost of operations:
Closed Facilities............... (194) (6,733) (15,157)
Sold Self-Storage Facilities.... (220) (241) (800)
Sold Commercial Facility........ - (81) (105)
---------- ----------- -----------
Total cost of operations.......... (414) (7,055) (16,062)
---------- ----------- -----------
Depreciation expense:
Closed Facilities .............. (29) (1,115) (3,335)
Sold Self-Storage Facilities.... (59) (85) (506)
Sold Commercial Facility........ - (82) (99)
---------- ----------- -----------
Total depreciation expense........ (88) (1,282) (3,940)
---------- ----------- -----------
Other:
Asset impairment charges........ - (1,575) (3,229)
Lease termination costs......... - (416) -
Net gain on dispositions........ 6,323 971 5,121
---------- ----------- -----------
Total other ...................... 6,323 (1,020) 1,892
---------- ----------- -----------
Total discontinued operations $ 6,377 $ (901) $ 3,920
========== =========== ===========
F-14
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
4. Real estate facilities
----------------------
Activity in real estate facilities during 2005, 2004 and 2003 is
as follows:
2005 2004 2003
-------------- --------------- ---------------
(Amounts in thousands)
Operating facilities, at cost:
Beginning balance....................................... $ 5,510,750 $ 5,125,498 $ 4,988,526
Property acquisitions................................... 254,549 259,487 -
Disposition of facilities............................... (8,582) (6,785) (31,327)
Completed projects opened for operations................ 86,888 93,017 121,437
Casualty loss (Note 2).................................. (8,953) (2,874) -
Acquisition of minority interest (Note 9)............... 69,942 6,539 16,687
Capital improvements.................................... 25,890 35,868 30,175
-------------- --------------- ---------------
Ending balance.......................................... 5,930,484 5,510,750 5,125,498
-------------- --------------- ---------------
Accumulated depreciation:
Beginning balance....................................... (1,320,200) (1,153,059) (987,546)
Additions during the year............................... (186,048) (169,471) (172,328)
Casualty loss (Note 2).................................. 2,966 1,624 -
Disposition of facilities............................... 3,154 706 6,815
-------------- --------------- ---------------
Ending balance.......................................... (1,500,128) (1,320,200) (1,153,059)
-------------- --------------- ---------------
Construction in process:
Beginning balance...................................... 56,160 81,856 105,323
Current development.................................... 86,248 71,602 102,428
Dispositions............................................ (1,048) (4,281) (4,458)
Completed projects opened for operations............... (86,888) (93,017) (121,437)
-------------- --------------- ---------------
Ending balance......................................... 54,472 56,160 81,856
-------------- --------------- ---------------
Total real estate facilities............................. $ 4,484,828 $ 4,246,710 $ 4,054,295
============== =============== ===============
Operating Facilities
--------------------
In 2005, we acquired from third parties 32 self-storage facilities
(2,390,000 net rentable square feet) at an aggregate cost of $254,549,000
in cash.
During 2005, we opened six newly developed self-storage facilities
(463,000 net rentable square feet), completed 11 projects to convert space
previously used by our containerized storage business into 721,000 net
rentable square feet of self-storage space, and we completed seven
expansion projects to existing self-storage facilities adding 288,000 net
rentable square feet. The total cost of these projects was approximately
$86,888,000.
During 2005, we disposed of various parcels of land for an
aggregate of $8,165,000, recording a gain on sale of approximately
$3,099,000. In addition, we disposed of a facility in connection with an
eminent domain proceeding, for an aggregate of $6,590,000 recording a gain
on sale of $5,180,000, which is included in Discontinued Operations (see
Note 3).
F-15
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
During the year ended December 31, 2004, we opened seven newly
developed self-storage facilities (505,000 net rentable square feet),
completed nine projects to convert space previously used by our
containerized storage business into 604,000 net rentable square feet of
self-storage space, and expanded the square footage of our existing
self-storage facilities (108,000 net rentable square feet) for an aggregate
cost of $91,498,000. In addition, we incurred $1,519,000 in additional
costs with respect to projects completed in 2003.
In 2004 we also acquired interests from third parties in 45
self-storage facilities (3,109,000 net rentable square feet) at an
aggregate cost of $259,487,000, comprised of $139,794,000 cash, $94,693,000
in assumed debt (Note 7), and the issuance of $25 million of our Series Z
Perpetual Preferred Units (Note 9).
During year ended December 31, 2004, we sold one discontinued
commercial facility, four vacant parcels of land and received partial
condemnation proceeds with respect to two existing self-storage facilities.
Total aggregate net proceeds totaled $12,648,000. We recorded a gain from
these transactions of $2,288,000, of which $1,317,000 is recorded to the
line item "Gain on disposition of real estate and real estate investments "
on our consolidated statement of income and $971,000 is recorded in
discontinued operations (Note 3) with respect to the aforementioned
commercial facility.
In addition, in 2004, we recorded a $1,250,000 casualty loss with
respect to real estate assets damaged as a result of hurricanes occurring
in the state of Florida. This casualty loss is comprised of $2,874,000 in
buildings and $1,624,000 in accumulated depreciation and is reflected on
the consolidated statement of income as "Casualty Loss." We expect to
receive no insurance proceeds with respect to this loss.
During 2003, we opened 14 newly developed self-storage facilities
with an aggregate cost of $107,126,000. We also completed expansions to
eight existing self-storage facilities with a total cost of $12,533,000 and
incurred additional costs with respect to facilities opened in prior years
of $1,778,000.
During 2003, we sold five self-storage facilities and an
industrial facility previously used by the containerized storage operations
for aggregate net proceeds of $20,950,000 of cash. An aggregate net gain on
sale of $5,121,000 was recorded for these sales, combined with an
impairment charge in the amount of $750,000 which was recorded when it was
determined that the industrial facility would be sold for less than its
book value. The gain and impairment charge are included in Discontinued
Operations. See Note 3.
In addition, during 2003 we sold excess land and completed the
sale of two additional self-storage facilities for aggregate net proceeds
of $13,082,000, recognizing a net gain on sale of $691,000. The two
self-storage facilities had been operated by the buyer pursuant to a lease
arrangement, with the lease income with respect to these two facilities
included in "Interest and Other Income."
At December 31, 2005, the unaudited adjusted basis of real estate
facilities for federal tax purposes was approximately $3.7 billion
(unaudited).
Construction in process
-----------------------
Construction in process at December 31, 2005 consists primarily of
four self-storage facilities (338,000 net rentable square feet), 51
expansion projects and various remodeling projects to enhance the visual
and structural appeal of existing self-storage facilities (3,020,000 net
rentable square feet) and seven projects to convert space at former
containerized storage facilities into self-storage space (553,000 net
rentable square feet).
5. Investments in real estate entities
-----------------------------------
At December 31, 2005, investments in real estate entities consist
of our ownership interests in eight partnerships, which principally own
self-storage facilities, and our ownership interest in PSB. 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 these entities. The accounting
policies of these entities are similar to ours.
F-16
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Approximately $46 million of our consolidated retained earnings is
represented by undistributed earnings of these Unconsolidated Entities.
During 2005, 2004 and 2003, we recognized earnings from our
investments of $24,883,000, $22,564,000, and $24,966,000, respectively, and
received cash distributions totaling $23,112,000, $20,961,000, and
$17,754,000, respectively. In addition, during 2005, we received a
distribution from affiliated entities of 635,885 shares of our common stock
and 31,909 depositary shares of our Equity Stock, Series A, with an
aggregate book value of $14,520,000.
The following table sets forth our investments in the
Unconsolidated Entities at December 31, 2005 and 2004 and our equity in
earnings of real estate investments for each of the three years ended
December 31, 2005:
Investments in Real Estate Equity in Earnings of Real Estate Entities
Entities at December 31, for the year ended December 31,
------------------------------ ------------------------------------------
2005 2004 2005 2004 2003
------------- ------------ ----------- ----------- -----------
Investment in PSB (a).......... $ 288,694 $ 284,564 $ 18,757 $ 16,895 $ 19,687
Other investments.............. 36,996 53,883 6,118 5,742 5,279
Acquisition Joint Venture...... 2,865 2,857 8 (73) -
------------- ------------ ----------- ----------- -----------
Total...................... $ 328,555 $ 341,304 $ 24,883 $ 22,564 $ 24,966
============= ============ =========== =========== ===========
(a) Included in equity in earnings for is the net impact of PSB's gains on
sale of real estate, impairment charges, and the impact from applying
EITF Topic D-42 aggregating $7,727,000, $4,544,000, and $187,000 in
2005, 2004 and 2003 respectively.
Investment in PS Business Parks, Inc. ("PSB")
---------------------------------------------
On January 2, 1997, we reorganized our commercial property
operations into an entity now known as 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"). The Company, and certain
Consolidated Entities, have a 44% common equity interest in PSB as of
December 31, 2005. This 44% common equity interest is comprised of the
ownership of 5,418,273 shares of PSB 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
December 31, 2005 ($49.20), the shares and units had a market value of
approximately $626,002,000 as compared to a book value of $288,694,000,
which is substantially equivalent to our underlying equity in this entity.
At December 31, 2005, PSB owned and operated approximately 17.6
million net rentable square feet of commercial space. In addition, PSB
manages commercial space owned by the Company and the Consolidated
Entities pursuant to property management agreements.
F-17
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
The following table sets forth selected financial information of
PSB; the amounts represent 100% of PSB's balances and not our pro-rata
share.
2005 2004
---------------- ---------------
(Amount in thousands)
For the year ended December 31,
Total revenue, interest and other income............. $ 225,136 $ 212,032
Depreciation and amortization........................ (76,285) (70,086)
Other expenses and casualty loss..................... (73,053) (70,751)
Minority interest in continuing operations........... (16,227) (24,746)
---------------- ---------------
Income from continuing operations.................. 59,571 46,449
Income from discontinued operations (a).............. 15,723 15,694
---------------- ---------------
Net income......................................... $ 75,294 $ 62,143
================ ================
At December 31,
Total assets (primarily real estate investments)..... $ 1,463,678 $ 1,366,052
Total debt........................................... 25,893 11,367
Other liabilities.................................... 39,126 40,676
Preferred equity and preferred minority interests.... 729,100 638,600
Common equity and common minority interests.......... 669,559 675,409
(a) Included in discontinued operations are net gains on sale of real
estate facilities totaling $18,109,000 and $15,462,000 for the years
ended December 31, 2005 and 2004, respectively, and minority interest
totaling $5,293,000 and $5,259,000 for the years ended December 31,
2005 and 2004 respectively.
Other Investments
-----------------
Other investments consist primarily of an average of approximately
41% common equity ownership in seven limited partnerships that own an
aggregate of 36 self-storage facilities. The book value of these
investments ($36,996,000) is approximately $18,011,000 higher than our
aggregate underlying equity in these entities; the portion allocated to
building is amortized as a reduction to equity in earnings over 25-year
period.
The following table sets forth certain condensed financial
information (representing 100% of these entities' balances and not our
pro-rata share) with respect to these investments:
2005 2004
--------------- ---------------
(Amount in thousands)
For the year ended December 31,
Total revenue........................ $ 29,392 $ 28,376
Cost of operations and other expenses (9,763) (9,870)
Depreciation and amortization........ (2,056) (2,247)
--------------- ---------------
Net income....................... $ 17,573 $ 16,259
=============== ===============
At December 31,
Total assets (primarily storage
facilities)...................... $ 48,287 $ 58,124
Total liabilities.................... 1,982 1,853
Total Partners' equity............... 46,305 56,271
F-18
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Acquisition Joint Venture
-------------------------
As described more fully under "Accounting for Acquisition Joint
Venture" in Note 2, the Acquisition Joint Venture was formed in January
2004 for the purpose of acquiring up to $125 million in existing
self-storage facilities from third parties. In 2004, the Acquisition Joint
Venture acquired two self-storage facilities directly from third parties at
an aggregate cost of $9,086,000, of which our pro rata share was
$2,930,000, and our investment in these two facilities is accounted for
using the equity method of accounting.
The following table sets forth certain condensed financial
information (representing 100% of the Acquisition Joint Venture's balances
and not our pro-rata share) with respect to the two self-storage facilities
acquired by the Acquisition Joint Venture.
2005 2004
--------------- -------------
(Amounts in thousands)
For the year ended December 31,
-------------------------------
Total revenue....................................... $ 1,302 $ 447
Cost of operations and other expenses............... (482) (192)
Depreciation and amortization....................... (270) (97)
--------------- -------------
Net income........................................ $ 550 $ 158
=============== =============
At December 31,
---------------
Total assets (primarily storage facilities)......... $ 8,442 $ 9,168
Total liabilities................................... 62 11
Total Partners' equity.............................. 8,380 9,157
6. Revolving line of credit
------------------------
We have a $200 million revolving line of credit (the "Credit
Agreement") that has a maturity date of April 1, 2007 and bears an annual
interest rate ranging from the London Interbank Offered Rate ("LIBOR") plus
0.45% to LIBOR plus 1.20% depending on our credit ratings (currently LIBOR
plus 0.45%). In addition, we are required to pay a quarterly commitment fee
ranging from 0.15% per annum to 0.30% per annum depending on our credit
ratings (currently the fee is 0.15% per annum). At December 31, 2005 and at
March 15, 2006, we had no outstanding borrowings on our line of credit.
The Credit Agreement includes various covenants, the more
significant of which require us to (i) maintain a balance sheet leverage
ratio of less than 0.55 to 1.00, (ii) maintain certain quarterly interest
and fixed-charge coverage ratios (as defined therein) of not less than 2.25
to 1.0 and 1.5 to 1.0, respectively, and (iii) maintain a minimum total
shareholders' equity (as defined therein). 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
1.5 times our unsecured recourse debt). We were in compliance with all
covenants of the Credit Agreement at December 31, 2005.
At December 31, 2005 and March 15, 2006, we had undrawn standby
letters of credit, which reduces our borrowing capability with respect to
our line of credit by the amount of the letter of credit, totaling
$17,985,000 ($13,935,000 at December 31, 2004). The beneficiaries of these
standby letters of credit were certain insurance companies associated with
our captive insurance and tenant insurance activities.
F-19
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
7. Notes payable
-------------
Notes payable at December 31, 2005 and 2004 consist of the
following:
2005 2004
------------------------- -----------------------
Carrying Carrying
amount Fair value amount Fair value
------------ ------------ ----------- ----------
(Amounts in thousands)
Unsecured senior notes:
7.66% note due January 2007............................. $ 22,400 $ 23,060 $ 33,600 $ 35,355
Mortgage notes payable:
7.134% and 8.75% mortgage notes secured by two real estate
facilities with an aggregate net book value of $10.8
million, principal and interest payable monthly, due at
October 2009 and September 2028..................... 1,484 1,632 1,629 1,782
5.05% mortgage notes (including unamortized note premium of
$1,921,000 and $2,382,000 at December 31, 2005 and 2004,
respectively) secured by 25 real estate facilities with
an aggregate net book value of $95.9 million, principal
and interest due monthly, due at varying dates between
October 2010 and May 2023........................... 38,568 37,511 41,470 41,470
5.25% mortgage notes (including unamortized note premium of
$3,499,000 and $4,064,000 at December 31, 2005 and
2004, respectively) secured by seven real estate
facilities with an aggregate net book value of $90.2
million, principal and interest due monthly, due at
varying dates between June 2011 and July 2013....... 51,498 50,679 52,820 52,820
------------ ------------ ----------- ----------
Total notes payable.............................. $113,950 $112,882 $129,519 $131,427
============ ============ =========== ==========
All of our notes payable are fixed rate. The unsecured senior
notes require semi-annual interest and annual principal payments to be paid
and have various restrictive covenants, all of which have been met at
December 31, 2005.
All of the mortgage notes have prepayment penalties or
restrictions on prepayment that make prepayment of these notes economically
impractical.
We assumed the 5.05% and 5.25% mortgage notes in connection with
property acquisitions in 2004. The stated interest rates on the notes range
from 5.4% to 8.0% with a weighted average of approximately 6.65%. The notes
were recorded at their estimated fair value based upon the estimated market
rate of 5.05% and 5.25%, an aggregate of approximately $94,693,000 as
compared to actual outstanding balances aggregating approximately
$88,247,000. This premium of approximately $6,446,000 over the principal
balance of the notes payable is amortized over the remaining term of the
loans based upon the effective interest method. During the year ended
December 31, 2005, we recorded $6,639,000 in interest expense on our notes
payable, comprised of $7,665,000 in cash less $1,026,000 in amortization of
premium.
F-20
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
At December 31, 2005, approximate principal maturities of notes
payable are as follows:
Unsecured Mortgage
senior notes notes payable Total
--------------- -------------- -----------
(dollar amounts in thousands)
2006......................... $ 11,200 $ 4,544 $ 15,744
2007......................... 11,200 4,789 15,989
2008......................... - 5,041 5,041
2009......................... - 5,237 5,237
2010......................... - 5,276 5,276
Thereafter................... - 66,663 66,663
--------------- -------------- -----------
$ 22,400 $ 91,550 $ 113,950
=============== ============== ===========
Weighted average rate........ 7.7% 5.2% 5.7%
=============== ============== ===========
Interest paid (including interest related to the borrowings under
the Credit Agreement, Debt to Joint Venture Partner described in Note 8,
and interest paid to Mr. Hughes described in Note 9) during 2005, 2004 and
2003 was $11,657,000, $4,377,000, and $7,131,000, respectively. In
addition, in 2005, 2004 and 2003, capitalized interest totaled $2,820,000,
$3,617,000, and $6,010,000, respectively, related to construction of real
estate facilities.
8. Debt to Joint Venture Partner
-----------------------------
As described more fully in Note 2, we accounted for certain
transactions with the Acquisition Joint Venture as financing transactions:
o On December 31, 2004, we sold seven self-storage facilities
that we had acquired in 2004 from third parties to our
Acquisition Joint Venture for $22,993,000, an amount that was
equal to fair value and our cost. Our partner's equity
contribution with respect to these transactions was
$16,095,000.
o On January 14, 2005, we sold an 86.7% interest in three
facilities to the Acquisition Joint Venture for an aggregate
amount of $27,424,000. Our partner's equity contribution with
respect to these facilities was $19,197,000.
Our partner's equity contributions with respect to these
transactions has been classified as debt under the caption "Debt to Joint
Venture Partner." The balances of $35,697,000 and $16,095,000 as of
December 31, 2005 and 2004, each approximates the fair value of our
partners' interest in these facilities as of each respective date.
A total of $2,939,000 was recorded as interest expense on our
consolidated statements of income with respect to our Debt to Joint Venture
Partner during the year ended December 31, 2005, representing our partner's
pro rata share of net earnings with respect to the properties we sold to
the Acquisition Joint Venture (an 8.5% return on their investment); a total
of $2,534,000 was paid to our joint venture partner (an 8.0% return payable
currently in accordance with the partnership agreement) during the year
ended December 31, 2005, with the debt balance increasing $405,000.
We expect that this debt will be repaid during 2008, assuming that
we exercise our option to acquire our partner's interest in the Acquisition
Joint Venture.
F-21
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
9. 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, or in the case of preferred
partnership interests, distributions paid, plus costs associated with the
application of EITF topic D-42 as it relates to the redemption of preferred
units.
Preferred partnership interests:
--------------------------------
At December 31, 2005 and 2004, we had the following series of
preferred partnership units outstanding:
Earliest At December 31, 2005 At December 31, 2004
Redemption Date or Distribution Units Carrying Units Carrying
Series Dates Redeemed Rate Outstanding Amount Outstanding Amount
- ------------------ ------------------- ------------ ------------ ------------ ------------ -----------
(amounts in thousands)
Series NN........ March 17, 2010 6.400% 8,000 $ 200,000 8,000 $ 200,000
Series Z......... October 12, 2009 6.250% 1,000 25,000 1,000 25,000
Series N......... March 17, 2005 9.500% - - 1,600 40,000
Series O ........ March 29, 2005 9.125% - - 1,800 45,000
------------ ------------- ----------- -----------
Total............ 9,000 $ 225,000 12,400 $ 310,000
============ ============= =========== ===========
Subject to certain conditions, the Series NN preferred partnership
units are convertible into shares of our 6.4% Series NN Cumulative
Preferred Stock, and the Series Z preferred partnership units are
convertible into shares of our 6.25% Series Z Cumulative Preferred Stock.
The preferred partnership units are not redeemable during the
first five years, thereafter, at our option, we can call the units for
redemption at the issuance amount plus any unpaid distributions. The Series
NN preferred partnership units are not redeemable by the holder. The
holders of the Series Z preferred partnership units have a one-time option,
exercisable five years from issuance, to require us to redeem their units
for $25.0 million in cash plus any unpaid distributions.
For each of the years ended December 31, 2005, 2004, and 2003, the
holders of the preferred partnership units were paid in aggregate
approximately $16,147,000, $22,423,000, and $26,906,000, respectively, in
distributions (excluding the special distribution paid on March 22, 2004,
described below), and received an equivalent allocation of minority
interest in earnings.
On March 17, 2005, we redeemed all the outstanding Series N
preferred partnership units ($40,000,000) and on March 29, 2005, we
redeemed all the outstanding Series O preferred partnership units
($45,000,000), at their carrying amount plus accrued distributions. The
redemption of these preferred partnership units resulted in an increase in
income allocated to minority interests and a reduction to the Company's net
income during the year ended December 31, 2005 of $874,000 as a result of
the application of EITF Topic D-42 which allocates the excess of the stated
amount of the preferred partnership units over their carrying amount to the
holders of the redeemed securities.
During October 2004, in connection with property acquisitions, one
of our consolidated operating partnerships issued $25.0 million of 6.250%
Series Z preferred partnership units.
F-22
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
On March 22, 2004, certain investors who held $200 million of our
Series N preferred partnership units agreed, in exchange for a special
distribution of $8,000,000, to exchange all their Series N preferred
partnership units for $200 million of our Series NN preferred partnership
units. The investors also received a distribution for dividends that
accrued from January 1, 2004 through the effective date of the exchange.
During the year ended December 31, 2004, income allocated to minority
interests was increased by $10,063,000 from (i) the special distribution to
the holders of the preferred units ($8,000,000) and (ii) the application of
EITF Topic D-42 ($2,063,000).
Other partnership interests
Minority interest at December 31, 2005 and 2004, and minority
interest in income for the three years ended December 31, 2005 with respect
to the other partnership interests are comprised of the following:
Minority interest at Minority interest in income for the year ended
----------------------------- ----------------------------------------------
December 31, December 31, December 31, December 31, December 31,
Description of Minority Interest 2005 2004 2005 2004 2003
- --------------------------------- ------------ ------------ -------------- -------------- -------------
(Amounts in thousands)
Consolidated Development Joint
Venture........................ $ - $ 64,297 $ 4,229 $ 5,652 $ 4,211
Convertible Partnership Units... 6,177 6,160 469 328 305
Other Consolidated Partnerships.. 22,793 48,446 10,932 11,447 2,281
------------ ------------ -------------- -------------- -------------
Total other partnership interests $ 28,970 $ 118,903 $ 15,630 $ 17,427 $ 6,797
============ ============ ============== ============== =============
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, referred to as "PSAC") whose partners
included a third party institutional investor and B. Wayne Hughes ("Mr.
Hughes"), the Chairman of the Board of the Company, to develop
approximately $100 million of self-storage facilities and to purchase $100
million of the our Equity Stock, Series AAA (see Note 10). We owned a
controlling interest in the Consolidated Development Joint Venture and
included the accounts of this partnership in our consolidated financial
statements since its inception. PSAC's interest in the Consolidated
Development Joint Venture was accounted for as minority interest, as
denoted in the above table.
On August 5, 2005, we acquired the institutional investor's
interest in PSAC for approximately $41,420,000 in cash. This acquisition
gave us a controlling position in PSAC and the right to acquire the
remaining interest in PSAC, held by Mr. Hughes, for a stipulated amount on
November 17, 2005. We immediately notified Mr. Hughes of our intent to
acquire his interest on November 17, 2005.
On August 5, 2005, we commenced consolidating the accounts of
PSAC. The total acquisition cost of the transaction was $105,933,000,
comprised of the $41,420,000 in cash paid to the institutional investor and
$64,513,000 in debt due to Mr. Hughes. Mr. Hughes' interest in PSAC was
accounted for as debt due to the exercise of our right to acquire his
interest. The total acquisition cost eliminated the book value of minority
interest on the date of acquisition ($62,013,000) with the remainder
allocated to real estate ($43,920,000).
The preferred return that Mr. Hughes accrued from August 5, 2005
through November 17, 2005 amounting to $1,458,000 is reflected on our
F-23
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
consolidated statements of income as interest expense. On November 17, 2005
we acquired Mr. Hughes' interest for an aggregate of $64,513,000 in cash,
plus accrued and unpaid interest, extinguishing the debt.
Minority interest at December 31, 2004 primarily represented the
total contributions received from PSAC combined with the accumulated net
income allocated to PSAC, net of cumulative distributions.
Convertible Partnership Units
-----------------------------
As of December 31, 2005 and 2004, one of our Consolidated Entities
had approximately 237,934 convertible partnership units ("Convertible
Units") outstanding, representing a limited partnership interest in the
partnership. The Convertible Units are convertible on a one-for-one basis
(subject to certain limitations) into common stock of the Company at the
option of the unitholder. Minority interest in income with respect to
Convertible Units reflects the Convertible Units' share of the net income
of the Company, with net income allocated to minority interests with
respect to weighted average outstanding Convertible Units on a per unit
basis equal to diluted earnings per common share. During the years ended
December 31, 2005, 2004, and 2003, no Convertible Units were converted.
Other Consolidated Partnerships
-------------------------------
The partnership agreements of the Other Consolidated Partnerships
included in the table above have termination dates that cannot be
unilaterally extended by the Company and, upon termination of each
partnership, the net assets of these entities would be liquidated and paid
to the minority interests and the Company based upon their relative
ownership interests.
At December 31, 2005, the Other Consolidated Partnerships reflect
common equity interests that we do not own in 22 entities owning an
aggregate of 73 self-storage facilities (24 entities owning an aggregate of
123 self-storage facilities at December 31, 2004).
In 2005, we acquired the remaining interests we did not own in the
Consolidated Entities for an aggregate of $51,395,000 in cash. The
acquisition resulted in a reduction of minority interest of $25,373,000
with the excess of cost over underlying book value ($26,022,000) allocated
to real estate.
On June 30, 2004, we acquired the remaining interest we did not
own in one of the Consolidated Entities, for an aggregate of $24,851,000 in
cash. This acquisition had the effect of reducing minority interest by
$18,312,000, with the excess of cost over underlying book value
($6,539,000) allocated to real estate.
During 2003, we acquired through a merger all of the remaining
limited partnership interest not currently owned by the Company in PS
Partners IV, Ltd., a partnership that is consolidated with the Company. The
acquisition cost was approximately $23,377,000, consisting of the issuance
of 426,859 shares of our common stock ($13,510,000) valued at the closing
trading price of the shares at the date of the acquisition, and cash of
approximately $9,867,000; this acquisition had the effect of reducing
minority interest by $6,690,000, with the excess of cost over underlying
book value ($16,687,000) allocated to real estate.
Impact of SFAS No. 150
----------------------
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150 - "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" ("SFAS No. 150"). This
statement prescribes reporting standards for financial instruments that
have characteristics of both liabilities and equity. This standard
F-24
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
generally indicates that certain financial instruments that give the issuer
a choice of setting an obligation with a variable number of securities or
settling an obligation with a transfer of assets, any mandatorily
redeemable security, and certain put options and forward purchase
contracts, should be classified as a liability on the balance sheet. With
the exception of minority interests, described below, we implemented SFAS
No. 150 on July 1, 2003, and the adoption had no impact on our financial
statements.
The provisions of SFAS No. 150 indicate that the minority interest
in the Other Consolidated Partnerships would have to be treated as a
liability, because these partnerships have termination dates that cannot be
unilaterally extended by us and, upon termination, the net assets of these
entities would be liquidated and paid to the minority interest and us based
upon relative ownership interests. However, on October 29, 2003, the FASB
decided to defer indefinitely a portion of the implementation of SFAS No.
150, which thereby deferred our requirement to recognize these minority
interest liabilities. If these partnerships were liquidated at December 31,
2005, we estimate that the minority interests would receive a total of
approximately $162 million as their share of the liquidation proceeds.
F-25
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
10. Shareholders' equity
--------------------
Cumulative Preferred Stock
--------------------------
At December 31, 2005 and December 31, 2004, we had the following
series of Cumulative Preferred Stock outstanding: At December 31, 2005 At
December 31, 2004
Earliest
Redemption Dividend Shares Carrying Shares Carrying
Series Date (a) Rate Outstanding Amount Outstanding Amount
- --------------------- ------------- ----------- --------------- -------------- ------------- ------------
(Dollar amount in thousands)
Series F (b) 5/2/05 9.750% - $ - 2,300,000 $ 57,500
Series Q (b) 1/19/06 8.600% - - 6,900 172,500
Series R 9/28/06 8.000% 20,400 510,000 20,400 510,000
Series S 10/31/06 7.875% 5,750 143,750 5,750 143,750
Series T 1/18/07 7.625% 6,086 152,150 6,086 152,150
Series U 2/19/07 7.625% 6,000 150,000 6,000 150,000
Series V 9/30/07 7.500% 6,900 172,500 6,900 172,500
Series W 10/6/08 6.500% 5,300 132,500 5,300 132,500
Series X 11/13/08 6.450% 4,800 120,000 4,800 120,000
Series Y 1/2/09 6.850% 1,600,000 40,000 1,600,000 40,000
Series Z 3/5/09 6.250% 4,500 112,500 4,500 112,500
Series A 3/31/09 6.125% 4,600 115,000 4,600 115,000
Series B 6/30/09 7.125% 4,350 108,750 4,350 108,750
Series C 9/13/09 6.600% 4,600 115,000 4,600 115,000
Series D 2/28/10 6.180% 5,400 135,000 - -
Series E 4/27/10 6.750% 5,650 141,250 - -
Series F 8/23/10 6.450% 10,000 250,000 - -
Series G 12/12/10 7.000% 4,000 100,000 - -
--------------- -------------- ------------- ------------
Total Cumulative Preferred Stock 1,698,336 $ 2,498,400 3,980,186 $ 2,102,150
=============== ============== ============= ============
(a) Except under certain conditions relating to the Company's qualification as
a REIT, the Cumulative Preferred Stock are not redeemable prior to the
dates indicated. On or after the dates indicated, each series of Cumulative
Preferred Stock will be redeemable, at our option, in whole or in part, at
$25.00 per depositary share (or per share in the case of the Series Y),
plus accrued and unpaid dividends.
(b) Series F and Series Q were redeemed on the date indicated. The Series Q
Cumulative Preferred Stock was called for redemption on November 30, 2005
and was redeemed on January 19, 2006 along with the unpaid distributions
from January 1, 2006 through the redemption date. Accordingly, the
redemption value of $172,500,000 was classified as a liability at December
31, 2005.
During 2005, we issued four series of Cumulative Preferred Stock:
Series D - issued February 28, 2005, net proceeds totaling $130,548,000,
Series E - issued April 27, 2005, net proceeds totaling $136,601,000,
Series F - issued August 23, 2005, net proceeds totaling $242,550,000 and
Series G - issued December 12, 2005, aggregate net proceeds totaling
$96,886,000.
During 2005, we redeemed our Series F (including redemption
expenses) of $57,517,000, plus accrued dividends. In November 2005, we
called for redemption our Series Q Cumulative Preferred Stock, at par. The
total cost of redemption of the Series Q Cumulative Preferred Stock was
approximately $172,517,000, plus accrued dividends, on the redemption date,
January 19, 2006. Accordingly, the redemption value of $172,500,000 Series
Q Cumulative Preferred Stock was classified as a liability at December 31,
2005.
F-26
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
During 2004, we issued five series of Cumulative Preferred Stock:
Series Y - issued January 2, 2004, net proceeds $40,000,000, Series Z -
issued March 5, 2004, net proceeds $108,756,000, Series A - issued March
31, 2004, net proceeds $111,177,000, Series B - issued June 30, 2004, net
proceeds $105,124,000, Series C - issued September 13, 2004, net proceeds
$111,177,000.
During 2004, we redeemed our Series K (which was called for
redemption in December 2003), Series L, Series M, and Series D Cumulative
Preferred Stocks (including redemption expenses) of $115,021,000,
$56,270,000, and $30,020,000, respectively, plus accrued dividends. In
December 2004, we called for redemption our Series E Cumulative Preferred
Stock. Accordingly, the redemption value of $54,875,000 for the Series E
Cumulative Preferred Stock was classified as a liability at December 31,
2004. The total cost of redemption of the Series E was approximately
$54,895,000, plus accrued dividends, on the redemption date, January 31,
2005.
During 2003, we issued our Series W and Series X Cumulative
Preferred Stock: Series W - issued on October 6, 2003, net proceeds of
$128,126,000 and Series X - issued November 13, 2003, net proceeds of
$116,020,000.
During 2003, we redeemed our Series B and Series C Cumulative
Preferred Stock, at par, at a total cost of $57,517,000 and $30,018,000
(including related redemption expenses), respectively. In December 2003, we
called for redemption our Series K Cumulative Preferred Stock. Accordingly,
the $115,000,000 Series K Cumulative Preferred Stock was classified as a
liability at December 31, 2003. The total cost of redemption of the Series
K was approximately $115,000,000, plus accrued dividends, on the redemption
date, January 20, 2004.
The holders of our Cumulative Preferred Stock have general
preference rights with respect to liquidation and quarterly distributions
and, except under certain conditions and as noted below, 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 December 31, 2005,
there were no dividends in arrears and the Debt Ratio was 4.5%.
Upon issuance of our Cumulative Preferred Stock, we classify the
liquidation value as preferred stock, with any issuance costs recorded as a
reduction in Paid-in capital.
Common Stock
------------
During 2005, 2004 and 2003, activity with respect to our Common
Stock was as follows:
2005 2004 2003
----------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ------------ ------------ ----------- ------------
(Dollar amount in thousands)
Employee Stock based
compensation................... 282,998 $ 7,511 1,985,416 $ 49,929 2,743,420 $ 68,088
Acquisition of minority interests - - - - 426,859 13,510
Conversion of Class B Common Stock
- - - - 7,000,000 700
Shares received as a distribution
From unconsolidated entities. (635,885) (14,520) - - - -
Repurchases of common stock...... (84,000) (4,990) (445,700) (20,295) (175,000) (6,001)
----------- ----------- ------------ ------------ ----------- ------------
(436,887) $ (11,999) 1,539,716 $ 29,634 9,995,279 $ 76,297
=========== =========== ============ ============ =========== ============
F-27
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
During 2005, we received a distribution of 503,110 shares, and one
of the Consolidated Entities received 132,775 shares, of our Common Stock
previously held by Unconsolidated Entities. The 503,110 shares that we
received were retired.
At December 31, 2005, certain entities we consolidate owned
1,146,207 shares of our Common Stock. These shares continue to be legally
issued and outstanding. In the consolidation process, these shares and the
related balance sheet amounts have been eliminated. In addition, these
shares are not included in the computation of weighted average shares
outstanding.
The following chart reconciles our legally issued and outstanding
shares of Common Stock and the reported outstanding shares of Common Stock
at December 31, 2005 and December 31, 2004:
At December 31, At December 31,
Reconciliation of Common Shares Outstanding 2005 2004
- ---------------------------------------------- --------------- ---------------
Legally issued and outstanding shares....... 129,235,770 129,455,882
Less - Shares owned by entities we consolidate
that are eliminated in consolidation.... (1,146,207) (929,432)
--------------- ---------------
Reported issued and outstanding shares...... 128,089,563 128,526,450
=============== ===============
As previously reported, the Board of Directors authorized the
repurchase from time to time of up to 10,000,000 shares of our Common Stock
on the open market or in privately negotiated transactions. During 2000,
the Board of Directors increased the authorized number of shares that we
could repurchase to 15,000,000. During 2001, the Board of Directors
increased the authorized number of shares that we could repurchase to
25,000,000. Cumulatively through December 31, 2005, we repurchased a total
of 22,201,720 shares of Common Stock at an aggregate cost of approximately
$567,148,000.
At December 31, 2005 and 2004, we had 5,276,412 and 5,548,277
shares of Common Stock reserved in connection with our stock option plans,
respectively, (see Note 12) and 237,934 shares reserved for the conversion
of Convertible Partnership Units.
Class B Common Stock
--------------------
The 7,000,000 shares of Class B Common Stock were converted into
7,000,000 shares of Common Stock on January 1, 2003.
Equity Stock
The Company is authorized to issue up to 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 December 31, 2005, we had 8,744,193 depositary shares
outstanding (8,776,102 at December 31, 2004), each representing 1/1,000 of
a share of Equity Stock, Series A ("Equity Stock A"). We received 31,909
depositary shares from a distribution from affiliated entities at March 31,
2005 (see Note 5). We have not issued any shares of our Equity Stock,
Series A since May 2001. The issuance amounts were recorded as part of
Paid-in capital on the consolidated balance sheet.
F-28
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
The Equity Stock, Series A ranks on parity with our common stock
and junior to the Cumulative 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: a) five times the per share dividend on the common stock or b)
$2.45 per annum. 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, each depositary share
will be convertible into 0.956 shares of our common stock. The depositary
shares are otherwise not convertible into common stock. Holders of
depositary shares vote 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. We have no obligation to pay
distributions if no distributions are paid to common shareholders.
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 the Consolidated
Development Joint Venture. On November 17, 2005, upon the acquisition of
Mr. Hughes' interest in PSAC (Note 9), we owned 100% of the partnership
interest in the Consolidated Development Joint Venture. For all periods
presented, the Equity Stock, Series AAA and related dividends were
eliminated in consolidation.
Dividends
---------
The unaudited characterization of dividends for Federal income tax
purposes is made based upon earnings and profits of the Company, as defined
by the Internal Revenue Code. For the tax year ended December 31, 2005,
distributions for the common stock, Equity Stock, Series A, and all the
various series of preferred stocks were classified as follows:
2005 (unaudited)
--------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---------------- ---------------- -------------- --------------
Ordinary Income 98.5488% 99.3947% 99.9589% 100.0000%
Long-Term Capital Gain 1.4512% 0.6053% 0.0411% 0.0000%
---------------- ---------------- -------------- --------------
Total 100% 100.00% 100.00% 100.00%
================ ================ ============== ==============
A percentage of the long-term capital gain is unrecaptured section
1250 gain for each quarter of 2005 as follows (unaudited):
2005 Percentage of Total Long-Term Capital Gain Distribution
----------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------------- ---------------- ----------------- -----------------
Unrecaptured Section 1250 Gain 7.3110% 0.0000% 8.0542% 0.0000%
================= ================ ================= =================
For corporate shareholders a portion of the total long-term
capital gain is required to be recaptured as ordinary income. For each
quarter of 2005 the percentages are as follows (unaudited):
2005 Percentage of Total Long-Term Capital Gain Distribution
----------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------------- ---------------- ----------------- -----------------
IRC ss.291 Recapture 1.4621% 0.0000% 1.6121% 0.0000%
================= ================ ================= =================
F-29
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
The following table summarizes dividends for the years ended
December 31, 2005, 2003 and 2002:
2005 2004 2003
---------------------- --------------------- ----------------------
Per share Total Per share Total Per share Total
----------- ---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
Cumulative Preferred Stock
Series B $ - $ - $ - $ - $0.575 $ 1,322
Series C - - - - $0.844 1,013
Series D - - $1.776 2,131 $2.375 2,850
Series E $0.208 457 $2.500 5,488 $2.500 5,488
Series F $0.819 1,884 $2.437 5,606 $2.437 5,606
Series K - - $0.109 501 $2.063 9,488
Series L - - $0.395 1,818 $2.063 9,488
Series M - - $1.373 3,089 $2.188 4,922
Series Q $2.150 14,835 $2.150 14,835 $2.150 14,835
Series R $2.000 40,800 $2.000 40,800 $2.000 40,800
Series S $1.969 11,320 $1.969 11,320 $1.969 11,320
Series T $1.906 11,601 $1.906 11,601 $1.906 11,601
Series U $1.906 11,438 $1.906 11,438 $1.906 11,438
Series V $1.875 12,938 $1.875 12,938 $1.875 12,938
Series W $1.625 8,612 $1.625 8,612 $0.388 2,057
Series X $1.613 7,740 $1.613 7,740 $0.215 1,030
Series Y $1.713 2,740 $1.708 2,732 - -
Series Z $1.563 7,031 $1.289 5,801 - -
Series A $1.531 7,044 $1.153 5,302 - -
Series B $1.781 7,748 $0.896 3,896 - -
Series C $1.650 7,590 $0.495 2,277 - -
Series D $1.292 6,976 - - - -
Series E $1.144 6,463 - - - -
Series F $0.543 5,430 - - - -
Series G $0.093 370 - - - -
---------- ----------- ----------
173,017 157,925 146,196
Common Equivalent Stock
Common Stock $1.900 244,200 $1.800 230,834 $1.800 225,864
Equity Stock, Series A $2.450 21,443 $2.450 21,501 $2.450 21,501
---------- ----------- ----------
Total Distributions $438,660 $410,260 $393,561
========== =========== ==========
11. Related party transactions
--------------------------
Relationships and transactions with the Hughes Family
-----------------------------------------------------
Mr. Hughes and his family (the "Hughes Family") have ownership
interests in, and operate approximately 44 self-storage facilities in
Canada under the name "Public Storage" ("PS Canada") pursuant to a license
agreement with the Company. We currently do not own any interests in these
facilities nor do we own any facilities in Canada. The Hughes Family owns
approximately 36% of our Common Stock outstanding at December 31, 2005. We
have a right of first refusal to acquire the stock or assets of the
corporation that manages the 44 self-storage facilities in Canada, if the
Hughes Family or the corporation agrees to sell them. However, we have no
interest in the operations of this corporation, we have no right to acquire
this stock or assets unless the Hughes Family decides to sell, the right of
first refusal does not apply to the self-storage facilities, and we receive
no benefit from the profits and increases in value of the Canadian
self-storage facilities.
F-30
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Prior to December 31, 2003, our personnel were engaged in the
supervision and the operation of these Canadian self-storage facilities and
provided certain administrative services for the Canadian owners, and
certain other services, primarily tax services, with respect to certain
other Hughes Family interests. The Hughes Family and the Canadian owners
reimbursed us at cost for these services (U.S. $542,499 and $638,000 in
respect of the Canadian operations for 2003 and 2002, respectively, and
U.S. $151,063 and $167,930 for other services during 2003 and 2002,
respectively). There have been conflicts of interest in allocating the time
of our personnel between our properties, the Canadian properties, and
certain other Hughes Family interests. The sharing of personnel and systems
with the Canadian entities was substantially discontinued by December 31,
2003. In October 2005, the Company's Board of Directors (with Mr. Hughes
and B. Wayne Hughes Jr. abstaining) approved the reimbursement of CAD
$653,424 (plus CAD $52,274 in interest accrued at 4%) representing the
amount previously charged to the Canadian entities for system development
costs that PSI no longer permits them to use. These amounts were reimbursed
to PS Canada in November 2005.
Through PSIC and PSCI-H, we continue to reinsure risks relating to
loss of goods stored by tenants in the self-storage facilities in Canada.
We acquired the tenant insurance business on December 31, 2001 through its
acquisition of PSIC. During 2005, 2004, and 2003, respectively, we received
$1,052,000, $1,069,000, and $1,017,000, respectively, in reinsurance
premiums attributable to the Canadian Facilities. Since our right to
provide tenant reinsurance to the Canadian Facilities may be qualified,
there is no assurance that these premiums will continue.
In November 1999, we formed the Consolidated Development Joint
Venture with a joint venture partner whose partners include an
institutional investor and Mr. Hughes. On August 5, 2005, we acquired the
institutional investor's interest in PSAC for approximately $41,420,000 in
cash. This acquisition gave us a controlling position in PSAC and the right
to acquire the remaining interest in PSAC, held by Mr. Hughes, for a
stipulated amount of $64,513,000 plus accrued preferred return on November
17, 2005. This transaction is discussed more fully in Note 9.
The Company and Mr. Hughes are co-general partners in certain of
the Consolidated Entities and the Unconsolidated Entities. Mr. Hughes and
his family also own limited partnership interests in certain of these
partnerships. The Company and Mr. Hughes and his family receive
distributions from these partnerships in accordance with the terms of the
partnership agreements.
Other Related Party Transactions
--------------------------------
Ronald L. Havner, Jr. is our vice-chairman and chief executive
officer, and he is chairman of the board of PSB. Until August 2003, Mr.
Havner was also the Chief Executive Officer of PSB. For 2003 and 2004
services, Mr. Havner was compensated by PSB, as well as by the Company.
Dann V. Angeloff, a director of the Company, is the general
partner of a limited partnership formed in June of 1973 that owns a
self-storage facility that is managed by us. We recorded management fees
with respect to this facility amounting to $45,000, $41,000 and $41,000 for
the years ended December 31, 2005, 2004 and 2003, respectively.
In December 2003, we loaned $100,000,000 to PSB. This loan bore
interest at the rate of 1.45% per year and was fully repaid on March 8,
2004.
F-31
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
PSB manages certain of the commercial facilities that we own
pursuant to management agreements for a management fee equal to 5% of
revenues. We paid a total of $579,000, $562,000, and $581,000,
respectively, in 2005, 2004 and 2003 in management fees with respect to
PSB's property management services.
We manage the Company's wholly-owned self-storage facilities as
well as the facilities owned by the Unconsolidated Entities and the
Consolidated Entities on a joint basis, in order to take advantage of scale
and other efficiencies. As a result, significant components of self-storage
operating costs, such as payroll costs, advertising and promotion, data
processing, and insurance expenses are shared and allocated among the
various entities using methodologies meant to fairly allocate such costs
based upon the related activities. The total of such expenses which were
included in the operations of the Unconsolidated Entities were
approximately $4.3 million, $4.5 million, and $4.1 million for the years
ended December 31, 2005, 2004, and 2003, respectively.
Pursuant to a cost-sharing and administrative services agreement,
PSB reimburses us for certain administrative services. PSB's share of these
costs totaled approximately $340,000 for each of the three years ended
December 31, 2005, 2004 and 2003, respectively.
Stor-RE and third party insurance carriers have provided PS
Canada, the Company, PSB, and other affiliates of the Company with
liability and casualty insurance coverage until March 31, 2004. PS Canada
has a 2.2% interest, and PSB has a 4.0% interest, in Stor-RE. PS Canada and
PSB obtained their own liability and casualty insurance covering
occurrences after April 1, 2004. For occurrences before April 1, 2004,
STOR-Re continues to provide liability and casualty insurance coverage
consistent with the relevant agreements.
12. Stock-based Compensation
------------------------
On December 31, 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment." We will adopt the provisions of this statement
effective January 1, 2006 utilizing the modified prospective method of
adoption. Because we already comply with the provisions of this statement,
the adoption will have no effect on our net income, income from continuing
operations, basic or diluted earnings per share, cash flow from operations,
our cash flow from financing activities, or our disclosure.
Description of Stock-Based Incentive Plan
-----------------------------------------
We have a 1990 Stock Option Plan (the "1990 Plan") which provides
for the grant of non-qualified stock options. We have a 1994 Stock Option
Plan (the "1994 Plan"), a 1996 Stock Option and Incentive Plan (the "1996
Plan"), a 2000 Non-Executive/Non-Director Stock Option and Incentive Plan
(the "2000 Plan"), a 2001 Non-Executive/Non Director Stock Option and
Incentive Plan (the "2001 non-executive Plan") and a 2001 Stock Option and
Incentive Plan (the "2001 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, the 2000 Plan, the 2001 Non-Executive Plan, and the
2001 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 PSI Plans vest over a three-year
period from the date of grant at the rate of one-third per year (options
granted after December 31, 2002 vest generally over a five-year period at
the rate of one-fifth 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, the 2000 Plan, the 2001 non-executive Plan and the 2001 Plan
also provide for the grant of restricted stock (see below) to officers, key
employees and service providers on terms determined by an authorized
committee of the Board of Directors. A total of approximately 3,012,671 and
3,338,986 securities were available for grant at December 31, 2005 and
2004, respectively.
Stock Options
-------------
Information with respect to stock options during 2005, 2004 and
2003 is as follows:
F-32
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
2005 2004 2003
--------------------------- ------------------------ --------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Price per of Price per of Price per
Options Share Options Share Options Share
----------- ---------- ----------- ---------- ----------- -----------
Options outstanding January 1 1,441,901 $35.07 3,088,618 $27.14 5,939,224 $25.79
Granted 288,000 62.56 353,500 51.46 272,500 34.50
Exercised (a) (249,520) 30.10 (1,957,907) 25.51 (2,743,420) 24.85
Cancelled (57,235) 36.84 (42,310) 32.75 (379,686) 28.33
----------- ---------- ----------- ---------- ----------- -----------
Options outstanding December 31 (b) (c) 1,423,146 $41.46 1,441,901 $35.08 3,088,618 $27.14
=========== ========== =========== ========== =========== ===========
Price range of options outstanding at
December 31: $18.00 to $69.87 $14.88 to $39.23 $14.88 to $37.40
Options exercisable at December 31 (d): 780,350 $31.38 651,013 $27.13 2,305,868 $25.24
=========== ========== =========== ========== =========== ===========
(a) The aggregate intrinsic value of shares exercised during each year,
representing the differential between the market price and the exercise
price on the respective dates of exercise, amounted to approximately
$7,508,000, $45,673,000, and $36,839,000 for the years ended December 31,
2005, 2004, and 2003, respectively.
(b) The options outstanding at December 31, 2005, have remaining average
contractual lives of 7.2 years, and an aggregate intrinsic value, based
upon the December 31, 2005 closing price of our common stock, of
approximately $37,372,000.
(c) Approximately 372,570, 472,788, and 2,159,544 options have exercise prices
less than $30 at December 31, 2005, 2004, and 2003, respectively.
Approximately 624,000 and 336,000 options have exercise prices greater than
$45 at December 31, 2005 and 2004, respectively (none at December 31,
2003).
(d) The aggregate intrinsic value of exercisable options at December 31, 2005,
based upon the closing price of our common stock at December 31, 2005,
amounted to approximately $28,358,000. Options exercisable at December 31,
2005 have a weighted average remaining contractual life of approximately
5.9 years.
We recognize compensation expense for stock option awards based
upon their fair value on the date of grant amortized over the applicable
vesting period (the "Fair Value Method"), with respect to stock options
granted after January 1, 2002. The fair value of the stock options is
determined utilizing the Black-Scholes option pricing model. The
Black-Scholes option pricing model utilizes several assumptions, including
the estimated life of the stock options, the average risk-free rate, the
expected dividend yield, and expected volatility. We establish these
assumptions based generally upon historical trends.
We do not recognize compensation expense for stock option awards
prior to January 1, 2002, instead, we disclose the amount of stock option
expense that would have been recognized in each year with respect to these
options had we utilized the Fair Value Method with respect to these awards,
in the table below. Because stock-based awards had a vesting period of
three years, our accounting method with respect to these pre-2002 awards
has no effect after December 31, 2004.
Outstanding stock options are included on a one-for-one basis in
our diluted weighted average shares, less a reduction for the treasury
stock method applied to a) the average cumulative measured but unrecognized
compensation expense during the period and b) the strike price proceeds
expected from the employee upon exercise.
F-33
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
The following table sets forth financial disclosures with respect to the
accounting for stock options:
For the years ended December 31,
------------------------------------------
Selected information with respect to employee stock options: 2005 2004 2003
----------- ---------- ----------
(dollar amounts in thousands,
except per-share amounts)
Average estimated value per option granted, utilizing the
Black-Scholes method.............................................. $6.77 $4.40 $1.95
Assumptions used in valuing options with the Black-Scholes method:
Expected life of options in years (a)......................... 5 5 5
Risk-free interest rate....................................... 4.0% 3.5% 3.0%
Expected volatility (b)....................................... 0.234 0.210 0.180
Expected dividend yield....................................... 7.0% 7.0% 7.0%
Net income information with respect to each year:
Net income, as reported........................................... $456,393 $366,213 $336,653
Add back: stock-based employee compensation expense included in net
income (c)..................................................... 1,010 709 530
Less: stock-based employee compensation cost that would have been
included if the fair value method were applied for all awards.. (1,010) (874) (3,311)
----------- ---------- ----------
Net income, assuming consistent application of the fair value method $456,393 $366,048 $333,872
========== ========== ==========
Earnings per share, as reported:
Basic ......................................................... $1.98 $1.39 $1.29
Diluted........................................................ $1.97 $1.38 $1.28
Earnings per share, assuming consistent application of the fair value
method
Basic ......................................................... $1.98 $1.39 $1.27
Diluted........................................................ $1.97 $1.38 $1.26
(a) Expected life is based upon our expectations of stock option recipients'
expected exercise and termination patterns.
(b) Expected volatility is based upon the level of volatility historically
experienced.
(c) At December 31, 2005, the total compensation cost related to nonvested
stock option awards amounts to approximately $2,604,000, which will be
recognized over the remaining vesting period.
Restricted Stock Units
----------------------
Outstanding restricted stock units vest over a five-year period
from the date of grant at the rate of one-fifth per year. The employee
receives additional compensation equal to the per-share dividends received
by common shareholders with respect to restricted stock units outstanding.
Such compensation is accounted for as dividends paid. Any dividends paid on
units which are subsequently forfeited are expensed. Upon vesting, the
employee receives common shares equal to the number of vested restricted
stock units in exchange for the units. The total value of each restricted
stock unit grant, based upon the market price of our common stock at the
date of grant, is amortized over the vesting period as compensation
expense. The related employer portion of payroll taxes is expensed as
incurred. Outstanding restricted stock units are included on a one-for-one
basis in our diluted weighted average shares, less a reduction for the
treasury stock method applied to the average cumulative measured but
unrecognized compensation expense during the period. For purposes of the
disclosures that follow, "fair value" on any particular date reflects the
closing market price of our common stock on that date.
F-34
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
During the year ended December 31, 2005, 169,750 restricted stock
units were granted with an aggregate fair value on the date of grant of
approximately $9,633,000, 74,200 restricted stock units were forfeited
(aggregate grant-date fair value of $3,388,000), and 47,760 restricted
stock units vested (aggregate grant-date fair value of $2,053,000) with an
aggregate fair value on the date of vesting of $3,156,000. This vesting
resulted in the issuance of 33,478 shares of common stock. In addition,
cash compensation was paid to employees in lieu of 14,282 shares of common
stock based upon the market value of the stock at the date of vesting, and
used to settle the employees' tax liability generated by the vesting.
During the year ended December 31, 2004, 94,500 restricted stock
units were granted with an aggregate fair value on the date of grant of
$4,649,000, 48,650 restricted stock units were forfeited, and 42,810
restricted stock units vested with an aggregate fair value on the date of
vesting of approximately $2,419,000. This vesting resulted in the issuance
of 27,509 shares of common stock. In addition, cash compensation was paid
to employees in lieu of 15,301 shares of common stock based upon the market
value of the stock at the date of vesting, and used to settle the
employees' tax liability generated by the vesting. During the year ended
December 31, 2003, we granted 249,000 restricted stock units to employees
of the Company with an aggregate fair value on the date of grant of
approximately $10,180,000.
At December 31, 2005, approximately 299,830 restricted stock units
were outstanding (252,040 and 249,000 at December 31, 2004 and 2003,
respectively) with an aggregate fair value at December 31, 2005, based upon
the closing price of our common stock, of approximately $20,304,000. The
aggregate grant-date fair value of the 299,830 restricted stock units
outstanding at December 31, 2005 was approximately $14,922,000 ($10,895,000
for the 252,040 restricted stock units at December 31, 2004), which will be
recognized over the remaining vesting period of approximately 3.5 years. A
total of $3,748,000, $2,254,000, and $970,000 in restricted stock expense
was recorded for the years ended December 31, 2005, 2004 and 2003,
respectively, which includes amortization of the fair value of the grant
reflected as an increase to paid-in capital, as well as payroll taxes we
incurred upon each respective vesting.
Outstanding restricted stock units are included on a one-for-one
basis in our diluted weighted average shares, less a reduction for the
treasury stock method applied to the average cumulative measured but
unrecognized compensation expense during the period.
13. Disclosures Regarding Segment Reporting
---------------------------------------
Description of Each Reportable Segment
--------------------------------------
Our reportable segments reflect significant operating activities
that are evaluated separately by management. We have four reportable
segments: self-storage operations, containerized storage operations,
commercial property operations, and ancillary operations. These segments
are organized generally based upon their operating characteristics.
The self-storage segment comprises the direct ownership,
development, and operation of traditional storage facilities, and the
ownership of equity interests in entities that own storage properties. The
containerized storage operations represent another segment. The commercial
property segment reflects our interest in the ownership, operation, and
management of commercial properties. The vast majority of the commercial
property operations are conducted through PSB, and to a much lesser extent
the Company and certain of its unconsolidated subsidiaries own commercial
space, managed by PSB, within facilities that combine storage and
commercial space for rent. The ancillary operations include four sources of
operating income: (i) the reinsurance of policies against losses to goods
stored by tenants in our self-storage facilities, (ii) sale of merchandise
at our self-storage facilities, (iii) truck rentals at our self-storage
facilities and (iv) management of facilities owned by third-party owners
and facilities owned by the Unconsolidated Entities.
F-35
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Measurement of Segment Profit or Loss
-------------------------------------
We evaluate performance and allocate resources based upon the net
segment income of each segment. Net segment income represents net income in
conformity with accounting principles generally accepted in the United
States and our significant accounting policies as denoted in Note 2, before
interest and other income, interest expense, corporate general and
administrative expense, and minority interest in income. The accounting
policies of the reportable segments are the same as those described in the
Summary of Significant Accounting Policies.
Interest and other income, interest expense, corporate general and
administrative expense, minority interest in income and gains and losses on
sales of real estate assets are not allocated to segments because
management does not utilize them to evaluate the results of operations of
each segment.
Measurement of Segment Assets
-----------------------------
No segment data relative to assets or liabilities is presented,
because we do not consider the historical cost of our real estate
facilities and investments in real estate entities in evaluating the
performance of operating management or in evaluating alternative courses of
action. The only other types of assets that might be allocated to
individual segments are trade receivables, payables, and other assets that
arise in the ordinary course of business, but they are also not a
significant factor in the measurement of segment performance.
Presentation of Segment Information
-----------------------------------
The following table sets forth a reconciliation of each segment's
net income to the Company's consolidated net income:
F-36
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Year Ended December 31,
----------------------------------
2005 2004 2003
----------- ----------- ----------
(Amounts in thousands)
Reconciliation of Net Income by Segment:
Self-storage
Revenue less cost of operations........... $631,365 $562,129 $517,199
Depreciation and amortization............. (191,267) (176,403) (176,847)
Equity in earnings of real estate
entities ............................. 6,348 4,953 4,583
Discontinued operations (Note 3).......... 5,362 328 6,412
----------- ----------- ----------
Total self-storage segment net income.. 451,808 391,007 351,347
----------- ----------- ----------
Commercial properties
Revenue less cost of operations........... 7,112 6,422 6,418
Depreciation and amortization ............ (2,322) (2,114) (2,436)
Equity in earnings of real estate
entities ............................. 35,175 36,482 38,194
Discontinued operations (Note 3) ......... - 1,122 237
----------- ----------- ----------
Total commercial property segment net
income............................... 39,965 41,912 42,413
----------- ----------- ----------
Containerized storage
Revenue less cost of operations........... 3,611 7,581 10,052
Depreciation and amortization ............ (2,808) (4,546) (4,780)
Discontinued operations (Note 3) ......... 1,015 (2,351) (2,729)
----------- ----------- ----------
Total containerized storage segment net
income............................... 1,818 684 2,543
----------- ----------- ----------
Ancillary Operations
Revenue less cost of operations.......... 23,795 15,509 16,568
Other items not allocated to segments
-------------------------------------
Equity in earnings - general and
administrative and other............... (16,640) (18,871) (17,811)
Interest and other income................. 16,447 5,391 2,537
General and administrative ............... (21,115) (18,813) (17,127)
Interest expense.......................... (8,216) (760) (1,121)
Minority interest in income .............. (32,651) (49,913) (43,703)
Casualty loss ............................ (1,917) (1,250) -
Gain on disposition of real estate........ 3,099 1,317 1,007
----------- ----------- ----------
Total other items not allocated to segments (60,993) (82,899) (76,218)
----------- ----------- ----------
Total consolidated net income ......... $456,393 $366,213 $336,653
=========== =========== ==========
14. Events Subsequent to December 31, 2005 (unaudited)
--------------------------------------------------
As noted above, on November 30, 2005, we called for redemption all
of the outstanding shares (total liquidation value of $172,500,000) of our
8.60% Cumulative Preferred Stock, Series Q, at $25 per share, plus accrued
dividends. These shares were subsequently redeemed on January 19, 2006.
F-37
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
On January 19, 2006, we issued 4,000,000 depositary shares, with
each depositary share representing 1/1,000 of a share of 6.95% Cumulative
Preferred Stock, Series H (carrying amount totaling $100,000,000). On
January 27, 2006, we issued an additional 200,000 depository shares, with
each depositary share representing 1/1,000 of a share of our 6.95%
Cumulative Preferred Stock, Series H (carrying amount totaling $5,000,000).
Between January 1, 2006 and March 15, 2006, we acquired three
self-storage facilities from third parties with total net rentable square
feet of 170,000, at an aggregate cost of approximately $20.0 million
comprised of cash totaling $15.4 million and the assumption of debt
totaling $4.6 million. These property acquisitions were funded entirely by
us.
We have entered into an agreement to acquire Shurgard Storage
Centers, Inc. ("Shurgard"), a publicly held REIT that has interests in
approximately 646 self-storage facilities located in the United States and
Europe. Under the agreement, and based upon our December 31, 2005 balance
sheet and Shurgard's September 30, 2005 balance sheet included in its
related Form 10-Q, i) we would issue 0.82 shares of our common stock for
each share of Shurgard common stock which would increase our common shares
outstanding from 128,089,563 to approximately 166,460,200 shares, ii) we
would assume Shurgard debt which totals approximately $1.8 billion at
September 30, 2005, increasing our debt outstanding (assuming no
prepayment) from $150 million to approximately $2.0 billion, and iii) $136
million of Shurgard preferred stock would be redeemed. The transaction is
targeted to close by the end of the second quarter of 2006.
Completion of the transaction is not assured and is subject to
risks, including that shareholders of either Public Storage or Shurgard do
not approve the transaction or that the other closing conditions are not
satisfied. In addition, Shurgard may under limited circumstances terminate
the agreement to take a superior proposal. Public Storage and Shurgard are
not aware of any significant governmental approvals that are required for
consummation of the merger. If any approval or action is required, it is
presently contemplated that Public Storage and Shurgard would use their
reasonable best efforts to obtain such approval. There can be no assurance
that any other approvals, if required, will be obtained.
The foregoing description of the terms of our agreement to acquire
Shurgard does not purport to be complete, and is qualified in its entirety
by reference to the full text of the merger agreement, a copy of which is
filed with our current report on Form 8-K dated March 7, 2006.
15. Recent Accounting Pronouncements and Guidance
---------------------------------------------
EITF Issue 04-05
----------------
Issue 04-05 of the Emerging Issues Task Force ("EITF 04-05")
states that the general partner in a partnership is presumed to control
that limited partnership, for purposes of determining whether to
consolidate an interest in an entity or to apply the equity method of
accounting. If the limited partners have either (1) the substantive ability
- through a simple majority vote - to liquidate the partnership or remove
the general partner without cause, or (2) substantive participating rights,
the general partner does not control the limited partnership.
The effective date for applying the guidance in EITF 04-05 is June
29, 2005, for new limited partnerships, or no later than our fiscal year
beginning January 1, 2006.
We have not fully quantified the impact of this statement on our
consolidated financial statements, but we do not believe that the impact
will be significant.
F-38
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Accounting Changes and Error Corrections
----------------------------------------
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Errors Corrections - a replacement of APB Opinion No. 20 and FASB Statement
No. 3." This statement replaces APB Opinion No. 20, "Accounting Changes,"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements," and changes the requirements for the accounting for and
reporting of a voluntary change in accounting principle. It also applies to
changes required by an accounting pronouncement in the instance that the
pronouncement does not include specific transition provisions. APB Opinion
No. 20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period the
cumulative effect of changing to the new accounting principle. SFAS No. 154
requires retrospective application of changes in accounting principle to
prior periods' financial statements, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of
the change. We will adopt the provisions of SFAS No. 154 as of January 1,
2006 and we do not believe this statement will have a material impact on
our financial position, operating results or cash flows.
Accounting for Conditional Asset Retirement Obligations
-------------------------------------------------------
In March 2005, the FASB issued FASB FIN 47, "Accounting for
Conditional Asset Retirement Obligations." FIN 47 clarifies that the term
"conditional asset retirement obligations" as used in SFAS No. 143,
"Accounting for Asset Retirement Obligations," refers to a legal obligation
to perform an asset retirement activity in which the timing and/or method
of settlements are conditional on a future event that may or may not be
within the control of the entity. FIN 47 indicates that an entity must
record a liability for a conditional asset retirement obligation if the
fair value of the obligation can be reasonably estimated and also clarifies
when an entity should have sufficient information to reasonably estimate
the fair value of an asset retirement obligation. This interpretation was
effective October 1, 2005. The adoption of FIN 47 had no material impact on
our financial position, operating results or cash flows.
16. Commitments and Contingencies
-----------------------------
Serrao v. Public Storage, Inc. (filed April 2003)
--------------------------------------------------
(Superior Court - Orange County)
--------------------------------
The plaintiff in this case filed a suit against the Company on
behalf of a putative class of renters who rented self-storage units from
the Company. Plaintiff alleges that the Company misrepresented the size of
its storage units, has brought claims under California statutory and common
law relating to consumer protection, fraud, unfair competition, and
negligent misrepresentation, and is seeking monetary damages, restitution,
and declaratory and injunctive relief.
The claim in this case is substantially similar to those in
Henriquez v. Public Storage, Inc., which was disclosed in prior reports. In
January 2003, the plaintiff caused the Henriquez action to be dismissed.
Based upon the uncertainty inherent in any putative class action,
we cannot presently determine the potential damages, if any, or the
ultimate outcome of this litigation. On November 3, 2003, the court granted
our motion to strike the plaintiff's nationwide class allegations and to
limit any putative class to California residents only. In August 2005, we
filed a motion to remove the case to federal court, but the case has been
remanded to the Superior Court. We are vigorously contesting the claims
upon which this lawsuit is based, including class certification efforts.
Gustavson, et al v. Public Storage, Inc. (filed June 2003) (Superior Court
---------------------------------------------------------------------------
- Los Angeles County); Potter, et al v. Hughes, et al (filed December 2004)
---------------------------------------------------------------------------
(United States District Court - Central District of California)
---------------------------------------------------------------
As previously reported, in November 2002, a shareholder of the
Company made a demand on the Board of Directors that challenged the
fairness of the Company's acquisition of PS Insurance Company, Ltd.
("PSIC") and related matters. PSIC was previously owned by the Hughes
Family.
F-39
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
In June 2003, the Hughes family filed a complaint (Gustavson, et
al v. Public Storage, Inc.) for declaratory relief asking the court to find
that the acquisition of PSIC and related matters were fair to the Company.
The Company filed an answer to the Hughes Family's complaint requesting a
final judicial determination of the Company's rights of recovery against
the Hughes Family in respect of PSIC. By order of the Superior Court, the
matter was tried before Justice Malcolm Lucas, a former chief justice of
the California Supreme Court. In October 2005, Judge Lucas rendered his
decision, ruling against the Company by finding that the PSIC transaction
was just and reasonable as to the Company and holding that the Hughes
Family was not required to make any payment to the Company. The Superior
Court has formally entered judgment accordingly and this lawsuit has been
concluded.
At the end of December 2004, the same shareholder referred to
above and a second shareholder filed a shareholder's derivative complaint
(Potter, et al v. Hughes, et al) naming as defendants the Company's
directors (and two former directors) and certain officers of the Company.
The matters alleged in the Potter complaint relate to PSIC, the Hughes
Family's Canadian self-storage operations and the Company's 1995
reorganization. In June 2005, the court granted the defendants' motion to
dismiss the Potter complaint with leave to amend the complaint. In July
2005, the plaintiffs filed an amended complaint, and the defendants filed a
motion to dismiss the amended complaint. The matter is currently under
submission. We believe the litigation will not have any financially adverse
effect on the Company (other than the costs and other expenses relating to
the lawsuit).
Brinkley et al v. Public Storage, Inc. (filed April, 2005) (Superior court
---------------------------------------------------------------------------
of California - Los Angeles County)
-----------------------------------
The Brinkley plaintiffs are suing the Company on behalf of a
purported class of California property managers who claim that they were
not compensated for all the hours they worked. The Brinkley suit is based
upon California wage and hour laws. The maximum potential liability cannot
be estimated, but would be increased if a class or classes are certified
or, if claims are permitted to be brought on behalf of others under the
California Unfair Business Practices Act. We are vigorously contesting the
claims and intend to resist any expansion beyond the named plaintiffs on
the grounds of lack of commonality of claims. We do not believe that this
matter will have any material adverse effect on the results of operations
of the Company.
Other Items
-----------
We are a party to various claims, complaints, and other legal
actions that have arisen in the normal course of business from time to time
that are not described above. We believe that it is unlikely that the
outcome of these other pending legal proceedings including employment and
tenant claims, in the aggregate, will have a material adverse impact upon
our operations or financial position.
Insurance and Loss Exposure
---------------------------
Our facilities have historically carried comprehensive insurance,
including fire, earthquake, flood, liability and extended coverage through
STOR-Re and PSIC-H, our captive insurance programs, and insure portions of
these risks through nationally recognized insurance carriers. Our captive
insurance programs also insure affiliates of the Company.
The Company, STOR-Re, PSIC-H and its affiliates' maximum aggregate
annual exposure for losses that are below the deductibles set forth in the
third-party insurance contracts, assuming multiple significant events
occur, is approximately $35 million. In addition, if losses exhaust the
third-party insurers' limit of coverage of $125,000,000 for property
coverage and $102,000,000 for general liability, our exposure could be
greater. These limits are higher than estimates of maximum probable losses
that could occur from individual catastrophic events (i.e. earthquake and
wind damage) determined in recent engineering and actuarial studies.
F-40
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Our tenant insurance program, operating through PSIC through March
31, 2004, and through PSIC-H beginning April 1, 2004, reinsures policies
against claims for losses to goods stored by tenants at our self-storage
facilities. Throughout 2003, 2004, and 2005, we had outside third-party
insurance coverage for claims paid exceeding $500,000 resulting from any
individual event, to a limit of $10,000,000. Effective January 1, 2006,
such coverage was revised to cover claims paid exceeding $1,500,000
resulting from any individual event, to a limit of $9,000,000.
DEVELOPMENT AND ACQUISITION OF REAL ESTATE FACILITIES
We currently have 62 projects in our development pipeline,
including newly developed facilities and expansions and enhancements to
existing self-storage facilities. The total estimated cost of these
facilities (unaudited) is $323,184,000, of which $54,472,000 has been spent
at December 31, 2005. Development of these projects is subject to
contingencies.
As of March 15, 2006, we are under contract to purchase seven
self-storage facilities (total approximate net rentable square feet of
574,000) at an aggregate cost of approximately $69.4 million. We anticipate
that these acquisitions will be funded entirely by us. Each of these
contracts is subject to significant contingencies, and there is no
assurance that any of these facilities will be acquired.
17. Supplementary quarterly financial data (unaudited)
--------------------------------------------------
Three Months Ended
--------------------------------------------------------------
March 31, June 30, September 30, December 31,
2005 2005 2005 2005
------------ ----------- ------------- ------------
(in thousands, except per share data)
Revenues (a)..................... $ 251,021 $ 262,893 $ 273,485 $ 273,562
============ =========== ============= ============
Cost of operations (a)........... $ 95,945 $ 94,918 $ 96,680 $ 91,088
============ =========== ============= ============
Income from continuing operations $ 95,348 $ 108,228 $ 123,068 $ 123,372
============ =========== ============= ============
Net income....................... $ 96,411 $ 108,266 $ 128,344 $ 123,372
============ =========== ============= ============
Per Common Share (Note 2):
Net income - Basic........... $ 0.38 $ 0.47 $ 0.62 $ 0.51
============ =========== ============= ============
Net income - Diluted......... $ 0.38 $ 0.47 $ 0.62 $ 0.51
============ =========== ============= ============
Three Months Ended
--------------------------------------------------------------
March 31, June 30, September 30, December 31,
2004 2004 2004 2004
------------ ----------- ------------- ------------
(in thousands, except per share data)
Revenues (a)..................... $ 228,182 $ 238,276 $ 245,415 $ 247,418
============ =========== ============= ============
Cost of operations (a)........... $ 90,109 $ 90,841 $ 90,717 $ 90,592
============ =========== ============= ============
Income from continuing operations $ 69,116 $ 92,828 $ 98,516 $ 106,654
============ =========== ============= ============
Net income....................... $ 69,067 $ 92,360 $ 97,515 $ 107,271
============ =========== ============= ============
Per Common Share (Note 2):
Net income - Basic............ $ 0.17 $ 0.38 $ 0.38 $ 0.46
============ =========== ============= ============
Net income - Diluted.......... $ 0.17 $ 0.37 $ 0.38 $ 0.46
============ =========== ============= ============
(a) Revenues and cost of operations as presented in this table differ from the
revenue and cost of operations as presented in our quarterly reports due
primarily to reclassification of our truck rental, merchandise sales, and
property management operations which are now included, along with our
tenant reinsurance operations, under "Ancillary Operations" on our income
statement. In previous presentations, the net income from our truck rental,
merchandise sales, and property management operations were reflected as a
component of "interest and other income." This reclassification increased
revenues and cost of operations a total of $7,558,000, $8,719,000, and
$8,417,000 in each of the first three quarters of 2004, respectively, and
$7,416,000, $8,597,000, and $8,557,000 in each of the first three quarter
in 2005, respectively. Revenues and cost of operations also differ due to
the impact of discontinued operations accounting as described in Note 3.
F-41
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
Self-storage Facilities
1/1/81 Newport News / Jefferson Avenue $- $108 $1,071 $630 $-
1/1/81 Virginia Beach / Diamond Springs - 186 1,094 737 -
8/1/81 San Jose / Snell - 312 1,815 407 -
10/1/81 Tampa / Lazy Lane - 282 1,899 650 -
6/1/82 San Jose / Tully - 645 1,579 10,726 -
6/1/82 San Carlos / Storage - 780 1,387 592 -
6/1/82 Mountain View - 1,180 1,182 318 -
6/1/82 Cupertino / Storage - 572 1,270 533 -
10/1/82 Sorrento Valley - 1,002 1,343 (815) -
10/1/82 Northwood - 1,034 1,522 359 -
12/1/82 Port/Halsey - 357 1,150 (404) 326
12/1/82 Sacto/Folsom - 396 329 676 323
1/1/83 Platte - 409 953 490 428
1/1/83 Semoran - 442 1,882 8,103 720
1/1/83 Raleigh/Yonkers - 203 914 474 425
3/1/83 Blackwood - 213 1,559 329 595
4/1/83 Vailsgate - 103 990 845 505
5/1/83 Delta Drive - 67 481 312 241
6/1/83 Ventura - 658 1,734 349 583
9/1/83 Southington - 124 1,233 403 546
9/1/83 Southhampton - 331 1,738 685 806
9/1/83 Webster/Keystone - 449 1,688 742 813
9/1/83 Dover - 107 1,462 503 627
9/1/83 Newcastle - 227 2,163 486 817
9/1/83 Newark - 208 2,031 405 746
9/1/83 Langhorne - 263 3,549 552 1,445
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
Self-storage Facilities
1/1/81 Newport News / Jefferson Avenue $108 $1,701 $1,809 $1,601
1/1/81 Virginia Beach / Diamond Springs 186 1,831 2,017 1,733
8/1/81 San Jose / Snell 312 2,222 2,534 2,152
10/1/81 Tampa / Lazy Lane 282 2,549 2,831 2,384
6/1/82 San Jose / Tully 2,990 9,960 12,950 3,319
6/1/82 San Carlos / Storage 780 1,979 2,759 1,844
6/1/82 Mountain View 1,046 1,634 2,680 1,390
6/1/82 Cupertino / Storage 572 1,803 2,375 1,609
10/1/82 Sorrento Valley 651 879 1,530 792
10/1/82 Northwood 1,034 1,881 2,915 1,672
12/1/82 Port/Halsey 357 1,072 1,429 793
12/1/82 Sacto/Folsom 396 1,328 1,724 993
1/1/83 Platte 409 1,871 2,280 1,371
1/1/83 Semoran 442 10,705 11,147 3,172
1/1/83 Raleigh/Yonkers 203 1,813 2,016 1,385
3/1/83 Blackwood 213 2,483 2,696 1,804
4/1/83 Vailsgate 103 2,340 2,443 1,552
5/1/83 Delta Drive 68 1,033 1,101 720
6/1/83 Ventura 658 2,666 3,324 1,872
9/1/83 Southington 123 2,183 2,306 1,523
9/1/83 Southhampton 331 3,229 3,560 2,351
9/1/83 Webster/Keystone 449 3,243 3,692 2,372
9/1/83 Dover 107 2,592 2,699 1,862
9/1/83 Newcastle 227 3,466 3,693 2,474
9/1/83 Newark 208 3,182 3,390 2,260
9/1/83 Langhorne 263 5,546 5,809 4,003
F-42
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
9/1/83 Hobart - 215 1,491 732 838
9/1/83 Ft. Wayne/W. Coliseum - 160 1,395 521 535
9/1/83 Ft. Wayne/Bluffton - 88 675 293 285
10/1/83 Orlando J. Y. Parkway - 383 1,512 464 622
11/1/83 Aurora - 505 758 359 341
11/1/83 Campbell - 1,379 1,849 (472) 474
11/1/83 Col Springs/Ed - 471 1,640 220 554
11/1/83 Col Springs/Mv - 320 1,036 295 441
11/1/83 Thorton - 418 1,400 178 536
11/1/83 Oklahoma City - 454 1,030 916 620
11/1/83 Tucson - 343 778 665 420
11/1/83 Webster/Nasa - 1,570 2,457 1,585 1,372
12/1/83 Charlotte - 165 1,274 487 442
12/1/83 Greensboro/Market - 214 1,653 820 794
12/1/83 Greensboro/Electra - 112 869 384 382
12/1/83 Columbia - 171 1,318 527 492
12/1/83 Richmond - 176 1,360 635 468
12/1/83 Augusta - 97 747 361 324
12/1/83 Tacoma - 553 1,173 487 487
1/1/84 Fremont/Albrae - 636 1,659 523 532
1/1/84 Belton - 175 858 794 378
1/1/84 Gladstone - 275 1,799 604 640
1/1/84 Hickman/112 - 257 1,848 (757) 618
1/1/84 Holmes - 289 1,333 472 455
1/1/84 Independence - 221 1,848 470 609
1/1/84 Merriam - 255 1,469 447 480
1/1/84 Olathe - 107 992 381 361
1/1/84 Shawnee - 205 1,420 503 502
1/1/84 Topeka - 75 1,049 298 356
3/1/84 Marrietta/Cobb - 73 542 349 259
3/1/84 Manassas - 320 1,556 471 553
3/1/84 Pico Rivera - 743 807 363 321
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
9/1/83 Hobart 215 3,061 3,276 2,184
9/1/83 Ft. Wayne/W. Coliseum 160 2,451 2,611 1,675
9/1/83 Ft. Wayne/Bluffton 88 1,253 1,341 852
10/1/83 Orlando J. Y. Parkway 383 2,598 2,981 1,840
11/1/83 Aurora 505 1,458 1,963 1,026
11/1/83 Campbell 1,379 1,851 3,230 1,352
11/1/83 Col Springs/Ed 471 2,414 2,885 1,736
11/1/83 Col Springs/Mv 320 1,772 2,092 1,267
11/1/83 Thorton 418 2,114 2,532 1,512
11/1/83 Oklahoma City 454 2,566 3,020 1,839
11/1/83 Tucson 343 1,863 2,206 1,301
11/1/83 Webster/Nasa 1,571 5,413 6,984 3,701
12/1/83 Charlotte 165 2,203 2,368 1,657
12/1/83 Greensboro/Market 214 3,267 3,481 2,435
12/1/83 Greensboro/Electra 112 1,635 1,747 1,237
12/1/83 Columbia 171 2,337 2,508 1,758
12/1/83 Richmond 176 2,463 2,639 1,758
12/1/83 Augusta 97 1,432 1,529 1,078
12/1/83 Tacoma 553 2,147 2,700 1,604
1/1/84 Fremont/Albrae 636 2,714 3,350 2,043
1/1/84 Belton 175 2,030 2,205 1,487
1/1/84 Gladstone 275 3,043 3,318 2,248
1/1/84 Hickman/112 158 1,808 1,966 1,312
1/1/84 Holmes 289 2,260 2,549 1,665
1/1/84 Independence 221 2,927 3,148 2,149
1/1/84 Merriam 255 2,396 2,651 1,799
1/1/84 Olathe 107 1,734 1,841 1,292
1/1/84 Shawnee 205 2,425 2,630 1,807
1/1/84 Topeka 75 1,703 1,778 1,261
3/1/84 Marrietta/Cobb 73 1,150 1,223 861
3/1/84 Manassas 320 2,580 2,900 1,897
3/1/84 Pico Rivera 743 1,491 2,234 1,129
F-43
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/1/84 Providence - 92 1,087 472 423
4/1/84 Milwaukie/Oregon - 289 584 285 311
5/1/84 Raleigh/Departure - 302 2,484 585 788
5/1/84 Virginia Beach - 509 2,121 812 776
5/1/84 Philadelphia/Grant - 1,041 3,262 716 971
5/1/84 Garland - 356 844 318 360
6/1/84 Lorton - 435 2,040 778 682
6/1/84 Baltimore - 382 1,793 929 634
6/1/84 Laurel - 501 2,349 869 824
6/1/84 Delran - 279 1,472 385 573
6/1/84 Orange Blossom - 226 924 254 398
6/1/84 Cincinnati - 402 1,573 889 672
6/1/84 Florence - 185 740 506 376
7/1/84 Trevose/Old Lincoln - 421 1,749 480 582
8/1/84 Medley - 584 1,016 455 464
8/1/84 Oklahoma City - 340 1,310 613 652
8/1/84 Newport News - 356 2,395 810 1,013
8/1/84 Kaplan/Walnut Hill - 971 2,359 951 1,041
8/1/84 Kaplan/Irving - 677 1,592 4,684 639
9/1/84 Cockrell Hill - 380 913 1,155 675
11/1/84 Omaha - 109 806 526 399
11/1/84 Hialeah - 886 1,784 407 672
12/1/84 Austin/Lamar - 643 947 589 443
12/1/84 Pompano - 399 1,386 644 698
12/1/84 Fort Worth - 122 928 53 303
12/1/84 Montgomeryville - 215 2,085 499 776
1/1/85 Cranston - 175 722 368 267
1/1/85 Bossier City - 184 1,542 628 656
2/1/85 Simi Valley - 737 1,389 368 520
2/1/85 Hurst - 231 1,220 253 480
3/1/85 Chattanooga - 202 1,573 784 683
3/1/85 Portland - 285 941 432 438
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/1/84 Providence 92 1,982 2,074 1,473
4/1/84 Milwaukie/Oregon 289 1,180 1,469 886
5/1/84 Raleigh/Departure 302 3,857 4,159 2,857
5/1/84 Virginia Beach 499 3,719 4,218 2,714
5/1/84 Philadelphia/Grant 1,040 4,950 5,990 3,596
5/1/84 Garland 356 1,522 1,878 1,044
6/1/84 Lorton 435 3,500 3,935 2,502
6/1/84 Baltimore 382 3,356 3,738 2,458
6/1/84 Laurel 500 4,043 4,543 2,927
6/1/84 Delran 279 2,430 2,709 1,700
6/1/84 Orange Blossom 226 1,576 1,802 1,123
6/1/84 Cincinnati 402 3,134 3,536 2,076
6/1/84 Florence 185 1,622 1,807 1,141
7/1/84 Trevose/Old Lincoln 421 2,811 3,232 2,061
8/1/84 Medley 584 1,935 2,519 1,341
8/1/84 Oklahoma City 340 2,575 2,915 1,830
8/1/84 Newport News 356 4,218 4,574 2,956
8/1/84 Kaplan/Walnut Hill 971 4,351 5,322 3,083
8/1/84 Kaplan/Irving 678 6,914 7,592 2,645
9/1/84 Cockrell Hill 380 2,743 3,123 1,939
11/1/84 Omaha 109 1,731 1,840 1,225
11/1/84 Hialeah 886 2,863 3,749 1,999
12/1/84 Austin/Lamar 643 1,979 2,622 1,355
12/1/84 Pompano 399 2,728 3,127 1,922
12/1/84 Fort Worth 122 1,284 1,406 894
12/1/84 Montgomeryville 215 3,360 3,575 2,291
1/1/85 Cranston 175 1,357 1,532 972
1/1/85 Bossier City 184 2,826 3,010 1,950
2/1/85 Simi Valley 737 2,277 3,014 1,572
2/1/85 Hurst 231 1,953 2,184 1,354
3/1/85 Chattanooga 202 3,040 3,242 1,937
3/1/85 Portland 285 1,811 2,096 1,195
F-44
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/1/85 Fern Park - 144 1,107 241 432
3/1/85 Fairfield - 338 1,187 532 527
3/1/85 Houston / Westheimer - 850 1,179 805 -
4/1/85 Austin/ S. First - 778 1,282 384 711
4/1/85 Cincinnati/ E. Kemper - 232 1,573 333 853
4/1/85 Cincinnati/ Colerain - 253 1,717 422 932
4/1/85 Florence/ Tanner Lane - 218 1,477 426 835
4/1/85 Laguna Hills - 1,224 3,303 491 1,213
5/1/85 Tacoma/ Phillips Rd. - 396 1,204 319 669
5/1/85 Milwaukie/ Mcloughlin - 458 742 423 620
5/1/85 Manchester/ S. Willow - 371 2,129 (70) 854
5/1/85 Longwood - 355 1,645 360 669
5/1/85 Columbus/Busch Blvd. - 202 1,559 612 592
5/1/85 Columbus/Kinnear Rd. - 241 1,865 694 771
5/1/85 Worthington - 221 1,824 658 709
5/1/85 Arlington - 201 1,497 581 618
6/1/85 N. Hollywood/ Raymer - 967 848 270 515
6/1/85 Grove City/ Marlane Drive - 150 1,157 511 471
6/1/85 Reynoldsburg - 204 1,568 791 598
7/1/85 San Diego/ Kearny Mesa Rd - 783 1,750 367 962
7/1/85 Scottsdale/ 70th St - 632 1,368 374 742
7/1/85 Concord/ Hwy 29 - 150 750 459 587
7/1/85 Columbus/Morse Rd. - 195 1,510 466 670
7/1/85 Columbus/Kenney Rd. - 199 1,531 562 598
7/1/85 Westerville - 199 1,517 717 620
7/1/85 Springfield - 90 699 474 332
7/1/85 Dayton/Needmore Road - 144 1,108 543 460
7/1/85 Dayton/Executive Blvd. - 160 1,207 479 569
7/1/85 Lilburn - 331 969 250 424
9/1/85 Madison/ Copps Ave. - 450 1,150 467 665
9/1/85 Columbus/ Sinclair - 307 893 400 519
9/1/85 Philadelphia/ Tacony St - 118 1,782 305 856
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/1/85 Fern Park 144 1,780 1,924 1,235
3/1/85 Fairfield 338 2,246 2,584 1,524
3/1/85 Houston / Westheimer 850 1,984 2,834 1,707
4/1/85 Austin/ S. First 778 2,377 3,155 1,531
4/1/85 Cincinnati/ E. Kemper 232 2,759 2,991 1,749
4/1/85 Cincinnati/ Colerain 253 3,071 3,324 1,950
4/1/85 Florence/ Tanner Lane 218 2,738 2,956 1,733
4/1/85 Laguna Hills 1,224 5,007 6,231 3,440
5/1/85 Tacoma/ Phillips Rd. 396 2,192 2,588 1,387
5/1/85 Milwaukie/ Mcloughlin 458 1,785 2,243 1,137
5/1/85 Manchester/ S. Willow 371 2,913 3,284 1,832
5/1/85 Longwood 355 2,674 3,029 1,829
5/1/85 Columbus/Busch Blvd. 202 2,763 2,965 1,786
5/1/85 Columbus/Kinnear Rd. 241 3,330 3,571 2,113
5/1/85 Worthington 221 3,191 3,412 2,062
5/1/85 Arlington 201 2,696 2,897 1,806
6/1/85 N. Hollywood/ Raymer 967 1,633 2,600 1,039
6/1/85 Grove City/ Marlane Drive 150 2,139 2,289 1,419
6/1/85 Reynoldsburg 204 2,957 3,161 1,854
7/1/85 San Diego/ Kearny Mesa Rd 783 3,079 3,862 1,966
7/1/85 Scottsdale/ 70th St 632 2,484 3,116 1,547
7/1/85 Concord/ Hwy 29 150 1,796 1,946 1,153
7/1/85 Columbus/Morse Rd. 195 2,646 2,841 1,808
7/1/85 Columbus/Kenney Rd. 199 2,691 2,890 1,799
7/1/85 Westerville 305 2,748 3,053 1,832
7/1/85 Springfield 90 1,505 1,595 974
7/1/85 Dayton/Needmore Road 144 2,111 2,255 1,380
7/1/85 Dayton/Executive Blvd. 159 2,256 2,415 1,548
7/1/85 Lilburn 330 1,644 1,974 1,126
9/1/85 Madison/ Copps Ave. 450 2,282 2,732 1,403
9/1/85 Columbus/ Sinclair 307 1,812 2,119 1,115
9/1/85 Philadelphia/ Tacony St 118 2,943 3,061 1,853
F-45
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/1/85 N. Hollywood/ Whitsett - 1,524 2,576 416 1,302
10/1/85 Portland/ SE 82nd St - 354 496 370 380
10/1/85 Columbus/ Ambleside - 124 1,526 170 644
10/1/85 Indianapolis/ Pike Place - 229 1,531 570 856
10/1/85 Indianapolis/ Beach Grove - 198 1,342 299 709
10/1/85 Hartford/ Roberts - 219 1,481 477 966
10/1/85 Wichita/ S. Rock Rd. - 501 1,478 302 657
10/1/85 Wichita/ E. Harry - 313 1,050 176 468
10/1/85 Wichita/ S. Woodlawn - 263 905 200 437
10/1/85 Wichita/ E. Kellogg - 185 658 5 261
10/1/85 Wichita/ S. Tyler - 294 1,004 138 530
10/1/85 Wichita/ W. Maple - 234 805 (27) 313
10/1/85 Wichita/ Carey Lane - 192 674 66 296
10/1/85 Wichita/ E. Macarthur - 220 775 (45) 323
10/1/85 Joplin/ S. Range Line - 264 904 216 465
10/1/85 San Antonio/ Wetmore Rd. - 306 1,079 558 638
10/1/85 San Antonio/ Callaghan - 288 1,016 451 543
10/1/85 San Antonio/ Zarzamora - 364 1,281 638 674
10/1/85 San Antonio/ Hackberry - 388 1,367 2,552 1,001
10/1/85 San Antonio/ Fredericksburg - 287 1,009 663 597
10/1/85 Dallas/ S. Westmoreland - 474 1,670 216 734
10/1/85 Dallas/ Alvin St. - 359 1,266 187 559
10/1/85 Fort Worth/ W. Beach St. - 356 1,252 207 531
10/1/85 Fort Worth/ E. Seminary - 382 1,346 223 552
10/1/85 Fort Worth/ Cockrell St. - 323 1,136 212 515
11/1/85 Everett/ Evergreen - 706 2,294 605 1,076
11/1/85 Seattle/ Empire Way - 1,652 5,348 779 2,198
12/1/85 Milpitas - 1,623 1,577 334 913
12/1/85 Pleasanton/ Santa Rita - 1,226 2,078 430 1,160
12/1/85 Amherst/ Niagra Falls - 132 701 289 400
12/1/85 West Sams Blvd. - 164 1,159 (242) 383
12/1/85 MacArthur Rd. - 204 1,628 239 638
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/1/85 N. Hollywood/ Whitsett 1,524 4,294 5,818 2,697
10/1/85 Portland/ SE 82nd St 354 1,246 1,600 785
10/1/85 Columbus/ Ambleside 124 2,340 2,464 1,411
10/1/85 Indianapolis/ Pike Place 229 2,957 3,186 1,748
10/1/85 Indianapolis/ Beach Grove 198 2,350 2,548 1,455
10/1/85 Hartford/ Roberts 219 2,924 3,143 1,762
10/1/85 Wichita/ S. Rock Rd. 642 2,296 2,938 1,433
10/1/85 Wichita/ E. Harry 285 1,722 2,007 1,088
10/1/85 Wichita/ S. Woodlawn 263 1,542 1,805 952
10/1/85 Wichita/ E. Kellogg 185 924 1,109 574
10/1/85 Wichita/ S. Tyler 294 1,672 1,966 1,077
10/1/85 Wichita/ W. Maple 234 1,091 1,325 687
10/1/85 Wichita/ Carey Lane 192 1,036 1,228 650
10/1/85 Wichita/ E. Macarthur 220 1,053 1,273 642
10/1/85 Joplin/ S. Range Line 264 1,585 1,849 1,017
10/1/85 San Antonio/ Wetmore Rd. 306 2,275 2,581 1,466
10/1/85 San Antonio/ Callaghan 288 2,010 2,298 1,303
10/1/85 San Antonio/ Zarzamora 364 2,593 2,957 1,674
10/1/85 San Antonio/ Hackberry 389 4,919 5,308 2,027
10/1/85 San Antonio/ Fredericksburg 287 2,269 2,556 1,402
10/1/85 Dallas/ S. Westmoreland 474 2,620 3,094 1,724
10/1/85 Dallas/ Alvin St. 359 2,012 2,371 1,334
10/1/85 Fort Worth/ W. Beach St. 356 1,990 2,346 1,312
10/1/85 Fort Worth/ E. Seminary 382 2,121 2,503 1,402
10/1/85 Fort Worth/ Cockrell St. 323 1,863 2,186 1,227
11/1/85 Everett/ Evergreen 706 3,975 4,681 2,654
11/1/85 Seattle/ Empire Way 1,651 8,326 9,977 5,492
12/1/85 Milpitas 1,623 2,824 4,447 1,738
12/1/85 Pleasanton/ Santa Rita 1,226 3,668 4,894 2,264
12/1/85 Amherst/ Niagra Falls 132 1,390 1,522 914
12/1/85 West Sams Blvd. 164 1,300 1,464 865
12/1/85 MacArthur Rd. 204 2,505 2,709 1,629
F-46
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
12/1/85 Brockton/ Main - 153 2,020 (155) 678
12/1/85 Eatontown/ Hwy 35 - 308 4,067 655 1,648
12/1/85 Denver/ Leetsdale - 603 847 285 408
1/1/86 Mapleshade/ Rudderow - 362 1,811 383 825
1/1/86 Bordentown/ Groveville - 196 981 184 471
1/1/86 Sun Valley/ Sheldon - 544 1,836 399 793
1/1/86 Las Vegas/ Highland - 432 848 308 420
2/1/86 Costa Mesa/ Pomona - 1,405 1,520 409 693
2/1/86 Brea/ Imperial Hwy - 1,069 2,165 423 954
2/1/86 Skokie/ McCormick - 638 1,912 325 779
2/1/86 Colorado Springs/ Sinton - 535 1,115 424 631
2/1/86 Oklahoma City/ Penn - 146 829 164 406
2/1/86 Oklahoma City/ 39th - 238 812 351 477
3/1/86 Jacksonville/ Wiley - 140 510 296 331
3/1/86 St. Louis/ Forder - 517 1,133 339 534
3/3/86 Tampa / 56th - 450 1,360 588 -
4/1/86 Reno/ Telegraph - 649 1,051 558 682
4/1/86 St. Louis/Kirkham - 199 1,001 246 401
4/1/86 St. Louis/Reavis - 192 958 248 384
4/1/86 Fort Worth/East Loop - 196 804 261 369
5/1/86 Westlake Village - 1,205 995 4,965 429
5/1/86 Sacramento/Franklin Blvd. - 872 978 3,287 389
6/1/86 Richland Hills - 543 857 459 404
6/1/86 West Valley/So. 3600 - 208 1,552 464 413
7/1/86 Colorado Springs/ Hollow Tree - 574 726 321 426
7/1/86 West LA/Purdue Ave. - 2,415 3,585 273 1,212
7/1/86 Capital Heights/Central Ave. - 649 3,851 493 1,277
7/1/86 Pontiac/Dixie Hwy. - 259 2,091 227 756
8/1/86 Laurel/Ft. Meade Rd. - 475 1,475 355 630
8/1/86 Hammond / Calumet - 97 751 646 366
9/1/86 Kansas City/S. 44th. - 509 1,906 641 737
9/1/86 Lakewood / Wadsworth - 6th - 1,070 3,155 749 1,027
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
12/1/85 Brockton/ Main 153 2,543 2,696 1,663
12/1/85 Eatontown/ Hwy 35 308 6,370 6,678 4,141
12/1/85 Denver/ Leetsdale 603 1,540 2,143 991
1/1/86 Mapleshade/ Rudderow 362 3,019 3,381 1,965
1/1/86 Bordentown/ Groveville 196 1,636 1,832 1,064
1/1/86 Sun Valley/ Sheldon 544 3,028 3,572 1,984
1/1/86 Las Vegas/ Highland 432 1,576 2,008 1,024
2/1/86 Costa Mesa/ Pomona 1,405 2,622 4,027 1,719
2/1/86 Brea/ Imperial Hwy 1,069 3,542 4,611 2,315
2/1/86 Skokie/ McCormick 638 3,016 3,654 1,944
2/1/86 Colorado Springs/ Sinton 535 2,170 2,705 1,382
2/1/86 Oklahoma City/ Penn 146 1,399 1,545 914
2/1/86 Oklahoma City/ 39th 238 1,640 1,878 1,076
3/1/86 Jacksonville/ Wiley 140 1,137 1,277 747
3/1/86 St. Louis/ Forder 517 2,006 2,523 1,302
3/3/86 Tampa / 56th 450 1,948 2,398 1,542
4/1/86 Reno/ Telegraph 649 2,291 2,940 1,500
4/1/86 St. Louis/Kirkham 199 1,648 1,847 1,086
4/1/86 St. Louis/Reavis 192 1,590 1,782 1,045
4/1/86 Fort Worth/East Loop 196 1,434 1,630 953
5/1/86 Westlake Village 1,247 6,347 7,594 1,069
5/1/86 Sacramento/Franklin Blvd. 1,139 4,387 5,526 1,729
6/1/86 Richland Hills 543 1,720 2,263 1,151
6/1/86 West Valley/So. 3600 208 2,429 2,637 1,569
7/1/86 Colorado Springs/ Hollow Tree 574 1,473 2,047 939
7/1/86 West LA/Purdue Ave. 2,416 5,069 7,485 3,296
7/1/86 Capital Heights/Central Ave. 649 5,621 6,270 3,632
7/1/86 Pontiac/Dixie Hwy. 259 3,074 3,333 1,968
8/1/86 Laurel/Ft. Meade Rd. 475 2,460 2,935 1,579
8/1/86 Hammond / Calumet 97 1,763 1,860 1,105
9/1/86 Kansas City/S. 44th. 509 3,284 3,793 2,105
9/1/86 Lakewood / Wadsworth - 6th 1,070 4,931 6,001 3,377
F-47
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/1/86 Peralta/Fremont - 851 1,074 327 456
10/1/86 Birmingham/Highland - 89 786 252 398
10/1/86 Birmingham/Riverchase - 262 1,338 460 645
10/1/86 Birmingham/Eastwood - 166 1,184 416 612
10/1/86 Birmingham/Forestdale - 152 948 280 519
10/1/86 Birmingham/Centerpoint - 265 1,305 419 525
10/1/86 Birmingham/Roebuck Plaza - 101 399 302 425
10/1/86 Birmingham/Greensprings - 347 1,173 359 281
10/1/86 Birmingham/Hoover-Lorna - 372 1,128 421 431
10/1/86 Midfield/Bessemer - 170 355 354 112
10/1/86 Huntsville/Leeman Ferry Rd. - 158 992 305 558
10/1/86 Huntsville/Drake - 253 1,172 302 538
10/1/86 Anniston/Whiteside - 59 566 225 329
10/1/86 Houston/Glenvista - 595 1,043 699 494
10/1/86 Houston/I-45 - 704 1,146 992 604
10/1/86 Houston/Rogerdale - 1,631 2,792 718 1,232
10/1/86 Houston/Gessner - 1,032 1,693 1,105 746
10/1/86 Houston/Richmond-Fairdale - 1,502 2,506 1,215 1,160
10/1/86 Houston/Gulfton - 1,732 3,036 1,173 1,398
10/1/86 Houston/Westpark - 503 854 221 435
10/1/86 Jonesboro - 157 718 266 370
10/1/86 Houston / South Loop West - 1,299 3,491 1,302 1,366
10/1/86 Houston / Plainfield Road - 904 2,319 867 920
10/1/86 Houston / North Freeway - 719 1,987 238 609
10/1/86 Houston / Old Katy Road - 1,365 3,431 27 1,274
10/1/86 Houston / Long Point - 451 1,187 659 563
10/1/86 Austin / Research Blvd. - 1,390 1,710 595 672
11/1/86 Arleta / Osborne Street - 987 663 314 290
12/1/86 Lynnwood / 196th Street - 1,063 1,602 7,395 571
12/1/86 N. Auburn / Auburn Way N. - 606 1,144 448 533
12/1/86 Gresham / Burnside & 202nd - 351 1,056 455 482
12/1/86 Denver / Sheridan Boulevard - 1,033 2,792 981 1,007
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/1/86 Peralta/Fremont 851 1,857 2,708 1,197
10/1/86 Birmingham/Highland 150 1,375 1,525 909
10/1/86 Birmingham/Riverchase 278 2,427 2,705 1,605
10/1/86 Birmingham/Eastwood 232 2,146 2,378 1,359
10/1/86 Birmingham/Forestdale 190 1,709 1,899 1,120
10/1/86 Birmingham/Centerpoint 273 2,241 2,514 1,411
10/1/86 Birmingham/Roebuck Plaza 340 887 1,227 576
10/1/86 Birmingham/Greensprings 16 2,144 2,160 1,397
10/1/86 Birmingham/Hoover-Lorna 266 2,086 2,352 1,329
10/1/86 Midfield/Bessemer 95 896 991 569
10/1/86 Huntsville/Leeman Ferry Rd. 198 1,815 2,013 1,203
10/1/86 Huntsville/Drake 248 2,017 2,265 1,301
10/1/86 Anniston/Whiteside 107 1,072 1,179 706
10/1/86 Houston/Glenvista 595 2,236 2,831 1,452
10/1/86 Houston/I-45 703 2,743 3,446 1,785
10/1/86 Houston/Rogerdale 1,631 4,742 6,373 3,051
10/1/86 Houston/Gessner 1,032 3,544 4,576 2,335
10/1/86 Houston/Richmond-Fairdale 1,501 4,882 6,383 3,200
10/1/86 Houston/Gulfton 1,732 5,607 7,339 3,664
10/1/86 Houston/Westpark 503 1,510 2,013 975
10/1/86 Jonesboro 157 1,354 1,511 876
10/1/86 Houston / South Loop West 1,299 6,159 7,458 4,267
10/1/86 Houston / Plainfield Road 904 4,106 5,010 2,828
10/1/86 Houston / North Freeway 661 2,892 3,553 1,943
10/1/86 Houston / Old Katy Road 1,164 4,933 6,097 3,334
10/1/86 Houston / Long Point 451 2,409 2,860 1,708
10/1/86 Austin / Research Blvd. 1,390 2,977 4,367 2,051
11/1/86 Arleta / Osborne Street 987 1,267 2,254 842
12/1/86 Lynnwood / 196th Street 1,405 9,226 10,631 2,771
12/1/86 N. Auburn / Auburn Way N. 606 2,125 2,731 1,475
12/1/86 Gresham / Burnside & 202nd 351 1,993 2,344 1,334
12/1/86 Denver / Sheridan Boulevard 1,033 4,780 5,813 3,244
F-48
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
12/1/86 Marietta / Cobb Parkway - 536 2,764 1,042 1,016
12/1/86 Hillsboro / T.V.Highway - 461 574 260 414
12/1/86 San Antonio / West Sunset Road - 1,206 1,594 580 649
12/31/86 Monrovia / Myrtle Avenue - 1,149 2,446 220 -
12/31/86 Chatsworth / Topanga - 1,447 1,243 3,776 -
12/31/86 Houston / Larkwood - 247 602 387 -
12/31/86 Northridge - 3,624 1,922 2,492 -
12/31/86 Santa Clara / Duane - 1,950 1,004 404 -
12/31/86 Oyster Point - 1,569 1,490 468 -
12/31/86 Walnut - 767 613 5,666 -
3/1/87 Annandale / Ravensworth - 679 1,621 339 596
4/1/87 City Of Industry / Amar - 748 2,052 520 702
5/1/87 Oklahoma City / W. Hefner - 459 941 352 417
7/1/87 Oakbrook Terrace - 912 2,688 1,741 399
8/1/87 San Antonio/Austin Hwy. - 400 850 (12) 164
10/1/87 Plantation/S. State Rd. - 924 1,801 (213) 298
10/1/87 Rockville/Fredrick Rd. - 1,695 3,305 (93) 519
2/1/88 Anaheim/Lakeview - 995 1,505 46 256
6/7/88 Mesquite / Sorrento Drive - 928 1,011 3,506 -
7/1/88 Fort Wayne - 101 1,524 232 663
1/1/92 Costa Mesa - 533 980 772 -
3/1/92 Dallas / Walnut St. - 537 1,008 303 -
5/1/92 Camp Creek - 576 1,075 320 -
9/1/92 Orlando/W. Colonial - 368 713 218 -
9/1/92 Jacksonville/Arlington - 554 1,065 275 -
10/1/92 Stockton/Mariners - 381 730 218 -
11/18/92 Virginia Beach/General Booth Blvd - 599 1,119 449 -
1/1/93 Redwood City/Storage - 907 1,684 262 -
1/1/93 City Of Industry - 1,611 2,991 879 -
1/1/93 San Jose/Felipe - 1,124 2,088 553 -
1/1/93 Baldwin Park/Garvey Ave - 840 1,561 433 -
3/19/93 Westminister / W. 80th - 840 1,586 317 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
12/1/86 Marietta / Cobb Parkway 536 4,822 5,358 3,162
12/1/86 Hillsboro / T.V.Highway 461 1,248 1,709 947
12/1/86 San Antonio / West Sunset Road 1,207 2,822 4,029 1,913
12/31/86 Monrovia / Myrtle Avenue 1,149 2,666 3,815 2,003
12/31/86 Chatsworth / Topanga 1,448 5,018 6,466 1,427
12/31/86 Houston / Larkwood 246 990 1,236 718
12/31/86 Northridge 3,624 4,414 8,038 2,244
12/31/86 Santa Clara / Duane 1,950 1,408 3,358 1,046
12/31/86 Oyster Point 1,569 1,958 3,527 1,410
12/31/86 Walnut 769 6,277 7,046 1,448
3/1/87 Annandale / Ravensworth 679 2,556 3,235 1,705
4/1/87 City Of Industry / Amar 748 3,274 4,022 1,497
5/1/87 Oklahoma City / W. Hefner 459 1,710 2,169 1,127
7/1/87 Oakbrook Terrace 1,580 4,160 5,740 2,901
8/1/87 San Antonio/Austin Hwy. 400 1,002 1,402 879
10/1/87 Plantation/S. State Rd. 924 1,886 2,810 1,598
10/1/87 Rockville/Fredrick Rd. 1,694 3,732 5,426 3,171
2/1/88 Anaheim/Lakeview 995 1,807 2,802 1,507
6/7/88 Mesquite / Sorrento Drive 1,045 4,400 5,445 1,913
7/1/88 Fort Wayne 101 2,419 2,520 1,256
1/1/92 Costa Mesa 535 1,750 2,285 1,377
3/1/92 Dallas / Walnut St. 537 1,311 1,848 1,301
5/1/92 Camp Creek 576 1,395 1,971 876
9/1/92 Orlando/W. Colonial 367 932 1,299 556
9/1/92 Jacksonville/Arlington 554 1,340 1,894 797
10/1/92 Stockton/Mariners 381 948 1,329 573
11/18/92 Virginia Beach/General Booth Blvd 599 1,568 2,167 926
1/1/93 Redwood City/Storage 907 1,946 2,853 1,086
1/1/93 City Of Industry 1,611 3,870 5,481 2,283
1/1/93 San Jose/Felipe 1,124 2,641 3,765 1,412
1/1/93 Baldwin Park/Garvey Ave 840 1,994 2,834 1,161
3/19/93 Westminister / W. 80th 840 1,903 2,743 1,074
F-49
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/26/93 Costa Mesa / Newport 867 2,141 3,989 5,397 -
5/13/93 Austin /N. Lamar - 919 1,695 8,576 -
5/28/93 Jacksonville/Phillips Hwy. - 406 771 224 -
5/28/93 Tampa/Nebraska Avenue - 550 1,043 180 -
6/9/93 Calabasas / Ventura Blvd. - 1,762 3,269 228 -
6/9/93 Carmichael / Fair Oaks - 573 1,052 272 -
6/9/93 Santa Clara / Duane - 454 834 120 -
6/10/93 Citrus Heights / Sylvan Road - 438 822 200 -
6/25/93 Trenton / Allen Road - 623 1,166 255 -
6/30/93 Los Angeles/W.Jefferson Blvd - 1,085 2,017 224 -
7/16/93 Austin / So. Congress Ave - 777 1,445 376 -
8/1/93 Gaithersburg / E. Diamond - 602 1,139 177 -
8/11/93 Atlanta / Northside - 1,150 2,149 363 -
8/11/93 Smyrna/ Rosswill Rd - 446 842 247 -
8/13/93 So. Brunswick/Highway - 1,076 2,033 370 -
10/1/93 Denver / Federal Blvd - 875 1,633 277 -
10/1/93 Citrus Heights - 527 987 124 -
10/1/93 Lakewood / 6th Ave - 798 1,489 54 -
10/27/93 Houston / S Shaver St - 481 896 225 -
11/3/93 Upland/S. Euclid Ave. - 431 807 551 -
11/16/93 Norcross / Jimmy Carter - 627 1,167 230 -
11/16/93 Seattle / 13th - 1,085 2,015 675 -
12/9/93 Salt Lake City - 765 1,422 31 -
12/16/93 West Valley City - 683 1,276 246 -
12/21/93 Pinellas Park / 34th St. W - 607 1,134 245 -
12/28/93 New Orleans / S. Carrollton Ave - 1,575 2,941 207 -
12/29/93 Orange / Main - 1,238 2,317 1,478 -
12/29/93 Sunnyvale / Wedell - 554 1,037 779 -
12/29/93 El Cajon / Magnolia - 421 791 590 -
12/29/93 Orlando / S. Semoran Blvd. - 462 872 634 -
12/29/93 Tampa / W. Hillsborough Ave - 352 665 437 -
12/29/93 Irving / West Loop 12 - 341 643 201 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/26/93 Costa Mesa / Newport 3,730 7,797 11,527 2,744
5/13/93 Austin /N. Lamar 1,421 9,769 11,190 2,553
5/28/93 Jacksonville/Phillips Hwy. 406 995 1,401 586
5/28/93 Tampa/Nebraska Avenue 550 1,223 1,773 690
6/9/93 Calabasas / Ventura Blvd. 1,762 3,497 5,259 1,863
6/9/93 Carmichael / Fair Oaks 573 1,324 1,897 773
6/9/93 Santa Clara / Duane 453 955 1,408 525
6/10/93 Citrus Heights / Sylvan Road 437 1,023 1,460 604
6/25/93 Trenton / Allen Road 623 1,421 2,044 774
6/30/93 Los Angeles/W.Jefferson Blvd 1,085 2,241 3,326 1,199
7/16/93 Austin / So. Congress Ave 777 1,821 2,598 1,057
8/1/93 Gaithersburg / E. Diamond 602 1,316 1,918 706
8/11/93 Atlanta / Northside 1,150 2,512 3,662 1,402
8/11/93 Smyrna/ Rosswill Rd 446 1,089 1,535 639
8/13/93 So. Brunswick/Highway 1,076 2,403 3,479 1,324
10/1/93 Denver / Federal Blvd 875 1,910 2,785 1,000
10/1/93 Citrus Heights 527 1,111 1,638 599
10/1/93 Lakewood / 6th Ave 685 1,656 2,341 855
10/27/93 Houston / S Shaver St 481 1,121 1,602 624
11/3/93 Upland/S. Euclid Ave. 508 1,281 1,789 624
11/16/93 Norcross / Jimmy Carter 626 1,398 2,024 748
11/16/93 Seattle / 13th 1,085 2,690 3,775 1,559
12/9/93 Salt Lake City 633 1,585 2,218 461
12/16/93 West Valley City 682 1,523 2,205 814
12/21/93 Pinellas Park / 34th St. W 607 1,379 1,986 769
12/28/93 New Orleans / S. Carrollton Ave 1,575 3,148 4,723 1,679
12/29/93 Orange / Main 1,593 3,440 5,033 1,713
12/29/93 Sunnyvale / Wedell 725 1,645 2,370 861
12/29/93 El Cajon / Magnolia 542 1,260 1,802 640
12/29/93 Orlando / S. Semoran Blvd. 601 1,367 1,968 744
12/29/93 Tampa / W. Hillsborough Ave 436 1,018 1,454 538
12/29/93 Irving / West Loop 12 355 830 1,185 469
F-50
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
12/29/93 Fullerton / W. Commonwealth - 904 1,687 1,276 -
12/29/93 N. Lauderdale / Mcnab Rd - 628 1,182 725 -
12/29/93 Los Alimitos / Cerritos - 695 1,299 715 -
12/29/93 Frederick / Prospect Blvd. - 573 1,082 629 -
12/29/93 Indianapolis / E. Washington - 403 775 526 -
12/29/93 Gardena / Western Ave. - 552 1,035 608 -
12/29/93 Palm Bay / Bobcock Street - 409 775 576 -
1/10/94 Hialeah / W. 20Th Ave. - 1,855 3,497 (5) -
1/12/94 Sunnyvale / N. Fair Oaks Ave - 689 1,285 335 -
1/12/94 Honolulu / Iwaena - - 3,382 898 -
1/12/94 Miami / Golden Glades - 579 1,081 470 -
1/21/94 Herndon / Centreville Road - 1,584 2,981 523 -
2/8/94 Las Vegas/S. Martin Luther King Blvd. - 1,383 2,592 1,101 -
2/28/94 Arlingtn/Old Jeffersn Davishwy - 735 1,399 616 -
3/8/94 Beaverton / Sw Barnes Road - 942 1,810 211 -
3/21/94 Austin / Arboretum - 473 897 2,772 -
3/25/94 Tinton Falls / Shrewsbury Ave - 1,074 2,033 280 -
3/25/94 East Brunswick / Milltown Road - 1,282 2,411 455 -
3/25/94 Mercerville / Quakerbridge Road - 1,109 2,111 341 -
3/31/94 Hypoluxo - 735 1,404 1,876 -
4/26/94 No. Highlands / Roseville Road - 980 1,835 408 -
5/12/94 Fort Pierce/Okeechobee Road - 438 842 160 -
5/24/94 Hempstead/Peninsula Blvd. - 2,053 3,832 350 -
5/24/94 La/Huntington - 483 905 206 -
6/9/94 Chattanooga / Brainerd Road - 613 1,170 267 -
6/9/94 Chattanooga / Ringgold Road - 761 1,433 499 -
6/18/94 Las Vegas / S. Valley View Blvd - 837 1,571 275 -
6/23/94 Las Vegas / Tropicana - 750 1,408 283 -
6/23/94 Henderson / Green Valley Pkwy - 1,047 1,960 317 -
6/24/94 Las Vegas / N. Lamb Blvd. - 869 1,629 100 -
6/30/94 Birmingham / W. Oxmoor Road - 532 1,004 480 -
7/20/94 Milpitas / Dempsey Road - 1,260 2,358 243 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
12/29/93 Fullerton / W. Commonwealth 1,160 2,707 3,867 1,264
12/29/93 N. Lauderdale / Mcnab Rd 798 1,737 2,535 871
12/29/93 Los Alimitos / Cerritos 874 1,835 2,709 901
12/29/93 Frederick / Prospect Blvd. 692 1,592 2,284 825
12/29/93 Indianapolis / E. Washington 505 1,199 1,704 632
12/29/93 Gardena / Western Ave. 695 1,500 2,195 746
12/29/93 Palm Bay / Bobcock Street 525 1,235 1,760 640
1/10/94 Hialeah / W. 20Th Ave. 1,590 3,757 5,347 1,898
1/12/94 Sunnyvale / N. Fair Oaks Ave 657 1,652 2,309 827
1/12/94 Honolulu / Iwaena - 4,280 4,280 2,024
1/12/94 Miami / Golden Glades 557 1,573 2,130 823
1/21/94 Herndon / Centreville Road 1,358 3,730 5,088 1,765
2/8/94 Las Vegas/S. Martin Luther King Blvd. 1,436 3,640 5,076 1,824
2/28/94 Arlingtn/Old Jeffersn Davishwy 630 2,120 2,750 1,074
3/8/94 Beaverton / Sw Barnes Road 807 2,156 2,963 1,207
3/21/94 Austin / Arboretum 1,554 2,588 4,142 1,015
3/25/94 Tinton Falls / Shrewsbury Ave 921 2,466 3,387 1,286
3/25/94 East Brunswick / Milltown Road 1,099 3,049 4,148 1,587
3/25/94 Mercerville / Quakerbridge Road 950 2,611 3,561 1,363
3/31/94 Hypoluxo 630 3,385 4,015 2,604
4/26/94 No. Highlands / Roseville Road 840 2,383 3,223 1,284
5/12/94 Fort Pierce/Okeechobee Road 375 1,065 1,440 693
5/24/94 Hempstead/Peninsula Blvd. 1,762 4,473 6,235 2,235
5/24/94 La/Huntington 414 1,180 1,594 613
6/9/94 Chattanooga / Brainerd Road 525 1,525 2,050 823
6/9/94 Chattanooga / Ringgold Road 652 2,041 2,693 1,126
6/18/94 Las Vegas / S. Valley View Blvd 718 1,965 2,683 951
6/23/94 Las Vegas / Tropicana 643 1,798 2,441 932
6/23/94 Henderson / Green Valley Pkwy 898 2,426 3,324 1,173
6/24/94 Las Vegas / N. Lamb Blvd. 669 1,929 2,598 739
6/30/94 Birmingham / W. Oxmoor Road 456 1,560 2,016 909
7/20/94 Milpitas / Dempsey Road 1,080 2,781 3,861 1,384
F-51
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
8/17/94 New Orleans/I-10 - 784 1,470 (467) -
8/17/94 Beaverton / S.W. Denny Road - 663 1,245 150 -
8/17/94 Irwindale / Central Ave. - 674 1,263 133 -
8/17/94 Suitland / St. Barnabas Rd - 1,530 2,913 400 -
8/17/94 North Brunswick / How Lane - 1,238 2,323 159 -
8/17/94 Lombard / 64th - 847 1,583 186 -
8/17/94 Alsip / 27th - 406 765 152 -
9/15/94 Huntsville / Old Monrovia Road - 613 1,157 253 -
9/27/94 West Haven / Bull Hill Lane - 455 873 5,356 -
9/30/94 San Francisco / Marin St. - 1,227 2,339 1,248 -
9/30/94 Baltimore / Hillen Street - 580 1,095 279 -
9/30/94 San Francisco /10th & Howard - 1,423 2,668 306 -
9/30/94 Montebello / E. Whittier - 383 732 202 -
9/30/94 Arlington / Collins - 228 435 273 -
9/30/94 Miami / S.W. 119th Ave - 656 1,221 61 -
9/30/94 Blackwood / Erial Road - 774 1,437 138 -
9/30/94 Concord / Monument - 1,092 2,027 432 -
9/30/94 Rochester / Lee Road - 469 871 332 -
9/30/94 Houston / Bellaire - 623 1,157 295 -
9/30/94 Austin / Lamar Blvd - 781 1,452 168 -
9/30/94 Milwaukee / Lovers Lane Rd - 469 871 264 -
9/30/94 Monterey / Del Rey Oaks - 1,093 1,897 128 -
9/30/94 St. Petersburg / 66Th St. - 427 793 205 -
9/30/94 Dayton Bch / N. Nova Road - 396 735 116 -
9/30/94 Maple Shade / Route 38 - 994 1,846 253 -
9/30/94 Marlton / Route 73 N. - 938 1,742 151 -
9/30/94 Naperville / E. Ogden Ave - 683 1,268 159 -
9/30/94 Long Beach / South Street - 1,778 3,307 447 -
9/30/94 Aloha / S.W. Shaw - 805 1,495 140 -
9/30/94 Alexandria / S. Pickett - 1,550 2,879 308 -
9/30/94 Houston / Highway 6 North - 1,120 2,083 265 -
9/30/94 San Antonio/Nacogdoches Rd - 571 1,060 250 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- -------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
8/17/94 New Orleans/I-10 672 1,115 1,787 550
8/17/94 Beaverton / S.W. Denny Road 568 1,490 2,058 732
8/17/94 Irwindale / Central Ave. 578 1,492 2,070 721
8/17/94 Suitland / St. Barnabas Rd 1,312 3,531 4,843 1,759
8/17/94 North Brunswick / How Lane 1,062 2,658 3,720 1,273
8/17/94 Lombard / 64th 726 1,890 2,616 930
8/17/94 Alsip / 27th 348 975 1,323 489
9/15/94 Huntsville / Old Monrovia Road 525 1,498 2,023 804
9/27/94 West Haven / Bull Hill Lane 1,964 4,720 6,684 1,457
9/30/94 San Francisco / Marin St. 1,371 3,443 4,814 1,654
9/30/94 Baltimore / Hillen Street 497 1,457 1,954 784
9/30/94 San Francisco /10th & Howard 1,221 3,176 4,397 1,563
9/30/94 Montebello / E. Whittier 329 988 1,317 508
9/30/94 Arlington / Collins 195 741 936 464
9/30/94 Miami / S.W. 119th Ave 562 1,376 1,938 655
9/30/94 Blackwood / Erial Road 663 1,686 2,349 820
9/30/94 Concord / Monument 936 2,615 3,551 1,350
9/30/94 Rochester / Lee Road 402 1,270 1,672 669
9/30/94 Houston / Bellaire 534 1,541 2,075 785
9/30/94 Austin / Lamar Blvd 669 1,732 2,401 857
9/30/94 Milwaukee / Lovers Lane Rd 402 1,202 1,604 583
9/30/94 Monterey / Del Rey Oaks 903 2,215 3,118 1,108
9/30/94 St. Petersburg / 66Th St. 366 1,059 1,425 564
9/30/94 Dayton Bch / N. Nova Road 339 908 1,247 495
9/30/94 Maple Shade / Route 38 852 2,241 3,093 1,100
9/30/94 Marlton / Route 73 N. 805 2,026 2,831 953
9/30/94 Naperville / E. Ogden Ave 585 1,525 2,110 745
9/30/94 Long Beach / South Street 1,524 4,008 5,532 1,918
9/30/94 Aloha / S.W. Shaw 690 1,750 2,440 864
9/30/94 Alexandria / S. Pickett 1,329 3,408 4,737 1,649
9/30/94 Houston / Highway 6 North 960 2,508 3,468 1,256
9/30/94 San Antonio/Nacogdoches Rd 489 1,392 1,881 722
F-52
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
9/30/94 San Ramon/San Ramon Valley - 1,530 2,840 519 -
9/30/94 San Rafael / Merrydale Rd - 1,705 3,165 223 -
9/30/94 San Antonio / Austin Hwy - 592 1,098 197 -
9/30/94 Sharonville / E. Kemper - 574 1,070 261 -
10/13/94 Davie / State Road 84 - 744 1,467 895 -
10/13/94 Carrollton / Marsh Lane - 770 1,437 1,419 -
10/31/94 Sherman Oaks / Van Nuys Blvd - 1,278 2,461 967 -
12/19/94 Salt Lake City/West North Temple - 490 917 (59) -
12/28/94 Milpitas / Watson - 1,575 2,925 311 -
12/28/94 Las Vegas / Jones Blvd - 1,208 2,243 185 -
12/28/94 Venice / Guthrie - 578 1,073 140 -
12/30/94 Apple Valley / Foliage Ave - 910 1,695 251 -
1/4/95 Chula Vista / Main Street - 735 1,802 197 -
1/5/95 Pantego / West Park - 315 735 156 -
1/12/95 Roswell / Alpharetta - 423 993 426 -
1/23/95 North Bergen / Tonne - 1,564 3,772 390 -
1/23/95 San Leandro / Hesperian - 734 1,726 147 -
1/24/95 Nashville / Elm Hill - 338 791 453 -
2/3/95 Reno / S. Mccarron Blvd - 1,080 2,537 207 -
2/15/95 Schiller Park - 1,688 3,939 408 -
2/15/95 Lansing - 1,514 3,534 229 -
2/15/95 Pleasanton - 1,257 2,932 130 -
2/15/95 LA/Sepulveda - 1,453 3,390 135 -
2/28/95 Decatur / Flat Shoal - 970 2,288 660 -
2/28/95 Smyrna / S. Cobb - 663 1,559 276 -
2/28/95 Downey / Bellflower - 916 2,158 200 -
2/28/95 Vallejo / Lincoln - 445 1,052 227 -
2/28/95 Lynnwood / 180th St - 516 1,205 253 -
2/28/95 Kent / Pacific Hwy - 728 1,711 160 -
2/28/95 Kirkland - 1,254 2,932 424 -
2/28/95 Federal Way/Pacific - 785 1,832 287 -
2/28/95 Tampa / S. Dale - 791 1,852 301 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
9/30/94 San Ramon/San Ramon Valley 1,311 3,578 4,889 1,753
9/30/94 San Rafael / Merrydale Rd 1,461 3,632 5,093 1,761
9/30/94 San Antonio / Austin Hwy 507 1,380 1,887 724
9/30/94 Sharonville / E. Kemper 492 1,413 1,905 745
10/13/94 Davie / State Road 84 637 2,469 3,106 1,232
10/13/94 Carrollton / Marsh Lane 1,022 2,604 3,626 1,212
10/31/94 Sherman Oaks / Van Nuys Blvd 1,423 3,283 4,706 1,588
12/19/94 Salt Lake City/West North Temple 385 963 1,348 289
12/28/94 Milpitas / Watson 1,350 3,461 4,811 1,647
12/28/94 Las Vegas / Jones Blvd 1,035 2,601 3,636 1,235
12/28/94 Venice / Guthrie 495 1,296 1,791 634
12/30/94 Apple Valley / Foliage Ave 780 2,076 2,856 1,026
1/4/95 Chula Vista / Main Street 735 1,999 2,734 1,030
1/5/95 Pantego / West Park 315 891 1,206 471
1/12/95 Roswell / Alpharetta 423 1,419 1,842 762
1/23/95 North Bergen / Tonne 1,551 4,175 5,726 1,982
1/23/95 San Leandro / Hesperian 734 1,873 2,607 875
1/24/95 Nashville / Elm Hill 337 1,245 1,582 722
2/3/95 Reno / S. Mccarron Blvd 1,080 2,744 3,824 1,289
2/15/95 Schiller Park 1,688 4,347 6,035 1,813
2/15/95 Lansing 1,514 3,763 5,277 1,529
2/15/95 Pleasanton 1,257 3,062 4,319 1,221
2/15/95 LA/Sepulveda 1,453 3,525 4,978 1,414
2/28/95 Decatur / Flat Shoal 970 2,948 3,918 1,455
2/28/95 Smyrna / S. Cobb 663 1,835 2,498 935
2/28/95 Downey / Bellflower 916 2,358 3,274 1,090
2/28/95 Vallejo / Lincoln 445 1,279 1,724 656
2/28/95 Lynnwood / 180th St 516 1,458 1,974 740
2/28/95 Kent / Pacific Hwy 728 1,871 2,599 893
2/28/95 Kirkland 1,254 3,356 4,610 1,523
2/28/95 Federal Way/Pacific 785 2,119 2,904 1,072
2/28/95 Tampa / S. Dale 791 2,153 2,944 1,055
F-53
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
2/28/95 Burlingame/Adrian Rd - 2,280 5,349 360 -
2/28/95 Miami / Cloverleaf - 606 1,426 310 -
2/28/95 Pinole / San Pablo - 639 1,502 307 -
2/28/95 South Gate / Firesto - 1,442 3,449 443 -
2/28/95 San Jose / Mabury - 892 2,088 176 -
2/28/95 La Puente / Valley Blvd - 591 1,390 256 -
2/28/95 San Jose / Capitol E - 1,215 2,852 153 -
2/28/95 Milwaukie / 40th Street - 576 1,388 123 -
2/28/95 Portland / N. Lombard - 812 1,900 226 -
2/28/95 Miami / Biscayne - 1,313 3,076 325 -
2/28/95 Chicago / Clark Street - 442 1,031 349 -
2/28/95 Palatine / Dundee - 698 1,643 544 -
2/28/95 Williamsville/Transit - 284 670 274 -
2/28/95 Amherst / Sheridan - 484 1,151 193 -
3/2/95 Everett / Highway 99 - 859 2,022 285 -
3/2/95 Burien / 1St Ave South - 763 1,783 480 -
3/2/95 Kent / South 238th Street - 763 1,783 272 -
3/31/95 Cheverly / Central Ave - 911 2,164 233 -
5/1/95 Sandy / S. State Street - 1,043 2,442 (242) -
5/3/95 Largo / Ulmerton Roa - 263 654 145 -
5/8/95 Fairfield/Western Street - 439 1,030 97 -
5/8/95 Dallas / W. Mockingbird - 1,440 3,371 176 -
5/8/95 East Point / Lakewood - 884 2,071 366 -
5/25/95 Falls Church / Gallows Rd - 350 835 9,335 -
6/12/95 Baltimore / Old Waterloo - 769 1,850 214 -
6/12/95 Pleasant Hill / Hookston - 766 1,848 138 -
6/12/95 Mountain View/Old Middlefield - 2,095 4,913 191 -
6/30/95 San Jose / Blossom Hill - 1,467 3,444 231 -
6/30/95 Fairfield / Kings Highway - 1,811 4,273 275 -
6/30/95 Pacoima / Paxton Street 617 840 1,976 211 -
6/30/95 Portland / Prescott - 647 1,509 220 -
6/30/95 St. Petersburg - 352 827 267 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
2/28/95 Burlingame/Adrian Rd 2,280 5,709 7,989 2,686
2/28/95 Miami / Cloverleaf 606 1,736 2,342 875
2/28/95 Pinole / San Pablo 639 1,809 2,448 900
2/28/95 South Gate / Firesto 1,442 3,892 5,334 1,919
2/28/95 San Jose / Mabury 892 2,264 3,156 1,045
2/28/95 La Puente / Valley Blvd 591 1,646 2,237 841
2/28/95 San Jose / Capitol E 1,215 3,005 4,220 1,401
2/28/95 Milwaukie / 40th Street 579 1,508 2,087 737
2/28/95 Portland / N. Lombard 812 2,126 2,938 1,038
2/28/95 Miami / Biscayne 1,313 3,401 4,714 1,455
2/28/95 Chicago / Clark Street 442 1,380 1,822 769
2/28/95 Palatine / Dundee 698 2,187 2,885 1,007
2/28/95 Williamsville/Transit 284 944 1,228 490
2/28/95 Amherst / Sheridan 484 1,344 1,828 678
3/2/95 Everett / Highway 99 859 2,307 3,166 1,119
3/2/95 Burien / 1St Ave South 763 2,263 3,026 1,061
3/2/95 Kent / South 238th Street 763 2,055 2,818 1,044
3/31/95 Cheverly / Central Ave 911 2,397 3,308 1,114
5/1/95 Sandy / S. State Street 923 2,320 3,243 680
5/3/95 Largo / Ulmerton Roa 262 800 1,062 430
5/8/95 Fairfield/Western Street 439 1,127 1,566 521
5/8/95 Dallas / W. Mockingbird 1,440 3,547 4,987 1,613
5/8/95 East Point / Lakewood 884 2,437 3,321 1,225
5/25/95 Falls Church / Gallows Rd 3,608 6,912 10,520 654
6/12/95 Baltimore / Old Waterloo 769 2,064 2,833 936
6/12/95 Pleasant Hill / Hookston 742 2,010 2,752 926
6/12/95 Mountain View/Old Middlefield 2,095 5,104 7,199 2,225
6/30/95 San Jose / Blossom Hill 1,467 3,675 5,142 1,659
6/30/95 Fairfield / Kings Highway 1,810 4,549 6,359 2,061
6/30/95 Pacoima / Paxton Street 840 2,187 3,027 988
6/30/95 Portland / Prescott 647 1,729 2,376 819
6/30/95 St. Petersburg 352 1,094 1,446 552
F-54
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
6/30/95 Dallas / Audelia Road - 1,166 2,725 876 -
6/30/95 Miami Gardens - 823 1,929 222 -
6/30/95 Grand Prairie / 19th - 566 1,329 158 -
6/30/95 Joliet / Jefferson Street - 501 1,181 214 -
6/30/95 Bridgeton / Pennridge - 283 661 200 -
6/30/95 Portland / S.E.92nd - 638 1,497 221 -
6/30/95 Houston / S.W. Freeway - 537 1,254 6,875 -
6/30/95 Milwaukee / Brown - 358 849 257 -
6/30/95 Orlando / W. Oak Ridge - 698 1,642 274 -
6/30/95 Lauderhill / State Road - 644 1,508 192 -
6/30/95 Orange Park /Blanding Blvd - 394 918 231 -
6/30/95 St. Petersburg /Joe'S Creek - 704 1,642 204 -
6/30/95 St. Louis / Page Service Drive - 531 1,241 195 -
6/30/95 Independence /E. 42nd - 438 1,023 187 -
6/30/95 Cherry Hill / Dobbs Lane - 716 1,676 218 -
6/30/95 Edgewater Park / Route 130 - 683 1,593 132 -
6/30/95 Beaverton / S.W. 110 - 572 1,342 206 -
6/30/95 Markham / W. 159Th Place - 230 539 188 -
6/30/95 Houston / N.W. Freeway - 447 1,066 150 -
6/30/95 Portland / Gantenbein - 537 1,262 240 -
6/30/95 Upper Chichester/Market St. - 569 1,329 164 -
6/30/95 Fort Worth / Hwy 80 - 379 891 131 -
6/30/95 Greenfield/ S. 108th - 728 1,707 299 -
6/30/95 Altamonte Springs - 566 1,326 208 -
6/30/95 Seattle / Delridge Way - 760 1,779 270 -
6/30/95 Elmhurst / Lake Frontage Rd - 748 1,758 226 -
6/30/95 Los Angeles / Beverly Blvd - 787 1,886 426 -
6/30/95 Lawrenceville / Brunswick - 841 1,961 183 -
6/30/95 Richmond / Carlson - 865 2,025 317 -
6/30/95 Liverpool / Oswego Road - 545 1,279 325 -
6/30/95 Rochester / East Ave - 578 1,375 464 -
6/30/95 Pasadena / E. Beltway - 757 1,767 159 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
6/30/95 Dallas / Audelia Road 1,166 3,601 4,767 1,921
6/30/95 Miami Gardens 823 2,151 2,974 997
6/30/95 Grand Prairie / 19th 566 1,487 2,053 704
6/30/95 Joliet / Jefferson Street 501 1,395 1,896 677
6/30/95 Bridgeton / Pennridge 283 861 1,144 454
6/30/95 Portland / S.E.92nd 638 1,718 2,356 817
6/30/95 Houston / S.W. Freeway 1,140 7,526 8,666 1,522
6/30/95 Milwaukee / Brown 358 1,106 1,464 549
6/30/95 Orlando / W. Oak Ridge 697 1,917 2,614 918
6/30/95 Lauderhill / State Road 644 1,700 2,344 788
6/30/95 Orange Park /Blanding Blvd 394 1,149 1,543 590
6/30/95 St. Petersburg /Joe'S Creek 703 1,847 2,550 869
6/30/95 St. Louis / Page Service Drive 531 1,436 1,967 693
6/30/95 Independence /E. 42nd 438 1,210 1,648 594
6/30/95 Cherry Hill / Dobbs Lane 715 1,895 2,610 849
6/30/95 Edgewater Park / Route 130 683 1,725 2,408 781
6/30/95 Beaverton / S.W. 110 572 1,548 2,120 729
6/30/95 Markham / W. 159Th Place 229 728 957 364
6/30/95 Houston / N.W. Freeway 447 1,216 1,663 592
6/30/95 Portland / Gantenbein 537 1,502 2,039 712
6/30/95 Upper Chichester/Market St. 569 1,493 2,062 681
6/30/95 Fort Worth / Hwy 80 379 1,022 1,401 502
6/30/95 Greenfield/ S. 108th 727 2,007 2,734 955
6/30/95 Altamonte Springs 566 1,534 2,100 692
6/30/95 Seattle / Delridge Way 760 2,049 2,809 948
6/30/95 Elmhurst / Lake Frontage Rd 748 1,984 2,732 909
6/30/95 Los Angeles / Beverly Blvd 787 2,312 3,099 1,167
6/30/95 Lawrenceville / Brunswick 841 2,144 2,985 950
6/30/95 Richmond / Carlson 865 2,342 3,207 1,139
6/30/95 Liverpool / Oswego Road 545 1,604 2,149 788
6/30/95 Rochester / East Ave 578 1,839 2,417 798
6/30/95 Pasadena / E. Beltway 757 1,926 2,683 884
F-55
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
7/13/95 Tarzana / Burbank Blvd - 2,895 6,823 431 -
7/31/95 Orlando / Lakehurst - 450 1,063 169 -
7/31/95 Livermore / Portola - 921 2,157 212 -
7/31/95 San Jose / Tully - 912 2,137 502 -
7/31/95 Mission Bay - 1,617 3,785 567 -
7/31/95 Las Vegas / Decatur - 1,147 2,697 354 -
7/31/95 Pleasanton / Stanley - 1,624 3,811 245 -
7/31/95 Castro Valley / Grove - 757 1,772 105 -
7/31/95 Honolulu / Kaneohe - 1,215 2,846 2,151 -
7/31/95 Chicago / Wabash Ave - 645 1,535 685 -
7/31/95 Springfield / Parker - 765 1,834 210 -
7/31/95 Huntington Bch/Gotham - 765 1,808 185 -
7/31/95 Tucker / Lawrenceville - 630 1,480 217 -
7/31/95 Marietta / Canton Road - 600 1,423 295 -
7/31/95 Wheeling / Hintz - 450 1,054 173 -
8/1/95 Gresham / Division - 607 1,428 107 -
8/1/95 Tucker / Lawrenceville - 600 1,405 359 -
8/1/95 Decatur / Covington - 720 1,694 268 -
8/11/95 Studio City/Ventura - 1,285 3,015 272 -
8/12/95 Smyrna / Hargrove Road - 1,020 3,038 489 -
9/1/95 Hayward / Mission Blvd - 1,020 2,383 267 -
9/1/95 Park City / Belvider - 600 1,405 138 -
9/1/95 New Castle/Dupont Parkway - 990 2,369 193 -
9/1/95 Las Vegas / Rainbow - 1,050 2,459 123 -
9/1/95 Mountain View / Reng - 945 2,216 163 -
9/1/95 Venice / Cadillac - 930 2,182 269 -
9/1/95 Simi Valley /Los Angeles - 1,590 3,724 309 -
9/1/95 Spring Valley/Foreman - 1,095 2,572 366 -
9/6/95 Darien / Frontage Road - 975 2,321 130 -
9/30/95 Whittier - 215 384 199 781
9/30/95 Van Nuys/Balboa - 295 657 60 1,148
9/30/95 Huntington Beach - 176 321 125 738
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
7/13/95 Tarzana / Burbank Blvd 2,895 7,254 10,149 3,328
7/31/95 Orlando / Lakehurst 450 1,232 1,682 585
7/31/95 Livermore / Portola 921 2,369 3,290 1,089
7/31/95 San Jose / Tully 912 2,639 3,551 1,184
7/31/95 Mission Bay 1,617 4,352 5,969 2,051
7/31/95 Las Vegas / Decatur 1,147 3,051 4,198 1,436
7/31/95 Pleasanton / Stanley 1,624 4,056 5,680 1,824
7/31/95 Castro Valley / Grove 757 1,877 2,634 835
7/31/95 Honolulu / Kaneohe 2,133 4,079 6,212 1,652
7/31/95 Chicago / Wabash Ave 645 2,220 2,865 1,294
7/31/95 Springfield / Parker 765 2,044 2,809 931
7/31/95 Huntington Bch/Gotham 765 1,993 2,758 931
7/31/95 Tucker / Lawrenceville 630 1,697 2,327 812
7/31/95 Marietta / Canton Road 600 1,718 2,318 844
7/31/95 Wheeling / Hintz 450 1,227 1,677 574
8/1/95 Gresham / Division 607 1,535 2,142 703
8/1/95 Tucker / Lawrenceville 600 1,764 2,364 864
8/1/95 Decatur / Covington 720 1,962 2,682 924
8/11/95 Studio City/Ventura 1,285 3,287 4,572 1,439
8/12/95 Smyrna / Hargrove Road 1,020 3,527 4,547 1,524
9/1/95 Hayward / Mission Blvd 1,020 2,650 3,670 1,157
9/1/95 Park City / Belvider 600 1,543 2,143 688
9/1/95 New Castle/Dupont Parkway 990 2,562 3,552 1,151
9/1/95 Las Vegas / Rainbow 1,050 2,582 3,632 1,138
9/1/95 Mountain View / Reng 945 2,379 3,324 1,059
9/1/95 Venice / Cadillac 930 2,451 3,381 1,133
9/1/95 Simi Valley /Los Angeles 1,590 4,033 5,623 1,768
9/1/95 Spring Valley/Foreman 1,095 2,938 4,033 1,238
9/6/95 Darien / Frontage Road 975 2,451 3,426 1,097
9/30/95 Whittier 215 1,364 1,579 666
9/30/95 Van Nuys/Balboa 295 1,865 2,160 956
9/30/95 Huntington Beach 176 1,184 1,360 594
F-56
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
9/30/95 Monterey Park - 124 346 (38) 782
9/30/95 Downey - 191 317 113 825
9/30/95 Del Amo - 474 742 418 922
9/30/95 Carson - 375 735 397 428
9/30/95 Van Nuys/Balboa Blvd - 1,920 4,504 627 -
10/31/95 San Lorenzo /Hesperian - 1,590 3,716 399 -
10/31/95 Chicago / W. 47th Street - 300 708 270 -
10/31/95 Los Angeles / Eastern - 455 1,070 176 -
11/15/95 Costa Mesa - 522 1,218 159 -
11/15/95 Plano / E. 14th - 705 1,646 102 -
11/15/95 Citrus Heights/Sunrise - 520 1,213 148 -
11/15/95 Modesto/Briggsmore Ave - 470 1,097 124 -
11/15/95 So San Francisco/Spruce - 1,905 4,444 459 -
11/15/95 Pacheco/Buchanan Circle - 1,681 3,951 327 -
11/16/95 Palm Beach Gardens - 657 1,540 127 -
11/16/95 Delray Beach - 600 1,407 156 -
1/1/96 Bensenville/York Rd - 667 1,602 251 895
1/1/96 Louisville/Preston - 211 1,060 96 594
1/1/96 San Jose/Aborn Road - 615 1,342 98 759
1/1/96 Englewood/Federal - 481 1,395 150 777
1/1/96 W. Hollywood/Santa Monica - 3,415 4,577 305 2,552
1/1/96 Orland Hills/W. 159th - 917 2,392 350 1,342
1/1/96 Merrionette Park - 818 2,020 167 1,122
1/1/96 Denver/S Quebec - 1,849 1,941 203 1,086
1/1/96 Tigard/S.W. Pacific - 633 1,206 140 705
1/1/96 Coram/Middle Count - 507 1,421 150 792
1/1/96 Houston/FM 1960 - 635 1,294 233 783
1/1/96 Kent/Military Trail - 409 1,670 201 956
1/1/96 Turnersville/Black - 165 1,360 145 758
1/1/96 Sewell/Rts. 553 - 323 1,138 134 658
1/1/96 Maple Shade/Fellowship - 331 1,421 145 803
1/1/96 Hyattsville/Kenilworth - 509 1,757 172 1,000
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
9/30/95 Monterey Park 124 1,090 1,214 611
9/30/95 Downey 191 1,255 1,446 634
9/30/95 Del Amo 474 2,082 2,556 1,079
9/30/95 Carson 375 1,560 1,935 627
9/30/95 Van Nuys/Balboa Blvd 1,920 5,131 7,051 1,954
10/31/95 San Lorenzo /Hesperian 1,590 4,115 5,705 1,651
10/31/95 Chicago / W. 47th Street 300 978 1,278 448
10/31/95 Los Angeles / Eastern 454 1,247 1,701 519
11/15/95 Costa Mesa 522 1,377 1,899 542
11/15/95 Plano / E. 14th 705 1,748 2,453 732
11/15/95 Citrus Heights/Sunrise 520 1,361 1,881 607
11/15/95 Modesto/Briggsmore Ave 470 1,221 1,691 535
11/15/95 So San Francisco/Spruce 1,904 4,904 6,808 2,063
11/15/95 Pacheco/Buchanan Circle 1,681 4,278 5,959 1,816
11/16/95 Palm Beach Gardens 657 1,667 2,324 746
11/16/95 Delray Beach 600 1,563 2,163 715
1/1/96 Bensenville/York Rd 667 2,748 3,415 1,040
1/1/96 Louisville/Preston 211 1,750 1,961 628
1/1/96 San Jose/Aborn Road 615 2,199 2,814 824
1/1/96 Englewood/Federal 481 2,322 2,803 888
1/1/96 W. Hollywood/Santa Monica 3,415 7,434 10,849 2,673
1/1/96 Orland Hills/W. 159th 917 4,084 5,001 1,529
1/1/96 Merrionette Park 818 3,309 4,127 1,194
1/1/96 Denver/S Quebec 1,849 3,230 5,079 1,194
1/1/96 Tigard/S.W. Pacific 633 2,051 2,684 760
1/1/96 Coram/Middle Count 507 2,363 2,870 838
1/1/96 Houston/FM 1960 635 2,310 2,945 891
1/1/96 Kent/Military Trail 409 2,827 3,236 1,022
1/1/96 Turnersville/Black 165 2,263 2,428 828
1/1/96 Sewell/Rts. 553 323 1,930 2,253 711
1/1/96 Maple Shade/Fellowship 331 2,369 2,700 843
1/1/96 Hyattsville/Kenilworth 509 2,929 3,438 1,039
F-57
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
1/1/96 Waterbury/Captain - 434 2,089 209 1,162
1/1/96 Bedford Hts/Miles - 835 1,577 305 929
1/1/96 Livonia/Newburgh - 635 1,407 122 783
1/1/96 Sunland/Sunland Blvd. - 631 1,965 134 1,090
1/1/96 Des Moines - 448 1,350 115 768
1/1/96 Oxonhill/Indianhead - 772 2,017 332 1,141
1/1/96 Sacramento/N. 16th - 582 2,610 181 1,466
1/1/96 Houston/Westheimer - 1,508 2,274 287 1,304
1/1/96 San Pablo/San Pablo - 565 1,232 157 713
1/1/96 Bowie/Woodcliff - 718 2,336 220 1,292
1/1/96 Milwaukee/S. 84th - 444 1,868 337 1,091
1/1/96 Clinton/Malcolm Road - 593 2,123 261 1,187
1/3/96 San Gabriel - 1,005 2,345 259 -
1/5/96 San Francisco, Second St. - 2,880 6,814 215 -
1/12/96 San Antonio, TX - 912 2,170 91 -
2/29/96 Naples, FL/Old US 41 - 849 2,016 242 -
2/29/96 Lake Worth, FL/S. Military Tr. - 1,782 4,723 44 -
2/29/96 Brandon, FL/W Brandon Blvd. - 1,928 4,523 1,004 -
2/29/96 Coral Springs FL/W Sample Rd. - 3,480 8,148 (115) -
2/29/96 Delray Beach FL/S Military Tr. - 941 2,222 174 -
2/29/96 Jupiter FL/Military Trail - 2,280 5,347 245 -
2/29/96 Lakeworth FL/Lake Worth Rd - 737 1,742 140 -
2/29/96 New Port Richey/State Rd 54 - 857 2,025 265 -
2/29/96 Sanford FL/S Orlando Dr - 734 1,749 2,038 -
3/8/96 Atlanta/Roswell - 898 3,649 125 -
3/31/96 Oakland - 1,065 2,764 440 -
3/31/96 Saratoga - 2,339 6,081 226 -
3/31/96 Randallstown - 1,359 3,527 313 -
3/31/96 Plano - 650 1,682 127 -
3/31/96 Houston - 543 1,402 131 -
3/31/96 Irvine - 1,920 4,975 728 -
3/31/96 Milwaukee - 542 1,402 158 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
1/1/96 Waterbury/Captain 434 3,460 3,894 1,097
1/1/96 Bedford Hts/Miles 835 2,811 3,646 1,070
1/1/96 Livonia/Newburgh 635 2,312 2,947 820
1/1/96 Sunland/Sunland Blvd. 631 3,189 3,820 1,085
1/1/96 Des Moines 448 2,233 2,681 816
1/1/96 Oxonhill/Indianhead 772 3,490 4,262 1,250
1/1/96 Sacramento/N. 16th 582 4,257 4,839 1,270
1/1/96 Houston/Westheimer 1,508 3,865 5,373 1,418
1/1/96 San Pablo/San Pablo 565 2,102 2,667 747
1/1/96 Bowie/Woodcliff 718 3,848 4,566 1,260
1/1/96 Milwaukee/S. 84th 444 3,296 3,740 1,154
1/1/96 Clinton/Malcolm Road 593 3,571 4,164 1,199
1/3/96 San Gabriel 1,005 2,604 3,609 1,174
1/5/96 San Francisco, Second St. 2,880 7,029 9,909 2,939
1/12/96 San Antonio, TX 912 2,261 3,173 945
2/29/96 Naples, FL/Old US 41 849 2,258 3,107 955
2/29/96 Lake Worth, FL/S. Military Tr. 1,782 4,767 6,549 1,966
2/29/96 Brandon, FL/W Brandon Blvd. 1,928 5,527 7,455 2,716
2/29/96 Coral Springs FL/W Sample Rd. 3,480 8,033 11,513 3,273
2/29/96 Delray Beach FL/S Military Tr. 940 2,397 3,337 1,041
2/29/96 Jupiter FL/Military Trail 2,280 5,592 7,872 2,337
2/29/96 Lakeworth FL/Lake Worth Rd 736 1,883 2,619 817
2/29/96 New Port Richey/State Rd 54 856 2,291 3,147 966
2/29/96 Sanford FL/S Orlando Dr 975 3,546 4,521 1,470
3/8/96 Atlanta/Roswell 898 3,774 4,672 1,535
3/31/96 Oakland 1,065 3,204 4,269 1,331
3/31/96 Saratoga 2,339 6,307 8,646 2,526
3/31/96 Randallstown 1,359 3,840 5,199 1,624
3/31/96 Plano 650 1,809 2,459 776
3/31/96 Houston 543 1,533 2,076 658
3/31/96 Irvine 1,920 5,703 7,623 2,330
3/31/96 Milwaukee 542 1,560 2,102 664
F-58
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/31/96 Carrollton - 578 1,495 106 -
3/31/96 Torrance - 1,415 3,675 180 -
3/31/96 Jacksonville - 713 1,845 224 -
3/31/96 Dallas - 315 810 1,744 -
3/31/96 Houston - 669 1,724 553 -
3/31/96 Baltimore - 842 2,180 253 -
3/31/96 New Haven - 740 1,907 (166) -
4/1/96 Chicago/Pulaski - 764 1,869 200 -
4/1/96 Las Vegas/Desert Inn - 1,115 2,729 178 -
4/1/96 Torrance/Crenshaw - 916 2,243 138 -
4/1/96 Weymouth - 485 1,187 187 -
4/1/96 St. Louis/Barrett Station Road - 630 1,542 113 -
4/1/96 Rockville/Randolph - 1,153 2,823 221 -
4/1/96 Simi Valley/East Street - 970 2,374 73 -
4/1/96 Houston/Westheimer - 1,390 3,402 6,228 -
4/3/96 Naples - 1,187 2,809 271 -
6/26/96 Boca Raton - 3,180 7,468 275 -
6/28/96 Venice - 669 1,575 172 -
6/30/96 Las Vegas - 921 2,155 349 -
6/30/96 Bedford Park - 606 1,419 256 -
6/30/96 Los Angeles - 692 1,616 122 -
6/30/96 Silver Spring - 1,513 3,535 278 -
6/30/96 Newark - 1,051 2,458 124 -
6/30/96 Brooklyn - 783 1,830 528 -
7/2/96 Glen Burnie/Furnace Br Rd - 1,755 4,150 676 -
7/22/96 Lakewood/W Hampton - 717 2,092 84 -
8/13/96 Norcross/Holcomb Bridge Rd - 955 3,117 161 -
9/5/96 Spring Valley/S Pascack rd - 1,260 2,966 581 -
9/16/96 Dallas/Royal Lane - 1,008 2,426 222 -
9/16/96 Colorado Springs/Tomah Drive - 731 1,759 123 -
9/16/96 Lewisville/S. Stemmons - 603 1,451 145 -
9/16/96 Las Vegas/Boulder Hwy. - 947 2,279 394 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/31/96 Carrollton 578 1,601 2,179 683
3/31/96 Torrance 1,415 3,855 5,270 1,589
3/31/96 Jacksonville 713 2,069 2,782 913
3/31/96 Dallas 315 2,554 2,869 719
3/31/96 Houston 669 2,277 2,946 1,046
3/31/96 Baltimore 842 2,433 3,275 1,039
3/31/96 New Haven 667 1,814 2,481 794
4/1/96 Chicago/Pulaski 764 2,069 2,833 800
4/1/96 Las Vegas/Desert Inn 1,115 2,907 4,022 1,127
4/1/96 Torrance/Crenshaw 916 2,381 3,297 900
4/1/96 Weymouth 485 1,374 1,859 504
4/1/96 St. Louis/Barrett Station Road 630 1,655 2,285 630
4/1/96 Rockville/Randolph 1,153 3,044 4,197 1,153
4/1/96 Simi Valley/East Street 970 2,447 3,417 916
4/1/96 Houston/Westheimer 1,390 9,630 11,020 3,052
4/3/96 Naples 1,186 3,081 4,267 1,318
6/26/96 Boca Raton 3,180 7,743 10,923 3,171
6/28/96 Venice 669 1,747 2,416 757
6/30/96 Las Vegas 921 2,504 3,425 1,032
6/30/96 Bedford Park 606 1,675 2,281 739
6/30/96 Los Angeles 691 1,739 2,430 719
6/30/96 Silver Spring 1,513 3,813 5,326 1,599
6/30/96 Newark 1,051 2,582 3,633 1,045
6/30/96 Brooklyn 783 2,358 3,141 1,126
7/2/96 Glen Burnie/Furnace Br Rd 1,755 4,826 6,581 1,783
7/22/96 Lakewood/W Hampton 716 2,177 2,893 848
8/13/96 Norcross/Holcomb Bridge Rd 954 3,279 4,233 1,294
9/5/96 Spring Valley/S Pascack rd 1,260 3,547 4,807 1,468
9/16/96 Dallas/Royal Lane 1,007 2,649 3,656 1,082
9/16/96 Colorado Springs/Tomah Drive 730 1,883 2,613 747
9/16/96 Lewisville/S. Stemmons 603 1,596 2,199 660
9/16/96 Las Vegas/Boulder Hwy. 947 2,673 3,620 1,100
F-59
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
9/16/96 Sarasota/S. Tamiami Trail - 584 1,407 1,456 -
9/16/96 Willow Grove/Maryland Road - 673 1,620 134 -
9/16/96 Houston/W. Montgomery Rd. - 524 1,261 204 -
9/16/96 Denver/W. Hampden - 1,084 2,609 230 -
9/16/96 Littleton/Southpark Way - 922 2,221 362 -
9/16/96 Petaluma/Baywood Drive - 861 2,074 175 -
9/16/96 Canoga Park/Sherman Way - 1,543 3,716 595 -
9/16/96 Jacksonville/South Lane Ave. - 554 1,334 246 -
9/16/96 Newport News/Warwick Blvd. - 575 1,385 189 -
9/16/96 Greenbrook/Route 22 - 1,227 2,954 605 -
9/16/96 Monsey/Route 59 - 1,068 2,572 181 -
9/16/96 Santa Rosa/Santa Rosa Ave. - 575 1,385 130 -
9/16/96 Fort Worth/Brentwood - 823 2,016 163 -
9/16/96 Glendale/San Fernando Road - 2,500 6,124 215 -
9/16/96 Houston/Harwin - 549 1,344 178 -
9/16/96 Irvine/Cowan Street - 1,890 4,631 348 -
9/16/96 Fairfield/Dixie Highway - 427 1,046 148 -
9/16/96 Mesa/Country Club Drive - 701 1,718 385 -
9/16/96 San Francisco/Geary Blvd. - 2,957 7,244 411 -
9/16/96 Houston/Gulf Freeway - 701 1,718 4,972 -
9/16/96 Las Vegas/S. Decatur Blvd. - 1,037 2,539 262 -
9/16/96 Tempe/McKellips Road - 823 1,972 277 -
9/16/96 Richland Hills/Airport Fwy. - 473 1,158 200 -
10/11/96 Hampton/Pembroke Road - 1,080 2,346 (176) -
10/11/96 Norfolk/Widgeon Road - 1,110 2,405 (301) -
10/11/96 Richmond/Bloom Lane - 1,188 2,512 (117) -
10/11/96 Virginia Beach/Southern Blvd - 282 610 263 -
10/11/96 Chesapeake/Military Hwy - 912 1,974 442 -
10/11/96 Richmond/Midlothian Park - 762 1,588 535 -
10/11/96 Roanoke/Peters Creek Road - 819 1,776 279 -
10/11/96 Orlando/E Oakridge Rd - 927 2,020 274 -
10/11/96 Orlando/South Hwy 17-92 - 1,170 2,549 204 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
9/16/96 Sarasota/S. Tamiami Trail 584 2,863 3,447 723
9/16/96 Willow Grove/Maryland Road 673 1,754 2,427 683
9/16/96 Houston/W. Montgomery Rd. 524 1,465 1,989 629
9/16/96 Denver/W. Hampden 1,084 2,839 3,923 1,108
9/16/96 Littleton/Southpark Way 922 2,583 3,505 1,070
9/16/96 Petaluma/Baywood Drive 861 2,249 3,110 902
9/16/96 Canoga Park/Sherman Way 1,543 4,311 5,854 1,789
9/16/96 Jacksonville/South Lane Ave. 554 1,580 2,134 677
9/16/96 Newport News/Warwick Blvd. 575 1,574 2,149 655
9/16/96 Greenbrook/Route 22 1,227 3,559 4,786 1,360
9/16/96 Monsey/Route 59 1,068 2,753 3,821 1,066
9/16/96 Santa Rosa/Santa Rosa Ave. 575 1,515 2,090 604
9/16/96 Fort Worth/Brentwood 823 2,179 3,002 867
9/16/96 Glendale/San Fernando Road 2,500 6,339 8,839 2,403
9/16/96 Houston/Harwin 549 1,522 2,071 630
9/16/96 Irvine/Cowan Street 1,890 4,979 6,869 1,915
9/16/96 Fairfield/Dixie Highway 427 1,194 1,621 474
9/16/96 Mesa/Country Club Drive 701 2,103 2,804 815
9/16/96 San Francisco/Geary Blvd. 2,957 7,655 10,612 2,946
9/16/96 Houston/Gulf Freeway 701 6,690 7,391 1,430
9/16/96 Las Vegas/S. Decatur Blvd. 1,037 2,801 3,838 1,072
9/16/96 Tempe/McKellips Road 823 2,249 3,072 914
9/16/96 Richland Hills/Airport Fwy. 473 1,358 1,831 586
10/11/96 Hampton/Pembroke Road 914 2,336 3,250 703
10/11/96 Norfolk/Widgeon Road 908 2,306 3,214 700
10/11/96 Richmond/Bloom Lane 995 2,588 3,583 804
10/11/96 Virginia Beach/Southern Blvd 282 873 1,155 441
10/11/96 Chesapeake/Military Hwy 912 2,416 3,328 1,085
10/11/96 Richmond/Midlothian Park 762 2,123 2,885 1,040
10/11/96 Roanoke/Peters Creek Road 819 2,055 2,874 885
10/11/96 Orlando/E Oakridge Rd 927 2,294 3,221 938
10/11/96 Orlando/South Hwy 17-92 1,170 2,753 3,923 1,107
F-60
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/25/96 Austin/Renelli - 1,710 3,990 303 -
10/25/96 Austin/Santiago - 900 2,100 214 -
10/25/96 Dallas/East N.W. Highway - 698 1,628 194 -
10/25/96 Dallas/Denton Drive - 900 2,100 153 -
10/25/96 Houston/Hempstead - 518 1,207 438 -
10/25/96 Pasadena/So. Shaver - 420 980 420 -
10/31/96 Houston/Joel Wheaton Rd - 465 1,085 204 -
10/31/96 Mt Holly/541 Bypass - 360 840 291 -
11/13/96 Town East/Mesquite - 330 770 179 -
11/14/96 Bossier City LA - 633 1,488 (104) -
12/5/96 Lake Forest/Bake Parkway - 971 2,173 579 -
12/16/96 Cherry Hill/Old Cuthbert - 645 1,505 642 -
12/16/96 Oklahoma City/SW 74th - 375 875 115 -
12/16/96 Oklahoma City/S Santa Fe - 360 840 167 -
12/16/96 Oklahoma City/S. May - 360 840 143 -
12/16/96 Arlington/S. Watson Rd. - 930 2,170 566 -
12/16/96 Richardson/E. Arapaho - 1,290 3,010 436 -
12/23/96 Eagle Rock/Colorado - 330 813 422 -
12/23/96 Upper Darby/Lansdowne - 899 2,272 264 -
12/23/96 Plymouth Meeting /Chemical - 1,109 2,802 206 -
12/23/96 Philadelphia/Byberry - 1,019 2,575 224 -
12/23/96 Ft. Lauderdale/State Road - 1,199 3,030 265 -
12/23/96 Englewood/Costilla - 1,739 4,393 181 -
12/23/96 Lilburn/Beaver Ruin Road - 600 1,515 176 -
12/23/96 Carmichael/Fair Oaks - 809 2,045 214 -
12/23/96 Portland/Division Street - 989 2,499 165 -
12/23/96 Napa/Industrial - 660 1,666 158 -
12/23/96 Wheatridge/W. 44th Avenue - 1,439 3,636 184 -
12/23/96 Las Vegas/Charleston - 1,049 2,651 184 -
12/23/96 Las Vegas/South Arvill - 929 2,348 221 -
12/23/96 Los Angeles/Santa Monica - 3,328 8,407 307 -
12/23/96 Warren/Schoenherr Rd. - 749 1,894 182 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/25/96 Austin/Renelli 1,710 4,293 6,003 1,697
10/25/96 Austin/Santiago 900 2,314 3,214 962
10/25/96 Dallas/East N.W. Highway 697 1,823 2,520 759
10/25/96 Dallas/Denton Drive 900 2,253 3,153 904
10/25/96 Houston/Hempstead 517 1,646 2,163 699
10/25/96 Pasadena/So. Shaver 420 1,400 1,820 580
10/31/96 Houston/Joel Wheaton Rd 465 1,289 1,754 557
10/31/96 Mt Holly/541 Bypass 360 1,131 1,491 499
11/13/96 Town East/Mesquite 330 949 1,279 394
11/14/96 Bossier City LA 557 1,460 2,017 456
12/5/96 Lake Forest/Bake Parkway 973 2,750 3,723 940
12/16/96 Cherry Hill/Old Cuthbert 645 2,147 2,792 941
12/16/96 Oklahoma City/SW 74th 375 990 1,365 413
12/16/96 Oklahoma City/S Santa Fe 360 1,007 1,367 444
12/16/96 Oklahoma City/S. May 360 983 1,343 431
12/16/96 Arlington/S. Watson Rd. 930 2,736 3,666 1,167
12/16/96 Richardson/E. Arapaho 1,290 3,446 4,736 1,347
12/23/96 Eagle Rock/Colorado 444 1,121 1,565 314
12/23/96 Upper Darby/Lansdowne 899 2,536 3,435 1,008
12/23/96 Plymouth Meeting /Chemical 1,109 3,008 4,117 798
12/23/96 Philadelphia/Byberry 1,019 2,799 3,818 1,090
12/23/96 Ft. Lauderdale/State Road 1,199 3,295 4,494 1,289
12/23/96 Englewood/Costilla 1,739 4,574 6,313 1,729
12/23/96 Lilburn/Beaver Ruin Road 600 1,691 2,291 697
12/23/96 Carmichael/Fair Oaks 809 2,259 3,068 922
12/23/96 Portland/Division Street 989 2,664 3,653 1,041
12/23/96 Napa/Industrial 659 1,825 2,484 737
12/23/96 Wheatridge/W. 44th Avenue 1,439 3,820 5,259 1,465
12/23/96 Las Vegas/Charleston 1,049 2,835 3,884 1,090
12/23/96 Las Vegas/South Arvill 929 2,569 3,498 971
12/23/96 Los Angeles/Santa Monica 3,327 8,715 12,042 3,282
12/23/96 Warren/Schoenherr Rd. 749 2,076 2,825 843
F-61
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
12/23/96 Portland/N.E. 71st Avenue - 869 2,196 288 -
12/23/96 Seattle/Pacific Hwy. South - 689 1,742 194 -
12/23/96 Broadview/S. 25th Avenue - 1,289 3,257 345 -
12/23/96 Winter Springs/W. St. Rte 434 - 689 1,742 131 -
12/23/96 Tampa/15th Street - 420 1,060 335 -
12/23/96 Pompano Beach/S. Dixie Hwy. - 930 2,292 378 -
12/23/96 Overland Park/Mastin - 990 2,440 3,274 -
12/23/96 Auburn/R Street - 690 1,700 218 -
12/23/96 Federal Heights/W. 48th Ave. - 720 1,774 189 -
12/23/96 Decatur/Covington - 930 2,292 249 -
12/23/96 Forest Park/Jonesboro Rd. - 540 1,331 168 -
12/23/96 Mangonia Park/Australian Ave. - 840 2,070 78 -
12/23/96 Whittier/Colima - 540 1,331 104 -
12/23/96 Kent/Pacific Hwy South - 930 2,292 195 -
12/23/96 Topeka/8th Street - 150 370 159 -
12/23/96 Denver East Evans - 1,740 4,288 217 -
12/23/96 Pittsburgh/California Ave. - 630 1,552 119 -
12/23/96 Ft. Lauderdale/Powerline - 660 1,626 324 -
12/23/96 Philadelphia/Oxford - 900 2,218 205 -
12/23/96 Dallas/Lemmon Ave. - 1,710 4,214 171 -
12/23/96 Alsip/115th Street - 750 1,848 4,583 -
12/23/96 Green Acres/Jog Road - 600 1,479 74 -
12/23/96 Pompano Beach/Sample Road - 1,320 3,253 55 -
12/23/96 Wyndmoor/Ivy Hill - 2,160 5,323 278 -
12/23/96 W. Palm Beach/Belvedere - 960 2,366 211 -
12/23/96 Renton 174th St. - 960 2,366 259 -
12/23/96 Sacramento/Northgate - 1,021 2,647 158 -
12/23/96 Phoenix/19th Avenue - 991 2,569 238 -
12/23/96 Bedford Park/Cicero - 1,321 3,426 348 -
12/23/96 Lake Worth/Lk Worth - 1,111 2,880 241 -
12/23/96 Arlington/Algonquin - 991 2,569 637 -
12/23/96 Seattle/15th Avenue - 781 2,024 260 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
12/23/96 Portland/N.E. 71st Avenue 869 2,484 3,353 1,004
12/23/96 Seattle/Pacific Hwy. South 689 1,936 2,625 814
12/23/96 Broadview/S. 25th Avenue 1,289 3,602 4,891 1,424
12/23/96 Winter Springs/W. St. Rte 434 689 1,873 2,562 734
12/23/96 Tampa/15th Street 420 1,395 1,815 611
12/23/96 Pompano Beach/S. Dixie Hwy. 930 2,670 3,600 1,115
12/23/96 Overland Park/Mastin 1,306 5,398 6,704 1,478
12/23/96 Auburn/R Street 690 1,918 2,608 794
12/23/96 Federal Heights/W. 48th Ave. 720 1,963 2,683 746
12/23/96 Decatur/Covington 930 2,541 3,471 1,015
12/23/96 Forest Park/Jonesboro Rd. 540 1,499 2,039 630
12/23/96 Mangonia Park/Australian Ave. 840 2,148 2,988 857
12/23/96 Whittier/Colima 540 1,435 1,975 566
12/23/96 Kent/Pacific Hwy South 930 2,487 3,417 985
12/23/96 Topeka/8th Street 150 529 679 262
12/23/96 Denver East Evans 1,740 4,505 6,245 1,736
12/23/96 Pittsburgh/California Ave. 630 1,671 2,301 670
12/23/96 Ft. Lauderdale/Powerline 660 1,950 2,610 866
12/23/96 Philadelphia/Oxford 900 2,423 3,323 952
12/23/96 Dallas/Lemmon Ave. 1,710 4,385 6,095 1,679
12/23/96 Alsip/115th Street 750 6,431 7,181 1,233
12/23/96 Green Acres/Jog Road 600 1,553 2,153 634
12/23/96 Pompano Beach/Sample Road 1,320 3,308 4,628 1,283
12/23/96 Wyndmoor/Ivy Hill 2,160 5,601 7,761 2,148
12/23/96 W. Palm Beach/Belvedere 960 2,577 3,537 1,025
12/23/96 Renton 174th St. 960 2,625 3,585 1,073
12/23/96 Sacramento/Northgate 1,021 2,805 3,826 1,099
12/23/96 Phoenix/19th Avenue 991 2,807 3,798 1,117
12/23/96 Bedford Park/Cicero 1,321 3,774 5,095 1,495
12/23/96 Lake Worth/Lk Worth 1,111 3,121 4,232 1,227
12/23/96 Arlington/Algonquin 991 3,206 4,197 1,305
12/23/96 Seattle/15th Avenue 781 2,284 3,065 890
F-62
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
12/23/96 Southington/Spring - 811 2,102 180 -
12/23/96 Clifton/Broad Street - 1,411 3,659 218 -
12/23/96 Hillside/Glenwood - 563 4,051 381 -
12/23/96 Nashville/Dickerson Pike - 990 2,440 215 -
12/23/96 Madison/Gallatin Road - 780 1,922 250 -
12/30/96 Concorde/Treat - 1,396 3,258 278 -
12/30/96 Virginia Beach - 535 1,248 156 -
12/30/96 San Mateo - 2,408 5,619 224 -
1/22/97 Austin, 1033 E. 41 Street - 257 3,633 97 -
4/12/97 Annandale / Backlick - 955 2,229 377 -
4/12/97 Ft. Worth / West Freeway - 667 1,556 249 -
4/12/97 Campbell / S. Curtner - 2,550 5,950 723 -
4/12/97 Aurora / S. Idalia - 1,002 2,338 567 -
4/12/97 Santa Cruz / Capitola - 1,037 2,420 337 -
4/12/97 Indianapolis / Lafayette Road - 682 1,590 295 -
4/12/97 Indianapolis / Route 31 - 619 1,444 342 -
4/12/97 Farmingdale / Broad Hollow Rd. - 1,568 3,658 771 -
4/12/97 Tyson's Corner / Springhill Rd. - 3,861 9,010 1,312 -
4/12/97 Fountain Valley / Newhope - 1,137 2,653 344 -
4/12/97 Dallas / Winsted - 1,375 3,209 465 -
4/12/97 Columbia / Broad River Rd. - 121 282 155 -
4/12/97 Livermore / S. Front Road - 876 2,044 194 -
4/12/97 Garland / Plano - 889 2,073 237 -
4/12/97 San Jose / Story Road - 1,352 3,156 367 -
4/12/97 Aurora / Abilene - 1,406 3,280 457 -
4/12/97 Antioch / Sunset Drive - 1,035 2,416 224 -
4/12/97 Rancho Cordova / Sunrise - 1,048 2,445 391 -
4/12/97 Berlin / Wilbur Cross - 756 1,764 281 -
4/12/97 Whittier / Whittier Blvd. - 648 1,513 178 -
4/12/97 Peabody / Newbury Street - 1,159 2,704 536 -
4/12/97 Denver / Blake - 602 1,405 213 -
4/12/97 Evansville / Green River Road - 470 1,096 189 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
12/23/96 Southington/Spring 811 2,282 3,093 899
12/23/96 Clifton/Broad Street 1,411 3,877 5,288 1,475
12/23/96 Hillside/Glenwood 563 4,432 4,995 1,773
12/23/96 Nashville/Dickerson Pike 990 2,655 3,645 1,061
12/23/96 Madison/Gallatin Road 780 2,172 2,952 913
12/30/96 Concorde/Treat 1,396 3,536 4,932 1,307
12/30/96 Virginia Beach 535 1,404 1,939 568
12/30/96 San Mateo 2,408 5,843 8,251 2,188
1/22/97 Austin, 1033 E. 41 Street 257 3,730 3,987 1,351
4/12/97 Annandale / Backlick 955 2,606 3,561 979
4/12/97 Ft. Worth / West Freeway 667 1,805 2,472 689
4/12/97 Campbell / S. Curtner 2,550 6,673 9,223 2,410
4/12/97 Aurora / S. Idalia 1,002 2,905 3,907 1,096
4/12/97 Santa Cruz / Capitola 1,037 2,757 3,794 1,009
4/12/97 Indianapolis / Lafayette Road 682 1,885 2,567 737
4/12/97 Indianapolis / Route 31 619 1,786 2,405 701
4/12/97 Farmingdale / Broad Hollow Rd. 1,568 4,429 5,997 1,625
4/12/97 Tyson's Corner / Springhill Rd. 3,861 10,322 14,183 3,845
4/12/97 Fountain Valley / Newhope 1,137 2,997 4,134 1,085
4/12/97 Dallas / Winsted 1,375 3,674 5,049 1,381
4/12/97 Columbia / Broad River Rd. 121 437 558 225
4/12/97 Livermore / S. Front Road 876 2,238 3,114 825
4/12/97 Garland / Plano 888 2,311 3,199 872
4/12/97 San Jose / Story Road 1,352 3,523 4,875 1,328
4/12/97 Aurora / Abilene 1,406 3,737 5,143 1,394
4/12/97 Antioch / Sunset Drive 1,035 2,640 3,675 971
4/12/97 Rancho Cordova / Sunrise 1,048 2,836 3,884 1,119
4/12/97 Berlin / Wilbur Cross 756 2,045 2,801 798
4/12/97 Whittier / Whittier Blvd. 648 1,691 2,339 619
4/12/97 Peabody / Newbury Street 1,159 3,240 4,399 1,262
4/12/97 Denver / Blake 602 1,618 2,220 612
4/12/97 Evansville / Green River Road 470 1,285 1,755 496
F-63
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/12/97 Burien / First Ave. So. - 792 1,847 255 -
4/12/97 Rancho Cordova / Mather Field - 494 1,153 181 -
4/12/97 Sugar Land / Eldridge - 705 1,644 225 -
4/12/97 Columbus / Eastland Drive - 602 1,405 334 -
4/12/97 Slickerville / Black Horse Pike - 539 1,258 210 -
4/12/97 Seattle / Aurora - 1,145 2,671 316 -
4/12/97 Gaithersburg / Christopher Ave. - 972 2,268 285 -
4/12/97 Manchester / Tolland Turnpike - 807 1,883 235 -
6/25/97 L.A./Venice Blvd. - 523 1,221 1,797 -
6/25/97 Kirkland-Totem - 2,131 4,972 253 -
6/25/97 Idianapolis - 471 1,098 158 -
6/25/97 Dallas - 699 1,631 75 -
6/25/97 Atlanta - 1,183 2,761 141 -
6/25/97 Bensalem - 1,159 2,705 105 -
6/25/97 Evansville - 429 1,000 62 -
6/25/97 Austin - 813 1,897 78 -
6/25/97 Harbor City - 1,244 2,904 271 -
6/25/97 Birmingham - 539 1,258 119 -
6/25/97 Sacramento - 489 1,396 (191) -
6/25/97 Carrollton - 441 1,029 43 -
6/25/97 La Habra - 822 1,918 87 -
6/25/97 Lombard - 1,527 3,564 1,753 -
6/25/97 Fairfield - 740 1,727 88 -
6/25/97 Seattle - 1,498 3,494 295 -
6/25/97 Bellevue - 1,653 3,858 201 -
6/25/97 Citrus Heights - 642 1,244 539 -
6/25/97 San Jose - 1,273 2,971 24 -
6/25/97 Stanton - 948 2,212 67 -
6/25/97 Garland - 486 1,135 61 -
6/25/97 Westford - 857 1,999 192 -
6/25/97 Dallas - 1,627 3,797 670 -
6/25/97 Wheat Ridge - 1,054 2,459 418 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/12/97 Burien / First Ave. So. 792 2,102 2,894 809
4/12/97 Rancho Cordova / Mather Field 494 1,334 1,828 520
4/12/97 Sugar Land / Eldridge 705 1,869 2,574 724
4/12/97 Columbus / Eastland Drive 602 1,739 2,341 671
4/12/97 Slickerville / Black Horse Pike 539 1,468 2,007 605
4/12/97 Seattle / Aurora 1,145 2,987 4,132 1,105
4/12/97 Gaithersburg / Christopher Ave. 972 2,553 3,525 972
4/12/97 Manchester / Tolland Turnpike 807 2,118 2,925 797
6/25/97 L.A./Venice Blvd. 1,044 2,497 3,541 704
6/25/97 Kirkland-Totem 2,131 5,225 7,356 1,957
6/25/97 Idianapolis 471 1,256 1,727 478
6/25/97 Dallas 699 1,706 2,405 639
6/25/97 Atlanta 1,183 2,902 4,085 1,080
6/25/97 Bensalem 1,159 2,810 3,969 1,032
6/25/97 Evansville 401 1,090 1,491 418
6/25/97 Austin 813 1,975 2,788 733
6/25/97 Harbor City 1,244 3,175 4,419 1,243
6/25/97 Birmingham 539 1,377 1,916 530
6/25/97 Sacramento 489 1,205 1,694 454
6/25/97 Carrollton 441 1,072 1,513 397
6/25/97 La Habra 822 2,005 2,827 735
6/25/97 Lombard 2,047 4,797 6,844 1,649
6/25/97 Fairfield 740 1,815 2,555 657
6/25/97 Seattle 1,498 3,789 5,287 1,510
6/25/97 Bellevue 1,653 4,059 5,712 1,452
6/25/97 Citrus Heights 642 1,783 2,425 755
6/25/97 San Jose 1,273 2,995 4,268 1,078
6/25/97 Stanton 948 2,279 3,227 835
6/25/97 Garland 486 1,196 1,682 451
6/25/97 Westford 857 2,191 3,048 804
6/25/97 Dallas 1,627 4,467 6,094 1,686
6/25/97 Wheat Ridge 1,054 2,877 3,931 1,020
F-64
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
6/25/97 Berlin - 825 1,925 318 -
6/25/97 Gretna - 1,069 2,494 407 -
6/25/97 Spring - 461 1,077 214 -
6/25/97 Sacramento - 592 1,380 907 -
6/25/97 Houston/South Dairyashford - 856 1,997 355 -
6/25/97 Naperville - 1,108 2,585 435 -
6/25/97 Carrollton - 1,158 2,702 526 -
6/25/97 Waipahu - 1,620 3,780 776 -
6/25/97 Davis - 628 1,465 229 -
6/25/97 Decatur - 951 2,220 411 -
6/25/97 Jacksonville - 653 1,525 297 -
6/25/97 Chicoppe - 663 1,546 341 -
6/25/97 Alexandria - 1,533 3,576 533 -
6/25/97 Houston/Veterans Memorial Dr. - 458 1,070 181 -
6/25/97 Los Angeles/Olympic - 4,392 10,247 1,262 -
6/25/97 Littleton - 1,340 3,126 615 -
6/25/97 Metairie - 1,229 2,868 234 -
6/25/97 Louisville - 717 1,672 304 -
6/25/97 East Hazel Crest - 753 1,757 2,198 -
6/25/97 Edmonds - 1,187 2,770 425 -
6/25/97 Foster City - 1,064 2,483 342 -
6/25/97 Chicago - 1,160 2,708 532 -
6/25/97 Philadelphia - 924 2,155 405 -
6/25/97 Dallas/Vilbig Rd. - 508 1,184 223 -
6/25/97 Staten Island - 1,676 3,910 584 -
6/25/97 Pelham Manor - 1,209 2,820 765 -
6/25/97 Irving - 469 1,093 206 -
6/25/97 Elk Grove - 642 1,497 286 -
6/25/97 LAX - 1,312 3,062 555 -
6/25/97 Denver - 1,316 3,071 645 -
6/25/97 Plano - 1,369 3,193 480 -
6/25/97 Lynnwood - 839 1,959 360 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
6/25/97 Berlin 825 2,243 3,068 802
6/25/97 Gretna 1,069 2,901 3,970 1,175
6/25/97 Spring 461 1,291 1,752 486
6/25/97 Sacramento 720 2,159 2,879 758
6/25/97 Houston/South Dairyashford 856 2,352 3,208 853
6/25/97 Naperville 1,108 3,020 4,128 1,075
6/25/97 Carrollton 1,158 3,228 4,386 1,195
6/25/97 Waipahu 1,620 4,556 6,176 1,576
6/25/97 Davis 628 1,694 2,322 624
6/25/97 Decatur 951 2,631 3,582 991
6/25/97 Jacksonville 653 1,822 2,475 701
6/25/97 Chicoppe 663 1,887 2,550 735
6/25/97 Alexandria 1,533 4,109 5,642 1,474
6/25/97 Houston/Veterans Memorial Dr. 458 1,251 1,709 467
6/25/97 Los Angeles/Olympic 4,392 11,509 15,901 4,066
6/25/97 Littleton 1,340 3,741 5,081 1,350
6/25/97 Metairie 1,229 3,102 4,331 1,137
6/25/97 Louisville 717 1,976 2,693 739
6/25/97 East Hazel Crest 1,236 3,472 4,708 1,442
6/25/97 Edmonds 1,187 3,195 4,382 1,165
6/25/97 Foster City 1,064 2,825 3,889 1,003
6/25/97 Chicago 1,160 3,240 4,400 1,196
6/25/97 Philadelphia 924 2,560 3,484 928
6/25/97 Dallas/Vilbig Rd. 508 1,407 1,915 533
6/25/97 Staten Island 1,676 4,494 6,170 1,629
6/25/97 Pelham Manor 1,209 3,585 4,794 1,345
6/25/97 Irving 468 1,300 1,768 495
6/25/97 Elk Grove 642 1,783 2,425 659
6/25/97 LAX 1,312 3,617 4,929 1,340
6/25/97 Denver 1,316 3,716 5,032 1,333
6/25/97 Plano 1,369 3,673 5,042 1,305
6/25/97 Lynnwood 839 2,319 3,158 875
F-65
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
6/25/97 Lilburn - 507 1,182 390 -
6/25/97 Parma - 881 2,055 505 -
6/25/97 Davie - 1,086 2,533 567 -
6/25/97 Allen Park - 953 2,223 543 -
6/25/97 Aurora - 808 1,886 463 -
6/25/97 San Diego/16th Street - 932 2,175 620 -
6/25/97 Sterling Heights - 766 1,787 459 -
6/25/97 East L.A./Boyle Heights - 957 2,232 510 -
6/25/97 Springfield/Alban Station - 1,317 3,074 674 -
6/25/97 Littleton - 868 2,026 508 -
6/25/97 Sacramento/57th Street - 869 2,029 492 -
6/25/97 Miami - 1,762 4,111 995 -
8/13/97 Santa Monica / Wilshire Blvd. - 2,040 4,760 317 -
10/1/97 Marietta /Austell Rd - 398 1,326 306 681
10/1/97 Denver / Leetsdale - 1,407 1,682 254 952
10/1/97 Baltimore / York Road - 1,538 1,952 671 1,125
10/1/97 Bolingbrook - 737 1,776 262 927
10/1/97 Kent / Central - 483 1,321 196 687
10/1/97 Geneva / Roosevelt - 355 1,302 219 665
10/1/97 Denver / Sheridan - 429 1,105 170 587
10/1/97 Mountlake Terrace - 1,017 1,783 232 950
10/1/97 Carol Stream/ St.Charles - 185 1,187 202 591
10/1/97 Marietta / Cobb Park - 420 1,131 314 619
10/1/97 Venice / Rose - 5,468 5,478 677 3,117
10/1/97 Ventura / Ventura Blvd - 911 2,227 273 1,146
10/1/97 Studio City/ Ventura - 2,421 1,610 192 995
10/1/97 Madison Heights - 428 1,686 2,590 1,014
10/1/97 Lax / Imperial - 1,662 2,079 194 1,159
10/1/97 Justice / Industrial - 233 1,181 177 589
10/1/97 Burbank / San Fernando - 1,825 2,210 252 1,223
10/1/97 Pinole / Appian Way - 728 1,827 205 935
10/1/97 Denver / Tamarac Park - 2,545 1,692 431 1,127
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
6/25/97 Lilburn 507 1,572 2,079 595
6/25/97 Parma 880 2,561 3,441 944
6/25/97 Davie 1,085 3,101 4,186 1,153
6/25/97 Allen Park 953 2,766 3,719 1,015
6/25/97 Aurora 808 2,349 3,157 843
6/25/97 San Diego/16th Street 932 2,795 3,727 1,088
6/25/97 Sterling Heights 766 2,246 3,012 837
6/25/97 East L.A./Boyle Heights 957 2,742 3,699 991
6/25/97 Springfield/Alban Station 1,317 3,748 5,065 1,355
6/25/97 Littleton 868 2,534 3,402 915
6/25/97 Sacramento/57th Street 869 2,521 3,390 935
6/25/97 Miami 1,762 5,106 6,868 1,804
8/13/97 Santa Monica / Wilshire Blvd. 2,040 5,077 7,117 1,880
10/1/97 Marietta /Austell Rd 440 2,271 2,711 804
10/1/97 Denver / Leetsdale 1,554 2,741 4,295 1,006
10/1/97 Baltimore / York Road 1,700 3,586 5,286 1,245
10/1/97 Bolingbrook 814 2,888 3,702 1,026
10/1/97 Kent / Central 533 2,154 2,687 773
10/1/97 Geneva / Roosevelt 392 2,149 2,541 778
10/1/97 Denver / Sheridan 474 1,817 2,291 674
10/1/97 Mountlake Terrace 1,123 2,859 3,982 985
10/1/97 Carol Stream/ St.Charles 205 1,960 2,165 692
10/1/97 Marietta / Cobb Park 464 2,020 2,484 736
10/1/97 Venice / Rose 6,042 8,698 14,740 2,835
10/1/97 Ventura / Ventura Blvd 1,006 3,551 4,557 1,244
10/1/97 Studio City/ Ventura 2,676 2,542 5,218 883
10/1/97 Madison Heights 473 5,245 5,718 893
10/1/97 Lax / Imperial 1,837 3,257 5,094 1,169
10/1/97 Justice / Industrial 258 1,922 2,180 681
10/1/97 Burbank / San Fernando 2,016 3,494 5,510 1,199
10/1/97 Pinole / Appian Way 804 2,891 3,695 1,019
10/1/97 Denver / Tamarac Park 2,812 2,983 5,795 1,152
F-66
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/1/97 Gresham / Powell - 322 1,298 215 646
10/1/97 Warren / Mound Road - 268 1,025 211 528
10/1/97 Woodside/Brooklyn - 5,016 3,950 588 3,195
10/1/97 Enfield / Elm Street - 399 1,900 291 945
10/1/97 Roselle / Lake Street - 312 1,411 215 710
10/1/97 Milwaukee / Appleton - 324 1,385 276 706
10/1/97 Emeryville / Bay St - 1,602 1,830 171 1,091
10/1/97 Monterey / Del Rey - 257 1,048 230 563
10/1/97 San Leandro / Washington - 660 1,142 170 653
10/1/97 Boca Raton / N.W. 20 - 1,140 2,256 422 1,198
10/1/97 Washington Dc/So Capital - 1,437 4,489 459 2,274
10/1/97 Lynn / Lynnway - 463 3,059 430 1,513
10/1/97 Pompano Beach - 1,077 1,527 650 869
10/1/97 Lake Oswego/ N.State - 465 1,956 278 972
10/1/97 Daly City / Mission - 389 2,921 230 1,389
10/1/97 Odenton / Route 175 - 456 2,104 254 1,053
10/1/97 Novato / Landing - 2,416 3,496 249 1,706
10/1/97 St. Louis / Lindberg - 584 1,508 335 711
10/1/97 Oakland/International - 358 1,568 249 700
10/1/97 Stockton / March Lane - 663 1,398 192 657
10/1/97 Des Plaines / Golf Rd - 1,363 3,093 256 1,118
10/1/97 Morton Grove / Wauke - 2,658 3,232 5,976 822
10/1/97 Los Angeles / Jefferson - 1,090 1,580 263 820
10/1/97 Los Angeles / Martin - 869 1,152 113 717
10/1/97 San Leandro / E. 14th - 627 1,289 116 608
10/1/97 Tucson / Tanque Verde - 345 1,709 270 709
10/1/97 Randolph / Warren St - 2,330 1,914 524 1,332
10/1/97 Forrestville / Penn. - 1,056 2,347 315 1,114
10/1/97 Bridgeport - 4,877 2,739 683 1,651
10/1/97 North Hollywood/Vine - 906 2,379 232 1,211
10/1/97 Santa Cruz / Portola - 535 1,526 178 761
10/1/97 Hyde Park / River St - 626 1,748 309 665
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/1/97 Gresham / Powell 356 2,125 2,481 719
10/1/97 Warren / Mound Road 296 1,736 2,032 585
10/1/97 Woodside/Brooklyn 5,542 7,207 12,749 2,075
10/1/97 Enfield / Elm Street 441 3,094 3,535 1,015
10/1/97 Roselle / Lake Street 344 2,304 2,648 803
10/1/97 Milwaukee / Appleton 358 2,333 2,691 779
10/1/97 Emeryville / Bay St 1,770 2,924 4,694 1,009
10/1/97 Monterey / Del Rey 284 1,814 2,098 569
10/1/97 San Leandro / Washington 730 1,895 2,625 639
10/1/97 Boca Raton / N.W. 20 1,260 3,756 5,016 1,210
10/1/97 Washington Dc/So Capital 1,588 7,071 8,659 2,105
10/1/97 Lynn / Lynnway 512 4,953 5,465 1,642
10/1/97 Pompano Beach 1,190 2,933 4,123 852
10/1/97 Lake Oswego/ N.State 514 3,157 3,671 1,013
10/1/97 Daly City / Mission 430 4,499 4,929 1,475
10/1/97 Odenton / Route 175 504 3,363 3,867 1,007
10/1/97 Novato / Landing 2,905 4,962 7,867 1,720
10/1/97 St. Louis / Lindberg 728 2,410 3,138 832
10/1/97 Oakland/International 475 2,400 2,875 807
10/1/97 Stockton / March Lane 811 2,099 2,910 691
10/1/97 Des Plaines / Golf Rd 1,630 4,200 5,830 1,473
10/1/97 Morton Grove / Wauke 3,111 9,577 12,688 2,087
10/1/97 Los Angeles / Jefferson 1,323 2,430 3,753 783
10/1/97 Los Angeles / Martin 1,066 1,785 2,851 562
10/1/97 San Leandro / E. 14th 775 1,865 2,640 619
10/1/97 Tucson / Tanque Verde 469 2,564 3,033 829
10/1/97 Randolph / Warren St 2,719 3,381 6,100 958
10/1/97 Forrestville / Penn. 1,313 3,519 4,832 1,188
10/1/97 Bridgeport 5,613 4,337 9,950 1,478
10/1/97 North Hollywood/Vine 1,166 3,562 4,728 1,092
10/1/97 Santa Cruz / Portola 689 2,311 3,000 737
10/1/97 Hyde Park / River St 759 2,589 3,348 843
F-67
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/1/97 Dublin / San Ramon Rd - 942 1,999 177 803
10/1/97 Vallejo / Humboldt - 473 1,651 191 757
10/1/97 Fremont/Warm Springs - 848 2,885 253 1,105
10/1/97 Seattle / Stone Way - 829 2,180 347 1,080
10/1/97 W. Olympia - 149 1,096 294 452
10/1/97 Mercer/Parkside Ave - 359 1,763 273 962
10/1/97 Bridge Water / Main - 445 2,054 299 811
10/1/97 Norwalk / Hoyt Street - 2,369 3,049 576 1,391
11/2/97 Lansing - 758 1,768 (101) -
11/7/97 Phoenix - 1,197 2,793 231 -
11/13/97 Tinley Park - 1,422 3,319 80 -
3/17/98 Houston/De Soto Dr. - 659 1,537 151 -
3/17/98 Houston / East Freeway - 593 1,384 180 -
3/17/98 Austin/Ben White - 692 1,614 70 -
3/17/98 Arlington/E.Pioneer - 922 2,152 246 -
3/17/98 Las Vegas/Tropicana - 1,285 2,998 165 -
3/17/98 Branford / Summit Place - 728 1,698 189 -
3/17/98 Las Vegas / Charleston - 791 1,845 123 -
3/17/98 So. San Francisco - 1,550 3,617 220 -
3/17/98 Pasadena / Arroyo Prkwy - 3,005 7,012 254 -
3/17/98 Tempe / E. Broadway - 633 1,476 260 -
3/17/98 Phoenix / N. 43rd Ave - 443 1,033 178 -
3/17/98 Phoenix/No. 43rd - 380 886 437 -
3/17/98 Phoenix / Black Canyon - 380 886 154 -
3/17/98 Phoenix/Black Canyon - 136 317 195 -
3/17/98 Nesconset / Southern - 1,423 3,321 170 -
4/1/98 St. Louis / Hwy. 141 - 659 1,628 4,464 -
4/1/98 Island Park / Austin - 2,313 3,015 (739) -
4/1/98 Akron / Brittain Rd. - 275 2,248 (197) -
4/1/98 Patchogue/W.Sunrise - 936 2,184 169 -
4/1/98 Havertown/West Chester - 1,254 2,926 132 -
4/1/98 Schiller Park/River - 568 1,390 110 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/1/97 Dublin / San Ramon Rd 1,119 2,802 3,921 951
10/1/97 Vallejo / Humboldt 620 2,452 3,072 779
10/1/97 Fremont/Warm Springs 1,072 4,019 5,091 1,300
10/1/97 Seattle / Stone Way 1,078 3,358 4,436 1,001
10/1/97 W. Olympia 209 1,782 1,991 545
10/1/97 Mercer/Parkside Ave 503 2,854 3,357 843
10/1/97 Bridge Water / Main 576 3,033 3,609 930
10/1/97 Norwalk / Hoyt Street 2,794 4,591 7,385 1,547
11/2/97 Lansing 730 1,695 2,425 640
11/7/97 Phoenix 1,197 3,024 4,221 1,048
11/13/97 Tinley Park 1,422 3,399 4,821 1,132
3/17/98 Houston/De Soto Dr. 659 1,688 2,347 582
3/17/98 Houston / East Freeway 593 1,564 2,157 577
3/17/98 Austin/Ben White 682 1,694 2,376 575
3/17/98 Arlington/E.Pioneer 922 2,398 3,320 837
3/17/98 Las Vegas/Tropicana 1,285 3,163 4,448 1,069
3/17/98 Branford / Summit Place 727 1,888 2,615 647
3/17/98 Las Vegas / Charleston 791 1,968 2,759 668
3/17/98 So. San Francisco 1,550 3,837 5,387 1,208
3/17/98 Pasadena / Arroyo Prkwy 3,005 7,266 10,271 2,358
3/17/98 Tempe / E. Broadway 633 1,736 2,369 594
3/17/98 Phoenix / N. 43rd Ave 443 1,211 1,654 453
3/17/98 Phoenix/No. 43rd 380 1,323 1,703 465
3/17/98 Phoenix / Black Canyon 380 1,040 1,420 398
3/17/98 Phoenix/Black Canyon 136 512 648 265
3/17/98 Nesconset / Southern 1,423 3,491 4,914 1,137
4/1/98 St. Louis / Hwy. 141 1,344 5,407 6,751 1,332
4/1/98 Island Park / Austin 1,374 3,215 4,589 1,040
4/1/98 Akron / Brittain Rd. 669 1,657 2,326 490
4/1/98 Patchogue/W.Sunrise 936 2,353 3,289 812
4/1/98 Havertown/West Chester 1,249 3,063 4,312 1,027
4/1/98 Schiller Park/River 568 1,500 2,068 524
F-68
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/1/98 Chicago / Cuyler - 1,400 2,695 220 -
4/1/98 Chicago Heights/West - 468 1,804 170 -
4/1/98 Arlington Hts/University - 670 3,004 98 -
4/1/98 Cicero / Ogden - 1,678 2,266 313 -
4/1/98 Chicago/W. Howard St. - 974 2,875 165 -
4/1/98 Chicago/N. Western Ave - 1,453 3,205 171 -
4/1/98 Chicago/Northwest Hwy - 925 2,412 86 -
4/1/98 Chicago/N. Wells St. - 1,446 2,828 103 -
4/1/98 Chicago / Pulaski Rd. - 1,276 2,858 82 -
4/1/98 Artesia / Artesia - 625 1,419 94 -
4/1/98 Arcadia / Lower Azusa - 821 1,369 207 -
4/1/98 Manassas / Centreville - 405 2,137 302 -
4/1/98 La Downtwn/10 Fwy - 1,608 3,358 242 -
4/1/98 Bellevue / Northup - 1,232 3,306 464 -
4/1/98 Hollywood/Cole & Wilshire - 1,590 1,785 117 -
4/1/98 Atlanta/John Wesley - 1,233 1,665 219 -
4/1/98 Montebello/S. Maple - 1,274 2,299 136 -
4/1/98 Lake City/Forest Park - 248 1,445 125 -
4/1/98 Baltimore / W. Patap - 403 2,650 169 -
4/1/98 Fraser/Groesbeck Hwy - 368 1,796 86 -
4/1/98 Vallejo / Mini Drive - 560 1,803 83 -
4/1/98 San Diego/54th & Euclid - 952 2,550 160 -
4/1/98 Miami / 5th Street - 2,327 3,234 209 -
4/1/98 Silver Spring/Hill - 922 2,080 157 -
4/1/98 Chicago/E. 95th St. - 397 2,357 178 -
4/1/98 Chicago / S. Harlem - 791 1,424 113 -
4/1/98 St. Charles /Highway - 623 1,501 197 -
4/1/98 Chicago/Burr Ridge Rd. - 421 2,165 78 -
4/1/98 Yonkers / Route 9a - 1,722 3,823 296 -
4/1/98 Silverlake/Glendale - 2,314 5,481 229 -
4/1/98 Chicago/Harlem Ave - 1,430 3,038 148 -
4/1/98 Bethesda / Butler Rd - 1,146 2,509 77 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/1/98 Chicago / Cuyler 1,400 2,915 4,315 1,012
4/1/98 Chicago Heights/West 468 1,974 2,442 696
4/1/98 Arlington Hts/University 670 3,102 3,772 1,076
4/1/98 Cicero / Ogden 1,678 2,579 4,257 1,013
4/1/98 Chicago/W. Howard St. 974 3,040 4,014 1,092
4/1/98 Chicago/N. Western Ave 1,453 3,376 4,829 1,183
4/1/98 Chicago/Northwest Hwy 925 2,498 3,423 858
4/1/98 Chicago/N. Wells St. 1,446 2,931 4,377 1,017
4/1/98 Chicago / Pulaski Rd. 1,276 2,940 4,216 1,002
4/1/98 Artesia / Artesia 625 1,513 2,138 630
4/1/98 Arcadia / Lower Azusa 821 1,576 2,397 656
4/1/98 Manassas / Centreville 405 2,439 2,844 1,023
4/1/98 La Downtwn/10 Fwy 1,608 3,600 5,208 1,466
4/1/98 Bellevue / Northup 1,232 3,770 5,002 1,505
4/1/98 Hollywood/Cole & Wilshire 1,590 1,902 3,492 770
4/1/98 Atlanta/John Wesley 1,233 1,884 3,117 850
4/1/98 Montebello/S. Maple 1,273 2,436 3,709 981
4/1/98 Lake City/Forest Park 248 1,570 1,818 647
4/1/98 Baltimore / W. Patap 402 2,820 3,222 1,136
4/1/98 Fraser/Groesbeck Hwy 368 1,882 2,250 758
4/1/98 Vallejo / Mini Drive 560 1,886 2,446 768
4/1/98 San Diego/54th & Euclid 952 2,710 3,662 1,170
4/1/98 Miami / 5th Street 2,327 3,443 5,770 1,428
4/1/98 Silver Spring/Hill 922 2,237 3,159 998
4/1/98 Chicago/E. 95th St. 397 2,535 2,932 1,111
4/1/98 Chicago / S. Harlem 791 1,537 2,328 678
4/1/98 St. Charles /Highway 623 1,698 2,321 741
4/1/98 Chicago/Burr Ridge Rd. 421 2,243 2,664 985
4/1/98 Yonkers / Route 9a 1,722 4,119 5,841 1,744
4/1/98 Silverlake/Glendale 2,314 5,710 8,024 2,418
4/1/98 Chicago/Harlem Ave 1,430 3,186 4,616 1,366
4/1/98 Bethesda / Butler Rd 1,146 2,586 3,732 1,081
F-69
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/1/98 Dundalk / Wise Ave - 447 2,005 141 -
4/1/98 St. Louis / Hwy. 141 - 659 1,628 66 -
4/1/98 Island Park / Austin - 2,313 3,015 109 -
4/1/98 Dallas / Kingsly - 1,095 1,712 109 -
5/1/98 Berkeley / 2nd St. - 1,914 4,466 (70) -
5/8/98 Cleveland / W. 117th - 930 2,277 206 -
5/8/98 La /Venice Blvd - 1,470 3,599 137 -
5/8/98 Aurora / Farnsworth - 960 2,350 106 -
5/8/98 Santa Rosa / Hopper - 1,020 2,497 123 -
5/8/98 Golden Valley / Winn - 630 1,542 139 -
5/8/98 St. Louis / Benham - 810 1,983 153 -
5/8/98 Chicago / S. Chicago - 840 2,057 100 -
10/1/98 El Segundo / Sepulveda - 6,586 5,795 223 -
10/1/98 Atlanta / Memorial Dr. - 414 2,239 246 -
10/1/98 Chicago / W. 79th St - 861 2,789 279 -
10/1/98 Chicago / N. Broadway - 1,918 3,824 242 -
10/1/98 Dallas / Greenville - 1,933 2,892 116 -
10/1/98 Tacoma / Orchard - 358 1,987 147 -
10/1/98 St. Louis / Gravois - 312 2,327 140 -
10/1/98 White Bear Lake - 578 2,079 196 -
10/1/98 Santa Cruz / Soquel - 832 2,385 121 -
10/1/98 Coon Rapids / Hwy 10 - 330 1,646 124 -
10/1/98 Oxnard / Hueneme Rd - 923 3,925 208 -
10/1/98 Vancouver/ Millplain - 343 2,000 89 -
10/1/98 Tigard / Mc Ewan - 597 1,652 80 -
10/1/98 Griffith / Cline - 299 2,118 88 -
10/1/98 Miami / Sunset Drive - 1,656 2,321 1,657 -
10/1/98 Farmington / 9 Mile - 580 2,526 157 -
10/1/98 Los Gatos / University - 2,234 3,890 184 -
10/1/98 N. Hollywood - 1,484 3,143 90 -
10/1/98 Petaluma / Transport - 460 1,840 4,901 -
10/1/98 Chicago / 111th - 341 2,898 2,277 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/1/98 Dundalk / Wise Ave 447 2,146 2,593 885
4/1/98 St. Louis / Hwy. 141 659 1,694 2,353 795
4/1/98 Island Park / Austin 2,313 3,124 5,437 1,460
4/1/98 Dallas / Kingsly 1,095 1,821 2,916 758
5/1/98 Berkeley / 2nd St. 1,837 4,473 6,310 1,487
5/8/98 Cleveland / W. 117th 930 2,483 3,413 868
5/8/98 La /Venice Blvd 1,470 3,736 5,206 1,180
5/8/98 Aurora / Farnsworth 960 2,456 3,416 784
5/8/98 Santa Rosa / Hopper 1,020 2,620 3,640 842
5/8/98 Golden Valley / Winn 630 1,681 2,311 559
5/8/98 St. Louis / Benham 810 2,136 2,946 728
5/8/98 Chicago / S. Chicago 840 2,157 2,997 679
10/1/98 El Segundo / Sepulveda 6,586 6,018 12,604 1,885
10/1/98 Atlanta / Memorial Dr. 414 2,485 2,899 828
10/1/98 Chicago / W. 79th St 861 3,068 3,929 1,082
10/1/98 Chicago / N. Broadway 1,917 4,067 5,984 1,308
10/1/98 Dallas / Greenville 1,933 3,008 4,941 958
10/1/98 Tacoma / Orchard 358 2,134 2,492 684
10/1/98 St. Louis / Gravois 312 2,467 2,779 821
10/1/98 White Bear Lake 578 2,275 2,853 729
10/1/98 Santa Cruz / Soquel 832 2,506 3,338 809
10/1/98 Coon Rapids / Hwy 10 330 1,770 2,100 572
10/1/98 Oxnard / Hueneme Rd 923 4,133 5,056 1,301
10/1/98 Vancouver/ Millplain 342 2,090 2,432 677
10/1/98 Tigard / Mc Ewan 597 1,732 2,329 571
10/1/98 Griffith / Cline 299 2,206 2,505 686
10/1/98 Miami / Sunset Drive 2,267 3,367 5,634 919
10/1/98 Farmington / 9 Mile 580 2,683 3,263 836
10/1/98 Los Gatos / University 2,234 4,074 6,308 1,286
10/1/98 N. Hollywood 1,484 3,233 4,717 1,002
10/1/98 Petaluma / Transport 857 6,344 7,201 1,338
10/1/98 Chicago / 111th 431 5,085 5,516 1,212
F-70
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/1/98 Upper Darby / Market - 808 5,011 198 -
10/1/98 San Jose / Santa - 966 3,870 105 -
10/1/98 San Diego / Morena - 3,173 5,469 190 -
10/1/98 Brooklyn /Rockaway Ave - 6,272 9,691 517 -
10/1/98 Revere / Charger St - 1,997 3,727 297 -
10/1/98 Las Vegas / E. Charles - 602 2,545 259 -
10/1/98 Laurel / Baltimore Ave - 1,899 4,498 201 -
10/1/98 East La/Figueroa & 4th - 1,213 2,689 72 -
10/1/98 Oldsmar / Tampa Road - 760 2,154 2,760 -
10/1/98 Ft. Lauderdale /S.W. - 1,046 2,928 125 -
10/1/98 Miami / Nw 73rd St - 1,050 3,064 42 -
12/9/98 Miami / Nw 115th Ave - 1,095 2,349 4,807 -
1/1/99 New Orleans/St.Charles - 1,463 2,634 (432) -
1/6/99 Brandon / E. Brandon Blvd - 1,560 3,695 62 -
3/12/99 St. Louis / N. Lindbergh Blvd. - 1,688 3,939 352 -
3/12/99 St. Louis /Vandeventer Midtown - 699 1,631 163 -
3/12/99 St. Ann / Maryland Heights - 1,035 2,414 297 -
3/12/99 Florissant / N. Hwy 67 - 971 2,265 273 -
3/12/99 Ferguson Area-W.Florissant - 1,194 2,732 425 -
3/12/99 Florissant / New Halls Ferry Rd - 1,144 2,670 351 -
3/12/99 St. Louis / Airport - 785 1,833 248 -
3/12/99 St. Louis/ S.Third St - 1,096 2,557 110 -
3/12/99 Kansas City / E. 47th St. - 610 1,424 172 -
3/12/99 Kansas City /E. 67th Terrace - 1,136 2,643 180 -
3/12/99 Kansas City / James A. Reed Rd - 749 1,748 100 -
3/12/99 Independence / 291 - 871 2,032 150 -
3/12/99 Raytown / Woodson Rd - 915 2,134 106 -
3/12/99 Kansas City / 34th Main Street - 114 2,599 606 -
3/12/99 Columbia / River Dr - 671 1,566 278 -
3/12/99 Columbia / Buckner Rd - 714 1,665 345 -
3/12/99 Columbia / Decker Park Rd - 605 1,412 117 -
3/12/99 Columbia / Rosewood Dr - 777 1,814 97 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
n At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/1/98 Upper Darby / Market 808 5,209 6,017 1,645
10/1/98 San Jose / Santa 966 3,975 4,941 1,254
10/1/98 San Diego / Morena 3,173 5,659 8,832 1,752
10/1/98 Brooklyn /Rockaway Ave 6,272 10,208 16,480 3,259
10/1/98 Revere / Charger St 1,997 4,024 6,021 1,321
10/1/98 Las Vegas / E. Charles 602 2,804 3,406 926
10/1/98 Laurel / Baltimore Ave 1,899 4,699 6,598 1,505
10/1/98 East La/Figueroa & 4th 1,213 2,761 3,974 862
10/1/98 Oldsmar / Tampa Road 1,049 4,625 5,674 1,188
10/1/98 Ft. Lauderdale /S.W. 1,046 3,053 4,099 951
10/1/98 Miami / Nw 73rd St 1,050 3,106 4,156 982
12/9/98 Miami / Nw 115th Ave 1,178 7,073 8,251 788
1/1/99 New Orleans/St.Charles 1,039 2,626 3,665 741
1/6/99 Brandon / E. Brandon Blvd 1,560 3,757 5,317 975
3/12/99 St. Louis / N. Lindbergh Blvd. 1,688 4,291 5,979 1,276
3/12/99 St. Louis /Vandeventer Midtown 699 1,794 2,493 546
3/12/99 St. Ann / Maryland Heights 1,035 2,711 3,746 795
3/12/99 Florissant / N. Hwy 67 971 2,538 3,509 768
3/12/99 Ferguson Area-W.Florissant 1,178 3,173 4,351 1,002
3/12/99 Florissant / New Halls Ferry Rd 1,144 3,021 4,165 948
3/12/99 St. Louis / Airport 785 2,081 2,866 612
3/12/99 St. Louis/ S.Third St 1,096 2,667 3,763 769
3/12/99 Kansas City / E. 47th St. 610 1,596 2,206 493
3/12/99 Kansas City /E. 67th Terrace 1,134 2,825 3,959 797
3/12/99 Kansas City / James A. Reed Rd 749 1,848 2,597 549
3/12/99 Independence / 291 871 2,182 3,053 644
3/12/99 Raytown / Woodson Rd 915 2,240 3,155 657
3/12/99 Kansas City / 34th Main Street 114 3,205 3,319 1,113
3/12/99 Columbia / River Dr 671 1,844 2,515 572
3/12/99 Columbia / Buckner Rd 714 2,010 2,724 709
3/12/99 Columbia / Decker Park Rd 605 1,529 2,134 487
3/12/99 Columbia / Rosewood Dr 777 1,911 2,688 581
F-71
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 W. Columbia / Orchard Dr. - 272 634 152 -
3/12/99 W. Columbia / Airport Blvd - 493 1,151 128 -
3/12/99 Greenville / Whitehorse Rd - 882 2,058 124 -
3/12/99 Greenville / Woods Lake Rd - 364 849 130 -
3/12/99 Mauldin / N. Main Street - 571 1,333 140 -
3/12/99 Simpsonville / Grand View Dr - 582 1,358 126 -
3/12/99 Taylors / Wade Hampton Blvd - 650 1,517 126 -
3/12/99 Charleston/Ashley Phosphate - 839 1,950 183 -
3/12/99 N. Charleston / Dorchester Rd - 380 886 134 -
3/12/99 N. Charleston / Dorchester - 487 1,137 156 -
3/12/99 Charleston / Sam Rittenberg Blvd - 555 1,296 106 -
3/12/99 Hilton Head / Office Park Rd - 1,279 2,985 148 -
3/12/99 Columbia / Plumbers Rd - 368 858 146 -
3/12/99 Greenville / Pineknoll Rd - 927 2,163 206 -
3/12/99 Hilton Head / Yacht Cove Dr - 1,182 2,753 228 -
3/12/99 Spartanburg / Chesnee Hwy - 533 1,244 299 -
3/12/99 Charleston / Ashley River Rd - 1,114 2,581 185 -
3/12/99 Columbia / Broad River - 1,463 3,413 279 -
3/12/99 Charlotte / East Wt Harris Blvd - 736 1,718 115 -
3/12/99 Charlotte / North Tryon St. - 708 1,653 580 -
3/12/99 Charlotte / South Blvd - 641 1,496 144 -
3/12/99 Kannapolis / Oregon St - 463 1,081 113 -
3/12/99 Durham / E. Club Blvd - 947 2,209 150 -
3/12/99 Durham / N. Duke St. - 769 1,794 131 -
3/12/99 Raleigh / Maitland Dr - 679 1,585 141 -
3/12/99 Greensboro / O'henry Blvd - 577 1,345 213 -
3/12/99 Gastonia / S. York Rd - 467 1,089 123 -
3/12/99 Durham / Kangaroo Dr. - 1,102 2,572 419 -
3/12/99 Pensacola / Brent Lane - 402 938 (151) -
3/12/99 Pensacola / Creighton Road - 454 1,060 69 -
3/12/99 Jacksonville / Park Avenue - 905 2,113 149 -
3/12/99 Jacksonville / Phillips Hwy - 665 1,545 227 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 W. Columbia / Orchard Dr. 272 786 1,058 278
3/12/99 W. Columbia / Airport Blvd 493 1,279 1,772 398
3/12/99 Greenville / Whitehorse Rd 882 2,182 3,064 649
3/12/99 Greenville / Woods Lake Rd 364 979 1,343 322
3/12/99 Mauldin / N. Main Street 571 1,473 2,044 480
3/12/99 Simpsonville / Grand View Dr 574 1,492 2,066 472
3/12/99 Taylors / Wade Hampton Blvd 650 1,643 2,293 515
3/12/99 Charleston/Ashley Phosphate 823 2,149 2,972 698
3/12/99 N. Charleston / Dorchester Rd 380 1,020 1,400 324
3/12/99 N. Charleston / Dorchester 487 1,293 1,780 425
3/12/99 Charleston / Sam Rittenberg Blvd 555 1,402 1,957 444
3/12/99 Hilton Head / Office Park Rd 1,279 3,133 4,412 908
3/12/99 Columbia / Plumbers Rd 368 1,004 1,372 331
3/12/99 Greenville / Pineknoll Rd 927 2,369 3,296 741
3/12/99 Hilton Head / Yacht Cove Dr 1,180 2,983 4,163 894
3/12/99 Spartanburg / Chesnee Hwy 533 1,543 2,076 554
3/12/99 Charleston / Ashley River Rd 1,108 2,772 3,880 817
3/12/99 Columbia / Broad River 1,463 3,692 5,155 1,135
3/12/99 Charlotte / East Wt Harris Blvd 736 1,833 2,569 559
3/12/99 Charlotte / North Tryon St. 708 2,233 2,941 626
3/12/99 Charlotte / South Blvd 641 1,640 2,281 516
3/12/99 Kannapolis / Oregon St 463 1,194 1,657 378
3/12/99 Durham / E. Club Blvd 947 2,359 3,306 703
3/12/99 Durham / N. Duke St. 769 1,925 2,694 587
3/12/99 Raleigh / Maitland Dr 679 1,726 2,405 539
3/12/99 Greensboro / O'henry Blvd 577 1,558 2,135 542
3/12/99 Gastonia / S. York Rd 467 1,212 1,679 404
3/12/99 Durham / Kangaroo Dr. 1,102 2,991 4,093 918
3/12/99 Pensacola / Brent Lane 229 960 1,189 296
3/12/99 Pensacola / Creighton Road 454 1,129 1,583 381
3/12/99 Jacksonville / Park Avenue 905 2,262 3,167 693
3/12/99 Jacksonville / Phillips Hwy 663 1,774 2,437 570
F-72
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 Clearwater / Highland Ave - 724 1,690 256 -
3/12/99 Tarpon Springs / Us Highway 19 - 892 2,081 181 -
3/12/99 Orlando /S. Orange Blossom Trail - 1,229 2,867 142 -
3/12/99 Casselberry Ii - 1,160 2,708 171 -
3/12/99 Miami / Nw 14th Street - 1,739 4,058 131 -
3/12/99 Tarpon Springs / Highway 19 - 1,179 2,751 341 -
3/12/99 Ft. Myers / Tamiami Trail South - 834 1,945 (266) -
3/12/99 Jacksonville / Ft. Caroline Rd. - 1,037 2,420 174 -
3/12/99 Orlando / South Semoran - 565 1,319 40 -
3/12/99 Jacksonville / Southside Blvd. - 1,278 2,982 245 -
3/12/99 Miami / Nw 7th Ave - 783 1,827 138 -
3/12/99 Vero Beach / Us Hwy 1 - 678 1,583 60 -
3/12/99 Ponte Vedra / Palm Valley Rd. - 745 2,749 505 -
3/12/99 Miami Lakes / Nw 153rd St. - 425 992 59 -
3/12/99 Deerfield Beach / Sw 10th St. - 1,844 4,302 76 -
3/12/99 Apopka / S. Orange Blossom - 307 717 145 -
3/12/99 Davie / University - 313 4,379 128 -
3/12/99 Arlington / Division - 998 2,328 84 -
3/12/99 Duncanville/S.Cedar Ridge - 1,477 3,447 222 -
3/12/99 Carrollton / Trinity Mills West - 530 1,237 88 -
3/12/99 Houston / Wallisville Rd. - 744 1,736 75 -
3/12/99 Houston / Fondren South - 647 1,510 128 -
3/12/99 Houston / Addicks Satsuma - 409 954 126 -
3/12/99 Addison / Inwood Road - 1,204 2,808 65 -
3/12/99 Garland / Jackson Drive - 755 1,761 77 -
3/12/99 Garland / Buckingham Road - 492 1,149 114 -
3/12/99 Houston / South Main - 1,461 3,409 200 -
3/12/99 Plano / Parker Road-Avenue K - 1,517 3,539 157 -
3/12/99 Houston / Bingle Road - 576 1,345 127 -
3/12/99 Houston / Mangum Road - 737 1,719 246 -
3/12/99 Houston / Hayes Road - 916 2,138 121 -
3/12/99 Katy / Dominion Drive - 995 2,321 52 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 Clearwater / Highland Ave 724 1,946 2,670 581
3/12/99 Tarpon Springs / Us Highway 19 892 2,262 3,154 709
3/12/99 Orlando /S. Orange Blossom Trail 1,229 3,009 4,238 907
3/12/99 Casselberry Ii 1,160 2,879 4,039 849
3/12/99 Miami / Nw 14th Street 1,739 4,189 5,928 1,221
3/12/99 Tarpon Springs / Highway 19 1,179 3,092 4,271 888
3/12/99 Ft. Myers / Tamiami Trail South 834 1,679 2,513 431
3/12/99 Jacksonville / Ft. Caroline Rd. 1,037 2,594 3,631 809
3/12/99 Orlando / South Semoran 565 1,359 1,924 393
3/12/99 Jacksonville / Southside Blvd. 1,278 3,227 4,505 994
3/12/99 Miami / Nw 7th Ave 783 1,965 2,748 624
3/12/99 Vero Beach / Us Hwy 1 678 1,643 2,321 486
3/12/99 Ponte Vedra / Palm Valley Rd. 745 3,254 3,999 1,021
3/12/99 Miami Lakes / Nw 153rd St. 425 1,051 1,476 326
3/12/99 Deerfield Beach / Sw 10th St. 1,844 4,378 6,222 1,241
3/12/99 Apopka / S. Orange Blossom 307 862 1,169 288
3/12/99 Davie / University 313 4,507 4,820 1,274
3/12/99 Arlington / Division 997 2,413 3,410 693
3/12/99 Duncanville/S.Cedar Ridge 1,477 3,669 5,146 1,109
3/12/99 Carrollton / Trinity Mills West 530 1,325 1,855 413
3/12/99 Houston / Wallisville Rd. 744 1,811 2,555 536
3/12/99 Houston / Fondren South 647 1,638 2,285 482
3/12/99 Houston / Addicks Satsuma 409 1,080 1,489 341
3/12/99 Addison / Inwood Road 1,204 2,873 4,077 815
3/12/99 Garland / Jackson Drive 755 1,838 2,593 538
3/12/99 Garland / Buckingham Road 492 1,263 1,755 411
3/12/99 Houston / South Main 1,461 3,609 5,070 1,021
3/12/99 Plano / Parker Road-Avenue K 1,517 3,696 5,213 1,086
3/12/99 Houston / Bingle Road 576 1,472 2,048 461
3/12/99 Houston / Mangum Road 737 1,965 2,702 603
3/12/99 Houston / Hayes Road 916 2,259 3,175 657
3/12/99 Katy / Dominion Drive 995 2,373 3,368 677
F-73
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 Houston / Fm 1960 West - 513 1,198 131 -
3/12/99 Webster / Fm 528 Road - 756 1,764 82 -
3/12/99 Houston / Loch Katrine Lane - 580 1,352 139 -
3/12/99 Houston / Milwee St. - 779 1,815 170 -
3/12/99 Lewisville / Highway 121 - 688 1,605 93 -
3/12/99 Richardson / Central Expressway - 465 1,085 99 -
3/12/99 Houston / Hwy 6 South - 569 1,328 67 -
3/12/99 Houston / Westheimer West - 1,075 2,508 48 -
3/12/99 Ft. Worth / Granbury Road - 763 1,781 63 -
3/12/99 Houston / New Castle - 2,346 5,473 1,291 -
3/12/99 Dallas / Inwood Road - 1,478 3,448 114 -
3/12/99 Fort Worth / Loop 820 North - 729 1,702 117 -
3/12/99 Arlington / Cooper St - 779 1,818 80 -
3/12/99 Webster / Highway 3 - 677 1,580 74 -
3/12/99 Augusta / Peach Orchard Rd - 860 2,007 299 -
3/12/99 Martinez / Old Petersburg Rd - 407 950 149 -
3/12/99 Jonesboro / Tara Blvd - 785 1,827 284 -
3/12/99 Atlanta / Briarcliff Rd - 2,171 5,066 251 -
3/12/99 Decatur / N Decatur Rd - 933 2,177 261 -
3/12/99 Douglasville / Westmoreland - 453 1,056 216 -
3/12/99 Doraville / Mcelroy Rd - 827 1,931 247 -
3/12/99 Roswell / Alpharetta - 1,772 4,135 198 -
3/12/99 Douglasville / Duralee Lane - 533 1,244 160 -
3/12/99 Douglasville / Highway 5 - 804 1,875 466 -
3/12/99 Forest Park / Jonesboro - 659 1,537 199 -
3/12/99 Marietta / Whitlock - 1,016 2,370 198 -
3/12/99 Marietta / Cobb - 727 1,696 478 -
3/12/99 Norcross / Jones Mill Rd - 1,142 2,670 186 -
3/12/99 Norcross / Dawson Blvd - 1,232 2,874 388 -
3/12/99 Forest Park / Old Dixie Hwy - 895 2,070 353 -
3/12/99 Decatur / Covington - 1,764 4,116 142 -
3/12/99 Alpharetta / Maxwell Rd - 1,075 2,509 139 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 Houston / Fm 1960 West 513 1,329 1,842 415
3/12/99 Webster / Fm 528 Road 756 1,846 2,602 548
3/12/99 Houston / Loch Katrine Lane 580 1,491 2,071 436
3/12/99 Houston / Milwee St. 778 1,986 2,764 618
3/12/99 Lewisville / Highway 121 688 1,698 2,386 513
3/12/99 Richardson / Central Expressway 465 1,184 1,649 371
3/12/99 Houston / Hwy 6 South 569 1,395 1,964 406
3/12/99 Houston / Westheimer West 1,075 2,556 3,631 726
3/12/99 Ft. Worth / Granbury Road 763 1,844 2,607 534
3/12/99 Houston / New Castle 2,346 6,764 9,110 1,779
3/12/99 Dallas / Inwood Road 1,478 3,562 5,040 1,003
3/12/99 Fort Worth / Loop 820 North 729 1,819 2,548 546
3/12/99 Arlington / Cooper St 779 1,898 2,677 546
3/12/99 Webster / Highway 3 677 1,654 2,331 492
3/12/99 Augusta / Peach Orchard Rd 860 2,306 3,166 809
3/12/99 Martinez / Old Petersburg Rd 407 1,099 1,506 362
3/12/99 Jonesboro / Tara Blvd 784 2,112 2,896 687
3/12/99 Atlanta / Briarcliff Rd 2,171 5,317 7,488 1,576
3/12/99 Decatur / N Decatur Rd 933 2,438 3,371 728
3/12/99 Douglasville / Westmoreland 453 1,272 1,725 458
3/12/99 Doraville / Mcelroy Rd 827 2,178 3,005 723
3/12/99 Roswell / Alpharetta 1,772 4,333 6,105 1,252
3/12/99 Douglasville / Duralee Lane 533 1,404 1,937 441
3/12/99 Douglasville / Highway 5 804 2,341 3,145 884
3/12/99 Forest Park / Jonesboro 659 1,736 2,395 575
3/12/99 Marietta / Whitlock 1,016 2,568 3,584 777
3/12/99 Marietta / Cobb 727 2,174 2,901 665
3/12/99 Norcross / Jones Mill Rd 1,142 2,856 3,998 870
3/12/99 Norcross / Dawson Blvd 1,232 3,262 4,494 984
3/12/99 Forest Park / Old Dixie Hwy 889 2,429 3,318 777
3/12/99 Decatur / Covington 1,764 4,258 6,022 1,231
3/12/99 Alpharetta / Maxwell Rd 1,075 2,648 3,723 764
F-74
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 Alpharetta / N. Main St - 1,240 2,893 108 -
3/12/99 Atlanta / Bolton Rd - 866 2,019 178 -
3/12/99 Riverdale / Georgia Hwy 85 - 1,075 2,508 175 -
3/12/99 Kennesaw / Rutledge Road - 803 1,874 251 -
3/12/99 Lawrenceville / Buford Dr. - 256 597 84 -
3/12/99 Hanover Park / W. Lake Street - 1,320 3,081 180 -
3/12/99 Chicago / W. Jarvis Ave - 313 731 79 -
3/12/99 Chicago / N. Broadway St - 535 1,249 225 -
3/12/99 Carol Stream / Phillips Court - 829 1,780 100 -
3/12/99 Winfield / Roosevelt Road - 1,109 2,587 118 -
3/12/99 Schaumburg / S. Roselle Road - 659 1,537 101 -
3/12/99 Tinley Park / Brennan Hwy - 771 1,799 174 -
3/12/99 Schaumburg / Palmer Drive - 1,333 3,111 157 -
3/12/99 Mobile / Hillcrest Road - 554 1,293 144 -
3/12/99 Mobile / Azalea Road - 517 1,206 156 -
3/12/99 Mobile / Moffat Road - 537 1,254 120 -
3/12/99 Mobile / Grelot Road - 804 1,877 176 -
3/12/99 Mobile / Government Blvd - 407 950 116 -
3/12/99 New Orleans / Tchoupitoulas - 1,092 2,548 173 -
3/12/99 Louisville / Breckenridge Lane - 581 1,356 103 -
3/12/99 Louisville - 554 1,292 134 -
3/12/99 Louisville / Poplar Level - 463 1,080 147 -
3/12/99 Chesapeake / Western Branch - 1,274 2,973 195 -
3/12/99 Centreville / Lee Hwy - 1,650 3,851 190 -
3/12/99 Sterling / S. Sterling Blvd - 1,282 2,992 186 -
3/12/99 Manassas / Sudley Road - 776 1,810 214 -
3/12/99 Longmont / Wedgewood Ave - 717 1,673 90 -
3/12/99 Fort Collins / So.College Ave - 745 1,739 142 -
3/12/99 Colo Sprngs / Parkmoor Village - 620 1,446 177 -
3/12/99 Colo Sprngs / Van Teylingen - 1,216 2,837 192 -
3/12/99 Denver / So. Clinton St. - 462 1,609 93 -
3/12/99 Denver / Washington St. - 795 1,846 395 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 Alpharetta / N. Main St 1,240 3,001 4,241 860
3/12/99 Atlanta / Bolton Rd 865 2,198 3,063 673
3/12/99 Riverdale / Georgia Hwy 85 1,075 2,683 3,758 778
3/12/99 Kennesaw / Rutledge Road 803 2,125 2,928 683
3/12/99 Lawrenceville / Buford Dr. 256 681 937 228
3/12/99 Hanover Park / W. Lake Street 1,320 3,261 4,581 947
3/12/99 Chicago / W. Jarvis Ave 313 810 1,123 271
3/12/99 Chicago / N. Broadway St 535 1,474 2,009 521
3/12/99 Carol Stream / Phillips Court 783 1,926 2,709 537
3/12/99 Winfield / Roosevelt Road 1,109 2,705 3,814 795
3/12/99 Schaumburg / S. Roselle Road 659 1,638 2,297 496
3/12/99 Tinley Park / Brennan Hwy 771 1,973 2,744 608
3/12/99 Schaumburg / Palmer Drive 1,333 3,268 4,601 943
3/12/99 Mobile / Hillcrest Road 554 1,437 1,991 464
3/12/99 Mobile / Azalea Road 517 1,362 1,879 444
3/12/99 Mobile / Moffat Road 537 1,374 1,911 444
3/12/99 Mobile / Grelot Road 804 2,053 2,857 619
3/12/99 Mobile / Government Blvd 407 1,066 1,473 340
3/12/99 New Orleans / Tchoupitoulas 1,092 2,721 3,813 869
3/12/99 Louisville / Breckenridge Lane 581 1,459 2,040 440
3/12/99 Louisville 554 1,426 1,980 459
3/12/99 Louisville / Poplar Level 463 1,227 1,690 411
3/12/99 Chesapeake / Western Branch 1,274 3,168 4,442 941
3/12/99 Centreville / Lee Hwy 1,636 4,055 5,691 1,187
3/12/99 Sterling / S. Sterling Blvd 1,282 3,178 4,460 941
3/12/99 Manassas / Sudley Road 776 2,024 2,800 627
3/12/99 Longmont / Wedgewood Ave 717 1,763 2,480 512
3/12/99 Fort Collins / So.College Ave 745 1,881 2,626 570
3/12/99 Colo Sprngs / Parkmoor Village 620 1,623 2,243 484
3/12/99 Colo Sprngs / Van Teylingen 1,216 3,029 4,245 894
3/12/99 Denver / So. Clinton St. 462 1,702 2,164 492
3/12/99 Denver / Washington St. 792 2,244 3,036 662
F-75
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 Colo Sprngs / Centennial Blvd - 1,352 3,155 94 -
3/12/99 Colo Sprngs / Astrozon Court - 810 1,889 152 -
3/12/99 Arvada / 64th Ave - 671 1,566 96 -
3/12/99 Golden / Simms Street - 918 2,143 339 -
3/12/99 Lawrence / Haskell Ave - 636 1,484 157 -
3/12/99 Overland Park / Hemlock St - 1,168 2,725 132 -
3/12/99 Lenexa / Long St. - 720 1,644 42 -
3/12/99 Shawnee / Hedge Lane Terrace - 570 1,331 149 -
3/12/99 Mission / Foxridge Dr - 1,657 3,864 178 -
3/12/99 Milwaukee / W. Dean Road - 1,362 3,163 538 -
3/12/99 Columbus / Morse Road - 1,415 3,302 556 -
3/12/99 Milford / Branch Hill - 527 1,229 2,416 -
3/12/99 Fairfield / Dixie - 519 1,211 113 -
3/12/99 Cincinnati / Western Hills - 758 1,769 220 -
3/12/99 Austin / N. Mopac Expressway - 865 2,791 75 -
3/12/99 Atlanta / Dunwoody Place - 1,410 3,296 256 -
3/12/99 Kennedale/Bowman Sprgs - 425 991 69 -
3/12/99 Colo Sprngs/N.Powers - 1,124 2,622 204 -
3/12/99 St. Louis/S. Third St - 206 480 15 -
3/12/99 Orlando / L.B. Mcleod Road - 521 1,217 61 -
3/12/99 Jacksonville / Roosevelt Blvd. - 851 1,986 301 -
3/12/99 Miami-Kendall / Sw 84th Street - 935 2,180 126 -
3/12/99 North Miami Beach / 69th St - 1,594 3,720 193 -
3/12/99 Miami Beach / Dade Blvd - 962 2,245 283 -
3/12/99 Chicago / N. Natchez Ave - 1,684 3,930 266 -
3/12/99 Chicago / W. Cermak Road - 1,294 3,019 608 -
3/12/99 Kansas City / State Ave - 645 1,505 209 -
3/12/99 Lenexa / Santa Fe Trail Road - 713 1,663 186 -
3/12/99 Waukesha / Foster Court - 765 1,785 167 -
3/12/99 River Grove / N. 5th Ave. - 1,094 2,552 30 -
3/12/99 St. Charles / E. Main St. - 951 2,220 (292) -
3/12/99 Chicago / West 47th St. - 705 1,645 72 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross CArrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 Colo Sprngs / Centennial Blvd 1,352 3,249 4,601 920
3/12/99 Colo Sprngs / Astrozon Court 810 2,041 2,851 632
3/12/99 Arvada / 64th Ave 671 1,662 2,333 500
3/12/99 Golden / Simms Street 918 2,482 3,400 784
3/12/99 Lawrence / Haskell Ave 636 1,641 2,277 495
3/12/99 Overland Park / Hemlock St 1,168 2,857 4,025 827
3/12/99 Lenexa / Long St. 709 1,697 2,406 482
3/12/99 Shawnee / Hedge Lane Terrace 570 1,480 2,050 453
3/12/99 Mission / Foxridge Dr 1,656 4,043 5,699 1,176
3/12/99 Milwaukee / W. Dean Road 1,357 3,706 5,063 1,199
3/12/99 Columbus / Morse Road 1,415 3,858 5,273 1,193
3/12/99 Milford / Branch Hill 527 3,645 4,172 811
3/12/99 Fairfield / Dixie 519 1,324 1,843 397
3/12/99 Cincinnati / Western Hills 758 1,989 2,747 635
3/12/99 Austin / N. Mopac Expressway 865 2,866 3,731 758
3/12/99 Atlanta / Dunwoody Place 1,390 3,572 4,962 1,053
3/12/99 Kennedale/Bowman Sprgs 425 1,060 1,485 323
3/12/99 Colo Sprngs/N.Powers 1,124 2,826 3,950 866
3/12/99 St. Louis/S. Third St 206 495 701 141
3/12/99 Orlando / L.B. Mcleod Road 521 1,278 1,799 376
3/12/99 Jacksonville / Roosevelt Blvd. 851 2,287 3,138 794
3/12/99 Miami-Kendall / Sw 84th Street 935 2,306 3,241 717
3/12/99 North Miami Beach / 69th St 1,594 3,913 5,507 1,162
3/12/99 Miami Beach / Dade Blvd 962 2,528 3,490 794
3/12/99 Chicago / N. Natchez Ave 1,684 4,196 5,880 1,214
3/12/99 Chicago / W. Cermak Road 1,294 3,627 4,921 1,267
3/12/99 Kansas City / State Ave 645 1,714 2,359 557
3/12/99 Lenexa / Santa Fe Trail Road 713 1,849 2,562 559
3/12/99 Waukesha / Foster Court 765 1,952 2,717 579
3/12/99 River Grove / N. 5th Ave. 1,034 2,642 3,676 1,001
3/12/99 St. Charles / E. Main St. 802 2,077 2,879 847
3/12/99 Chicago / West 47th St. 705 1,717 2,422 497
F-76
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
3/12/99 Carol Stream / S. Main Place - 1,320 3,079 186 -
3/12/99 Carpentersville /N. Western Ave - 911 2,120 144 -
3/12/99 Elgin / E. Chicago St. - 570 2,163 103 -
3/12/99 Elgin / Big Timber Road - 1,347 3,253 253 -
3/12/99 Chicago / S. Pulaski Road - 458 2,118 300 -
3/12/99 Aurora / Business 30 - 900 2,097 153 -
3/12/99 Streamwood / Old Church Road - 855 1,991 78 -
3/12/99 Mt. Prospect / Central Road - 802 1,847 213 -
3/12/99 Geneva / Gary Ave - 1,072 2,501 76 -
3/12/99 Naperville / Lasalle Ave - 1,501 3,502 121 -
3/31/99 Forest Park - 270 3,378 3,862 -
4/1/99 Fresno - 44 206 (241) 804
5/1/99 Stockton - 151 402 (256) 2,017
6/30/99 Winter Park/N. Semor - 342 638 331 728
6/30/99 N. Richland Hills - 455 769 278 832
6/30/99 Rolling Meadows/Lois - 441 849 371 898
6/30/99 Gresham/Burnside - 354 544 207 627
6/30/99 Jacksonville/University - 211 741 244 700
6/30/99 Irving/W. Airport - 419 960 216 857
6/30/99 Houston/Highway 6 So. - 751 1,006 1,001 1,057
6/30/99 Concord/Arnold - 827 1,553 484 1,874
6/30/99 Rockville/Gude Drive - 602 768 389 880
6/30/99 Bradenton/Cortez Road - 476 885 382 906
6/30/99 San Antonio/Nw Loop - 511 786 209 855
6/30/99 Anaheim / La Palma - 1,378 851 217 1,221
6/30/99 Spring Valley/Sweetwater - 271 380 5,058 416
6/30/99 Ft. Myers/Tamiami - 948 962 325 1,208
6/30/99 Littleton/Centennial - 421 804 301 812
6/30/99 Newark/Cedar Blvd - 729 971 325 1,067
6/30/99 Falls Church/Columbia - 901 975 327 1,141
6/30/99 Fairfax / Lee Highway - 586 1,078 346 1,106
6/30/99 Wheat Ridge / W. 44th - 480 789 271 831
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
3/12/99 Carol Stream / S. Main Place 1,320 3,265 4,585 995
3/12/99 Carpentersville /N. Western Ave 909 2,266 3,175 679
3/12/99 Elgin / E. Chicago St. 570 2,266 2,836 638
3/12/99 Elgin / Big Timber Road 1,347 3,506 4,853 1,104
3/12/99 Chicago / S. Pulaski Road 458 2,418 2,876 664
3/12/99 Aurora / Business 30 899 2,251 3,150 683
3/12/99 Streamwood / Old Church Road 854 2,070 2,924 591
3/12/99 Mt. Prospect / Central Road 795 2,067 2,862 654
3/12/99 Geneva / Gary Ave 1,072 2,577 3,649 747
3/12/99 Naperville / Lasalle Ave 1,501 3,623 5,124 1,054
3/31/99 Forest Park 270 7,240 7,510 2,368
4/1/99 Fresno 193 620 813 177
5/1/99 Stockton 590 1,724 2,314 498
6/30/99 Winter Park/N. Semor 427 1,612 2,039 427
6/30/99 N. Richland Hills 569 1,765 2,334 520
6/30/99 Rolling Meadows/Lois 551 2,008 2,559 597
6/30/99 Gresham/Burnside 441 1,291 1,732 368
6/30/99 Jacksonville/University 263 1,633 1,896 483
6/30/99 Irving/W. Airport 524 1,928 2,452 530
6/30/99 Houston/Highway 6 So. 937 2,878 3,815 852
6/30/99 Concord/Arnold 1,031 3,707 4,738 1,146
6/30/99 Rockville/Gude Drive 751 1,888 2,639 557
6/30/99 Bradenton/Cortez Road 594 2,055 2,649 607
6/30/99 San Antonio/Nw Loop 638 1,723 2,361 470
6/30/99 Anaheim / La Palma 1,720 1,947 3,667 499
6/30/99 Spring Valley/Sweetwater 356 5,769 6,125 544
6/30/99 Ft. Myers/Tamiami 1,184 2,259 3,443 605
6/30/99 Littleton/Centennial 526 1,812 2,338 522
6/30/99 Newark/Cedar Blvd 910 2,182 3,092 594
6/30/99 Falls Church/Columbia 1,126 2,218 3,344 622
6/30/99 Fairfax / Lee Highway 732 2,384 3,116 689
6/30/99 Wheat Ridge / W. 44th 599 1,772 2,371 525
F-77
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
6/30/99 Huntington Bch/Gotham - 952 890 322 1,130
6/30/99 Fort Worth/McCart - 372 942 180 703
6/30/99 San Diego/Clairemont - 1,601 2,035 412 2,034
6/30/99 Houston/Millridge N. - 1,160 1,983 281 2,433
6/30/99 Woodbridge/Jefferson - 840 1,689 296 1,446
6/30/99 Mountainside - 1,260 1,237 337 1,523
6/30/99 Woodbridge / Davis - 1,796 1,623 478 1,996
6/30/99 Huntington Beach - 1,026 1,437 149 1,450
6/30/99 Edison / Old Post Rd - 498 1,267 329 1,175
6/30/99 Northridge/Parthenia - 1,848 1,486 197 1,839
6/30/99 Brick Township/Brick - 590 1,431 313 1,364
6/30/99 Stone Mountain/Rock - 1,233 288 320 852
6/30/99 Hyattsville - 768 2,186 270 1,919
6/30/99 Union City / Alvarado - 992 1,776 223 1,690
6/30/99 Oak Park / Greenfield - 621 1,735 218 1,490
6/30/99 Tujunga/Foothill Blvd - 1,746 2,383 248 2,370
7/1/99 Pantego/W. Pioneer Pkwy - 432 1,228 61 -
7/1/99 Nashville/Lafayette St - 486 1,135 217 -
7/1/99 Nashville/Metroplex Dr - 380 886 143 -
7/1/99 Madison / Myatt Dr - 441 1,028 108 -
7/1/99 Hixson / Highway 153 - 488 1,138 224 -
7/1/99 Hixson / Gadd Rd - 207 484 342 -
7/1/99 Red Bank / Harding Rd - 452 1,056 183 -
7/1/99 Nashville/Welshwood Dr - 934 2,179 219 -
7/1/99 Madison/Williams Ave - 1,318 3,076 501 -
7/1/99 Nashville/Mcnally Dr - 884 2,062 509 -
7/1/99 Hermitage/Central Ct - 646 1,508 173 -
7/1/99 Antioch/Cane Ridge Rd - 353 823 184 -
9/1/99 Charlotte / Ashley Road - 664 1,551 39 -
9/1/99 Raleigh / Capital Blvd - 927 2,166 217 -
9/1/99 Charlotte / South Blvd. - 734 1,715 39 -
9/1/99 Greensboro/W.Market St. - 603 1,409 53 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
n At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
6/30/99 Huntington Bch/Gotham 1,189 2,105 3,294 605
6/30/99 Fort Worth/McCart 464 1,733 2,197 372
6/30/99 San Diego/Clairemont 1,999 4,083 6,082 1,107
6/30/99 Houston/Millridge N. 1,449 4,408 5,857 1,193
6/30/99 Woodbridge/Jefferson 1,048 3,223 4,271 733
6/30/99 Mountainside 1,574 2,783 4,357 697
6/30/99 Woodbridge / Davis 2,243 3,650 5,893 1,058
6/30/99 Huntington Beach 1,282 2,780 4,062 721
6/30/99 Edison / Old Post Rd 622 2,647 3,269 733
6/30/99 Northridge/Parthenia 2,308 3,062 5,370 759
6/30/99 Brick Township/Brick 736 2,962 3,698 754
6/30/99 Stone Mountain/Rock 1,540 1,153 2,693 299
6/30/99 Hyattsville 959 4,184 5,143 1,075
6/30/99 Union City / Alvarado 1,239 3,442 4,681 871
6/30/99 Oak Park / Greenfield 775 3,289 4,064 855
6/30/99 Tujunga/Foothill Blvd 2,180 4,567 6,747 1,068
7/1/99 Pantego/W. Pioneer Pkwy 432 1,289 1,721 223
7/1/99 Nashville/Lafayette St 486 1,352 1,838 453
7/1/99 Nashville/Metroplex Dr 379 1,030 1,409 358
7/1/99 Madison / Myatt Dr 441 1,136 1,577 361
7/1/99 Hixson / Highway 153 487 1,363 1,850 466
7/1/99 Hixson / Gadd Rd 207 826 1,033 357
7/1/99 Red Bank / Harding Rd 452 1,239 1,691 432
7/1/99 Nashville/Welshwood Dr 934 2,398 3,332 747
7/1/99 Madison/Williams Ave 1,318 3,577 4,895 1,103
7/1/99 Nashville/Mcnally Dr 884 2,571 3,455 903
7/1/99 Hermitage/Central Ct 646 1,681 2,327 536
7/1/99 Antioch/Cane Ridge Rd 352 1,008 1,360 347
9/1/99 Charlotte / Ashley Road 651 1,603 2,254 464
9/1/99 Raleigh / Capital Blvd 909 2,401 3,310 675
9/1/99 Charlotte / South Blvd. 719 1,769 2,488 521
9/1/99 Greensboro/W.Market St. 591 1,474 2,065 436
F-78
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/8/99 Belmont / O'neill Ave - 869 4,659 167 -
10/11/99 Matthews - 937 3,165 256 1,665
11/15/99 Poplar, Memphis - 1,631 3,093 316 2,201
12/17/99 Dallas / Swiss Ave - 1,862 4,344 149 -
12/30/99 Oak Park/Greenfield Rd - 1,184 3,685 (95) -
12/30/99 Santa Anna - 2,657 3,293 462 3,083
1/21/00 Hanover Park - 262 3,104 69 -
1/25/00 Memphis / N.Germantwn Pkwy - 884 3,024 194 1,237
1/31/00 Rowland Heights/Walnut - 681 1,589 117 -
2/8/00 Lewisville / Justin Rd - 529 2,919 2,772 1,585
2/28/00 Plano / Avenue K - 2,064 10,407 1,781 -
4/1/00 Hyattsville/Edmonson - 1,036 2,657 61 -
4/29/00 St.Louis/Ellisville Twn Centre - 765 4,377 292 1,621
5/2/00 Mill Valley - 1,412 3,294 (367) -
5/2/00 Culver City - 2,439 5,689 (656) -
5/26/00 Phoenix/N. 35th Ave - 868 2,967 54 -
6/5/00 Mount Sinai / Route 25a - 950 3,338 287 1,923
6/15/00 Pinellas Park - 526 2,247 271 1,100
6/30/00 San Antonio/Broadway St - 1,131 4,558 1,262 -
7/13/00 Lincolnwood - 1,598 3,727 344 -
7/17/00 La Palco/New Orleans - 1,023 3,204 111 1,709
7/29/00 Tracy/1615& 1650 W.11th S - 1,745 4,530 320 -
8/1/00 Pineville - 2,197 3,417 348 2,262
8/23/00 Morris Plains - 1,501 4,300 636 3,596
8/31/00 Florissant/New Halls Fry - 800 4,225 92 -
8/31/00 Orange, CA - 661 1,542 54 -
9/1/00 Bayshore, NY - 1,277 2,980 1,564 -
9/1/00 Los Angeles, CA - 590 1,376 517 -
9/13/00 Merrillville - 343 2,474 213 1,449
9/15/00 Gardena / W. El Segundo - 1,532 3,424 125 -
9/15/00 Chicago / Ashland Avenue - 850 4,880 361 -
9/15/00 Oakland / Macarthur - 678 2,751 151 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/8/99 Belmont / O'neill Ave 878 4,817 5,695 1,338
10/11/99 Matthews 1,500 4,523 6,023 814
11/15/99 Poplar, Memphis 2,378 4,863 7,241 824
12/17/99 Dallas / Swiss Ave 1,878 4,477 6,355 1,270
12/30/99 Oak Park/Greenfield Rd 1,196 3,578 4,774 935
12/30/99 Santa Anna 3,705 5,790 9,495 882
1/21/00 Hanover Park 256 3,179 3,435 715
1/25/00 Memphis / N.Germantwn Pkwy 1,301 4,038 5,339 774
1/31/00 Rowland Heights/Walnut 688 1,699 2,387 471
2/8/00 Lewisville / Justin Rd 1,680 6,125 7,805 802
2/28/00 Plano / Avenue K 1,221 13,031 14,252 5,582
4/1/00 Hyattsville/Edmonson 1,036 2,718 3,754 670
4/29/00 St.Louis/Ellisville Twn Centre 1,312 5,743 7,055 1,064
5/2/00 Mill Valley 1,283 3,056 4,339 779
5/2/00 Culver City 2,217 5,255 7,472 1,326
5/26/00 Phoenix/N. 35th Ave 867 3,022 3,889 604
6/5/00 Mount Sinai / Route 25a 1,600 4,898 6,498 814
6/15/00 Pinellas Park 887 3,257 4,144 472
6/30/00 San Antonio/Broadway St 1,131 5,820 6,951 1,227
7/13/00 Lincolnwood 1,613 4,056 5,669 1,081
7/17/00 La Palco/New Orleans 1,609 4,438 6,047 603
7/29/00 Tracy/1615& 1650 W.11th S 1,762 4,833 6,595 1,198
8/1/00 Pineville 2,965 5,259 8,224 860
8/23/00 Morris Plains 2,720 7,313 10,033 1,002
8/31/00 Florissant/New Halls Fry 807 4,310 5,117 1,066
8/31/00 Orange, CA 667 1,590 2,257 394
9/1/00 Bayshore, NY 1,533 4,288 5,821 1,039
9/1/00 Los Angeles, CA 708 1,775 2,483 489
9/13/00 Merrillville 832 3,647 4,479 567
9/15/00 Gardena / W. El Segundo 1,532 3,549 5,081 740
9/15/00 Chicago / Ashland Avenue 850 5,241 6,091 1,130
9/15/00 Oakland / Macarthur 678 2,902 3,580 619
F-79
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
9/15/00 Alexandria / Pickett Ii - 2,743 6,198 369 -
9/15/00 Royal Oak / Coolidge Highway - 1,062 2,576 155 -
9/15/00 Hawthorne / Crenshaw Blvd. - 1,079 2,913 149 -
9/15/00 Rockaway / U.S. Route 46 - 2,424 4,945 271 -
9/15/00 Evanston / Greenbay - 846 4,436 190 -
9/15/00 Los Angeles / Coliseum - 3,109 4,013 173 -
9/15/00 Bethpage / Hempstead Turnpike - 2,899 5,457 861 -
9/15/00 Northport / Fort Salonga Road - 2,999 5,698 279 -
9/15/00 Brooklyn / St. Johns Place - 3,492 6,026 296 -
9/15/00 Lake Ronkonkoma / Portion Rd. - 937 4,199 165 -
9/15/00 Tampa/Gunn Hwy - 1,843 4,300 87 -
9/18/00 Tampa/N. Del Mabry - 2,204 2,447 7,533 -
9/30/00 Marietta/Kennestone& Hwy5 - 622 3,388 1,409 -
9/30/00 Lilburn/Indian Trail - 1,695 5,170 1,649 -
11/15/00 Largo/Missouri - 1,092 4,270 293 2,215
11/21/00 St. Louis/Wilson - 1,608 3,913 1,931 -
12/21/00 Houston/7715 Katy Frwy - 2,274 5,307 (2,514) -
12/21/00 Houston/10801 Katy Frwy - 1,664 3,884 (41) -
12/21/00 Houston/Main St - 1,681 3,924 105 -
12/21/00 Houston/W. Loop/S. Frwy - 2,036 4,749 117 -
12/29/00 Chicago - 1,946 6,002 37 -
12/30/00 Raleigh/Glenwood - 1,545 3,628 116 -
12/30/00 Frazier - 800 3,324 43 -
1/5/01 Troy/E. Big Beaver Rd - 2,195 4,221 260 1,846
1/11/01 Ft Lauderdale - 954 3,972 387 2,183
1/16/01 No Hollywood/Sherman Way - 2,173 5,442 56 -
1/18/01 Tuscon/E. Speedway - 735 2,895 177 1,066
1/25/01 Lombard/Finley - 851 3,806 405 2,112
3/15/01 Los Angeles/West Pico - 8,579 8,630 2,513 -
4/1/01 Lakewood/Cedar Dr. - 1,329 9,356 3,751 -
4/7/01 Farmingdale/Rte 110 - 2,364 5,807 10 -
4/17/01 Philadelphia/Aramingo - 968 4,539 26 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
9/15/00 Alexandria / Pickett Ii 2,743 6,567 9,310 1,331
9/15/00 Royal Oak / Coolidge Highway 1,062 2,731 3,793 580
9/15/00 Hawthorne / Crenshaw Blvd. 1,079 3,062 4,141 639
9/15/00 Rockaway / U.S. Route 46 2,424 5,216 7,640 1,088
9/15/00 Evanston / Greenbay 846 4,626 5,472 941
9/15/00 Los Angeles / Coliseum 3,109 4,186 7,295 826
9/15/00 Bethpage / Hempstead Turnpike 2,899 6,318 9,217 1,252
9/15/00 Northport / Fort Salonga Road 2,998 5,978 8,976 1,211
9/15/00 Brooklyn / St. Johns Place 3,492 6,322 9,814 1,222
9/15/00 Lake Ronkonkoma / Portion Rd. 937 4,364 5,301 869
9/15/00 Tampa/Gunn Hwy 1,843 4,387 6,230 966
9/18/00 Tampa/N. Del Mabry 2,225 9,959 12,184 3,593
9/30/00 Marietta/Kennestone& Hwy5 628 4,791 5,419 1,015
9/30/00 Lilburn/Indian Trail 1,712 6,802 8,514 1,352
11/15/00 Largo/Missouri 1,838 6,032 7,870 937
11/21/00 St. Louis/Wilson 1,628 5,824 7,452 1,163
12/21/00 Houston/7715 Katy Frwy 1,500 3,567 5,067 557
12/21/00 Houston/10801 Katy Frwy 1,618 3,889 5,507 692
12/21/00 Houston/Main St 1,684 4,026 5,710 724
12/21/00 Houston/W. Loop/S. Frwy 2,038 4,864 6,902 875
12/29/00 Chicago 1,949 6,036 7,985 1,210
12/30/00 Raleigh/Glenwood 1,560 3,729 5,289 840
12/30/00 Frazier 800 3,367 4,167 566
1/5/01 Troy/E. Big Beaver Rd 2,821 5,701 8,522 877
1/11/01 Ft Lauderdale 1,746 5,750 7,496 852
1/16/01 No Hollywood/Sherman Way 2,175 5,496 7,671 1,220
1/18/01 Tuscon/E. Speedway 1,095 3,778 4,873 614
1/25/01 Lombard/Finley 1,565 5,609 7,174 835
3/15/01 Los Angeles/West Pico 8,610 11,112 19,722 2,120
4/1/01 Lakewood/Cedar Dr. 1,331 13,105 14,436 2,311
4/7/01 Farmingdale/Rte 110 2,378 5,803 8,181 1,159
4/17/01 Philadelphia/Aramingo 968 4,565 5,533 861
F-80
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
4/18/01 Largo/Walsingham Road - 1,000 3,545 (241) -
6/17/01 Port Washington/Seaview &W.Sh - 2,381 4,608 1,792 -
6/18/01 Silver Springs/Prosperity - 1,065 5,391 1,731 -
6/19/01 Tampa/W. Waters Ave & Wilsky - 953 3,785 23 -
6/26/01 Middletown - 1,535 4,258 463 2,258
7/29/01 Miami/Sw 85th Ave - 2,755 4,951 (12) -
8/28/01 Hoover/John Hawkins Pkwy - 1,050 2,453 43 -
9/30/01 Syosset - 2,461 5,312 227 1,855
12/27/01 Los Angeles/W.Jefferson - 8,285 9,429 902 -
12/27/01 Howell/Hgwy 9 - 941 4,070 269 1,260
12/29/01 Catonsville/Kent - 1,378 5,289 2,623 -
12/29/01 Old Bridge/Rte 9 - 1,244 4,960 (10) -
12/29/01 Sacremento/Roseville - 876 5,344 1,936 -
12/31/01 Santa Ana/E.Mcfadden - 7,587 8,612 1,027 -
1/1/02 Concord - 650 1,332 64 -
1/1/02 Tustin - 962 1,465 (13) -
1/1/02 Pasadena/Sierra Madre - 706 872 45 -
1/1/02 Azusa - 933 1,659 4,967 -
1/1/02 Redlands - 423 1,202 171 -
1/1/02 Airport I - 346 861 35 -
1/1/02 Miami / Marlin Road - 562 1,345 13 -
1/1/02 Riverside - 95 1,106 (1) -
1/1/02 Oakland / San Leandro - 330 1,116 60 -
1/1/02 Richmond / Jacuzzi - 419 1,224 (3) -
1/1/02 Santa Clara / Laurel - 1,178 1,789 57 -
1/1/02 Pembroke Park - 475 1,259 (50) -
1/1/02 Ft. Lauderdale / Sun - 452 1,254 (58) -
1/1/02 San Carlos / Shorewa - 737 1,360 (35) -
1/1/02 Ft. Lauderdale / Sun - 532 1,444 2 -
1/1/02 Sacramento / Howe - 361 1,181 1 -
1/1/02 Sacramento / Capitol - 186 1,284 (16) -
1/1/02 Miami / Airport - 517 915 30 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
4/18/01 Largo/Walsingham Road 800 3,504 4,304 668
6/17/01 Port Washington/Seaview &W.Sh 2,359 6,422 8,781 900
6/18/01 Silver Springs/Prosperity 1,065 7,122 8,187 1,048
6/19/01 Tampa/W. Waters Ave & Wilsky 954 3,807 4,761 695
6/26/01 Middletown 2,295 6,219 8,514 831
7/29/01 Miami/Sw 85th Ave 2,731 4,963 7,694 890
8/28/01 Hoover/John Hawkins Pkwy 1,051 2,495 3,546 453
9/30/01 Syosset 3,090 6,765 9,855 924
12/27/01 Los Angeles/W.Jefferson 8,300 10,316 18,616 1,701
12/27/01 Howell/Hgwy 9 1,365 5,175 6,540 719
12/29/01 Catonsville/Kent 1,378 7,912 9,290 1,094
12/29/01 Old Bridge/Rte 9 1,250 4,944 6,194 802
12/29/01 Sacremento/Roseville 526 7,630 8,156 1,129
12/31/01 Santa Ana/E.Mcfadden 7,601 9,625 17,226 1,617
1/1/02 Concord 650 1,396 2,046 345
1/1/02 Tustin 963 1,451 2,414 390
1/1/02 Pasadena/Sierra Madre 706 917 1,623 229
1/1/02 Azusa 932 6,627 7,559 838
1/1/02 Redlands 422 1,374 1,796 338
1/1/02 Airport I 347 895 1,242 227
1/1/02 Miami / Marlin Road 562 1,358 1,920 350
1/1/02 Riverside 94 1,106 1,200 295
1/1/02 Oakland / San Leandro 330 1,176 1,506 304
1/1/02 Richmond / Jacuzzi 419 1,221 1,640 317
1/1/02 Santa Clara / Laurel 1,179 1,845 3,024 485
1/1/02 Pembroke Park 475 1,209 1,684 321
1/1/02 Ft. Lauderdale / Sun 452 1,196 1,648 314
1/1/02 San Carlos / Shorewa 737 1,325 2,062 356
1/1/02 Ft. Lauderdale / Sun 533 1,445 1,978 384
1/1/02 Sacramento / Howe 361 1,182 1,543 303
1/1/02 Sacramento / Capitol 186 1,268 1,454 329
1/1/02 Miami / Airport 517 945 1,462 270
F-81
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
1/1/02 Marietta / Cobb Park - 419 1,571 39 -
1/1/02 Sacramento / Florin - 624 1,710 84 -
1/1/02 Belmont / Dairy Lane - 915 1,252 45 -
1/1/02 So. San Francisco - 1,018 2,464 103 -
1/1/02 Palmdale / P Street - 218 1,287 37 -
1/1/02 Tucker / Montreal Rd - 760 1,485 66 -
1/1/02 Pasadena / S Fair Oaks - 1,313 1,905 72 -
1/1/02 Carmichael/Fair Oaks - 584 1,431 12 -
1/1/02 Carson / Carson St - 507 877 89 -
1/1/02 San Jose / Felipe Ave - 517 1,482 31 -
1/1/02 Miami / 27th Ave - 272 1,572 47 -
1/1/02 San Jose / Capitol - 400 1,183 16 -
1/1/02 Tucker / Mountain - 519 1,385 58 -
1/3/02 St Charles/Veterans Memorial Pkwy - 687 1,602 142 -
1/7/02 Bothell/ N. Bothell Way - 1,063 4,995 150 -
1/15/02 Houston / N.Loop - 2,045 6,178 1,885 -
1/16/02 Orlando / S. Kirkman - 889 3,180 41 -
1/16/02 Austin / Us Hwy 183 - 608 3,856 23 -
1/16/02 Rochelle Park / 168 - 744 4,430 30 -
1/16/02 Honolulu / Waialae - 10,631 10,783 152 -
1/16/02 Sunny Isles Bch - 931 2,845 (7) -
1/16/02 San Ramon / San Ramo - 1,522 3,510 38 -
1/16/02 Austin / W. 6th St - 2,399 4,493 255 -
1/16/02 Schaumburg / W. Wise - 1,158 2,598 24 -
1/16/02 Laguna Hills / Moulton - 2,319 5,200 153 -
1/16/02 Annapolis / West St - 955 3,669 32 -
1/16/02 Birmingham / Commons - 1,125 3,938 105 -
1/16/02 Crestwood / Watson Rd - 1,232 3,093 2 -
1/16/02 Northglenn /Huron St - 688 2,075 29 -
1/16/02 Skokie / Skokie Blvd - 716 5,285 31 -
1/16/02 Garden City / Stewart - 1,489 4,039 26 -
1/16/02 Millersville / Veterans - 1,036 4,229 22 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
1/1/02 Marietta / Cobb Park 420 1,609 2,029 465
1/1/02 Sacramento / Florin 623 1,795 2,418 533
1/1/02 Belmont / Dairy Lane 914 1,298 2,212 376
1/1/02 So. San Francisco 1,019 2,566 3,585 753
1/1/02 Palmdale / P Street 218 1,324 1,542 383
1/1/02 Tucker / Montreal Rd 759 1,552 2,311 445
1/1/02 Pasadena / S Fair Oaks 1,312 1,978 3,290 560
1/1/02 Carmichael/Fair Oaks 584 1,443 2,027 409
1/1/02 Carson / Carson St 506 967 1,473 270
1/1/02 San Jose / Felipe Ave 516 1,514 2,030 481
1/1/02 Miami / 27th Ave 271 1,620 1,891 484
1/1/02 San Jose / Capitol 401 1,198 1,599 349
1/1/02 Tucker / Mountain 520 1,442 1,962 433
1/3/02 St Charles/Veterans Memorial Pkwy 687 1,744 2,431 334
1/7/02 Bothell/ N. Bothell Way 1,063 5,145 6,208 819
1/15/02 Houston / N.Loop 2,045 8,063 10,108 994
1/16/02 Orlando / S. Kirkman 889 3,221 4,110 542
1/16/02 Austin / Us Hwy 183 608 3,879 4,487 658
1/16/02 Rochelle Park / 168 744 4,460 5,204 742
1/16/02 Honolulu / Waialae 10,631 10,935 21,566 1,833
1/16/02 Sunny Isles Bch 931 2,838 3,769 479
1/16/02 San Ramon / San Ramo 1,522 3,548 5,070 587
1/16/02 Austin / W. 6th St 2,399 4,748 7,147 859
1/16/02 Schaumburg / W. Wise 1,158 2,622 3,780 439
1/16/02 Laguna Hills / Moulton 2,319 5,353 7,672 954
1/16/02 Annapolis / West St 955 3,701 4,656 625
1/16/02 Birmingham / Commons 1,125 4,043 5,168 675
1/16/02 Crestwood / Watson Rd 1,232 3,095 4,327 514
1/16/02 Northglenn /Huron St 688 2,104 2,792 359
1/16/02 Skokie / Skokie Blvd 716 5,316 6,032 912
1/16/02 Garden City / Stewart 1,489 4,065 5,554 677
1/16/02 Millersville / Veterans 1,036 4,251 5,287 747
F-82
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
1/16/02 W. Babylon / Sunrise - 1,609 3,959 33 -
1/16/02 Memphis / Summer Ave - 1,103 2,772 12 -
1/16/02 Santa Clara/Lafayette - 1,393 4,626 9 -
1/16/02 Naperville / Washington - 2,712 2,225 445 -
1/16/02 Phoenix/W Union Hills - 1,071 2,934 26 -
1/16/02 Woodlawn / Whitehead - 2,682 3,355 29 -
1/16/02 Issaquah / Pickering - 1,138 3,704 22 -
1/16/02 West La /W Olympic - 6,532 5,975 53 -
1/16/02 New Orleans/I-10 - 1,286 3,380 (1,934) -
1/16/02 Pasadena / E. Colorado - 1,125 5,160 49 -
1/16/02 Memphis / Covington - 620 3,076 5 -
1/16/02 Hiawassee / N.Hiawassee - 1,622 1,892 56 -
1/16/02 Longwood / State Rd - 2,123 3,083 88 -
1/16/02 Casselberry / State - 1,628 3,308 19 -
1/16/02 Honolulu/Kahala - 3,722 8,525 52 -
1/16/02 Waukegan / Greenbay - 933 3,826 19 -
1/16/02 Southfield / Telegraph - 2,869 5,507 110 -
1/16/02 San Mateo / S. Delaware - 1,921 4,602 36 -
1/16/02 Scottsdale/N.Hayden - 2,111 3,564 23 -
1/16/02 Gilbert/W Park Ave - 497 3,534 2 -
1/16/02 W.Palm Beach/Okeechobee - 2,149 4,650 (391) -
1/16/02 Indianapolis / W.86th - 812 2,421 2 -
1/16/02 Indianapolis / Madison - 716 2,655 23 -
1/16/02 Indianapolis / Rockville - 704 2,704 3 -
1/16/02 Santa Cruz / River - 2,148 6,584 66 -
1/16/02 Novato / Rush Landing - 1,858 2,574 10 -
1/16/02 Martinez / Arnold Dr - 847 5,422 16 -
1/16/02 Charlotte/Cambridge - 836 3,908 6 -
1/16/02 Rancho Cucamonga - 579 3,222 3,356 -
1/16/02 Renton / Kent - 768 4,078 37 -
1/16/02 Hawthorne / Goffle Rd - 2,414 4,918 5 -
2/2/02 Nashua / Southwood Dr - 2,493 4,326 168 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
1/16/02 W. Babylon / Sunrise 1,609 3,992 5,601 668
1/16/02 Memphis / Summer Ave 1,103 2,784 3,887 461
1/16/02 Santa Clara/Lafayette 1,393 4,635 6,028 764
1/16/02 Naperville / Washington 2,712 2,670 5,382 413
1/16/02 Phoenix/W Union Hills 1,065 2,966 4,031 504
1/16/02 Woodlawn / Whitehead 2,682 3,384 6,066 598
1/16/02 Issaquah / Pickering 1,137 3,727 4,864 621
1/16/02 West La /W Olympic 6,532 6,028 12,560 1,013
1/16/02 New Orleans/I-10 1,292 1,440 2,732 240
1/16/02 Pasadena / E. Colorado 1,125 5,209 6,334 860
1/16/02 Memphis / Covington 620 3,081 3,701 513
1/16/02 Hiawassee / N.Hiawassee 1,622 1,948 3,570 332
1/16/02 Longwood / State Rd 2,123 3,171 5,294 571
1/16/02 Casselberry / State 1,628 3,327 4,955 551
1/16/02 Honolulu/Kahala 3,722 8,577 12,299 1,416
1/16/02 Waukegan / Greenbay 933 3,845 4,778 634
1/16/02 Southfield / Telegraph 2,869 5,617 8,486 916
1/16/02 San Mateo / S. Delaware 1,921 4,638 6,559 760
1/16/02 Scottsdale/N.Hayden 2,113 3,585 5,698 602
1/16/02 Gilbert/W Park Ave 497 3,536 4,033 588
1/16/02 W.Palm Beach/Okeechobee 2,149 4,259 6,408 614
1/16/02 Indianapolis / W.86th 812 2,423 3,235 400
1/16/02 Indianapolis / Madison 716 2,678 3,394 441
1/16/02 Indianapolis / Rockville 704 2,707 3,411 446
1/16/02 Santa Cruz / River 2,148 6,650 8,798 1,079
1/16/02 Novato / Rush Landing 1,858 2,584 4,442 427
1/16/02 Martinez / Arnold Dr 847 5,438 6,285 876
1/16/02 Charlotte/Cambridge 836 3,914 4,750 651
1/16/02 Rancho Cucamonga 1,130 6,027 7,157 562
1/16/02 Renton / Kent 768 4,115 4,883 683
1/16/02 Hawthorne / Goffle Rd 2,413 4,924 7,337 805
2/2/02 Nashua / Southwood Dr 2,493 4,494 6,987 703
F-83
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
2/15/02 Houston/Fm 1960 East - 859 2,004 55 -
3/7/02 Baltimore / Russell Street - 1,763 5,821 190 -
3/11/02 Weymouth / Main St - 1,440 4,433 152 -
3/28/02 Clinton / Branch Ave & Schultz - 1,257 4,108 449 3,253
4/17/02 La Mirada/Alondra - 1,749 5,044 346 2,443
5/1/02 N.Richlnd Hls/Rufe Snow Dr - 632 6,337 2,287 -
5/2/02 Parkville/E.Joppa - 898 4,306 132 -
6/17/02 Waltham / Lexington St - 3,183 5,733 278 -
6/30/02 Nashville / Charlotte - 876 2,004 88 -
7/2/02 Mt Juliet / Lebonan Rd - 516 1,203 70 -
7/14/02 Yorktown / George Washington - 707 1,684 39 -
7/22/02 Brea/E. Lambert & Clifwood Pk - 2,114 3,555 147 -
8/1/02 Bricktown/Route 70 - 1,292 3,690 176 -
8/1/02 Danvers / Newbury St. - 1,311 4,140 593 -
8/15/02 Montclair / Holt Blvd. - 889 2,074 196 -
8/21/02 Rockville Centre/Merrick Rd - 3,693 6,990 362 -
9/13/02 Lacey / Martin Way - 1,379 3,217 61 -
9/13/02 Lakewood / Bridgeport - 1,286 3,000 83 -
9/13/02 Kent / Pacific Highway - 1,839 4,291 130 -
11/4/02 Scotch Plains /Route 22 - 2,124 5,072 50 -
12/23/02 Snta Clarita/Viaprincssa - 2,508 3,008 3,562 -
2/13/03 Pasadena / Ritchie Hwy - 2,253 4,218 10 -
2/13/03 Malden / Eastern Ave - 3,212 2,739 41 -
2/24/03 Miami / SW 137th Ave - 1,600 4,684 (292) -
3/3/03 Chantilly / Dulles South Court - 2,190 4,314 26 -
3/6/03 Medford / Mystic Ave - 3,886 4,982 19 -
5/27/03 Castro Valley / Grove Way - 2,247 5,881 917 -
8/2/03 Sacramento / E.Stockton Blvd - 554 4,175 31 -
8/13/03 Timonium / W. Padonia Road - 1,932 3,681 27 -
8/21/03 Van Nuys / Sepulveda - 1,698 3,886 2,406 -
9/9/03 Westwood / East St - 3,267 5,013 281 -
10/21/03 San Diego / Miramar Road - 2,244 6,653 656 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
2/15/02 Houston/Fm 1960 East 859 2,059 2,918 334
3/7/02 Baltimore / Russell Street 1,763 6,011 7,774 927
3/11/02 Weymouth / Main St 1,440 4,585 6,025 707
3/28/02 Clinton / Branch Ave & Schultz 2,358 6,709 9,067 717
4/17/02 La Mirada/Alondra 2,575 7,007 9,582 807
5/1/02 N.Richlnd Hls/Rufe Snow Dr 632 8,624 9,256 1,120
5/2/02 Parkville/E.Joppa 898 4,438 5,336 654
6/17/02 Waltham / Lexington St 3,187 6,007 9,194 844
6/30/02 Nashville / Charlotte 876 2,092 2,968 320
7/2/02 Mt Juliet / Lebonan Rd 516 1,273 1,789 200
7/14/02 Yorktown / George Washington 707 1,723 2,430 262
7/22/02 Brea/E. Lambert & Clifwood Pk 2,113 3,703 5,816 520
8/1/02 Bricktown/Route 70 1,293 3,865 5,158 537
8/1/02 Danvers / Newbury St. 1,312 4,732 6,044 611
8/15/02 Montclair / Holt Blvd. 889 2,270 3,159 384
8/21/02 Rockville Centre/Merrick Rd 3,692 7,353 11,045 995
9/13/02 Lacey / Martin Way 1,379 3,278 4,657 283
9/13/02 Lakewood / Bridgeport 1,286 3,083 4,369 277
9/13/02 Kent / Pacific Highway 1,839 4,421 6,260 399
11/4/02 Scotch Plains /Route 22 2,126 5,120 7,246 701
12/23/02 Snta Clarita/Viaprincssa 2,508 6,570 9,078 644
2/13/03 Pasadena / Ritchie Hwy 2,253 4,228 6,481 494
2/13/03 Malden / Eastern Ave 3,212 2,780 5,992 312
2/24/03 Miami / SW 137th Ave 1,600 4,392 5,992 507
3/3/03 Chantilly / Dulles South Court 2,190 4,340 6,530 469
3/6/03 Medford / Mystic Ave 3,886 5,001 8,887 536
5/27/03 Castro Valley / Grove Way 2,307 6,738 9,045 687
8/2/03 Sacramento / E.Stockton Blvd 554 4,206 4,760 463
8/13/03 Timonium / W. Padonia Road 1,932 3,708 5,640 374
8/21/03 Van Nuys / Sepulveda 1,699 6,291 7,990 362
9/9/03 Westwood / East St 3,281 5,280 8,561 531
10/21/03 San Diego / Miramar Road 2,244 7,309 9,553 682
F-84
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
11/3/03 El Sobrante/San Pablo - 1,255 4,990 795 -
11/6/03 Pearl City / Kamehameha Hwy - 4,428 4,839 479 -
12/23/03 Boston / Southampton Street - 5,334 7,511 789 -
1/9/04 Farmingville / Horseblock Road - 1,919 4,420 (115) -
2/27/04 Salem / Goodhue St. - 1,544 6,160 52 -
3/18/04 Seven Corners / Arlington Blvd. - 6,087 7,553 (290) -
6/30/04 Marlton / Route 73 - 1,103 5,195 15 -
7/1/04 Long Island City/Northern Blvd. - 4,876 7,610 (246) -
7/9/04 West Valley Cty/Redwood 1,999 876 2,067 47 -
7/12/04 Hicksville/E. Old Country Rd. - 1,693 3,910 145 -
7/15/04 Harwood/Ronald - 1,619 3,778 36 -
9/24/04 E. Hanover/State Rt - 3,895 4,943 233 -
10/14/04 Apple Valley/148th St 774 591 1,375 27 -
10/14/04 Blaine / Hwy 65 NE 1,029 789 1,833 27 -
10/14/04 Brooklyn Park / Lakeland Ave 1,846 1,411 3,278 66 -
10/14/04 Brooklyn Park / Xylon Ave 1,464 1,120 2,601 49 -
10/14/04 St Paul(Eagan)/Sibley Mem'l Hwy 800 615 1,431 16 -
10/14/04 Maple Grove / Zachary Lane 1,738 1,337 3,105 34 -
10/14/04 Minneapolis / Hiawatha Ave 1,930 1,480 3,437 53 -
10/14/04 New Hope / 36th Ave 1,734 1,332 3,094 40 -
10/14/04 Rosemount / Chippendale Ave 1,130 864 2,008 39 -
10/14/04 St Cloud/Franklin 752 575 1,338 24 -
10/14/04 Savage / W 128th St 1,988 1,522 3,535 62 -
10/14/04 Spring Lake Park/Hwy 65 NE 1,998 1,534 3,562 50 -
10/14/04 St Paul / Terrace Court 1,473 1,122 2,606 67 -
10/14/04 St Paul / Eaton St 1,521 1,161 2,698 60 -
10/14/04 St Paul-Hartzell / Wabash Ave - 1,207 2,816 68 -
10/14/04 West St Paul / Marie Ave 1,888 1,447 3,361 56 -
10/14/04 Stillwater / Memorial Ave 2,175 1,669 3,876 57 -
10/14/04 St Paul(VadnaisHts/Birch Lake Rd 1,212 928 2,157 37 -
10/14/04 Woodbury / Hudson Road 2,429 1,863 4,327 67 -
10/14/04 Brown Deer / N Green Bay Rd 1,382 1,059 2,461 40 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
11/3/03 El Sobrante/San Pablo 1,257 5,783 7,040 506
11/6/03 Pearl City / Kamehameha Hwy 4,430 5,316 9,746 481
12/23/03 Boston / Southampton Street 5,345 8,289 13,634 673
1/9/04 Farmingville / Horseblock Road 1,919 4,305 6,224 348
2/27/04 Salem / Goodhue St. 1,544 6,212 7,756 457
3/18/04 Seven Corners / Arlington Blvd. 6,086 7,264 13,350 505
6/30/04 Marlton / Route 73 1,103 5,210 6,313 321
7/1/04 Long Island City/Northern Blvd. 4,876 7,364 12,240 468
7/9/04 West Valley Cty/Redwood 883 2,107 2,990 130
7/12/04 Hicksville/E. Old Country Rd. 1,693 4,055 5,748 228
7/15/04 Harwood/Ronald 1,619 3,814 5,433 221
9/24/04 E. Hanover/State Rt 3,895 5,176 9,071 257
10/14/04 Apple Valley/148th St 592 1,401 1,993 67
10/14/04 Blaine / Hwy 65 NE 790 1,859 2,649 88
10/14/04 Brooklyn Park / Lakeland Ave 1,413 3,342 4,755 158
10/14/04 Brooklyn Park / Xylon Ave 1,121 2,649 3,770 126
10/14/04 St Paul(Eagan)/Sibley Mem'l Hwy 616 1,446 2,062 68
10/14/04 Maple Grove / Zachary Lane 1,338 3,138 4,476 148
10/14/04 Minneapolis / Hiawatha Ave 1,482 3,488 4,970 165
10/14/04 New Hope / 36th Ave 1,333 3,133 4,466 148
10/14/04 Rosemount / Chippendale Ave 865 2,046 2,911 98
10/14/04 St Cloud/Franklin 576 1,361 1,937 65
10/14/04 Savage / W 128th St 1,524 3,595 5,119 169
10/14/04 Spring Lake Park/Hwy 65 NE 1,535 3,611 5,146 169
10/14/04 St Paul / Terrace Court 1,123 2,672 3,795 126
10/14/04 St Paul / Eaton St 1,163 2,756 3,919 130
10/14/04 St Paul-Hartzell / Wabash Ave 1,207 2,884 4,091 138
10/14/04 West St Paul / Marie Ave 1,449 3,415 4,864 160
10/14/04 Stillwater / Memorial Ave 1,671 3,931 5,602 185
10/14/04 St Paul(VadnaisHts/Birch Lake Rd 929 2,193 3,122 102
10/14/04 Woodbury / Hudson Road 1,865 4,392 6,257 206
10/14/04 Brown Deer / N Green Bay Rd 1,061 2,499 3,560 117
F-85
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
10/14/04 Germantown / Spaten Court 797 607 1,411 34 -
10/14/04 Milwaukee/ N 77th St 1,618 1,241 2,882 44 -
10/14/04 Milwaukee/ S 13th St 1,933 1,484 3,446 48 -
10/14/04 Oak Creek / S 27th St 980 751 1,746 27 -
10/14/04 Waukesha / Arcadian Ave 2,170 1,665 3,868 56 -
10/14/04 West Allis / W Lincoln Ave 1,806 1,390 3,227 34 -
10/14/04 Garland / O'Banion Rd 1,372 606 1,414 33 -
10/14/04 Grand Prairie/ Hwy360 2,120 942 2,198 30 -
10/14/04 Duncanville/N Duncnvill 3,424 1,524 3,556 41 -
10/14/04 Lancaster/ W Pleasant 2,237 993 2,317 35 -
10/14/04 Mesquite / Oates Dr 2,111 937 2,186 35 -
10/14/04 Dallas / E NW Hwy 2,127 942 2,198 40 -
11/24/04 Pompano Beach/E. Sample 4,729 1,608 3,754 73 -
11/24/04 Davie / SW 41st St. 6,104 2,467 5,758 86 -
11/24/04 North Bay Village/Kennedy 6,697 3,275 7,644 53 -
11/24/04 Miami / Biscayne Blvd 6,636 3,538 8,258 (44) -
11/24/04 Miami Gardens/NW 57th St 6,645 2,706 6,316 19 -
11/24/04 Tamarac/ N University Dr 6,465 2,580 6,022 (6) -
11/24/04 Miami / SW 31st Ave 14,228 11,574 27,009 118 - 1
11/24/04 Hialeah / W 20th Ave 5,555 2,224 5,192 (7) -
11/24/04 Miami / SW 42nd St 7,402 2,955 6,897 33 -
11/24/04 Miami / SW 40th St 7,347 2,933 6,844 16 -
11/25/04 Carlsbad/CorteDelAbeto - 2,861 6,676 1,339 -
1/19/05 Cheektowaga / William St - 965 2,262 34 -
1/19/05 Amherst / Millersport Hwy - 1,431 3,350 13 -
1/19/05 Lancaster / Walden Ave - 528 1,244 19 -
1/19/05 Tonawanda/HospitalityCentreWay - 1,205 2,823 20 -
1/19/05 Wheatfield / Niagara Falls Blv - 1,130 2,649 24 -
1/20/05 Oak Lawn / Southwest Hwy - 1,850 4,330 63 -
2/25/05 Owings Mills / Reisterstown Rd - 887 3,865 - -
4/26/05 Hoboken / 8th St - 3,963 9,290 2 -
5/3/05 Bayville / 939 Route 9 - 1,928 4,519 14 -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
10/14/04 Germantown / Spaten Court 608 1,444 2,052 67
10/14/04 Milwaukee/ N 77th St 1,242 2,925 4,167 137
10/14/04 Milwaukee/ S 13th St 1,486 3,492 4,978 164
10/14/04 Oak Creek / S 27th St 752 1,772 2,524 83
10/14/04 Waukesha / Arcadian Ave 1,667 3,922 5,589 184
10/14/04 West Allis / W Lincoln Ave 1,391 3,260 4,651 153
10/14/04 Garland / O'Banion Rd 608 1,445 2,053 60
10/14/04 Grand Prairie/ Hwy360 944 2,226 3,170 91
10/14/04 Duncanville/N Duncnvill 1,526 3,595 5,121 147
10/14/04 Lancaster/ W Pleasant 995 2,350 3,345 96
10/14/04 Mesquite / Oates Dr 939 2,219 3,158 91
10/14/04 Dallas / E NW Hwy 944 2,236 3,180 92
11/24/04 Pompano Beach/E. Sample 1,621 3,814 5,435 165
11/24/04 Davie / SW 41st St. 2,467 5,844 8,311 252
11/24/04 North Bay Village/Kennedy 3,274 7,698 10,972 334
11/24/04 Miami / Biscayne Blvd 3,538 8,214 11,752 357
11/24/04 Miami Gardens/NW 57th St 2,706 6,335 9,041 274
11/24/04 Tamarac/ N University Dr 2,580 6,016 8,596 261
11/24/04 Miami / SW 31st Ave 11,573 27,128 38,701 1,177
11/24/04 Hialeah / W 20th Ave 2,224 5,185 7,409 229
11/24/04 Miami / SW 42nd St 2,955 6,930 9,885 305
11/24/04 Miami / SW 40th St 2,933 6,860 9,793 300
11/25/04 Carlsbad/CorteDelAbeto 2,861 8,015 10,876 344
1/19/05 Cheektowaga / William St 965 2,296 3,261 86
1/19/05 Amherst / Millersport Hwy 1,431 3,363 4,794 127
1/19/05 Lancaster / Walden Ave 528 1,263 1,791 47
1/19/05 Tonawanda/HospitalityCentreWay 1,205 2,843 4,048 107
1/19/05 Wheatfield / Niagara Falls Blv 1,130 2,673 3,803 101
1/20/05 Oak Lawn / Southwest Hwy 1,850 4,393 6,243 164
2/25/05 Owings Mills / Reisterstown Rd 887 3,865 4,752 131
4/26/05 Hoboken / 8th St 3,963 9,292 13,255 254
5/3/05 Bayville / 939 Route 9 1,928 4,533 6,461 120
F-86
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
5/3/05 Bricktown / Burnt Tavern Rd - 3,522 8,239 12 -
5/3/05 JacksonTwnshp/N.County Line Rd - 1,555 3,647 15 -
5/16/05 Methuen / Pleasant Valley St - 2,263 4,540 - -
5/19/05 Libertyville / Kelley Crt - 2,042 4,783 20 -
5/19/05 Joliet / Essington - 1,434 3,367 46 -
6/15/05 Atlanta/Howell Mill Rd NW - 1,864 4,363 18 -
6/15/05 Smyrna / Herodian Way SE - 1,294 3,032 28 -
7/7/05 Lithonia / Minola Dr - 1,273 2,985 36 -
7/13/05 Kennesaw / Bells Ferry Rd NW - 1,264 2,976 18 -
7/27/05 Atlanta / Monroe Dr NE - 2,914 6,829 - -
8/11/05 Suwanee / Old Peachtree Rd NE - 1,914 4,497 7 -
9/7/05 Brandon / Providence Rd - 2,592 6,067 3 -
9/15/05 Woodstock / Hwy 92 - 1,251 2,935 25 -
9/22/05 Charlotte / W. Arrowood Rd - 1,426 3,335 4 -
10/4/05 Jacksonville Beach / Beach Bl - 2,552 5,981 3 -
10/5/05 Bronx / Brush Ave - 4,517 10,581 - -
10/11/05 Austin / E. Ben White Blvd - 213 3,461 - -
10/12/05 Deerfield Beach/S. Powerline R - 3,365 7,874 - -
10/14/05 Cooper City / Sheridan St - 3,035 7,092 - -
10/19/05 Staten Island / Veterans Rd W. - 3,599 8,430 - -
10/19/05 Pittsburg / LoveridgeCenter - 3,602 8,448 1 -
10/21/05 Norristown / W.Main St - 1,465 4,818 - -
11/1/05 Miller Place / Route 25A - 2,757 6,459 - -
11/17/05 Miami / Biscayne Blvd (Omni) - 7,434 17,268 - -
11/30/05 Manchester / Taylor St - 1,305 3,029 1 -
12/6/05 Buffalo Grove/E. Aptakisic Rd - 1,986 4,635 - -
12/13/05 Lorton / Pohick Rd & I95 - 1,167 4,582 - -
12/16/05 Pico Rivera / Washington Blvd - 4,719 11,012 - -
12/27/05 Queens Village / Jamaica Ave - 3,409 5,494 - -
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
5/3/05 Bricktown / Burnt Tavern Rd 3,522 8,251 11,773 218
5/3/05 JacksonTwnshp/N.County Line Rd 1,555 3,662 5,217 97
5/16/05 Methuen / Pleasant Valley St 2,263 4,540 6,803 115
5/19/05 Libertyville / Kelley Crt 2,042 4,803 6,845 121
5/19/05 Joliet / Essington 1,434 3,413 4,847 85
6/15/05 Atlanta/Howell Mill Rd NW 1,864 4,381 6,245 96
6/15/05 Smyrna / Herodian Way SE 1,294 3,060 4,354 66
7/7/05 Lithonia / Minola Dr 1,273 3,021 4,294 58
7/13/05 Kennesaw / Bells Ferry Rd NW 1,264 2,994 4,258 56
7/27/05 Atlanta / Monroe Dr NE 2,914 6,829 9,743 117
8/11/05 Suwanee / Old Peachtree Rd NE 1,914 4,504 6,418 60
9/7/05 Brandon / Providence Rd 2,592 6,070 8,662 76
9/15/05 Woodstock / Hwy 92 1,251 2,960 4,211 30
9/22/05 Charlotte / W. Arrowood Rd 1,426 3,339 4,765 34
10/4/05 Jacksonville Beach / Beach Bl 2,552 5,984 8,536 58
10/5/05 Bronx / Brush Ave 4,517 10,581 15,098 101
10/11/05 Austin / E. Ben White Blvd 213 3,461 3,674 267
10/12/05 Deerfield Beach/S. Powerline R 3,365 7,874 11,239 69
10/14/05 Cooper City / Sheridan St 3,035 7,092 10,127 61
10/19/05 Staten Island / Veterans Rd W. 3,599 8,430 12,029 67
10/19/05 Pittsburg / LoveridgeCenter 3,602 8,449 12,051 68
10/21/05 Norristown / W.Main St 1,465 4,818 6,283 37
11/1/05 Miller Place / Route 25A 2,757 6,459 9,216 42
11/17/05 Miami / Biscayne Blvd (Omni) 7,434 17,268 24,702 83
11/30/05 Manchester / Taylor St 1,305 3,030 4,335 10
12/6/05 Buffalo Grove/E. Aptakisic Rd 1,986 4,635 6,621 13
12/13/05 Lorton / Pohick Rd & I95 1,167 4,582 5,749 17
12/16/05 Pico Rivera / Washington Blvd 4,719 11,012 15,731 19
12/27/05 Queens Village / Jamaica Ave 3,409 5,494 8,903 2
F-87
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustments
Initial Cost Resulting from
-------------------------- the Acquisition
Date Encum- Buildings & Subsequent of Minority
Acquired Description brances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
----------------------------------------------------------------------
Other Properties
Glendale/Western Avenue - 1,622 3,771 14,287 -
12/13/99 Burlingame (Commercial & PUD) - 4,043 9,434 328 -
4/28/00 San Diego/Sorrento - 1,282 3,016 268 -
6/1/98 Renton / Sw 39th St. - 725 2,196 52 -
6/29/98 Pompano Bch/Center Port Circle - 795 2,312 25 -
12/30/99 Tamarac Parkway - 1,902 4,467 1,350 -
12/29/00 Gardena - 1,737 5,456 30 -
4/2/02 Long Beach - 887 6,251 16 -
Construction in Progress - - - 54,472 -
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$127,247 $1,500,069 $3,518,756 $647,233 $318,898
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PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 2005
Date -------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- -------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
-------------------------------------------------
Other Properties
Glendale/Western Avenue 1,615 18,065 19,680 16,120
12/13/99 Burlingame (Commercial & PUD) 4,044 9,761 13,805 2,369
4/28/00 San Diego/Sorrento 1,024 3,542 4,566 955
6/1/98 Renton / Sw 39th St. 725 2,248 2,973 765
6/29/98 Pompano Bch/Center Port Circle 795 2,337 3,132 731
12/30/99 Tamarac Parkway 1,890 5,829 7,719 773
12/29/00 Gardena 1,737 5,486 7,223 890
4/2/02 Long Beach 887 6,267 7,154 493
Construction in Progress - 54,472 54,472 -
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$1,540,357 $4,444,599 $5,984,956 $1,500,128
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F-88