Public Storage Reports Results for the First Quarter Ended March 31, 2010 and Increases Its Quarterly Common Dividend Per Share by 23.1% to $0.80 Per Share

GLENDALE, Calif.--(BUSINESS WIRE)-- Public Storage (NYSE:PSA) announced today operating results for the first quarter ended March 31, 2010.

Operating Results for the Three Months Ended March 31, 2010

For the three months ended March 31, 2010, net income allocable to our common shareholders was $34.7 million or $0.21 per common share, on a diluted basis, compared to $159.5 million or $0.95 per common share, on a diluted basis, for the same period in 2009, representing a decrease of $124.8 million or $0.74 per common share. This decrease is primarily due to the application of Emerging Issues Task Force D-42 (“EITF D-42”) in connection with the redemption of our Equity Shares, Series A and repurchases of our preferred securities at costs which differ from the original net issuance proceeds for such securities. Overall, the application of EITF D-42 resulted in a net year-over-year reduction in net income allocable to our common shareholders of approximately $120.2 million or $0.71 per common share on a diluted basis.

During the three months ended March 31, 2010, we called for redemption our Equity Shares, Series A and in applying EITF D-42 the excess redemption cost over the original net issuance proceeds reduced net income allocable to our common shareholders by $25.7 million. Conversely, during the three months ended March 31, 2009, we repurchased a portion of our preferred securities at an aggregate cost that was less than the original net issuance proceeds for these securities and as a result of applying EITF D-42, combined with our 41% equity share of PSB’s benefit from repurchases of preferred securities, net income allocable to our common shareholders was increased by $94.5 million.

Revenues for the Same Store Facilities decreased 2.2% or $7.7 million in the quarter ended March 31, 2010 as compared to the same period in 2009, primarily due to a 3.0% reduction in realized rent per occupied square foot, offset by a 0.6% increase in average occupancies. Cost of operations for the Same Store Facilities decreased 0.7% or $0.9 million in the quarter ended March 31, 2010 as compared to the same period in 2009. Net operating income for our Same Store Facilities decreased 3.0% or $6.8 million in the quarter ended March 31, 2010 as compared to the same period in 2009.

Funds from Operations

For the three months ended March 31, 2010, funds from operations (“FFO”) decreased to $0.78 per common share on a diluted basis as compared to $1.51 per common share for the same period in 2009, representing a decrease of $0.73 per common share or 48.3%.

For the three months ended March 31, 2010, FFO was impacted by (i) a $25.7 million reduction in applying EITF D-42 to the redemption of our Equity Shares, Series A (compared to an aggregate $94.5 million increase recorded for our redemption, and our equity share of PSB’s redemption, of preferred equity in the same period in 2009), (ii) a foreign currency exchange loss totaling $34.8 million (compared to a loss of $34.7 million for the same period in 2009), and (iii) a $1.0 million impairment of real estate and other assets. For the three months ended March 31, 2009, FFO was further impacted by (i) a $4.1 million gain on the early extinguishment of debt, and (ii) costs incurred to terminate and wind down our truck rental operations of $3.5 million.

The following table provides a summary of the per-share impact of the items noted above:

FFO is a term defined by the National Association of Real Estate Investment Trusts (“NAREIT”). It is generally defined as net income before depreciation with respect to real estate assets and gains and losses on real estate assets. FFO is presented because management and many analysts consider FFO to be one measure of the performance of real estate companies. In addition, we believe that FFO is helpful to investors as an additional measure of the performance of a REIT, because net income includes the impact of depreciation, which assumes that the value of real estate diminishes predictably over time, while we believe that the value of real estate fluctuates due to market conditions and in response to inflation. FFO computations do not consider scheduled principal payments on debt, capital improvements, distributions and other obligations of the Company. FFO is not a substitute for our cash flow or net income as a measure of our liquidity or operating performance or our ability to pay dividends. Other REITs may not compute FFO in the same manner; accordingly, FFO may not be comparable among REITs. See the attached reconciliation of net income to funds from operations included in the selected financial data attached to this press release.

Property Operations – Same Store Facilities

The Same Store Facilities represents those 1,925 facilities that are stabilized and owned since January 1, 2008 and therefore provide meaningful comparisons for 2008, 2009, and 2010. The Same Store Facilities increased from 1,899 at December 31, 2009 to 1,925 at March 31, 2010, as facilities were added that are now stabilized and owned since January 1, 2008. The following table summarizes the historical operating results of these 1,925 facilities (120.3 million net rentable square feet) that represent approximately 96% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at March 31, 2010.

The following table summarizes additional selected financial data with respect to the Same Store Facilities (unaudited):

Shurgard Europe

We own a 49% equity interest in Shurgard Europe, with the remaining 51% equity interest owned by an institutional investor. We account for our investment in Shurgard Europe under the equity method.

At March 31, 2010, Shurgard Europe has an interest in 187 facilities (10 million net rentable square feet) located in seven Western European countries. Included in this total are 72 facilities (3.6 million net rentable square feet) that are owned by two joint ventures in which Shurgard Europe has a 20% interest. In April 2010, Shurgard Europe opened a newly developed facility in the United Kingdom with an aggregate cost of approximately $14 million and 50,000 net rentable square feet.

The two joint ventures collectively had approximately €220 million ($296 million) of outstanding debt at March 31, 2010. The loans are payable to various banks and are non-recourse to Shurgard Europe. One of the JV loans, totaling €104 million ($140 million), is due May 2011 and the other JV loan, totaling €116 million ($156 million), is due July 2010.

Our existing €391.9 million loan ($527.2 at March 31, 2010) to Shurgard Europe matures on March 31, 2013, and accrues interest at 9.0% per annum. The interest rate until October 31, 2009 was 7.5%, and was increased to 9.0% in connection with an extension of this loan. The loan currently is not hedged for future currency exchange fluctuations; accordingly, the amount of U.S. Dollars that will be received on repayment will depend upon the currency exchange rates at the time. We had a commitment to provide up to €185 million in additional loans to Shurgard Europe under certain circumstances, and this commitment expired undrawn on March 31, 2010.

Steven De Tollenaere, Shurgard Europe’s CEO, will be leaving effective June 1, 2010, having accepted a position in a different industry. Jean Kreusch, Shurgard Europe’s CFO, will assume the additional responsibility of interim CEO.

Acquisition of Self-Storage Facilities

As previously announced, we entered into an agreement to acquire 30 self-storage facilities for $189 million, including $100 million of assumed debt and $89 million of cash. Twenty-eight of the facilities (1.8 million square feet) are located in the Los Angeles area and the surrounding communities of Southern California. The other two facilities (107,000 square feet) are located in the Chicago area. We expect to incur approximately $12 million in capital expenditures in the year following acquisition to rebrand and improve these properties to the Public Storage standard. We expect to incur approximately $2 million in transaction-related expenses such as legal and other due diligence costs, which will be included in general and administrative expense, in the three months ending June 30, 2010.

The closing will occur in stages through June 30, 2010. As of May 6, 2010, we closed on eight facilities with a total acquisition cost of $38 million. These acquisitions are subject to customary closing conditions, and there can be no assurance that we will be able to complete the acquisitions of the remaining facilities.

Capital Activities

As previously announced, on April 15, 2010 we called for redemption all outstanding depositary shares representing interests in our 7.500% Cumulative Preferred Shares, Series V. These shares will be redeemed on May 18, 2010 at $25.00 per share plus accrued dividends from April 1, 2010 through the date of redemption. The aggregate redemption amount, before payment of accrued dividends, is $155 million. We will allocate approximately $5 million of income from our common shareholders to the holders of our Preferred Shares, representing the excess of the amount paid over the initial issuance proceeds, in the quarter ended June 30, 2010.

As previously announced, on April 13, 2010, we issued 5,800,000 depositary shares (including the subsequent exercise of the underwriter’s over-allotment option) at $25.00 per depositary share, with each depositary share representing 1/1,000 of a 6.875% Cumulative Preferred Share of Beneficial Interest, Series O. The offering resulted in net proceeds of approximately $140 million.

As previously announced, on April 15, 2010 we redeemed all outstanding depositary shares representing interests in our Equity Shares, Series A (NYSE:PSA.A) at $24.50 per share, for a total redemption price of $205.4 million. We allocated $25.7 million of income from our common shareholders to the holders of the Equity Shares, Series A, representing the excess of the amount paid over the initial issuance proceeds, in the quarter ended March 31, 2010.

Liquidity Position

At March 31, 2010, we had approximately $720 million of cash, $95 million invested in corporate notes and have access to our $300 million line of credit which does not expire until March 27, 2012. In addition, in April 2010 we raised net proceeds of approximately $140 million through the issuance of our Series O Preferred Shares. Our capital commitments after March 31, 2010, for the next year of approximately $575 million include (i) $205 million paid in April to redeem our Equity Shares, Series A, (ii) the $89 million cash portion of the acquisition cost of the 30 self-storage facilities as well as $12 million in related incremental capital expenditures, (iii) $155 million to be paid to redeem our Series V Preferred Shares and (iv) $117 million in principal payments on debt. We have no further significant commitments until 2013, when $251 million of existing debt comes due.

Our retained operating cash flow continues to provide a significant source of capital to fund our activities. During the quarter ended March 31, 2010, our funds from operations available to distribute to common shareholders (“FAD”) exceeded our regular common distributions by approximately $80 million. Our ability to continue to retain operating cash flow in the future will be contingent upon a number of factors including, but not limited to, the growth in our operations and our distribution requirements to maintain our REIT status.

Distributions Declared

On May 6, 2010, our Board of Trustees declared a regular common dividend of $0.80 per common share, representing an increase of $0.15 per share (a 23.1% increase) from the previous quarter’s distribution. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on June 30, 2010, to shareholders of record as of June 15, 2010.

First Quarter Conference Call

A conference call is scheduled for Friday, May 7, 2010, at 10:00 A.M. (PDT) to discuss the first quarter ended March 31, 2010 earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 68651364). A simultaneous audio web cast may be accessed by using the link at www.publicstorage.com under “Company Info, Investor Relations Upcoming Events”. A replay of the conference call may be accessed through May 21, 2010 by calling (800) 642-1687 (domestic) or (706) 645-9291 (international) or by using the link at www.publicstorage.com under “Company Info, Investor Relations Webcasts.” All forms of replay utilize conference ID number 68651364.

About Public Storage

Public Storage, a member of the S&P 500 and The Forbes Global 2000, is a fully integrated, self-administered and self-managed real estate investment trust that primarily acquires, develops, owns and operates self-storage facilities. The Company’s headquarters are located in Glendale, California. At March 31, 2010, the Company had interests in 2,009 self-storage facilities located in 38 states with approximately 127 million net rentable square feet in the United States and 188 storage facilities located in seven Western European nations with approximately ten million net rentable square feet operated under the “Shurgard” brand. The Company also owns a 41% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 19.8 million rentable square feet of commercial space, primarily flex, multitenant office and industrial space, at March 31, 2010.

Additional information about Public Storage is available on our website, www.publicstorage.com.

Forward-Looking Statements

All statements in this press release, 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 from time to time in Public Storage’s filings with the Securities and Exchange Commission, including in Item 1A, “Risk Factors” in Public Storage’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Form 10-Q for the period ended March 31, 2010 expected to be filed on or before May 10, 2010, our other Quarterly Reports on Form 10-Q and current reports on Form 8-K. These risks include, but are not limited to, the following: general risks associated with the ownership and operation of real estate, including changes in demand for our storage facilities, potential liability for environmental contamination, adverse changes in tax, real estate and zoning laws and regulations, and the impact of natural disasters; risks associated with downturns in the national and local economies in the markets in which we operate; the impact of competition from new and existing storage and commercial facilities and other storage alternatives; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage acquired and developed properties; risks related to our participation in joint ventures; risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations that could adversely affect our earnings and cash flows; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing REITs; risks associated with a possible failure by us to qualify as a REIT under the Internal Revenue Code of 1986, as amended; disruptions or shutdowns of our automated processes and systems; difficulties in raising capital at a reasonable cost; delays in the development process; and economic uncertainty due to the impact of war or terrorism. Public Storage disclaims 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 press release, except where expressly required by law.

Shurgard Europe Same Store Selected Operating Data

The Shurgard Europe Same Store Pool represents those 94 facilities that are stabilized and owned since January 1, 2008 and therefore provide meaningful comparisons for 2008, 2009, and 2010. The following table reflects the operating results of these 94 facilities. We account for our investment in Shurgard Europe on the equity method of accounting; accordingly, our pro-rata share of the operating results for these facilities is included in “equity in earnings of real estate entities” on our income statement.

Source: Public Storage

Public Storage

Clemente Teng, 818-244-8080

www.publicstorage.com