Public Storage Reports Results for the First Quarter Ended March 31, 2011 and Increases Its Quarterly Common Dividend Per Share by 18.75% to $0.95

GLENDALE, Calif.--(BUSINESS WIRE)-- Public Storage (NYSE:PSA) announced today operating results for the first quarter ended March 31, 2011.

Operating Results for the Three Months Ended March 31, 2011

For the three months ended March 31, 2011, net income allocable to our common shareholders was $148.1 million or $0.87 per diluted common share, compared to $34.7 million or $0.21 per diluted common share for the same period in 2010, representing an increase of $113.4 million or $0.66 per diluted common share. This increase is due to (i) a foreign currency exchange gain of $31.3 million during the quarter ended March 31, 2011 as compared to a loss of $34.8 million for the same period in 2010, (ii) an Emerging Issues Task Force D-42 (“EITF D-42”) charge totaling $25.7 million incurred in the three months ended March 31, 2010, in connection with the redemption of our Equity Shares, Series A, and (iii) improved operations of our Same Store Facilities (discussed below) and our non same store facilities.

Revenues for the Same Store Facilities (see table below) increased 3.4% or $12.0 million in the quarter ended March 31, 2011 as compared to the same period in 2010, primarily due to a 1.7% increase in average occupancy and a 1.4% increase in realized rent per occupied square foot. Cost of operations for the Same Store Facilities remained flat in the quarter ended March 31, 2011 as compared to the same period in 2010. Net operating income for our Same Store Facilities increased 5.4% or $12.1 million in the quarter ended March 31, 2011 as compared to the same period in 2010.

Funds from Operations

For the three months ended March 31, 2011, funds from operations (“FFO”) was $1.48 per common share on a diluted basis as compared to $0.78 per diluted common share for the same period in 2010, representing an increase of $0.70 per diluted common share or 89.7%.

For the three months ended March 31, 2011, FFO was impacted by (i) a foreign currency exchange gain of $31.3 million (compared to a loss of $34.8 million for the same period in 2010), and (ii) a $3 million gain for our equity share of PS Business Park’s (“PSB”) redemption of preferred shares in applying EITF D-42.

For the three months ended March 31, 2010, FFO was impacted by, (i) a $25.7 million reduction from the application of EITF D-42 to the redemption of Equity Shares, Series A and (ii) a $1.0 million impairment of real estate and other assets.

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 represent those 1,931 facilities that are stabilized and owned since January 1, 2009 and therefore provide meaningful comparisons for 2009, 2010 and 2011. The Same Store Facilities increased from 1,925 at December 31, 2010 to 1,931 at March 31, 2011. The following table summarizes the historical operating results of these 1,931 facilities (121.6 million net rentable square feet) that represent approximately 94% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at March 31, 2011.

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.

On March 2, 2011, Shurgard Europe acquired its JV partner’s 80% interest in two joint ventures for €172 million ($238 million), and as a result wholly owns the 72 properties previously held by the two joint ventures. We loaned approximately $238 million to Shurgard Europe to finance this transaction. This loan bears interest at a fixed rate of 7.0% per annum, matures May 31, 2011, and is denominated in U.S. Dollars. As of March 31, 2011, this loan totaled $238 million. We expect our joint venture partner in Shurgard Europe to acquire 51%, representing their pro-rata ownership of Shurgard Europe, of the loan by May 31, 2011. Following our joint venture partner’s funding of its pro-rata share, the loan will be restructured, and we do not expect repayment of this loan in the short-term.

At March 31, 2011, Shurgard Europe had an interest in 188 facilities (10 million net rentable square feet) located in seven Western European countries. Seventy-two of the properties are encumbered by two loans totaling approximately €198.8 million ($280 million) at March 31, 2011. The loans are payable to various banks and do not have recourse to Shurgard Europe’s other 116 properties or to Public Storage. One of the loans, totaling €90.8 million ($128 million), is due May 2011 with an option to extend one additional year. The other loan, totaling €108.0 million ($152 million) matures in July 2013.

Our existing €363.8 million loan ($512.9 million at March 31, 2011) to Shurgard Europe matures on March 31, 2013, and accrues interest at 9.0% per annum. We received principal payments on this loan totaling €9.9 million ($13.4 million) in the three months ended March 31, 2011. The loan is denominated in Euros, and 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. The timing of future early principal payments will depend on Shurgard Europe’s available cash flow from operations or financing and its alternative uses for that cash flow.

Acquisition of Self-Storage Facilities

During the three months ended March 31, 2011, we completed the acquisition of five facilities (386,000 net rentable square feet) in Nevada for approximately $19.6 million and in February 2011, we acquired the leasehold interest in the land at one of our existing self-storage facilities for approximately $6.6 million. We are also under contract to acquire two facilities (227,000 net rentable square feet), one of which is in New York and another in Los Angeles, for an aggregate of approximately $28 million.

Capital and Other Investing Activities

In addition to the loan provided to Shurgard Europe described above, on February 9, 2011, we loaned PSB $121 million which PSB used to re-pay borrowings against its credit facility and repurchase preferred units. The loan has a six-month term, no prepayment penalties, and bears interest at a rate of three-month LIBOR plus 0.85%, which is favorable in comparison to our existing rate of return on cash balances.

On February 22, 2011, we repaid our $103 million 7.75% unsecured note that matured.

On April 14, 2011, we issued 13,800,000 depositary shares (including the subsequent exercise, in part, of the underwriters’ over-allotment option) at $25.00 per depositary share, with each depositary share representing 1/1,000 of a 6.5% Cumulative Preferred Share of Beneficial Interest, Series Q. The offering resulted in gross proceeds of $345 million. On May 4, 2011, we issued an additional 1,200,000 shares of Series Q at par resulting in gross proceeds of $30 million.

On April 6, 2011, we called for redemption $350 million of our 7.25% Cumulative Preferred Share of Beneficial Interest, Series I, representing a partial redemption of $517.5 million of this series that was outstanding. In the quarter ending June 30, 2011, we expect to record an allocation of income pursuant to EITF D-42 to the holders of these shares of approximately $11 million, representing the excess paid to redeem these shares over the original issuance proceeds.

Distributions Declared

On May 5, 2011, our Board of Trustees declared a regular common dividend of $0.95 per common share, representing an increase of $0.15 per share, or an 18.75% 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, 2011, to shareholders of record as of June 15, 2011.

First Quarter Conference Call

A conference call is scheduled for Friday, May 6, 2011 at 10:00 a.m. (PDT) to discuss the first quarter ended March 31, 2011 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 59937113). 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 13, 2011 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 59937113.

About Public Storage

Public Storage, a member of the S&P 500, The Forbes Global 2000 and FT Global 500, 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, 2011, the Company had interests in 2,052 self-storage facilities located in 38 states with approximately 130 million net rentable square feet in the United States and 189 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 21.8 million rentable square feet of commercial space, primarily flex, multitenant office and industrial space, at March 31, 2011.

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, 2010, Form 10-Q for the period ended March 31, 2011 expected to be filed on or before May 10, 2011, 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 151 facilities that are wholly-owned and have been operated by Shurgard Europe at a stabilized occupancy level since January 1, 2009 and therefore provide meaningful comparisons for 2009, 2010 and 2011. Due to acquiring Shurgard’s JV partner’s 80% interest in two JVs that owned 72 properties on March 2, 2011, the Shurgard Europe Same Store Pool increased from 91 at December 31, 2010 to 151 at March 31, 2011 (61 facilities were moved from the JV Pool to the Same Store Pool and one facility was deleted from the Same Store Pool since it is under redevelopment). The following table reflects the operating results of these 151 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, Ext. 1141