PUBLIC STORAGE, INC.
2005 ANNUAL REPORT
2005 ANNUAL REPORT
b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r
b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r
0 f a c i l i t i e s 1,5 0 0 f a c i l i t i e s 1,5 0 0 f a c i l i t i e s 1,5 0 0 f a c i l i t i e s 1,5 0 0 f a c i l
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c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
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c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5 0 0 c o m p a n y S & P 5
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0 f a c i l i t i e s 1, 5 0 0 f a c i l i t i e s 1, 5 0 0 f a c i l i t i e s 1, 5 0 0 f a c i l i t i e s 1, 5 0 0 f a c i
b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r
b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r
b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r e v e n u e s $ 1 b i l l i o n r
P RO PE RT I E S (as of December 31, 2005)
Location
Alabama
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Number
of Properties(1)
Net Rentable
Square Feet
Location
Number
of Properties(1)
Net Rentable
Square Feet
22
15
312
50
14
4
155
71
6
99
18
22
7
10
44
19
15
25
38
891,000
894,000
18,970,000
3,207,000
751,000
231,000
9,622,000
4,467,000
337,000
6,286,000
1,029,000
1,310,000
330,000
675,000
2,642,000
1,180,000
891,000
1,571,000
2,144,000
Nebraska
Nevada
New Hampshire
New Jersey
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Virginia
Washington
Wisconsin
1
22
2
48
48
25
30
8
24
21
2
25
23
170
7
41
42
16
46,000
1,404,000
132,000
2,958,000
2,948,000
1,311,000
1,859,000
428,000
1,122,000
1,418,000
64,000
1,083,000
1,321,000
11,356,000
440,000
2,569,000
2,710,000
1,030,000
(1) Storage and properties combining self-storage and commercial space.
Totals
1,501
91,627,000
Cover. Public Storage facility on Kapiolani Boulevard in Honolulu, Hawaii. Scheduled to open in May 2006.
Rendering by Sueda & Associates, Inc., Honolulu, Hawaii.
SELECTED FINANCIAL HIGHLIGHTS
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
Interest and other income
Expenses:
Cost of operations (excluding depreciation)
Depreciation and amortization
General and administrative
Interest expense
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
Equity in earnings of real estate entities
Gain (loss) on disposition of real estate
investments and casualty loss
Minority interest in income (3)
Income from continuing operations
Discontinued operations (2)
Net income
Per Common Share:
Distributions
Net income - basic
Net income - diluted
Weighted average common shares - basic
Weighted average common shares - diluted
Balance Sheet Data:
Total assets
Total debt
Minority interest (other partnership interests)
Minority interest (preferred partnership interests)
Shareholders’ equity
Other Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
$1,044,514 $ 953,910 $ 891,419 $ 846,379 $ 787,655
8,640
796,295
16,447
1,060,961
2,537
893,956
5,210
851,589
5,391
959,301
378,631
196,397
21,115
8,216
604,359
362,269
183,063
18,813
760
564,905
341,182
184,063
17,127
1,121
543,493
309,819
175,726
15,619
3,809
504,973
279,564
163,922
21,038
3,227
467,751
456,602
24,883
394,396
22,564
350,463
24,966
346,616
29,888
328,544
38,542
1,182
(32,651)
450,016
6,377
4,091
(46,015)
325,162
(954)
$ 456,393 $ 366,213 $ 336,653 $ 318,738 $ 324,208
67
(49,913)
367,114
(901)
(2,541)
(44,087)
329,876
(11,138)
1,007
(43,703)
332,733
3,920
$
$
$
1.90 $
1.98 $
1.97 $
1.80 $
1.39 $
1.38 $
1.80 $
1.29 $
1.28 $
1.80 $
1.15 $
1.14 $
128,159
128,819
127,836
128,681
125,181
126,517
123,005
124,571
1.69
1.41
1.39
122,310
123,577
$5,552,486 $ 5,204,790 $ 4,968,069 $ 4,843,662 $4,625,879
$ 149,647 $ 145,614 $
76,030 $ 115,867 $ 168,552
28,970 $ 118,903 $ 141,137 $ 154,499 $ 169,601
$
$ 225,000 $ 310,000 $ 285,000 $ 285,000 $ 285,000
$4,817,009 $ 4,429,967 $ 4,219,799 $ 4,158,969 $3,909,583
$ 692,048 $ 616,664 $ 571,387 $ 591,283 $ 538,534
$ (443,656) $ (157,638) $ (205,133) $ (325,786) $ (306,058)
$ (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.
TO OUR SHAREHOLDERS
We had an excellent year in 2005. We achieved solid operating results and
positioned ourselves to acquire Shurgard Storage Centers, Inc. This acquisition
brings together the two best brands in the self-storage industry and further
solidifies our position as the largest self-storage company in the world. Before commenting
on this transaction, let me first review our results for 2005.
Total revenues grew by 11% in 2005 to surpass the $1 billion level for the first time in our
history. This growth was primarily generated from our self-storage operations, which grew
10% from the prior year. Net income to common shareholders rose by a solid 43% to
$254 million. As a result, earnings per share also increased by 43% to $1.97, from $1.38 per
share in 2004. These results were primarily driven by strong organic growth and additional
self-storage stores.
We also have another measure of performance that is commonly used by analysts and industry
experts called funds from operations or FFO. Net income and FFO are generally the same
except for depreciation expense. FFO was developed to provide an additional performance
metric for the evaluation of Real Estate Investment Trust companies, and generally is net
income plus depreciation expense. FFO is not reduced by the ongoing “capital investment”
required to maintain the competitive nature of our properties. For Public Storage, this is
approximately $30 million per year or about $0.30 per rentable foot. For most other forms of
commercial real estate, especially offices and malls, it is much higher.
FFO per share grew by 23% to $3.61 in 2005 from $2.93 in 2004 through successful
execution in three key areas.
• First, a consistent focus on operational excellence and dynamic product pricing by using
our brand name, national call center, media and promotional programs and striving for
consistent execution in our daily operations. We achieved industry-leading occupancies,
grew revenues per available square foot and improved operating margins.
• We selectively deployed capital to acquire and develop additional properties as well as
redeveloped existing properties, providing attractive rates of return and enhancing our
franchise value.
• We lowered our cost of capital by refinancing our preferred stock, the principal form of
leverage in our capital structure, and enhanced our financial flexibility.
In short, we generated good rates of return on invested capital and enhanced the value of our
existing properties. As a result, we are well positioned to capitalize on the opportunity to
acquire Shurgard.
Self-Storage Operations
Since our inception in 1972, our primary business has been providing self-storage solutions.
Four categories drive our operating results and future growth.
• Same Store properties are facilities that have been operating on a “stabilized” basis in terms
of occupancy and net operating income for at least three years.
• Development properties are newly constructed facilities.
• Expansion properties are the conversion of former Pick-Up and Delivery facilities into self-
storage facilities and the redevelopment of older facilities to improve their competitive
position.
• Acquisition of existing properties (third-party owned) that are solid investments and that
enhance the value of our existing portfolio.
Each of these four categories contributed to our earnings.
Net Operating Income by Category
(Dollar amounts in thousands)
2003
2004
2005
Same Store properties
$ 480,047
$ 506,641
$ 543,071
Development properties
Expansion properties
Acquisition properties
Total net operating income
12,255
24,897
—
25,124
27,265
3,099
36,435
28,948
22,911
before depreciation
517,199
562,129
631,365
Depreciation expense
(176,847)
(176,403)
(191,267)
Total earnings from self-storage
$ 340,352
$ 385,726
$ 440,098
Total amount invested
$ 5,125,498
$ 5,510,750
$ 5,930,484
2004-2005
Change
7%
45%
6%
639%
12%
8%
14%
Same Store Properties
The “Same Store” portfolio comprises 1,260 properties and represents about 82% of the net
rentable square feet of our portfolio. Net operating income (before depreciation) generated
from this group increased by 7.2% in 2005 to $543 million. Revenues rose by 4.9% driven
primarily by higher rental rates and administrative fees offset by a moderate 0.5% growth in
operating expenses. Operating margins improved to 67.0% in 2005 from 65.5% in 2004.
During 2005, rental rates grew by 4.7% and occupancy levels remained stable at 91%.
Revenue per available square feet, or “REVPAF,” which takes into account rental rates,
promotional discounts and occupancy, grew by 4.7%. We are beginning 2006 on a positive
trend. Our December 2005 in-place rents are approximately 5.2% higher than December
2004. In addition, we had positive net absorption of over 1,000 customers January and
February 2006, which is typically a negative absorption period.
In last year’s report, we commented that we were not pleased with the efficacy of our marketing
and promotion programs. Costs were rising and customer volumes were declining. While I
believe this is still an area of tremendous opportunity for us, we made substantial improvements
during 2005.
For the year, move-in volume declined by about 20,000 customers to 596,000; however, this was
offset by a decline in move-out volume of almost the same amount to 597,000 customers. Our
total acquisition costs (the sum of Yellow Pages, media, promotional discounts and our
national call center) per customer move-in remained about the same, at approximately $150
per customer. However, because we were able to achieve higher rental rates and fees, net
customer acquisition costs (costs net of rental rates and administrative fees) declined by about $4
per customer move-in, thereby improving the profitability of our rental activity.
We also continue to expand and refine our marketing channels. In 2005, we succeeded at
increasing the move-in volume and traffic generated from the internet, in part, due to the
redesign of our website. We plan to expand this marketing channel during 2006.
Operating expenses increased by 0.5% in 2005 compared to 4.6% in 2004. Removing
Pick-Up and Delivery and consumer truck rental service from the national call center in late
2004 produced cost savings of 26%, or approximately $3 million in 2005. A softer insurance
renewal market, along with improved cost controls, lowered property insurance costs by 10%,
or approximately $1 million. Our largest expense category, payroll, declined 2%, or a savings
of approximately $1 million. This was achieved by improving claims management and
initiating an expanded safety program which lowered workers’ compensation costs.
We expect some of these trends will change in 2006. Expenses at the national call center have
stabilized, and property insurance rates are expected to increase from the impact of recent
hurricane losses. Further reductions in our workers’ compensation costs will be modest.
During 2005, our repairs and maintenance expense (R&M) was essentially flat at
$26 million. Our maintenance capital expenditures declined by $10 million to $26 million
compared to 2004. With the average age of our properties at approximately 20 years, we
undertook a major project to develop asset plans for each property in our portfolio. We
delayed performing most major “maintenance capital expenditures” work. Having now
completed the plans, we expect our R&M and maintenance capital expenditures will be
moderately higher in 2006 than in 2005.
Development and Expansion Properties
Our development properties continued to lease-up with higher revenues generating improving
yields. During 2005, our 70 development and conversion facilities (5.6 million net rentable
square feet of space) generated a net operating income (before depreciation) yield of 6.7% based
on costs of $547 million. These facilities should continue to produce above average income
growth as they reach stabilized occupancy levels and attain greater pricing power.
During 2005, we completed six new properties, 11 conversions of former Pick-Up and Delivery
facilities into self-storage and seven expansion projects at a total cost of $87 million. These
projects added 1.5 million net rentable square feet to our portfolio.
Our future development and expansion activities should continue to provide growth. At year
end 2005, we had 62 projects which could add approximately 3.9 million net rentable square
feet over the next couple of years at an estimated cost of $323 million.
Acquisition Properties
We continue to find third-party owned properties with the potential to provide attractive long-
term returns on invested capital and complement and improve our existing franchise. Over the
past two years, we invested $515 million to acquire 77 facilities containing approximately
5.5 million net rentable square feet. During 2005, these facilities generated $23 million of net
operating income (before depreciation) for a yield of 4.5%. As with our development
properties, we expect these returns to improve as we are able to increase rental rates from
promotional lease-up rates and achieve stabilized occupancies.
There is no shortage of capital chasing quality self-storage properties, creating a very competitive
environment. We are governed by Warren Buffett’s maxim, “When money is cheap, assets are
dear. When money is dear, assets are cheap.” We continue to be disciplined in this difficult
acquisition environment.
Two things are important in buying or developing properties, from an investor’s perspective:
(1) the estimated free cash flow return on invested capital and (2) the potential growth in
cash flow. Both are critical to determining the long-term success of an investment. While
we attempt to underwrite based on a variety of factors that impact potential growth, we
recognize that this process is subjective and susceptible to wide variations. Accordingly, we
tend to emphasize the security of the current income stream over potential growth by
stressing factors such as barriers to new competition and favorable demographics in our
acquisition process.
Ancillary Business Operations
Our ancillary businesses – tenant reinsurance, merchandise sales (locks and boxes),
consumer truck rental (both our own and as an agent of Penske) and third-party
property management operations – collectively continue to contribute to our operating
results.
In 2005, net operating income of our ancillary businesses improved by $8 million to
$24 million, benefiting from a larger group of self-storage facilities and better margins.
The earnings contribution from these businesses is expected to increase as the number of
self-storage facilities we operate continues to grow.
Financing
We continued the planned refinancing of our high coupon preferred stock. During 2005,
we issued four new series of preferred stock raising $626 million at a blended annual rate
of 6.5%. Additionally, we redeemed four series of preferred stock which totaled
approximately $315 million and carried a weighted average annual rate of 9.0%.
Overall, the total $2.8 billion of preferred stock outstanding at year end 2005 has an
average annual rate of 7.1%, 120 basis points lower than in 2002.
(Dollar amounts in millions)
2002
2003
2004
2005
Outstanding preferred securities
$2,102
$2,152
$2,412
$2,723(1)
Weighted average cost of
preferred at period end
8.3%
8.1%
7.4%
7.1%(1)
Cash and cash equivalents
$ 103
$ 205
$ 366
$ 321(1)
(1)Adjusted for redemption of $172.5 million series Q preferred stock in January 2006.
During the first quarter of 2006, we completed the redemption of the $172.5 million, 8.60%
series Q preferred stock. For the remainder of 2006, we have an opportunity to redeem two
additional preferred issues totaling approximately $650 million with a blended annual rate of
approximately 8.0%. Given current rates at which we can issue preferred stock, we expect to
issue additional preferred stock in 2006.
Our liquidity also improved in 2005. Our cash balance has grown to $321 million at year end
2005, net of the $172.5 million series Q preferred stock redemption in January 2006. We
intend to use this cash in connection with the Shurgard acquisition or to fund our acquisition,
development and expansion projects and redeem additional preferred stock.
Investment in PS Business Parks
PS Business Parks’ (PSB) equity market capitalization was nearly $1.5 billion at year end, and
our 44% investment in PSB valued at approximately $625 million. More importantly, PSB
performed well relative to its competition and was able to grow its “Same Park” portfolio net
operating income by 3.0%.
A year ago, we said the winds were shifting in PSB’s favor. This was demonstrated in this
past year’s operating results. The higher Same Park net operating income was driven by a
3.1% increase in revenues primarily due to a 3.5% increase in occupancy from 2004.
Operating margins and annual realized rents remained stable at 70% and $13.73 per square
foot, respectively.
PSB is in a solid financial position with $200 million of cash at year end. PSB also took
advantage of the favorable interest rate environment to further lower its cost of capital by
completing two preferred issues totaling $102 million at a blended annual rate of 7.2%.
Overall, the total $729 million of preferred stock outstanding at year end has a blended
annual rate of 7.7%, 130 basis points lower than in 2003. In 2006, PSB has an opportunity
to call for redemption $169 million of preferred stock with a blended annual rate of 9.2%,
which would further lower its weighted average costs by 45 basis points to 7.25%.
(Dollar amounts in thousands)
2003
2004
2005
Outstanding preferred securities
$386,423
$638,600
$729,100
Weighted average cost of
preferred at period end
9.0%
7.8%
7.7%
Cash and cash equivalents
$
5,809
$ 39,688
$200,447
PSB’s operations should continue to improve in 2006 as its cost of capital continues
to decline and improving market conditions drive higher occupancies and revenue per
square foot. A key focus for PSB in 2006 will be to reduce customer acquisition costs
(tenant improvements and broker commissions) and increase free cash flow per share.
Pick-Up and Delivery Business
The Pick-Up and Delivery (PUD) business includes 12 facilities located in eight densely
populated markets. The business continues to transition to a stabilized business model
which we believe will be an attractive long-term investment.
The business generated positive net operating income in 2005. Customer move-ins
increased by over 50% from 2004. We redeployed most of PUD’s earnings into increased
marketing expenditures, primarily Yellow Page advertising and television media costs.
For 2006, we intend to continue to expand marketing and refine the business model.
Earnings and cash flow will be modest.
Other Items
In August 2005, we were added to the S&P 500 Index due to our positive operating
trends and our relative size. We are excited about being included in this index of
“leading companies in leading industries.”
To maintain our income tax status as a REIT and avoid corporate income taxes, we are
required to distribute our taxable income. As a result of our operating results and the
expectation of continued positive performance, our Board of Directors increased the
common dividend by 11% to an annual level of $2.00 per share in August.
Our owners have enjoyed solid returns over the last several years. Looking at the one-year
(2005), three-year (2003-2005) and five-year (2001-2005) return to owners, we have
exceeded both the S&P 500 and NAREIT Equity indices for the short and long term.
Total Shareholder Returns
2001-2005
247%
135%
139%
102%
50%
25%
12%
5%
3%
One-Year
Three-Year
Five-Year
Public Storage
S&P 500 Index
NAREIT Equity Index
250%
250%
200%
200%
150%
150%
100%
100%
50%
50%
0%
0
This is the “rear-view mirror.” While both our operating performance and growth
prospects have improved significantly over this period, it is almost certain that we will not
achieve these kinds of returns going forward.
Conclusion and Outlook
We have continuously said self-storage is a great business. Why? There are several reasons.
• Broad consumer awareness. A recent Wall Street Journal article cited a survey which
found one in 11 households now rents a self-storage unit compared to one in
17 households ten years ago.
• Low break-even point. A newly developed facility at a 30% to 35% occupancy level will
generally cover its fixed operating costs, consisting primarily of payroll, utilities,
property taxes and marketing costs. After “break-even,” the property generates positive
free cash flow.
• Low capital expenditures and no tenant improvement costs. A self-storage building is a
relatively simple design, requires a low amount of maintenance and has a very low
obsolescence factor. Since rental units are not finished with carpeting or interior paint,
no tenant improvements are required for new customers.
• Profits in cash. This is primarily a cash business, and our customers generally pay rent
a month in advance of their stay.
• Pricing power above inflation. Over the past five years, our Same Store rental rate has
grown 17.0%, compared with a 13.5% increase in the Consumer Price Index (“CPI”).
2001
2002
2003
2004
Five-Year
2005 Growth
Rental rate change
10.4%
1.2% (2.8%)
2.9%
4.7% 17.0%
CPI change
2.8%
1.6%
2.3% 2.7%
3.4% 13.5%
In addition, certain competitive advantages within our industry differentiate us from the
competition.
• Brand name. We believe our name is the most recognized and established name in the
self-storage industry. We have national recognition since our storage operations are
conducted in 37 states and are located in major metropolitan markets.
• Scale of operations. We are the largest provider of storage space in the industry. By
managing over 1,500 facilities, our size and scope enable us to achieve higher profit margins
and a lower level of administrative costs relative to revenues.
• Media. We are the only self-storage company to use television to advertise and have been
doing so since the mid-1980s. We believe the high cost of television makes it impractical
for our competitors to use this form of advertising. Our scale of operations enables us to
do so cost effectively and to help us generate “above industry average” occupancy levels.
• Financial flexibility. With a conservative capital structure that utilizes a significant
amount of preferred stock, we are not subject to the volatility of the capital markets.
With our solid financial profile and credit rating, we are able to raise capital when
prudent versus when we “have to have it.”
Our actions and operating results demonstrate we are the leader of the self-storage industry.
Our operating model and our focus on the three P’s – People, Product and Pricing – set us
apart from the rest of the competition. In the long run, if we continue to improve our
competitive advantages, lower our costs of capital and deploy incremental capital at reasonable
rates of return, our owners should benefit from sustained growth in cash flow per share.
Shurgard Transaction
On March 6, 2006, the boards of directors of Public Storage and Shurgard approved an
agreement under which Public Storage will acquire Shurgard for a total value of approximately
$5 billion. The agreement is subject to various conditions, including approval by the shareholders
of both Public Storage and Shurgard. Each share of Shurgard’s common stock would be
exchanged for 0.82 shares of Public Storage common stock. Following the close, Shurgard
shareholders would own approximately 23% of the combined company while Public Storage
shareholders would own the remaining 77%. The transaction is expected to close by mid year.
This transaction creates a company that will have a combined total market capitalization of
approximately $18 billion (based on current valuations), annual revenues in excess of
$1.5 billion and an exceptional portfolio of over 2,100 facilities in 38 states and seven
European countries. It will be the largest self-storage company in the world with significant
operating platforms in both the United States and Europe, suitable for continued expansion.
This combination creates a global enterprise with critical mass and leveragable strengths that
has the opportunity to achieve superior revenue growth, lower operating expenses, lower
capital costs and improved operating efficiency. There will be costs to implement this
combination, and most of the benefits will not be reflected in our 2006 operating results. We
will keep you informed of our progress.
In closing, I am personally grateful to our workforce of more than 4,000 employees and to our
senior management team, all of whom are the primary reason for Public Storage’s many years
of success and leadership in the industry.
Ronald L. Havner, Jr.
Vice-Chairman of the Board, Chief Executive Officer
and President
April 10, 2006
Computation of Funds from Operations (unaudited)
Funds from operations (“FFO”) is a term defined by the National Association of Real Estate Investment
Trusts (“NAREIT”). FFO is a supplemental non-GAAP financial disclosure, and it is generally defined
as net income before depreciation 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 and because we believe that FFO is helpful to investors as an additional measure of the
performance of a REIT. FFO computations do not consider scheduled principal payments on debt,
capital improvements, distribution 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.
(Amounts in thousands, except per share amounts)
Net income:
Depreciation and amortization
Depreciation and amortization included in
discontinued operations
Less - depreciation with respect to non-real estate assets
Depreciation from unconsolidated real estate investments
Gain on sale of real estate assets
Less - our share of gain on sale of real estate included
in equity of earnings of real estate entities
Minority interest share of income
Net cash provided by operating activities
FFO to minority interest - common
FFO to minority interest - preferred
Funds from operations
Less: allocations to preferred and equity stock shareholders:
Senior Preferred
Equity Stock, Series A
For the year ended December 31,
2005
2004
2003
$456,393
196,397
$366,213
183,063
$336,653
184,063
88
(1,789)
35,425
(8,279)
(7,858)
32,651
703,028
(18,782)
(17,021)
1,282
(4,252)
33,720
(2,288)
(6,715)
49,913
620,936
(23,473)
(32,486)
3,940
(6,206)
27,753
(6,128)
(2,786)
43,703
580,992
(23,125)
(26,906)
667,225
564,977
530,961
(180,555)
(21,443)
(166,649)
(21,501)
(153,316)
(21,501)
FFO allocable to our common shareholders
$465,227
$376,827
$356,144
Weighted average shares outstanding:
Common shares
Stock option dilution
128,159
660
127,836
845
125,181
1,336
Weighted average common shares for purposes of
computing fully-diluted FFO per common share
128,819
128,681
126,517
FFO per common share
$
3.61
$
2.93
$
2.81
CO R P O R AT E D ATA (as of March 22, 2006)
Directors
B. Wayne Hughes (1980)
Chairman of the Board
Ronald L. Havner, Jr. (2002)
Vice-Chairman of the Board,
Chief Executive Officer and President
Harvey Lenkin (1991)
Retired President and Chief Operating
Officer
Robert J. Abernethy (1980)
President of American Standard
Development Company and
Self-Storage Management Company
Dann V. Angeloff (1980)
President of The Angeloff Company
William C. Baker (1991)
Principal, Baker & Associates
John T. Evans (2003)
Partner, Osler, Hoskin & Harcourt LLP
Uri P. Harkham (1993)
President and Chief Executive Officer
of the Jonathan Martin Fashion Group
B. Wayne Hughes, Jr. (1998)
Vice President of American Commercial
Equities, LLC
Daniel C. Staton (1999)
President of Walnut Capital Partners
( ) = date director was elected to the Board
Executive Officers
Self-Storage Operations
John E. Graul
President
Harvey A. Grindeland
Senior Vice President and Divisional
Manager
Peter G. Panos
Senior Vice President and Divisional
Manager
John M. Sambuco
Senior Vice President and Divisional
Manager
David D. Young
Senior Vice President and Divisional
Manager
Alan Grossman
Senior Vice President and Chief Financial
Officer
Ancillary Businesses
Thomas Miller
President—PS Orangeco
Obren B. Gerich
President—PS Insurance
Real Estate Group
David F. Doll
President
David W. Marzocchi
Senior Vice President—Development and
Construction
Michael K. McGowan
Senior Vice President—Acquisitions
James F. Fitzpatrick
Senior Vice President—Entitlements
Ronald L. Havner, Jr.
Vice-Chairman of the Board,
Chief Executive Officer and President
John Reyes
Senior Vice President and Chief Financial
Officer
John E. Graul
Senior Vice President
John S. Baumann
Senior Vice President and Chief
Legal Officer
David F. Doll
Senior Vice President
Corporate Officers
Drew J. Adams
Vice President and Director of Taxes
Todd Andrews
Vice President and Controller
Mark B. Bilfield
Senior Vice President—Marketing
Capri L. Haga
Senior Vice President—Risk Management
Stephanie G. Heim
Vice President, Corporate Counsel
and Secretary
Ken A. Kederian
Vice President of Internal Audit
A. Ammar Kharouf
Vice President and Litigation Counsel
Candace N. Krol
Senior Vice President of
Human Resources
Brent C. Peterson
Vice President and Chief
Information Officer
A. Timothy Scott
Vice President and Tax Counsel
Clemente Teng
Vice President of Investor Services
Professional Services
Certifications
Stock Exchange Listing
Additional Information Sources
Transfer Agent
Computershare Trust
Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
(781) 575-3120
www.computershare.com
Independent Registered
Public Accounting Firm
Ernst & Young LLP
Los Angeles, California
The most recent certifications
by our Chief Executive
Officer and Chief Financial
Officer pursuant to Sections
302 and 906 of the Sarbanes-
Oxley Act of 2002 are filed as
exhibits to our Form 10-K.
Our Chief Executive Officer's
most recent annual certifica-
tion to the New York Stock
Exchange was submitted on
May 10, 2005.
The Company’s common
stock trades under ticker
symbol PSA on the New York
Stock Exchange and Pacific
Exchange.
PSA
The Company’s website, www.publicstorage.com,
contains financial information of interest to share-
holders, brokers, etc.
Public Storage, Inc. is a member and active sup-
porter of the National Association of Real Estate
Investment Trusts.
P U B L I C S T O R A G E , I N C .
701 Western Avenue, Glendale, California 91201-2349 • (818) 244-8080 • www.publicstorage.com
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(513-AR-06)