Public Storage (Form: 10-Q, Received: 08/03/2021 16:19:58)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

For the transition period from ____________ to ____________.

Commission File Number: 001-33519

Public Storage
‎(Exact name of registrant as specified in its charter)


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

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

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

Former name, former address and former fiscal, if changed since last report: N/A

Securities registered pursuant to Section 12b of the Act:



Title of Class	Trading Symbol	Name of each exchange on which registered
Common Shares, $0.10 par value	PSA	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.900% Cum Pref Share, Series E, $0.01 par value	PSAPrE	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.150% Cum Pref Share, Series F, $0.01 par value	PSAPrF	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.050% Cum Pref Share, Series G, $0.01 par value	PSAPrG	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.600% Cum Pref Share, Series H, $0.01 par value	PSAPrH	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref Share, Series I, $0.01 par value	PSAPrI	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.700% Cum Pref Share, Series J, $0.01 par value	PSAPrJ	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.750% Cum Pref Share, Series K, $0.01 par value	PSAPrK	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.625% Cum Pref Share, Series L, $0.01 par value	PSAPrL	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.125% Cum Pref Share, Series M, $0.01 par value	PSAPrM	New York Stock Exchange

Depositary Shares Each Representing 1/1,000 of a 3.875% Cum Pref Share, Series N, $0.01 par value	PSAPrN	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 3.900% Cum Pref Share, Series O, $0.01 par value	PSAPrO	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.000% Cum Pref Share, Series P, $0.01 par value	PSAPrP	New York Stock Exchange
0.875% Senior Notes due 2032	PSA32	New York Stock Exchange

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 at least the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated

filer

Accelerated

filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

[X]

[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

Indicate the number of the registrant’s outstanding common shares of beneficial interest, as of July 30, 2021:

Common Shares of beneficial interest, $0.10 par value per share – 175,228,245 shares

PUBLIC STORAGE

INDEX


PART I	FINANCIAL INFORMATION	Pages

Item 1.	Financial Statements (Unaudited)

	Balance Sheets at June 30, 2021 and December 31, 2020	1

	Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020	2

	Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020	3

	Statements of Equity for the Three and Six Months Ended June 30, 2021 and 2020	4-7

	Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	8-9

	Condensed Notes to Financial Statements	10-29

Item 2.	Management’s Discussion and Analysis of ‎Financial Condition and Results of Operations	30-62

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	63

PART II	OTHER INFORMATION (Items 3, 4 and 5 are not applicable)

Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 6.	Exhibits	64

PUBLIC STORAGE

BALANCE SHEETS

(Amounts in thousands, except share data)


	June 30,		December 31,
	2021		2020
ASSETS		(Unaudited)

Cash and equivalents	$	480,810	$	257,560
Real estate facilities, at cost:
Land		4,796,684		4,375,588
Buildings		15,181,248		12,997,039
		19,977,932		17,372,627
Accumulated depreciation		(7,435,657)		(7,152,135)
		12,542,275		10,220,492
Construction in process		249,713		188,079
		12,791,988		10,408,571

Investments in unconsolidated real estate entities		767,914		773,046
Goodwill and other intangible assets, net		265,486		204,654
Other assets		184,167		172,715
Total assets	$	14,490,365	$	11,816,546


LIABILITIES AND EQUITY

Notes payable	$	4,995,620	$	2,544,992
Preferred shares called for redemption (Note 8)		325,000		300,000
Accrued and other liabilities		406,642		394,655
Total liabilities		5,727,262		3,239,647

Commitments and contingencies (Note 12)

Equity:
Public Storage shareholders’ equity:
Preferred Shares, $0.01 par value, 100,000,000 shares authorized,
154,850 shares issued (in series) and outstanding,
(151,700 at December 31, 2020) at liquidation preference		3,871,250		3,792,500
Common Shares, $0.10 par value, 650,000,000 shares authorized,
174,864,437 shares issued and outstanding (174,581,742 shares at
December 31, 2020)		17,486		17,458
Paid-in capital		5,764,672		5,707,101
Accumulated deficit		(863,742)		(914,791)
Accumulated other comprehensive loss		(46,082)		(43,401)
Total Public Storage shareholders’ equity		8,743,584		8,558,867
Noncontrolling interests		19,519		18,032
Total equity		8,763,103		8,576,899
Total liabilities and equity	$	14,490,365	$	11,816,546

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Revenues:
Self-storage facilities	$	776,993	$	664,542	$	1,493,340	$	1,338,743
Ancillary operations		52,322		48,401		103,237		93,244
		829,315		712,943		1,596,577		1,431,987

Expenses:
Self-storage cost of operations		202,595		216,954		414,700		428,050
Ancillary cost of operations		15,991		15,335		32,309		28,907
Depreciation and amortization		172,728		137,618		319,587		273,518
General and administrative		27,740		17,104		47,314		34,972
Interest expense		21,994		14,145		37,244		27,766
		441,048		401,156		851,154		793,213

Other increases (decreases) to net income:
Interest and other income		3,113		5,665		5,965		11,784
Equity in earnings of unconsolidated real estate entities		29,066		17,655		48,522		41,623
Foreign currency exchange (loss) gain		(12,707)		(19,295)		32,678		(10,350)
Gain on sale of real estate		3,991		-		13,404		1,117
Net income		411,730		315,812		845,992		682,948
Allocation to noncontrolling interests		(1,304)		(889)		(2,530)		(1,869)
Net income allocable to Public Storage shareholders		410,426		314,923		843,462		681,079
Allocation of net income to:
Preferred shareholders		(46,183)		(52,952)		(92,263)		(104,957)
Preferred shareholders - redemptions (Note 8)		(16,989)		(15,069)		(16,989)		(15,069)
Restricted share units		(1,005)		(783)		(2,151)		(1,800)
Net income allocable to common shareholders	$	346,249	$	246,119	$	732,059	$	559,253
Net income per common share:
Basic	$	1.98	$	1.41	$	4.19	$	3.21
Diluted	$	1.97	$	1.41	$	4.18	$	3.20

Basic weighted average common shares outstanding		174,824		174,493		174,718		174,470
Diluted weighted average common shares outstanding		175,547		174,575		175,194		174,596

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Net income	$	411,730	$	315,812	$	845,992	$	682,948
Foreign currency exchange gain (loss) on
investment in Shurgard		3,259		4,869		(2,681)		(8,246)
Total comprehensive income		414,989		320,681		843,311		674,702
Allocation to noncontrolling interests		(1,304)		(889)		(2,530)		(1,869)
Comprehensive income allocable to
Public Storage shareholders	$	413,685	$	319,792	$	840,781	$	672,833

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2021

(Amounts in thousands, except share and per share amounts)

(Unaudited)


									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity

Balances at March 31, 2021	$	3,792,500	$	17,465	$	5,715,254	$	(877,931)	$	(49,341)	$	8,597,947	$	19,368	$	8,617,315
Issuance of 24,150 preferred shares (Note 8)		603,750		-		(17,412)		-		-		586,338		-		586,338
Redemption and shares called for redemption
of 21,000 preferred shares (Note 8)		(525,000)		-		-		-		-		(525,000)		-		(525,000)
Issuance of common shares in connection with
share-based compensation (213,433 shares)		-		21		42,874		-		-		42,895		-		42,895
Share-based compensation expense, net of cash
paid in lieu of common shares		-		-		23,956		-		-		23,956		-		23,956
Contributions by noncontrolling interests		-		-		-		-		-		-		385		385
Net income		-		-		-		411,730		-		411,730		-		411,730
Net income allocated to noncontrolling interests		-		-		-		(1,304)		-		(1,304)		1,304		-
Distributions to:
Preferred shareholders (Note 8)		-		-		-		(46,183)		-		(46,183)		-		(46,183)
Noncontrolling interests		-		-		-		-		-		-		(1,538)		(1,538)
Common shareholders and restricted share
unitholders ($2.00 per share) (Note 8)		-		-		-		(350,054)		-		(350,054)		-		(350,054)
Other comprehensive income (Note 2)		-		-		-		-		3,259		3,259		-		3,259
Balances at June 30, 2021	$	3,871,250	$	17,486	$	5,764,672	$	(863,742)	$	(46,082)	$	8,743,584	$	19,519	$	8,763,103

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Three Months Ended June 30, 2020

(Amounts in thousands, except share and per share amounts)

(Unaudited)


									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity

Balances at March 31, 2020	$	4,065,000	$	17,448	$	5,709,861	$	(701,226)	$	(78,005)	$	9,013,078	$	17,130	$	9,030,208
Issuance of 22,600 preferred shares (Note 8)		565,000		-		(15,830)		-		-		549,170		-		549,170
Redemption of 19,800 preferred shares (Note 8)		(495,000)		-		-		-		-		(495,000)		-		(495,000)
Issuance of common shares in connection with
share-based compensation (23,896 shares)		-		2		1,921		-		-		1,923		-		1,923
Share-based compensation expense, net of cash
paid in lieu of common shares		-		-		6,546		-		-		6,546		-		6,546
Acquisition of noncontrolling interests		-		-		(32)		-		-		(32)		(1)		(33)
Contributions by noncontrolling interests		-		-		-		-		-		-		867		867
Net income		-		-		-		315,812		-		315,812		-		315,812
Net income allocated to noncontrolling interests		-		-		-		(889)		-		(889)		889		-
Distributions to:
Preferred shareholders (Note 8)		-		-		-		(52,952)		-		(52,952)		-		(52,952)
Noncontrolling interests		-		-		-		-		-		-		(1,378)		(1,378)
Common shareholders and restricted share
unitholders ($2.00 per share) (Note 8)		-		-		-		(349,834)		-		(349,834)		-		(349,834)
Other comprehensive income (Note 2)		-		-		-		-		4,869		4,869		-		4,869
Balances at June 30, 2020	$	4,135,000	$	17,450	$	5,702,466	$	(789,089)	$	(73,136)	$	8,992,691	$	17,507	$	9,010,198

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Six Months Ended June 30, 2021

(Amounts in thousands, except share and per share amounts)

(Unaudited)


									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity
Balances at December 31, 2020	$	3,792,500	$	17,458	$	5,707,101	$	(914,791)	$	(43,401)	$	8,558,867	$	18,032	$	8,576,899
Issuance of 24,150 preferred shares (Note 8)		603,750		-		(17,412)		-		-		586,338		-		586,338
Redemption and shares called for redemption
of 21,000 preferred shares (Note 8)		(525,000)		-		-		-		-		(525,000)		-		(525,000)
Issuance of common shares in connection with
share-based compensation (282,695 shares) (Note 10)		-		28		47,570		-		-		47,598		-		47,598
Share-based compensation expense, net of cash
paid in lieu of common shares (Note 10)		-		-		27,445		-		-		27,445		-		27,445
Acquisition of noncontrolling interests		-		-		(32)		-		-		(32)		(1)		(33)
Contributions by noncontrolling interests		-		-		-		-		-		-		1,765		1,765
Net income		-		-		-		845,992		-		845,992		-		845,992
Net income allocated to noncontrolling interests		-		-		-		(2,530)		-		(2,530)		2,530		-
Distributions to:
Preferred shareholders (Note 8)		-		-		-		(92,263)		-		(92,263)		-		(92,263)
Noncontrolling interests		-		-		-		-		-		-		(2,807)		(2,807)
Common shareholders and restricted share
unitholders ($4.00 per share) (Note 8)		-		-		-		(700,150)		-		(700,150)		-		(700,150)
Other comprehensive loss (Note 2)		-		-		-		-		(2,681)		(2,681)		-		(2,681)
Balances at June 30, 2021	$	3,871,250	$	17,486	$	5,764,672	$	(863,742)	$	(46,082)	$	8,743,584	$	19,519	$	8,763,103

See accompanying notes.

PUBLIC STORAGE

STATEMENT OF EQUITY

Six Months Ended June 30, 2020

(Amounts in thousands, except share and per share amounts)

(Unaudited)


									Accumulated		Total
	Cumulative								Other		Public Storage
	Preferred		Common		Paid-in		Accumulated		Comprehensive		Shareholders’		Noncontrolling		Total
	Shares		Shares		Capital		Deficit		Loss		Equity		Interests		Equity

Balances at December 31, 2019	$	4,065,000	$	17,442	$	5,710,934	$	(665,575)	$	(64,890)	$	9,062,911	$	16,756	$	9,079,667
Issuance of 22,600 preferred shares (Note 8)		565,000		-		(15,830)		-		-		549,170		-		549,170
Redemption of 19,800 preferred shares (Note 8)		(495,000)		-		-		-		-		(495,000)		-		(495,000)
Issuance of common shares in connection with
share-based compensation (80,303 shares)		-		8		3,678		-		-		3,686		-		3,686
Share-based compensation expense, net of cash
paid in lieu of common shares		-		-		3,716		-		-		3,716		-		3,716
Acquisition of noncontrolling interests		-		-		(32)		-		-		(32)		(1)		(33)
Contributions by noncontrolling interests		-		-		-		-		-		-		1,433		1,433
Net income		-		-		-		682,948		-		682,948		-		682,948
Net income allocated to noncontrolling interests		-		-		-		(1,869)		-		(1,869)		1,869		-
Distributions to:
Preferred shareholders (Note 8)		-		-		-		(104,957)		-		(104,957)		-		(104,957)
Noncontrolling interests		-		-		-		-		-		-		(2,550)		(2,550)
Common shareholders and restricted share
unitholders ($4.00 per share) (Note 8)		-		-		-		(699,636)		-		(699,636)		-		(699,636)
Other comprehensive loss (Note 2)		-		-		-		-		(8,246)		(8,246)		-		(8,246)
Balances at June 30, 2020	$	4,135,000	$	17,450	$	5,702,466	$	(789,089)	$	(73,136)	$	8,992,691	$	17,507	$	9,010,198

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	For the Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net income	$	845,992	$	682,948
Adjustments to reconcile net income to net cash flows
from operating activities:
Gain on real estate investment sales		(13,404)		(1,117)
Depreciation and amortization		319,587		273,518
Equity in earnings of unconsolidated real estate entities		(48,522)		(41,623)
Distributions from cumulative equity in earnings of unconsolidated
real estate entities		43,747		37,032
Foreign currency exchange (gain) loss		(32,678)		10,350
Share-based compensation expense		32,672		12,801
Other		(16,939)		28,165
Total adjustments		284,463		319,126
Net cash flows from operating activities		1,130,455		1,002,074
Cash flows from investing activities:
Capital expenditures to maintain real estate facilities		(90,644)		(99,883)
Development and expansion of real estate facilities		(135,180)		(88,682)
Acquisition of real estate facilities and intangible assets		(2,518,358)		(253,331)
Distributions in excess of cumulative equity in earnings
from unconsolidated real estate entities		8,765		10,803
Repayment of note receivable		-		4,860
Proceeds from sale of real estate investments		15,713		1,399
Net cash flows used in investing activities		(2,719,704)		(424,834)
Cash flows from financing activities:
Repayments on notes payable		(1,053)		(1,000)
Issuance of notes payable, net of issuance costs		2,482,529		545,151
Issuance of preferred shares		586,338		549,170
Issuance of common shares		47,598		3,686
Redemption of preferred shares		(500,000)		-
Cash paid upon vesting of restricted share units		(9,013)		(9,085)
Acquisition of noncontrolling interests		(33)		(33)
Contributions by noncontrolling interests		1,765		1,433
Distributions paid to preferred shareholders,
common shareholders and restricted share unitholders		(792,413)		(804,593)
Distributions paid to noncontrolling interests		(2,807)		(2,550)
Net cash flows provided by financing activities		1,812,911		282,179
Net cash flows from operating, investing, and financing activities		223,662		859,419
Net effect of foreign exchange impact on cash and equivalents, including
restricted cash		173		(28)
Increase in cash and equivalents, including restricted cash	$	223,835	$	859,391

‎

See accompanying notes.

PUBLIC STORAGE

STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	For the Six Months Ended June 30,
	2021		2020

Cash and equivalents, including restricted cash at beginning of the period:
Cash and equivalents	$	257,560	$	409,743
Restricted cash included in other assets		25,040		23,811
	$	282,600	$	433,554

Cash and equivalents, including restricted cash at end of the period:
Cash and equivalents	$	480,810	$	1,268,475
Restricted cash included in other assets		25,625		24,470
	$	506,435	$	1,292,945

Supplemental schedule of non-cash investing and
financing activities:

Costs incurred during the period remaining unpaid at period end for:
Capital expenditures to maintain real estate facilities	$	(13,728)	$	(12,363)
Construction or expansion of real estate facilities		(41,345)		(26,763)
Accrued and other liabilities		55,073		39,126

Preferred shares called for redemption and reclassified to liabilities		325,000		495,000
Preferred shares called for redemption and reclassified from equity		(325,000)		(495,000)

See accompanying notes.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

1.Description of the Business

Public Storage (referred to herein as “the Company,” “we,” “us,” or “our”), a Maryland real estate investment trust (“REIT”), was organized in 1980. Our principal business activities include the 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, ancillary activities such as tenant reinsurance to the tenants at our self-storage facilities, merchandise sales and third party management, as well as the acquisition and development of additional self-storage space.

At June 30, 2021, we have direct and indirect equity interests in 2,649 self-storage facilities (with approximately 183.5 million net rentable square feet) located in 39 states in the United States (“U.S.”) operating under the “Public Storage” name, and 0.9 million net rentable square feet of commercial and retail space.

We own 31.3 million common shares (an approximate 35% interest) of Shurgard Self Storage SA (“Shurgard”) a public company traded on Euronext Brussels under the “SHUR” symbol, which owns 243 self-storage facilities (with approximately 13 million net rentable square feet) located in seven Western European countries, all operating under the “Shurgard” name. We also own an approximate 42% common equity interest in PS Business Parks, Inc. (“PSB”), a REIT traded on the New York Stock Exchange under the “PSB” symbol, which owns 28 million net rentable square feet of commercial properties, primarily multi-tenant industrial, flex, and office space, located in six states.

Disclosures of the number and square footage of facilities, as well as the number and coverage of tenant reinsurance policies (Note 12) are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (U.S.).

2.Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

We have prepared the accompanying interim financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Accounting Standards Codification of the Financial Accounting Standards Board (“FASB”), and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, the interim financial statements presented herein reflect all adjustments, primarily of a normal recurring nature, that are necessary to fairly present the interim financial statements. Because they do not include all of the disclosures required by GAAP for complete annual financial statements, these interim financial statements should be read together with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Certain amounts previously reported in our June 30, 2020 financial statements have been reclassified to conform to the June 30, 2021 presentation, including revenues and cost operations from our third party management activities of $3.7 million and $3.6 million, respectively, for the three months ended June 30, 2020, and $6.6 million and $6.2 million, respectively, for the six months ended June 30, 2020, previously reported within interest and other income. This reclassification had no impact on our balance sheet, statements of comprehensive income, statements of equity, or cash flows as of and for the three and six months ended June 30, 2020.

Additionally, we corrected our prior period financial statement presentation of share-based compensation expense and dividends paid on restricted share units (“RSUs”) between general and administrative expense and self-storage cost of operations. As a result, we revised our statements of income for the three and

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

six months ended June 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $6.3 million, respectively, and a corresponding decrease to general and administrative expenses. This immaterial correction had no impact on our total expenses or net income. The correction also had no impact on our balance sheet, statements of comprehensive income, statements of equity, or cash flows as of and for the three and six months ended June 30, 2020.

Summary of Significant Accounting Policies

Consolidation and Equity Method of Accounting

We consider entities to be Variable Interest Entities (“VIEs”) when they have insufficient equity to finance their activities without additional subordinated financial support provided by other parties, or the equity holders as a group do not have a controlling financial interest. We consolidate VIEs when we have (i) the power to direct the activities most significantly impacting economic performance, and (ii) either the obligation to absorb losses or the right to receive benefits from the VIE. At June 30, 2021, we were the primary beneficiary of, and therefore fully consolidated, three limited liability companies that are considered VIEs, which owned 48 self-storage properties acquired on April 28, 2021 known as the ezStorage portfolio. The net book value of the assets owned by these VIEs was approximately $1.8 billion as of June 30, 2021, which was included in real estate facilities on our Balance Sheet. The title of these 48 properties is expected to be reverted to us in the remainder of 2021. We consolidate all other entities when we control them through voting shares or contractual rights. The entities we consolidate, for the period in which the reference applies, are referred to collectively as the “Subsidiaries,” and we eliminate intercompany transactions and balances.

We account for our investments in entities that we do not consolidate but have significant influence over using the equity method of accounting. These entities, for the periods in which the reference applies, are referred to collectively as the “Unconsolidated Real Estate Entities,” for which we eliminate intra-entity profits and losses and amortize any differences between the cost of our investment and the underlying equity in net assets against equity in earnings as if the Unconsolidated Real Estate Entity were a consolidated subsidiary.

Equity in earnings of unconsolidated real estate entities presented on our income statements represents our pro-rata share of the earnings of the Unconsolidated Real Estate Entities. The dividends we receive from the Unconsolidated Real Estate Entities are reflected on our statements of cash flows as “distributions from cumulative equity in earnings of unconsolidated real estate entities” to the extent of our cumulative equity in earnings, with any excess classified as “distributions in excess of cumulative equity in earnings from unconsolidated real estate entities.”

Collectively, at June 30, 2021, the Company and the Subsidiaries own 2,649 self-storage facilities and four commercial facilities in the U.S. At June 30, 2021, the Unconsolidated Real Estate Entities are comprised of PSB and Shurgard.

Use of Estimates

The financial statements and accompanying notes reflect our estimates and assumptions. Actual results could differ from those estimates and assumptions.

Income Taxes

We have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). For each taxable year in which we qualify for taxation as a REIT, we will not be subject to U.S. federal corporate income tax on our “REIT taxable income” (generally, taxable income subject to specified

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed to our shareholders. We believe we have met these REIT requirements for all periods presented herein. Accordingly, we have recorded no U.S. federal corporate income tax expense related to our REIT taxable income.

Our tenant reinsurance, merchandise and third party management operations are subject to corporate income tax and such taxes are included in ancillary cost of operations. We also incur income and other taxes in certain states, which are included in general and administrative expense.

We recognize tax benefits of uncertain income tax positions that are subject to audit only if we believe it is more likely than not that the position would ultimately be sustained assuming the relevant taxing authorities had full knowledge of the relevant facts and circumstances of our positions. As of June 30, 2021, we had no tax benefits that were not recognized.

Real Estate Facilities

Real estate facilities are recorded at cost. We capitalize all costs incurred to acquire, develop, construct, renovate and improve facilities, including interest and property taxes incurred during the construction period. The costs of demolition of existing facilities associated with a renovation are expensed as incurred. We allocate the net acquisition cost of acquired real estate facilities to the underlying land, buildings, and identified intangible assets based upon their respective individual estimated fair values.

Costs associated with dispositions of real estate, as well as repairs and maintenance costs, are expensed as incurred. We depreciate buildings and improvements on a straight-line basis over estimated useful lives ranging generally between 5 to 25 years.

When we sell a full or partial interest in a real estate facility without retaining a controlling interest following sale, we recognize a gain or loss on sale as if 100% of the property was sold at fair value. If we retain a controlling interest following the sale, we record a noncontrolling interest for the book value of the partial interest sold, and recognize additional paid-in capital for the difference between the consideration received and the partial interest at book value.

Other Assets

Other assets primarily consist of right-of-use assets, prepaid costs and expenses, restricted cash, reinsurance premium receivables and rent receivables from our tenants (net of an allowance for uncollectible amounts).

Accrued and Other Liabilities

Accrued and other liabilities consist primarily of property tax accruals, trade and construction payables, rents prepaid by our tenants, lease liabilities, accrued tenant reinsurance losses and accrued payroll. We believe the fair value of our accrued and other liabilities approximates book value, due primarily to the short period until repayment. We disclose the nature of significant unaccrued losses that are reasonably possible of occurring and, if estimable, a range of exposure.

Cash Equivalents, Restricted Cash, Marketable Securities and Other Financial Instruments

Cash equivalents represent highly liquid financial instruments such as money market funds with daily liquidity or short-term commercial paper or treasury securities maturing within three months of acquisition. Cash and equivalents which are restricted from general corporate use are included in other assets. We believe that the

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

book value of all such financial instruments for all periods presented approximates fair value, due to the short period to maturity.

Fair Value

As used herein, the term “fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Because our estimates of fair value involve considerable judgment, including determination of the factors that market participants would consider in negotiating exchange values, such estimates may be limited in their ability to reflect what would actually be realized in an actual market exchange.

We estimate the fair value of our cash and equivalents, marketable securities, other assets, debt, and other liabilities by discounting the related future cash flows at a rate based upon quoted interest rates for securities that have similar characteristics such as credit quality and time to maturity. Such quoted interest rates are referred to generally as “Level 2” inputs.

We use significant judgment to estimate fair values of investments in real estate, goodwill, and other intangible assets. In estimating their values, we consider significant unobservable inputs such as market prices of land, market capitalization rates, expected returns, earnings multiples, projected levels of earnings, costs of construction, and functional depreciation. These inputs are referred to generally as “Level 3” inputs.

Currency and Credit Risk

Financial instruments that are exposed to credit risk consist primarily of cash and equivalents, certain portions of other assets including rents receivable from our tenants (net of an allowance for uncollectible receivables based upon expected losses in the portfolio) and restricted cash. Cash equivalents we invest in are either money market funds with a rating of at least AAA by Standard & Poor’s, commercial paper that is rated A1 by Standard & Poor’s or deposits with highly rated commercial banks.

At June 30, 2021, due primarily to our investment in Shurgard (Note 4) and our notes payable denominated in Euros (Note 6), our operating results and financial position are affected by fluctuations in currency exchange rates between the Euro, and to a lesser extent, other European currencies, against the U.S. Dollar.

Goodwill and Other Intangible Assets

Intangible assets are comprised of goodwill, the “Shurgard” trade name, and finite-lived assets.

Goodwill totaled $165.8 million at June 30, 2021 ($165.8 million at December 31, 2020). The “Shurgard” trade name, which is used by Shurgard pursuant to a fee-based licensing agreement, has a book value of $18.8 million at June 30, 2021 and December 31, 2020. Goodwill and the “Shurgard” trade name have indefinite lives and are not amortized.

Our finite-lived assets are comprised primarily of (i) acquired customers in place amortized relative to the benefit of the customers in place, with such amortization reflected as depreciation and amortization expense on our income statement and (ii) property tax abatements acquired and amortized relative to the reduction in property tax paid, with such amortization reflected as self-storage cost of operations on our income statement. At June 30, 2021, these intangibles had a net book value of $80.9 million ($20.1 million at December 31, 2020). Accumulated amortization totaled $38.7 million at June 30, 2021 ($27.3 million at December 31, 2020). A total of $19.6 million and $25.7 million in amortization expense was recorded in the three and six months ended June 30, 2021, respectively, and $4.3 million and $9.0 million in the same periods in 2020.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

The estimated future amortization expense for our finite-lived intangible assets at June 30, 2021 is approximately $35.5 million in the remainder of 2021, $31.3 million in 2022 and $14.1 million thereafter. During the six months ended June 30, 2021, intangibles increased $86.5 million in connection with the acquisition of self-storage facilities (Note 3).

Evaluation of Asset Impairment

We evaluate our real estate and finite-lived intangible assets for impairment each quarter. If there are indicators of impairment and we determine that the asset is not recoverable from future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal.

We evaluate our investments in unconsolidated real estate entities for impairment on a quarterly basis. We record an impairment charge to the extent the carrying amount exceeds estimated fair value, when we believe any such shortfall is other than temporary.

We evaluate goodwill for impairment annually and whenever relevant events, circumstances and other related factors indicate that fair value of the related reporting unit may be less than the carrying amount. If we determine that the fair value of the reporting unit exceeds the aggregate carrying amount, no impairment charge is recorded. Otherwise, we record an impairment charge to the extent the carrying amount of the goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value.

We evaluate other indefinite-lived intangible assets, such as the “Shurgard” trade name for impairment at least annually and whenever relevant events, circumstances and other related factors indicate that the fair value is less than the carrying amount. When we conclude that it is likely that the asset is not impaired, we do not record an impairment charge and no further analysis is performed. Otherwise, we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value.

No impairments were recorded in any of our evaluations for any period presented herein.

Revenue and Expense Recognition

Revenues from self-storage facilities, which are primarily composed of rental income earned pursuant to month-to-month leases, as well as associated late charges and administrative fees, are recognized as earned. Promotional discounts reduce rental income over the promotional period, which is generally one month. Ancillary revenues are recognized when earned.

We accrue for property tax expense based upon actual amounts billed and, in some circumstances, estimates when bills or assessments have not been received from the taxing authorities. If these estimates are incorrect, the timing and amount of expense recognition could be incorrect. Cost of operations (including advertising expenditures), general and administrative expense, and interest expense are expensed as incurred.

Foreign Currency Exchange Translation

The local currency (primarily the Euro) is the functional currency for our interests in foreign operations. The related balance sheet amounts are translated into U.S. Dollars at the exchange rates at the respective financial statement date, while amounts on our statements of income are translated at the average exchange rates during the respective period. Cumulative translation adjustments, to the extent not included in cumulative net income, are included in equity as a component of accumulated other comprehensive income (loss).

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

When financial instruments denominated in a currency other than the U.S. Dollar are expected to be settled in cash in the foreseeable future, the impact of changes in the U.S. Dollar equivalent are reflected in current earnings. The Euro was translated at exchange rates of approximately 1.188 U.S. Dollars per Euro at June 30, 2021 (1.226 at December 31, 2020), and average exchange rates of 1.205 and 1.101 for the three months ended June 30, 2021 and 2020, respectively, and average exchange rates of 1.205 and 1.102 for the six months ended June 30, 2021 and 2020, respectively.

Comprehensive Income

Total comprehensive income represents net income, adjusted for changes in other comprehensive income (loss) for the applicable period, which are comprised primarily of foreign currency translation gains and losses on our investment in Shurgard.

Net Income per Common Share

Net income is allocated to (i) noncontrolling interests based upon their share of the net income of the Subsidiaries and (ii) preferred shareholders, to the extent redemption cost exceeds the related original net issuance proceeds (an “preferred share redemption charge”), with the remaining net income allocated to each of our equity securities based upon the dividends declared or accumulated during the period, combined with participation rights in undistributed earnings.

Basic and diluted net income per common share are each calculated based upon net income allocable to common shareholders presented on the face of our income statement, divided by (i) in the case of basic net income per common share, weighted average common shares, and (ii) in the case of diluted income per share, weighted average common shares adjusted for the impact, if dilutive, of stock options outstanding (Note 10). The following table reconciles from basic to diluted common shares outstanding (amounts in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Weighted average common shares and equivalents
outstanding:
Basic weighted average common
shares outstanding		174,824		174,493		174,718		174,470
Net effect of dilutive stock options -
based on treasury stock method		723		82		476		126
Diluted weighted average common
shares outstanding		175,547		174,575		175,194		174,596

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

3.Real Estate Facilities

Activity in real estate facilities during the six months ended June 30, 2021 is as follows:



	Six Months Ended
	June 30, 2021
	(Amounts in thousands)
Operating facilities, at cost:
Beginning balance	$	17,372,627
Capital expenditures to maintain real estate facilities		94,616
Acquisitions		2,431,821
Dispositions		(6,705)
Developed or expanded facilities opened for operation		85,573
Ending balance		19,977,932
Accumulated depreciation:
Beginning balance		(7,152,135)
Depreciation expense		(287,918)
Dispositions		4,396
Ending balance		(7,435,657)
Construction in process:
Beginning balance		188,079
Costs incurred to develop and expand real estate facilities		147,207
Developed or expanded facilities opened for operation		(85,573)
Ending balance		249,713
Total real estate facilities at June 30, 2021	$	12,791,988

During the six months ended June 30, 2021, we acquired 99 self-storage facilities (8,148,000 net rentable square feet of storage space), for a total cost of $2.5 billion in cash. Approximately $86.5 million of the total cost was allocated to intangible assets. We completed development and redevelopment activities costing $85.6 million during the six months ended June 30, 2021, adding 0.5 million net rentable square feet of self-storage space. Construction in process at June 30, 2021 consists of projects to develop new self-storage facilities and expand existing self-storage facilities.

During the six months ended June 30, 2021, our accrual for unpaid construction costs increased $10.2 million (a $4.0 million decrease for the same period in 2020). During the six months ended June 30, 2021, our accrual for capital expenditures to maintain real estate facilities increased $3.5 million (a $4.3 million decrease for the same period in 2020).

During the six months ended June 30, 2021, we sold portions of real estate facilities in connection with an eminent domain proceeding for $15.7 million in cash proceeds and recorded a related gain on sale of real estate of approximately $13.4 million.

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

4.Investments in Unconsolidated Real Estate Entities

The following table sets forth our investments in, and equity in earnings of, the Unconsolidated Real Estate Entities (amounts in thousands):


	Investments in Unconsolidated Real Estate
	Entities at
	June 30, 2021		December 31, 2020

PSB	$	438,513	$	431,963
Shurgard		329,401		341,083
Total	$	767,914	$	773,046


	Equity in Earnings of Unconsolidated Real Estate Entities for the
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

PSB	$	20,908	$	13,228	$	35,384	$	34,965
Shurgard		8,158		4,427		13,138		6,658
Total	$	29,066	$	17,655	$	48,522	$	41,623

Investment in PSB

Throughout all periods presented, we owned 7,158,354 shares of PSB’s common stock and 7,305,355 limited partnership units in an operating partnership controlled by PSB, representing an approximate 42% common equity interest. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

Based upon the closing price at June 30, 2021 ($148.08) per share of PSB common stock, the shares and units we owned had a market value of approximately $2.1 billion.

Our equity in earnings of PSB is comprised of our equity share of PSB’s net income, less amortization of the PSB Basis Differential (defined below). Our equity share of PSB’s share-based compensation is recognized in paid-in capital.

During each of the six month periods ended June 30, 2021 and 2020, we received cash distributions from PSB totaling $30.4 million.

At June 30, 2021, our pro-rata investment in PSB’s real estate assets included in investment in unconsolidated real estate entities exceeds our pro-rata share of the underlying amounts on PSB’s balance sheet by approximately $3.0 million ($3.4 million at December 31, 2020). This differential (the “PSB Basis Differential”) is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such amortization totaled approximately $0.4 million during each of the six month periods ended June 30, 2021 and 2020.

PSB is a publicly held entity traded on the New York Stock Exchange under the symbol “PSB”.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

Investment in Shurgard

Throughout all periods presented, we effectively owned, directly and indirectly 31,268,459 Shurgard common shares, representing an approximate 35% equity interest in Shurgard.

Based upon the closing price at June 30, 2021 (€40.70 per share of Shurgard common stock, at 1.188 exchange rate of US Dollars to the Euro), the shares we owned had a market value of approximately $1.5 billion.

Our equity in earnings of Shurgard is comprised of our equity share of Shurgard’s net income, less amortization of the Shurgard Basis Differential (defined below). We eliminated $0.6 million and $0.5 million intra-entity profits and losses for the six month periods ended June 30, 2021 and 2020, respectively, representing our equity share of the trademark license fees that Shurgard pays to us for the use of the “Shurgard” trademark. We classify the remaining license fees we receive from Shurgard as interest and other income on our income statement.

The dividends we receive from Shurgard, combined with our equity share of trademark license fees collected from Shurgard, are reflected on our statements of cash flows as “distributions from cumulative equity in earnings of unconsolidated real estate entities” to the extent of our cumulative equity in earnings, with any excess classified as “distributions in excess of cumulative equity in earnings from unconsolidated real estate entities.” Shurgard paid €0.57 per share and €0.50 per share in dividends to its shareholders during the six months ended June 30, 2021 and 2020, respectively, of which our share totaled $21.5 million and $17.0 million, respectively.

At June 30, 2021, our pro-rata investment in Shurgard’s real estate assets included in investment in unconsolidated real estate entities exceeds our pro-rata share of the underlying amounts on Shurgard’s balance sheet by approximately $78.8 million ($83.1 million at December 31, 2020). This differential (the “Shurgard Basis Differential”) includes our cost basis adjustment in Shurgard’s real estate assets net of related deferred income taxes. The real estate assets basis differential is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such amortization totaled approximately $4.4 million and $6.3 million during the six month periods ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and 2020, we translated the book value of our investment in Shurgard from Euro to U.S. Dollar and recorded $2.7 million and $8.2 million other comprehensive loss, respectively.

Shurgard is a publicly held entity trading on Euronext Brussels under the symbol “SHUR”.

5.Credit Facility

We have a revolving credit agreement (the “Credit Facility”) with a $500 million borrowing limit, which matures on April 19, 2024. Amounts drawn on the Credit Facility bear annual interest at rates ranging from LIBOR plus 0.7% to LIBOR plus 1.350% depending upon the ratio of our Total Indebtedness to Gross Asset Value (as defined in the Credit Facility) (LIBOR plus 0.7% at June 30, 2021). We are also required to pay a quarterly facility fee ranging from 0.07% per annum to 0.25% per annum depending upon the ratio of our Total Indebtedness to our Gross Asset Value (0.07% per annum at June 30, 2021). At June 30, 2021 and August 3, 2021, we had no outstanding borrowings under this Credit Facility. We had undrawn standby letters of credit, which reduce our borrowing capacity, totaling $25.1 million at June 30, 2021 ($24.3 million at December 31, 2020). The Credit Facility has various customary restrictive covenants, all of which we were in compliance with at June 30, 2021.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

6.Notes Payable

Our notes payable are reflected net of issuance costs (including original issue discounts), which are amortized as interest expense on the effective interest method over the term of each respective note. Our notes payable at June 30, 2021 and December 31, 2020 are set forth in the tables below:

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)


			Amounts at June 30, 2021
	Coupon	Effective			Unamortized			Book		Fair
	Rate	Rate		Principal	Costs			Value		Value
			($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022	2.370%	2.483%	$	500,000	$	(627)	$	499,373	$	512,105
Notes due April 23, 2024	SOFR+0.47%	0.596%		700,000		(1,980)		698,020		702,637
Notes due February 15, 2026	0.875%	1.030%		500,000		(3,431)		496,569		495,387
Notes due September 15, 2027	3.094%	3.218%		500,000		(3,284)		496,716		545,829
Notes due May 1, 2028	1.850%	1.962%		650,000		(4,615)		645,385		654,584
Notes due May 1, 2029	3.385%	3.459%		500,000		(2,412)		497,588		556,510
Notes due May 1, 2031	2.300%	2.419%		650,000		(6,725)		643,275		660,910
				4,000,000		(23,075)		3,976,925		4,127,962

Euro Denominated Unsecured Debt
Notes due April 12, 2024	1.540%	1.540%		118,786		-		118,786		124,570
Notes due November 3, 2025	2.175%	2.175%		287,478		-		287,478		313,314
Notes due January 24, 2032	0.875%	0.978%		593,928		(5,663)		588,265		594,820
				1,000,192		(5,663)		994,529		1,032,704

Mortgage Debt, secured by 27
real estate facilities with a net
book value of $100.6 million	3.925%	3.919%		24,166		-		24,166		25,499

			$	5,024,358	$	(28,738)	$	4,995,620	$	5,186,165


	Amounts at
	December 31, 2020
		Book		Fair
		Value		Value
	($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022	$	499,109	$	517,419
Notes due September 15, 2027		496,452		560,833
Notes due May 1, 2029		497,433		574,833
		1,492,994		1,653,085

Euro Denominated Unsecured Debt
Notes due April 12, 2024		122,646		129,192
Notes due November 3, 2025		296,821		323,552
Notes due January 24, 2032		607,301		634,389
		1,026,768		1,087,133

Mortgage Debt		25,230		26,958

	$	2,544,992	$	2,767,176

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

U.S. Dollar Denominated Unsecured Notes

On January 19, 2021, we completed a public offering of $500 million aggregate principal amount of senior notes bearing interest at an annual rate of 0.875% and maturing on February 15, 2026. Interest on the senior notes is payable semi-annually, commencing on August 15, 2021. In connection with the offering, we incurred a total of $3.8 million in costs.

On April 23, 2021, we completed a public offering of $700 million, $650 million and $650 million aggregate principal amount of senior notes bearing interest at an annual rate of the compounded Secured Overnight Financing Rate (“SOFR”) + 0.47% (reset quarterly and at 0.495% as of June 30, 2021), 1.85% and 2.30%, respectively, and maturing on April 23, 2024, May 1, 2028 and May 1, 2031, respectively. Interest on the 2024 notes is payable quarterly, commencing on July 23, 2021. Interest on the 2028 notes and 2031 notes is payable semi-annually, commencing on November 1, 2021. In connection with the offering, we incurred a total of $13.7 million in costs.

The U.S. Dollar Denominated Unsecured Notes have various financial covenants, all of which we were in compliance with at June 30, 2021. Included in these covenants are (a) a maximum Debt to Total Assets of 65% (approximately 13% at June 30, 2021) and (b) a minimum ratio of Adjusted EBITDA to Interest Expense of 1.5x (approximately 36x for the twelve months ended June 30, 2021) as well as covenants limiting the amount we can encumber our properties with mortgage debt.

Euro Denominated Unsecured Notes

Our Euro denominated unsecured notes (the “Euro Notes”) consist of three tranches: (i) €242.0 million issued to institutional investors on November 3, 2015 for $264.3 million in net proceeds upon converting the Euros to U.S. Dollars, (ii) €100.0 million issued to institutional investors on April 12, 2016 for $113.6 million in net proceeds upon converting the Euros to U.S. Dollars, and (iii) €500.0 million issued in a public offering on January 24, 2020 for $545.2 million in net proceeds upon converting the Euros to U.S. Dollars. Interest is payable semi-annually on the notes issued November 3, 2015 and April 12, 2016, and annually on the notes issued January 24, 2020. The Euro Notes have financial covenants similar to those of the U.S. Dollar Notes.

We reflect changes in the U.S. Dollar equivalent of the amount payable, as a result of changes in foreign exchange rates as “foreign currency exchange (loss) gain” on our income statement (losses of $12.7 million and gains of $32.7 million for the three and six months ended June 30, 2021, respectively, as compared to losses of $19.3 million and $10.4 million for the three and six months ended June 30, 2020, respectively).

Mortgage Notes

Our non-recourse mortgage debt was assumed in connection with property acquisitions, and recorded at fair value with any premium or discount to the stated note balance amortized using the effective interest method.

At June 30, 2021, the related contractual interest rates are fixed, ranging between 3.2% and 7.1%, and mature between January 1, 2022 and July 1, 2030.

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

At June 30, 2021, approximate principal maturities of our Notes Payable are as follows (amounts in thousands):


	Unsecured		Mortgage
	Debt		Debt		Total


Remainder of 2021	$	-	$	789	$	789
2022		500,000		2,574		502,574
2023		-		19,219		19,219
2024		818,786		124		818,910
2025		287,478		131		287,609
Thereafter		3,393,928		1,329		3,395,257
	$	5,000,192	$	24,166	$	5,024,358
Weighted average effective rate		1.9%		3.9%		2.0%

Cash paid for interest totaled $32.3 million and $26.4 million for the six months ended June 30, 2021 and 2020, respectively. Interest capitalized as real estate totaled $1.7 million for each of the six month periods ended June 30, 2021 and 2020.

7.Noncontrolling Interests

At June 30, 2021, the noncontrolling interests represent (i) third-party equity interests in subsidiaries owning 23 operating self-storage facilities and five self-storage facilities that are under construction and (ii) 231,978 partnership units held by third-parties in a subsidiary that are convertible on a one-for-one basis (subject to certain limitations) into common shares of the Company at the option of the unitholder (collectively, the “Noncontrolling Interests”). At June 30, 2021, the Noncontrolling Interests cannot require us to redeem their interests, other than pursuant to a liquidation of the subsidiary.

During the six months ended June 30, 2021 and 2020, we allocated a total of $2.5 million and $1.9 million, respectively, of income to these interests; and we paid $2.8 million and $2.6 million, respectively, in distributions to these interests.

During the six months ended June 30, 2021 and 2020, Noncontrolling Interests contributed $1.8 million and $1.4 million, respectively, to our subsidiaries.

8.Shareholders’ Equity

Preferred Shares

At June 30, 2021 and December 31, 2020, we had the following series of Cumulative Preferred Shares (“Preferred Shares”) outstanding:

‎

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)


			At June 30, 2021			At December 31, 2020
Series	Earliest Redemption Date	Dividend Rate	Shares Outstanding	Liquidation Preference		Shares Outstanding	Liquidation Preference

			(Dollar amounts in thousands)
Series C	5/17/2021	5.125%	-	$	-	8,000	$	200,000
Series D	7/20/2021	4.950%	-		-	13,000		325,000
Series E	10/14/2021	4.900%	14,000		350,000	14,000		350,000
Series F	6/2/2022	5.150%	11,200		280,000	11,200		280,000
Series G	8/9/2022	5.050%	12,000		300,000	12,000		300,000
Series H	3/11/2024	5.600%	11,400		285,000	11,400		285,000
Series I	9/12/2024	4.875%	12,650		316,250	12,650		316,250
Series J	11/15/2024	4.700%	10,350		258,750	10,350		258,750
Series K	12/20/2024	4.750%	9,200		230,000	9,200		230,000
Series L	6/17/2025	4.625%	22,600		565,000	22,600		565,000
Series M	8/14/2025	4.125%	9,200		230,000	9,200		230,000
Series N	10/6/2025	3.875%	11,300		282,500	11,300		282,500
Series O	11/17/2025	3.900%	6,800		170,000	6,800		170,000
Series P	6/16/2026	4.000%	24,150		603,750	-		-
Total Preferred Shares			154,850	$	3,871,250	151,700	$	3,792,500

The holders of our Preferred Shares have general preference rights with respect to liquidation, quarterly distributions and any accumulated unpaid distributions. Except as noted below, holders of the Preferred Shares do not have voting rights. In the event of a cumulative arrearage equal to six quarterly dividends, holders of all outstanding series of preferred shares (voting as a single class without regard to series) will have the right to elect two additional members to serve on our board of trustees (our “Board”) until the arrearage has been cured. At June 30, 2021, there were no dividends in arrears. The affirmative vote of at least 66.67% of the outstanding shares of a series of Preferred Shares is required for any material and adverse amendment to the terms of such series. The affirmative vote of at least 66.67% of the outstanding shares of all of our Preferred Shares, voting as a single class, is required to issue shares ranking senior to our Preferred Shares.

Except under certain conditions relating to the Company’s qualification as a REIT, the Preferred Shares are not redeemable prior to the dates indicated on the table above. On or after the respective dates, each of the series of Preferred Shares is redeemable at our option, in whole or in part, at $25.00 per depositary share, plus accrued and unpaid dividends. Holders of the Preferred Shares cannot require us to redeem such shares.

Upon issuance of our Preferred Shares, we classify the liquidation value as preferred equity on our balance sheet with any issuance costs recorded as a reduction to Paid-in capital.

In December 2020, we called for redemption of, and on January 20, 2021, we redeemed our 5.400% Series B Preferred Shares, at par. The liquidation value (at par) of $300.0 million was reclassified as a liability at December 31, 2020, and is not included in the table above. We recorded a $9.9 million allocation of income from our common shareholders to the holders of our Preferred Shares in the year ended December 31, 2020 in connection with this redemption.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

On June 16, 2021, we issued 24.2 million depositary shares, each representing 0.001 of a share of our 4.000% Series P Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of $603.8 million in gross proceeds, and we incurred $17.4 million in issuance costs.

On June 30, 2021, we redeemed our 5.125% Series C Preferred Shares, at par. We recorded a $6.4 million allocation of income from our common shareholders to the holders of our Preferred Shares in the three and six months ended June 30, 2021 in connection with this redemption.

In June 2021, we called for redemption of, and on July 20, 2021, we redeemed our 4.950% Series D Preferred Shares, at par. The liquidation value (at par) of $325.0 million was reclassified as a liability at June 30, 2021, and is not included in the table above. We recorded a $10.6 million allocation of income from our common shareholders to the holders of our Preferred Shares in the three and six months ended June 30, 2021 in connection with this redemption.

On June 17, 2020, we issued 22.6 million depositary shares, each representing 0.001 of a share of our 4.625% Series L Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of $565.0 million in gross proceeds, and we incurred $15.8 million in issuance costs.

In June 2020, we called for redemption of, and on July 10, 2020, we redeemed our 5.375% Series V Preferred Shares, at par. We recorded a $15.1 million allocation of income from our common shareholders to the holders of our Preferred Shares in the three and six months ended June 30, 2020 in connection with this redemption.

Dividends

Common share dividends, including amounts paid to our restricted share unitholders, totaled $350.1 million ($2.00 per share) and $349.8 million ($2.00 per share) for the three months ended June 30, 2021 and 2020, respectively, and $700.2 million ($4.00 per share) and $699.6 million ($4.00 per share) for the six months ended June 30, 2021 and 2020, respectively. Preferred share dividends totaled $46.2 million and $53.0 million for the three months ended June 30, 2021 and 2020, respectively, and $92.3 million and $105.0 million for the six months ended June 30, 2021 and 2020, respectively.

9.Related Party Transactions

At June 30, 2021, Tamara Hughes Gustavson, a current member of the Board and her adult children owned and controlled 65 self-storage facilities in Canada. Ms. Gustavson’s direct ownership in these properties is less than 1.0%. These facilities operate under the “Public Storage” tradename, which we license to the owners of these facilities for use in Canada on a royalty-free, non-exclusive basis. We have no ownership interest in these facilities and we do not own or operate any facilities in Canada. If we chose to acquire or develop our own facilities in Canada, we would have to share the use of the “Public Storage” name in Canada. We have a right of first refusal, subject to limitations, to acquire the stock or assets of the corporation engaged in the operation of these facilities if their owners agree to sell them. Our subsidiaries reinsure risks relating to loss of goods stored by customers in these facilities, and have received approximately $992,000 and $719,000 for the six months ended June 30, 2021 and 2020, respectively.

10.Share-Based Compensation

Under various share-based compensation plans and under terms established or modified by our Board or a committee thereof, we grant non-qualified options to purchase the Company’s common shares, as well as RSUs, to trustees, officers, and key employees.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

Stock options and RSUs are considered “granted” and “outstanding” as the terms are used herein, when (i) the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, and (iii) the recipient is affected by changes in the market price of our stock.

We amortize the grant-date fair value of awards, as compensation expense over the service period, which begins on the grant date and ends on the expected vesting date. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award is amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method).

Share-based compensation expense associated with stock options and RSUs, including employer taxes incurred upon vesting, was recorded in the various expense categories in the Statement of Income as set forth in the following table. In addition, $1.1 million and $2.2 million share-based compensation cost was capitalized as real estate facilities for the three and six months ended June 30, 2021, respectively.



		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
	(Amounts in thousands)

Self-storage cost of operations	$	5,328	$	3,725	$	12,529	$	7,452
Ancillary cost of operations		549		-		1,049		-
General and administrative		12,471		3,446		20,368		6,488
Total	$	18,348	$	7,171	$	33,946	$	13,940

In July 2020, our share-based compensation plans were modified to allow immediate vesting upon retirement (“Retirement Acceleration”), and to extend the exercisability of outstanding stock options up to a year after retirement, for currently outstanding and future grants. Prior to the modification, unvested awards were forfeited, and outstanding vested stock options were cancelled, upon retirement. Employees are eligible for Retirement Acceleration if they meet certain conditions including length of service, age, notice of intent to retire, and facilitation of succession for their role.

This modification results in accelerating amortization of compensation expense for each grant by changing the end of the service period from the original vesting date to the date an employee is expected to be eligible for Retirement Acceleration, if earlier. As a result, the Company recorded $11.0 million in accelerated compensation expense during the six months ended June 30, 2021. No such compensation expense was recorded during the six months ended June 30, 2020.

During the three months ended March 31, 2021, the Company depleted the available shares under the 2016 Equity and Performance-Based Incentive Compensation Plan resulting in $4.8 million of award expense classified as a liability as of March 31, 2021. On April 26, 2021, the Company’s Shareholders approved the 2021 Equity and Performance-Based Incentive Compensation Plan, which authorizes an additional three million shares available for future issuance. Consequently, awards previously classified as a liability were revalued as of April 26, 2021, resulting in an additional stock based compensation expense of $3.6 million, and reclassified to equity.

In amortizing share-based compensation expense, we do not estimate future forfeitures. Instead, we reverse previously amortized share-based compensation expense with respect to grants that are forfeited in the period the employee terminates employment.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

Stock Options

Stock options vest over 3 to 5 years, expire 10 years after the grant date, and the exercise price is equal to the closing trading price of our common shares on the grant date. Employees cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our performance-based and non-performance based stock options.

Outstanding stock option grants are included on a one-for-one basis in our diluted weighted average shares, to the extent dilutive, after applying the treasury stock method (based upon the average common share price during the period) to assumed exercise proceeds and measured but unrecognized compensation.

For the three and six months ended June 30, 2021, we recorded share-based compensation expense for outstanding stock options of $10.6 million and $15.0 million, respectively, as compared to $1.5 million and $2.4 million for the same periods in 2020. The amount for the three and six months ended June 30, 2021 includes $3.7 million and $4.5 million, respectively, in connection with the Retirement Acceleration as discussed above.

During the six months ended June 30, 2021, 565,000 stock options were awarded, 234,467 options were exercised and 10,000 options were forfeited. A total of 3,281,700 stock options were outstanding at June 30, 2021, (2,961,167 at December 31, 2020) and have an average exercise price of $215.09.

During the six months ended June 30, 2021, we incurred share-based compensation expense of $0.7 million in connection with the initial 15,000 stock option awards issued to each of the five members that joined our Board in January 2021.

During the six months ended June 30, 2021, 245,000 stock options were awarded where vesting is dependent upon meeting certain performance targets with respect to 2021, 2022, and 2023. These awards contain a relative Total Shareholder Return modifier that will adjust the payout based on relative performance as compared to the market. As of June 30, 2021, these targets are expected to be met at 100% achievement. These options resulted in $3.4 million in related compensation expense during the six months ended June 30, 2021.

During the six months ended June 30, 2020, 770,000 stock options were awarded where vesting is dependent upon meeting certain performance targets with respect to 2020, 2021, and 2022. As of June 30, 2021, these targets are expected to be met at 125% achievement, an increase from 100% as of December 31, 2020, resulting in $8.8 million in related compensation expense during the six months ended June 30, 2021.

Restricted Share Units

RSUs generally vest over 5 to 8 years from the grant date. The grantee receives dividends for each outstanding RSU equal to the per-share dividends received by our common shareholders. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives common shares equal to the number of vested RSUs, less common shares withheld in exchange for tax deposits made by the Company to satisfy the grantee’s statutory tax liabilities arising from the vesting.

The fair value of our RSUs is determined based upon the applicable closing trading price of our common shares.

During the six months ended June 30, 2021, 84,500 RSUs were granted, 22,348 RSUs were forfeited and 70,929 RSUs vested. This vesting resulted in the issuance of 48,228 common shares. In addition, tax deposits totaling $9.0 million ($9.1 million for the same period in 2020) were made on behalf of employees in exchange for 22,701 common shares withheld upon vesting. A total of 544,011 RSUs were outstanding at June 30, 2021

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

(552,788 at December 31, 2020). During the six months ended June 30, 2021, 37,000 RSUs were awarded where vesting is dependent upon meeting certain performance targets for 2021. As of June 30, 2021, these targets are expected to be met at 125% achievement. These RSUs resulted in $2.7 million in related compensation expense during the six months ended June 30, 2021.

A total of $8.7 million and $21.1 million in RSU cost was recorded for the three and six months ended June 30, 2021, respectively, which includes approximately $0.1 million and $1.3 million, respectively, in employer taxes incurred upon vesting, as compared to $5.7 million and $11.5 million for the same periods in 2020, which includes approximately $0.1 million and $1.1 million, respectively, in employer taxes incurred upon vesting. The amount for the three and six months ended June 30, 2021 includes $3.5 million and $6.5 million, respectively, in connection with the Retirement Acceleration as discussed above.

11.Segment Information

Our reportable segments reflect the significant components of our operations where discrete financial information is evaluated separately by our chief operating decision maker (“CODM”). We organize our segments based primarily upon the nature of the underlying products and services, as well as the drivers of profitability growth. The net income for each reportable segment included in the table below are in conformity with GAAP and our significant accounting policies as denoted in Note 2. The amounts not attributable to reportable segments are aggregated under “other items not allocated to segments.”

Following is a description of and basis for presentation for each of our reportable segments.

Self-Storage Operations

The Self-Storage Operations segment reflects the rental operations from all self-storage facilities we own. Our CODM reviews the net operating income (“NOI”) of this segment, which represents the related revenues less cost of operations (prior to depreciation expense), in assessing performance and making resource allocation decisions. The presentation in the tables below sets forth the NOI of this segment, as well as the depreciation expense for this segment, which while reviewed by our CODM and included in net income, is not considered by the CODM in assessing performance and decision making. For all periods presented, substantially all of our real estate facilities, goodwill and other intangible assets, other assets, and accrued and other liabilities are associated with the Self-Storage Operations segment.

Ancillary Operations

The Ancillary Operations segment reflects the operations of our tenant reinsurance, merchandise sales and third party management activities.

Investment in PSB

This segment represents our approximate 42% equity interest in PSB, a publicly-traded REIT that owns, operates, acquires and develops commercial properties, primarily multi-tenant flex, office, and industrial space. PSB has a separate management team and board of directors that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in PSB, the CODM reviews PSB’s net income, which is detailed in PSB’s periodic filings with the SEC. The segment presentation in the tables below includes our equity earnings from PSB.

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

Investment in Shurgard

This segment represents our approximate 35% equity interest in Shurgard, a publicly held company which owns and operates self-storage facilities located in seven countries in Western Europe. Shurgard has a separate management team and board of trustees that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in Shurgard, the CODM reviews Shurgard’s net income. The segment presentation below includes our equity earnings from Shurgard.

Presentation of Segment Information

The following table reconciles NOI (as applicable) and net income of each segment to our consolidated net income:


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
		(amounts in thousands)
Self-Storage Segment
Revenue	$	776,993	$	664,542	$	1,493,340	$	1,338,743
Cost of operations		(202,595)		(216,954)		(414,700)		(428,050)
Net operating income		574,398		447,588		1,078,640		910,693
Depreciation and amortization		(172,728)		(137,618)		(319,587)		(273,518)
Net income		401,670		309,970		759,053		637,175

Ancillary Segment
Revenue		52,322		48,401		103,237		93,244
Cost of operations		(15,991)		(15,335)		(32,309)		(28,907)
Net operating income		36,331		33,066		70,928		64,337

Investment in PSB Segment (a) - Equity in earnings of unconsolidated entities		20,908		13,228		35,384		34,965

Investment in Shurgard Segment (a) - Equity in earnings of unconsolidated entities		8,158		4,427		13,138		6,658

Total net income allocated to segments		467,067		360,691		878,503		743,135

Other items not allocated to segments:
General and administrative		(27,740)		(17,104)		(47,314)		(34,972)
Interest and other income		3,113		5,665		5,965		11,784
Interest expense		(21,994)		(14,145)		(37,244)		(27,766)
Foreign currency exchange (loss) gain		(12,707)		(19,295)		32,678		(10,350)
Gain on sale of real estate		3,991		-		13,404		1,117
Net income	$	411,730	$	315,812	$	845,992	$	682,948

PUBLIC STORAGE

NOTES TO FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

(a) See Note 4 for a reconciliation of these amounts to our total Equity in Earnings of Unconsolidated Real Estate Entities on our income statements.

12.Commitments and Contingencies

Contingent Losses

We are a party to various legal proceedings and subject to various claims and complaints; however, we believe that the likelihood of these contingencies resulting in a material loss to the Company, either individually or in the aggregate, is remote.

Insurance and Loss Exposure

We carry property, earthquake, general liability, employee medical insurance and workers compensation coverage through internationally recognized insurance carriers, subject to deductibles. Our deductible for general liability is $2.0 million per occurrence. Our annual deductible for property loss is $25.0 million per occurrence. This deductible decreases to $5.0 million once we reach $35.0 million in aggregate losses for occurrences that exceed $5.0 million. Insurance carriers’ aggregate limits on these policies of $75.0 million for property losses and $102.0 million for general liability losses are higher than estimates of maximum probable losses that could occur from individual catastrophic events determined in recent engineering and actuarial studies; however, in case of multiple catastrophic events, these limits could be exceeded.

We reinsure a program that provides insurance to our customers from an independent third-party insurer. This program covers customer claims for losses to goods stored at our facilities as a result of specific named perils (earthquakes are not covered by this program), up to a maximum limit of $5,000 per storage unit. We reinsure all risks in this program, but purchase insurance to cover this exposure for a limit of $15.0 million for losses in excess of $5.0 million per occurrence. We are subject to licensing requirements and regulations in several states. Customers participate in the program at their option. At June 30, 2021, there were approximately 1,092,000 certificates held by our self-storage customers, representing aggregate coverage of approximately $4.6 billion.

Commitments

We have construction commitments representing future expected payments for construction under contract totaling $151.8 million at June 30, 2021. We expect to pay approximately $81.0 million in the remainder of 2021, $70.2 million in 2022 and $0.6 million in 2023 for these construction commitments.

We have future contractual payments on land, equipment and office space under various lease commitments totaling $66.5 million at June 30, 2021. We expect to pay approximately $1.4 million in the remainder of 2021, $3.1 million in 2022, $2.9 million in each of 2023, 2024 and 2025 and $53.3 million thereafter for these commitments.

13.Subsequent Events

Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.

On July 20, 2021, we redeemed our 4.950% Series D Preferred Shares, at par, for a total of $325 million in cash before payment of accrued dividends.

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements relating to our 2021 outlook and all underlying assumptions, our expected acquisition, disposition, development and redevelopment activity, supply and demand for our self-storage facilities, information relating to operating trends in our markets, expectations regarding operating expenses, including property tax changes, our strategic priorities, expectations with respect to financing activities, rental rates, cap rates and yields, leasing expectations, our credit ratings, and all other statements other than statements of historical fact. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. 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 “outlook,” “guidance,” “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 include, but are not limited to, those described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2021 and in our other filings with the SEC including:

general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development, expansion, and acquisition of self-storage facilities, potential liability for environmental contamination, natural disasters and adverse changes in laws and regulations governing property tax, real estate and zoning;

risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers;

risks associated with the COVID-19 Pandemic (the “COVID Pandemic”) or similar events, including but not limited to illness or death of our employees or customers, negative impacts to the economic environment and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, and/or potential regulatory actions to (i) close our facilities if we were determined not to be an “essential business” or for other reasons, (ii) limit our ability to increase rent or otherwise limit the rent we can charge or (iii) limit our ability to collect rent or evict delinquent tenants;

the risk that there could be an out-migration of population from certain high-cost major markets, if it is determined that the ability to “work from home,” which has become more prominent during the COVID Pandemic, could allow certain workers to live in less expensive localities, which could negatively impact the occupancies and revenues of our properties in such major high-cost markets;

the risk that more jurisdictions will reinstitute COVID Pandemic restrictions, which were previously eased, in response to increases in infections, including as a result of variants such as the Delta variant, or if additional pandemics occur;

the risk that we could experience a change in the move-out patterns of our long-term customers due to economic uncertainty and increases in unemployment resulting from changes in macro environment, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates;

the risk of negative impacts on the cost and availability of debt and equity capital as a result of the COVID Pandemic, which could have a material impact upon our capital and growth plans;

the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives;

the risk that our existing self-storage facilities may be at a disadvantage in competing with newly developed facilities with more visual and customer appeal;

risks related to increased reliance on Google and Sparefoot as customer acquisition channels;

difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage properties that we acquire directly or through the acquisition of entities that own and operate self-storage facilities, or to consummate announced acquisitions in the expected timeframe or at all;

risks associated with international operations including, but not limited to, unfavorable foreign currency rate fluctuations, changes in tax laws, and local and global economic uncertainty that could adversely affect our earnings and cash flows;

risks related to our participation in joint ventures;

the impact of the legal and regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental issues, taxes, our tenant reinsurance business, and labor, including risks related to the impact of new laws and regulations;

risks of increased tax expense associated either with a possible failure by us to qualify as a real estate investment trust (“REIT”), or with challenges to the determination of taxable income for our taxable REIT subsidiaries;

risks due to ballot initiatives or other actions that could remove the protections of Proposition 13 with respect to our real estate and result in substantial increases in our assessed values and property tax bills in California;

changes in United States (“U.S.”) federal or state tax laws related to the taxation of REITs and other corporations;

security breaches, including ransomware, or a failure of our networks, systems or technology could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments;

risks associated with the self-insurance of certain business risks, including property and casualty insurance, employee health insurance and workers compensation liabilities;

difficulties in raising capital at a reasonable cost;

delays and cost overruns on our projects to develop new facilities or expand our existing facilities;

difficulties in our ability to hire and retain skilled management and staff;

ineffective succession planning for our CEO, executive management and our other key employees;

ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and

economic uncertainty due to the impact of war or terrorism.

These forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements. All of our forward-looking statements, including those in this report, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether because of new information, new estimates, or other factors, events or circumstances after the date of these forward-looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this report, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenues, and expenses that are not readily apparent from other sources.

During the six months ended June 30, 2021, there were no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Form 10-K for the year ended December 31, 2020.

Overview

Our self-storage operations generate most of our net income and our earnings growth is most impacted by the level of organic growth within our Same Store Facilities. Accordingly, a significant portion of management’s time is devoted to maximizing cash flows from our existing self-storage facility portfolio.

During the three and six months ended June 30, 2021, revenues generated by our Same Store Facilities increased 10.8% and 7.1%, respectively, while Same Store cost of operations decreased. Demand and operating trends have continued to improve leading to increases in our self-storage rental rates in all markets while maintaining high levels of occupancy. Our operating trends have benefited from our ability to reduce labor costs through technology improvements and reduced need for internet marketing. At June 30, 2021, contract rent per occupied foot was 8.8% higher and square foot occupancy was 2.0% higher for our Same Store Facilities (as defined below) as compared to June 30, 2020, suggesting continued revenue growth into 2021.

In addition to managing our existing facilities for organic growth, we have grown and plan to continue to grow through the acquisition and development of new facilities and expand our existing self-storage facilities. Since the beginning of 2019 we acquired a total of 205 facilities with 16.4 million net rentable square feet for $3.7 billion, and within our non-same store portfolio have developed and expanded self-storage space for a total cost of $1.5 billion, adding 16.4 million net rentable square feet.

On April 28, 2021, as part of our portfolio growth, we acquired the ezStorage portfolio consisting of 48 properties (4.1 million net rentable square feet) for $1.8 billion. These properties are located in submarkets with strong demand drivers and other desirable characteristics across Washington DC, Virginia, and Maryland.

Our strong financial profile continues to enable an effective access to capital markets in order to support our growth and during the six months ended June 30, 2021, we raised an aggregate of $2.5 billion in two public debt offerings and $604 million in a public offering of our preferred shares.

In order to enhance the competitive position of certain of our facilities relative to local competitors (including newly developed facilities), we have embarked on a multi-year program to rebrand our properties, in order to develop more pronounced, attractive, and clearly identifiable color schemes and signage, as well as to upgrade the configuration and layout of the offices and other customer zones to improve the customer experience. The timing and scope of the program will evolve as the work is executed and we expect to spend approximately $133 million over 2021 on this effort.

Results of Operations

Operating results for the Three Months Ended June 30, 2021 and 2020

For the three months ended June 30, 2021, net income allocable to our common shareholders was $346.2 million or $1.97 per diluted common share, compared to $246.1 million or $1.41 per diluted common share in 2020 representing an increase of $100.1 million or $0.56 per diluted common share. The increase is due primarily to (i) a $126.8 million increase in self-storage net operating income (described below), (ii) a $11.4 million increase due to equity in earnings of unconsolidated real estate entities, partially offset by (iii) a $35.1 million increase in depreciation and amortization expense and (iv) a $10.6 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $126.8 million increase in self-storage net operating income is a result of a $91.6 million increase in our Same Store Facilities (as defined below), and a $35.2 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 10.8% or $66.4 million in the three months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 13.1% or $25.2 million in the three months ended June 30, 2021 as compared to 2020, due primarily to a 33.7% ($13.1 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID Pandemic, a 61.2% ($10.8 million) decrease in marketing expenses, and a change in property tax timing contributing to a 7.3% ($5.3 million) decrease in property tax expense. The increase in net operating income of $35.2 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2021 and 2020

For the six months ended June 30, 2021, net income allocable to our common shareholders was $732.1 million or $4.18 per diluted common share, compared to $559.3 million or $3.20 per diluted common share in 2020 representing an increase of $172.8 million or $0.98 per diluted common share. The increase is due primarily to (i) a $167.9 million increase in self-storage net operating income (described below), (ii) a $43.0 million increase due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, partially offset by (iii) a $46.1 million increase in depreciation and amortization expense and (iv) a $12.3 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $167.9 million increase in self-storage net operating income is a result of a $120.9 million increase in our Same Store Facilities (as defined below), and a $47.0 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 7.1% or $87.5 million in the six months ended June 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy. Cost of operations for the Same Store Facilities decreased by 8.7% or $33.3 million in the six months ended June 30, 2021 as compared to 2020, due primarily to a 24.3% ($17.4 million) decrease in on-site property manager payroll resulting from a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID Pandemic, a change in property tax timing contributing to our 7.9% ($11.5 million) decrease in property tax expense, and a 34.0% ($11.0 million) decrease in marketing expenses. The increase in net operating income of $47.0 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2020 and 2021 and the fill-up of recently developed and expanded facilities.

Funds from Operations and Core Funds from Operations

Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts and are considered helpful measures of REIT performance by REITs and many REIT analysts. FFO represents net income before depreciation and amortization, which is excluded because

it is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.

For the three months ended June 30, 2021, FFO was $2.99 per diluted common share, as compared to $2.28 per diluted common share for the same period in 2020, representing an increase of 31.1%, or $0.71 per diluted common share.

For the six months ended June 30, 2021, FFO was $6.07 per diluted common share, as compared to $4.90 per diluted common share for the same period in 2020, representing an increase of 23.9%, or $1.17 per diluted common share.

The following tables reconcile diluted earnings per share to FFO per share and set forth the computation of FFO per share:


		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
	(Amounts in thousands, except per share data)
Reconciliation of Diluted Earnings per Share to
FFO per Share:

Diluted Earnings per Share		$	1.97	$	1.41	$	4.18	$	3.20
Eliminate amounts per share excluded from FFO:
Depreciation and amortization			1.07		0.87		2.00		1.75
Gains on sale of real estate investments,
including our equity share from
investments			(0.05)		-		(0.11)		(0.05)
FFO per share		$	2.99	$	2.28	$	6.07	$	4.90

Computation of FFO per Share:

Net income allocable to common shareholders		$	346,249	$	246,119	$	732,059	$	559,253
Eliminate items excluded from FFO:
Depreciation and amortization			171,738		136,821		317,607		271,958
Depreciation from unconsolidated
real estate investments			17,343		16,872		35,276		35,115
Depreciation allocated to noncontrolling
interests and restricted share unitholders			(1,124)		(938)		(2,095)		(1,899)
Gains on sale of real estate investments,
including our equity share from
investments			(9,197)		-		(18,584)		(9,241)
FFO allocable to common shares		$	525,009	$	398,874	$	1,064,263	$	855,186
Diluted weighted average common shares			175,547		174,575		175,194		174,596
FFO per share		$	2.99	$	2.28	$	6.07	$	4.90

We also present “Core FFO per share,” a non-GAAP measure that represents FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other significant non-cash and/or nonrecurring income or expense items such as loss contingency

accruals, casualties, transactional due diligence, and advisory costs. We review Core FFO per share to evaluate our ongoing operating performance and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles FFO per share to Core FFO per share:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
					Percentage					Percentage
	2021		2020		Change	2021		2020		Change

FFO per share	$	2.99	$	2.28	31.1%	$	6.07	$	4.90	23.9%
Eliminate the per share impact of items
excluded from Core FFO, including
our equity share from investments:
Foreign currency exchange loss (gain)		0.07		0.11			(0.19)		0.06
Preferred share redemption charge		0.10		0.09			0.10		0.09
Other items		(0.01)		(0.02)			(0.01)		(0.01)
Core FFO per share	$	3.15	$	2.46	28.0%	$	5.97	$	5.04	18.5%

Analysis of Net Income by Reportable Segment

The following discussion and analysis is presented and organized in accordance with Note 11 to our June 30, 2021 financial statements, “Segment Information.” Accordingly, refer to the table presented in Note 11 in order to reconcile such amounts to our total net income and for further information on our reportable segments.

Self-Storage Operations

Our self-storage operations are analyzed in four groups: (i) the 2,278 facilities that we have owned and operated on a stabilized basis since January 1, 2019 (the “Same Store Facilities”), (ii) 205 facilities we acquired after December 31, 2018 (the “Acquired facilities”), (iii) 138 facilities that have been newly developed or expanded, or that we expect to commence expansion by December 31, 2021 (the “Newly developed and expanded facilities”) and (iv) 28 other facilities, which are otherwise not stabilized with respect to occupancies or rental rates since January 1, 2019 (the “Other non-same store facilities”). See Note 11 to our June 30, 2021 financial statements “Segment Information,” for a reconciliation of the amounts in the tables below to our total net income.


Self-Storage Operations
Summary	Three Months Ended June 30,					Six Months Ended June 30,
					Percentage					Percentage
	2021		2020		Change	2021		2020		Change
	(Dollar amounts and square footage in thousands)
Revenues:
Same Store facilities	$	680,838	$	614,418	10.8%	$	1,328,655	$	1,241,109	7.1%
Acquired facilities		42,395		9,359	353.0%		62,564		17,102	265.8%
Newly developed and expanded facilities		48,019		35,617	34.8%		90,958		70,318	29.4%
Other non-same store facilities		5,741		5,148	11.5%		11,163		10,214	9.3%
		776,993		664,542	16.9%		1,493,340		1,338,743	11.5%
Cost of operations (a):
Same Store facilities		167,174		192,345	(13.1)%		348,186		381,534	(8.7)%
Acquired facilities		15,147		5,044	200.3%		25,854		8,750	195.5%
Newly developed and expanded facilities		18,263		17,109	6.7%		36,401		33,201	9.6%
Other non-same store facilities		2,011		2,456	(18.1)%		4,259		4,565	(6.7)%
		202,595		216,954	(6.6)%		414,700		428,050	(3.1)%
Net operating income (b):
Same Store facilities		513,664		422,073	21.7%		980,469		859,575	14.1%
Acquired facilities		27,248		4,315	531.5%		36,710		8,352	339.5%
Newly developed and expanded facilities		29,756		18,508	60.8%		54,557		37,117	47.0%
Other non-same store facilities		3,730		2,692	38.6%		6,904		5,649	22.2%
Total net operating income		574,398		447,588	28.3%		1,078,640		910,693	18.4%

Depreciation and amortization expense:
Same Store facilities		(110,405)		(111,631)	(1.1)%		(219,811)		(221,948)	(1.0)%
Acquired facilities		(42,616)		(7,751)	449.8%		(58,311)		(15,069)	287.0%
Newly developed and expanded facilities		(14,597)		(13,155)	11.0%		(31,219)		(26,323)	18.6%
Other non-same store facilities		(5,110)		(5,081)	0.6%		(10,246)		(10,178)	0.7%
Total depreciation and
amortization expense		(172,728)		(137,618)	25.5%		(319,587)		(273,518)	16.8%

Net income (loss):
Same Store facilities		403,259		310,442	29.9%		760,658		637,627	19.3%
Acquired facilities		(15,368)		(3,436)	347.3%		(21,601)		(6,717)	221.6%
Newly developed and expanded facilities		15,159		5,353	183.2%		23,338		10,794	116.2%
Other non-same store facilities		(1,380)		(2,389)	(42.2)%		(3,342)		(4,529)	(26.2)%
Total net income	$	401,670	$	309,970	29.6%	$	759,053	$	637,175	19.1%

Number of facilities at period end:
Same Store facilities							2,278		2,278	-
Acquired facilities							205		59	247.5%
Newly developed and expanded facilities							138		134	3.0%
Other non-same store facilities							28		29	(3.4)%
							2,649		2,500	6.0%
Net rentable square footage at period end:
Same Store facilities							148,909		148,909	-
Acquired facilities							16,377		4,321	279.0%
Newly developed and expanded facilities							16,358		15,346	6.6%
Other non-same store facilities							1,866		2,027	(7.9)%
							183,510		170,603	7.6%

(a)We revised our prior period financial statements to correct the presentation of share-based compensation expense and dividends paid on RSUs between general and administrative expense and self-storage cost of operations. As a result, we revised our statements of income for the three and six months ended June 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $6.3 million, respectively, and a corresponding decrease to general and administrative expenses. This immaterial correction had no impact on our total expenses or net income. The correction also had no impact on our balance sheet, statements of comprehensive income, statements of equity, or cash flows as of and for the three and six months ended June 30, 2020.

(b)Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and in evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related financial measures, in evaluating our operating results. See Note 11 to our June 30, 2021 financial statements for a reconciliation of NOI to our total net income for all periods presented.

Net operating income from our self-storage operations has increased 28.3% and 18.4% in the three and six months ended June 30, 2021, as compared to the same periods in 2020. The increase is due primarily to increased Same Store revenues driven by increase in the realized annual rental income per occupied square foot for the three and six months ended June 30, 2021, respectively, combined with higher average occupancy and decreased Same Store expenses, the acquisition and development of new facilities and the fill-up of unstabilized facilities.

Same Store Facilities

The Same Store Facilities consist of facilities that have been owned and operated on a stabilized level of occupancy, revenues and cost of operations since January 1, 2019. The composition of our Same Store Facilities allows us to more effectively evaluate the ongoing performance of our self-storage portfolio in 2019, 2020, and 2021 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe the Same Store information is used by investors and analysts in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology or may not present such a measure, Same Store Facilities may not be comparable among REITs.

The following table summarizes the historical operating results of these 2,278 facilities (148.9 million net rentable square feet) that represent approximately 81% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2021. It includes various measures and detail that we do not include in the analysis of the developed, acquired, and other non-same store facilities, due to the relative magnitude and importance of our same store facilities relative to our self-storage facilities.


Selected Operating Data for the Same Store Facilities (2,278 facilities)
	Three Months Ended June 30,					Six Months Ended June 30,
					Percentage					Percentage
		2021	2020		Change		2021	2020		Change
	(Dollar amounts in thousands, except for per square foot data)
Revenues (a):
Rental income	$	661,684	$	596,110	11.0%	$	1,289,495	$	1,196,169	7.8%
Late charges and
administrative fees		19,154		18,308	4.6%		39,160		44,940	(12.9)%
Total revenues		680,838		614,418	10.8%		1,328,655		1,241,109	7.1%

Direct cost of operations (a):
Property taxes		67,194		72,458	(7.3)%		133,749		145,236	(7.9)%
On-site property manager
payroll		25,641		38,698	(33.7)%		54,370		71,804	(24.3)%
Repairs and maintenance		13,077		11,670	12.1%		26,108		24,383	7.1%
Utilities		9,334		9,567	(2.4)%		20,079		20,416	(1.7)%
Marketing		6,844		17,630	(61.2)%		21,415		32,438	(34.0)%
Other direct property costs		18,289		16,953	7.9%		36,630		33,842	8.2%
Total direct cost of operations		140,379		166,976	(15.9)%		292,351		328,119	(10.9)%
Direct net operating income (b)		540,459		447,442	20.8%		1,036,304		912,990	13.5%

Indirect cost of operations (a):
Supervisory payroll		(9,184)		(10,927)	(16.0)%		(19,018)		(21,838)	(12.9)%
Centralized management costs		(13,066)		(11,180)	16.9%		(26,083)		(24,992)	4.4%
Share-based compensation		(4,545)		(3,262)	39.3%		(10,734)		(6,585)	63.0%
Net operating income		513,664		422,073	21.7%		980,469		859,575	14.1%
Depreciation and
amortization expense		(110,405)		(111,631)	(1.1)%		(219,811)		(221,948)	(1.0)%
Net income	$	403,259	$	310,442	29.9%	$	760,658	$	637,627	19.3%


Gross margin (before indirect costs,
depreciation and amortization expense)		79.4%		72.8%	9.1%		78.0%		73.6%	6.0%

Gross margin (before depreciation
and amortization expense)		75.4%		68.7%	9.8%		73.8%		69.3%	6.5%

Weighted average for the period:
Square foot occupancy		97.0%		94.2%	3.0%		96.3%		93.6%	2.9%

Realized annual rental income per (c):
Occupied square foot	$	18.32	$	17.00	7.8%	$	17.98	$	17.16	4.8%
Available square foot	$	17.77	$	16.01	11.0%	$	17.32	$	16.07	7.8%

At June 30:
Square foot occupancy							96.5%		94.6%	2.0%
Annual contract rent per
occupied square foot (d)						$	18.75	$	17.24	8.8%

(a)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.

(b)Direct net operating income (“Direct NOI”), a subtotal within NOI, is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs and share-based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.

(c)Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.

(d)Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.

Analysis of Same Store Revenue

We believe a balanced occupancy and rate strategy maximizes our revenues over time. We regularly adjust the rental rates and promotional discounts offered (generally, “$1.00 rent for the first month”), as well as our marketing efforts to maximize revenue from new tenants to replace tenants that vacate.

We typically increase rental rates to our long-term tenants (generally, those that have been with us for at least a year) every six to twelve months. As a result, the number of long-term tenants we have in our facilities is an important factor in our revenue growth. The level of rate increases to long-term tenants is based upon balancing the additional revenue from the increase against the negative impact of incremental move-outs, by considering the customer’s in-place rent and prevailing market rents, among other factors.

Revenues generated by our Same Store Facilities increased 10.8% and 7.1% for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The increase is due primarily to (i) a 7.8% and 4.8% increase in realized annual rent per occupied square foot for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, and (ii) a 3.0% and 2.9% increase in average occupancy for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The same store revenue growth for the six months ended June 30, 2021 was partially offset by a 12.9% decrease in late charges and administrative fees as compared to the same period in 2020.

Our growth in revenues, weighted average square foot occupancy, realized annual rent per occupied square foot, and REVPAF for the three and six months ended June 30, 2021 as compared to the same periods in 2020 was evident in all of our top 15 markets.

For the three and six months ended June 30, 2020, our revenues were impacted by our decision to temporarily curtail our tenant rate increase program and additional pricing limitations to existing tenants imposed by local governments due to “State of Emergency” declarations in response to the COVID Pandemic and other disasters in the second quarter of 2020. Although most restrictions have recently been lifted, we continue to expect a portion of our revenues to remain impacted throughout 2021.

The increase of realized annual rent per occupied square foot in the three and six months ended June 30, 2021 as compared to the same periods in 2020 was due to (i) a 47.6% and 30.9% year over year increase in average rates per square foot charged to new tenants moving in during the three and six months, as a result of strong customer demand across all markets, combined with (ii) rate increases to existing tenants in 2021 as compared to the curtailed increases in 2020. At June 30, 2021, annual contract rent per occupied square foot was 8.8% higher as compared to June 30, 2020.

We experienced high occupancy levels throughout the first six months of 2021. Our average square foot occupancy levels increased 3.0% and 2.9% on a year over year basis during the three and six months ended June 30, 2021, respectively. At June 30, 2021, our square foot occupancy was 96.5%. The improvement in occupancy trends was due primarily to improved trends in move-outs, with year over year move-outs down 9.5% and 10.4% in the three and six months ended June 30, 2021, respectively. This resulted in an increased average length of stay for the three and six months ended June 30, 2021. An increased average length of stay supports revenue growth, due to more long-term tenants who are eligible for rate increases, and a reduced requirement to replace vacating tenants with new tenants which can lead to increased promotional costs and decrease our pricing leverage. With higher occupancy and pricing trends, we reduced promotional discounts given to new move-in customers for the three and six months ended June 30, 2021 by 59.1% and 38.8%, respectively, as compared to the same periods in 2020.

Demand historically has been higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants have typically been higher in the summer months than in the winter months. Demand fluctuates due to various local and regional factors, including the overall economy. Demand into our system is also impacted by new supply of self-storage space as well as alternatives to self-storage.

Late Charges and Administrative Fees

Late charges and administrative fees increased 4.6% for the three months ended June 30, 2021 as compared to the same period of 2020 due primarily to delinquent rent fees being waived in 2020 during the COVID Pandemic. Late charges and administrative fees decreased 12.9% year over year for the six months ended June 30, 2021 due to (i) an acceleration in average collections whereby a greater percentage of tenants paid their monthly rent promptly to avoid the incurrence of such fees and, to a lesser extent (ii) reduced move-in administrative fees due to lower move-ins.

Selected Key Statistical Data

The following table sets forth average annual contract rent per square foot and total square footage for tenants moving in and moving out during the three and six months ended June 30, 2021 and 2020. It also includes promotional discounts, which vary based upon the move-in contractual rates, move-in volume, and percentage of tenants moving in who receive the discount.


	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
	(Amounts in thousands, except for per square foot amounts)

Tenants moving in during the period:
Average annual contract rent
per square foot	$	17.43	$	11.81		47.6%	$	16.16	$	12.35		30.9%
Square footage		23,282		27,478		(15.3)%		47,817		53,664		(10.9)%
Promotional discounts given	$	7,665	$	18,719		(59.1)%	$	24,170	$	39,467		(38.8)%

Tenants moving out during the period:
Average annual contract rent
per square foot	$	16.98	$	15.22		11.6%	$	16.62	$	15.53		7.0%
Square footage		22,234		24,561		(9.5)%		44,077		49,181		(10.4)%

Revenue Expectations

At June 30, 2021, in place contractual rent was 10.8% higher on a year-over-year basis (comprised of a 2.0% increase in square foot occupancy and an 8.8% increase in annual contract rent per occupied foot).

We expect continued year-over-year revenue growth supported by strength in rates as a result of stable customer demand in the second half of 2021. As we return to a typical seasonal pattern of customer behavior (particularly the level of move-out activity), we may experience lower occupancy levels in the fourth quarter of 2021.

Analysis of Same Store Cost of Operations

Cost of operations (excluding depreciation and amortization) decreased 13.1% and 8.7% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, due primarily to decreased on-site property manager payroll, marketing and property tax expense. Decrease of cost of operations in the six months ended June 30, 2021 was partially offset by the increase of share-based compensation.

Property tax expense decreased 7.3% and 7.9% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. In 2020 our property tax expense was recognized on an accelerated basis in each of the first three quarters. We expect decreases through the third quarter to be offset by an increase in the fourth quarter of 2021, resulting in an approximate increase of 5.0% for the year ended December 31, 2021 compared to the same period in 2020, due primarily to higher assessed values and, to a lesser extent, increased tax rates. A summary of our 2020 actual and 2021 estimated quarterly property tax expense is presented below. Amounts for each of the three months ended September 30 and December 31, 2021 are based on our current estimates of 2021’s full-year property tax expense.


			Actual
	2021		2020
	(Amounts in thousands)
For the three months ended:
March 31	$	66,555	$	72,778

June 30		67,194		72,458

September 30		68,358		71,616

December 31		68,358		41,197

	$	270,465	$	258,049

On-site property manager payroll expense decreased 33.7% and 24.3% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The decrease is due to (i) a temporary $3.00 hourly incentive increase and enhancement of paid time off benefits to all of our property managers between April 1, 2020 and June 30, 2020 during the COVID Pandemic and (ii) a year over year decline in hours worked due to staffing reductions from reduced move-in and move-out activity and revisions to other operational processes. We expect reductions in hours worked to continue throughout the remainder of 2021.

Repairs and maintenance expense increased 12.1% and 7.1% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. Repairs and maintenance expense levels are dependent upon many factors such as (i) sporadic occurrences such as accidents, damage, and equipment malfunctions, (ii) short-term local supply and demand factors for material and labor, and (iii) weather conditions, which can impact costs such as snow removal, roof repairs, and HVAC maintenance and repairs.

Our utility expenses are comprised primarily of electricity costs, which are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Utility expense decreased 2.4% and 1.7% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The decrease experienced in the three and six months ended June 30, 2021 is due primarily to investments we are making in energy saving technology such as solar power and LED lights which generate favorable returns on investment in the form of lower utility usage. We continue to expect a decline in utility expense throughout the remainder of 2021.

Marketing expense is comprised principally of Internet advertising and the operating costs of our telephone reservation center. Internet advertising expense, comprised primarily of keyword search fees assessed on a “per

click” basis, varies based upon demand for self-storage space, the quantity of people inquiring about self-storage through online search, occupancy levels, the number and aggressiveness of bidding competitors and other factors. These factors are volatile; accordingly, Internet advertising can increase or decrease significantly in the short-term. We decreased marketing expense by 61.2% and 34.0% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, given strong demand and high occupancies in many of our same store properties.

Other direct property costs include administrative expenses specific to each self-storage facility, such as property insurance, telephone and data communication lines, business license costs, bank charges related to processing the facilities’ cash receipts, tenant mailings, credit card fees, eviction costs and the cost of operating each property’s rental office. These costs increased 7.9% and 8.2% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. We continue to experience increased credit card fees due to a long-term trend of more customers paying with credit cards rather than cash, checks, or other methods of payment with lower transaction costs.

Supervisory payroll expense, which represents cash compensation paid to the management personnel who directly and indirectly supervise the on-site property managers, decreased 16.0% and 12.9% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, due primarily to lower headcount in 2021 and incentives related to the COVID Pandemic in 2020.

Centralized management costs represents administrative and cash compensation expenses for shared general corporate functions to the extent their efforts are devoted to self-storage operations. Such functions include information technology support, hardware, and software, as well as centralized administration of payroll, benefits, training, repairs and maintenance, customer service, pricing and marketing, operational accounting and finance, and legal costs. Centralized management costs increased 16.9% and 4.4% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The increase was due primarily to an increase in IT team costs that support property operations, offset partially by lower travel expenses. We expect increases in centralized management costs in the remainder 2021 due to increased headcount.

Share-based compensation expense includes the amortization of restricted share units and stock options granted to management personnel who directly and indirectly supervise the on-site property managers, as well as those employees responsible for providing shared general corporate functions to the extent their efforts are devoted to self-storage operations. Such functions are listed above under centralized management costs. Share-based compensation expense also includes related employer taxes and varies based upon the level of grants and their related vesting and amortization periods, forfeitures, as well as the Company’s common share price on the date of each grant. For the three and six months ended June 30, 2021, share-based compensation expense increased 39.3% and 63.0%, respectively, as compared to the same periods in 2020, due primarily to the absence of comparable performance-based share-based compensation expense for the three and six months ended June 30, 2020 and the accelerated compensation costs recognized in the three and six months ended June 30, 2021 associated with modifying our share-based compensation plans in July 2020, to allow immediate vesting upon retirement.

Analysis of Same Store Depreciation and Amortization

Depreciation and amortization for Same Store Facilities decreased 1.1% and 1.0% in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. We expect modest increases in depreciation expense in the remainder of 2021 due to elevated levels of capital expenditures.

‎

Quarterly Financial Data

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 amounts)
Total revenues:
2021	$	647,817	$	680,838
2020	$	626,691	$	614,418	$	629,169	$	638,149	$	2,508,427

Total cost of operations:
2021	$	181,012	$	167,174
2020	$	189,189	$	192,345	$	184,329	$	146,584	$	712,447

Property taxes:
2021	$	66,555	$	67,194
2020	$	72,778	$	72,458	$	71,616	$	41,197	$	258,049

Repairs and maintenance:
2021	$	13,031	$	13,077
2020	$	12,713	$	11,670	$	12,973	$	13,485	$	50,841

Marketing:
2021	$	14,571	$	6,844
2020	$	14,808	$	17,630	$	16,158	$	13,526	$	62,122

REVPAF:
2021	$	16.86	$	17.77
2020	$	16.12	$	16.01	$	16.39	$	16.62	$	16.29

Weighted average realized annual rent per occupied square foot:
2021	$	17.63	$	18.32
2020	$	17.33	$	17.00	$	17.16	$	17.46	$	17.24

Weighted average occupancy levels for the period:
2021		95.6%		97.0%
2020		93.0%		94.2%		95.5%		95.2%		94.5%

Analysis of Market Trends

The following tables set forth selected market trends in our Same Store Facilities:

Same Store Facilities Operating Trends by Market



	As of ‎June 30, 2021		For the Three Months Ended June 30,
	Number	Square	Realized Rent per								Realized Rent Per
	of	Feet	Occupied Square Foot					Average Occupancy			Available Square Foot
	Facilities	(millions)		2021		2020	Change	2021	2020	Change		2021		2020	Change
Los Angeles	214	15.3	$	27.08	$	25.49	6.2%	98.4%	96.3%	2.2%	$	26.64	$	24.54	8.6%
San Francisco	130	8.1		27.60		26.18	5.4%	97.8%	95.2%	2.7%		26.99		24.91	8.4%
New York	91	6.5		26.88		25.43	5.7%	97.0%	94.3%	2.9%		26.06		23.97	8.7%
Seattle-Tacoma	129	8.1		21.61		20.10	7.5%	96.3%	94.2%	2.2%		20.81		18.93	9.9%
Miami	89	5.5		21.65		19.58	10.6%	97.3%	93.2%	4.4%		21.07		18.24	15.5%
Washington DC	87	5.9		22.21		20.88	6.4%	96.4%	94.3%	2.2%		21.40		19.69	8.7%
Chicago	83	5.8		16.15		14.70	9.9%	96.8%	93.6%	3.4%		15.64		13.75	13.7%
Atlanta	103	6.6		14.06		13.20	6.5%	96.8%	92.1%	5.1%		13.61		12.15	12.0%
Dallas-Ft. Worth	92	6.4		14.32		13.24	8.2%	96.9%	92.9%	4.3%		13.87		12.30	12.8%
Houston	98	6.4		13.35		12.61	5.9%	95.0%	91.4%	3.9%		12.69		11.53	10.1%
Philadelphia	56	3.5		18.06		16.54	9.2%	97.8%	95.7%	2.2%		17.66		15.83	11.6%
Orlando-Daytona	50	3.8		14.39		13.38	7.5%	97.0%	94.3%	2.9%		13.95		12.62	10.5%
West Palm Beach	52	3.5		20.34		17.87	13.8%	97.3%	93.6%	4.0%		19.78		16.72	18.3%
Tampa	40	2.9		15.01		13.58	10.5%	96.5%	92.6%	4.2%		14.49		12.57	15.3%
Charlotte	70	4.5		12.08		10.99	9.9%	96.3%	91.8%	4.9%		11.63		10.08	15.4%
All other markets	894	56.1		15.17		13.92	9.0%	97.0%	94.6%	2.5%		14.70		13.17	11.6%
Totals	2,278	148.9	$	18.32	$	17.00	7.8%	97.0%	94.2%	3.0%	$	17.77	$	16.01	11.0%

‎

Same Store Facilities Operating Trends by Market (Continued)


	For the Three Months Ended June 30,
																Net Operating
	Revenues ($000's)					Direct Expenses ($000's)					Indirect Expenses ($000's)					Income ($000's)
		2021		2020	Change		2021		2020	Change		2021		2020	Change		2021		2020	Change
Los Angeles	$	103,423	$	95,085	8.8%	$	13,771	$	17,328	(20.5)%	$	2,636	$	2,538	3.9%	$	87,016	$	75,219	15.7%
San Francisco		55,718		51,460	8.3%		8,086		9,755	(17.1)%		1,643		1,561	5.3%		45,989		40,144	14.6%
New York		43,266		39,869	8.5%		10,151		11,970	(15.2)%		1,322		1,273	3.8%		31,793		26,626	19.4%
Seattle-Tacoma		31,399		28,692	9.4%		5,584		6,726	(17.0)%		1,008		970	3.9%		24,807		20,996	18.2%
Miami		31,508		27,341	15.2%		6,345		8,373	(24.2)%		1,008		1,015	(0.7)%		24,155		17,953	34.5%
Washington DC		30,083		27,768	8.3%		6,446		7,463	(13.6)%		961		922	4.2%		22,676		19,383	17.0%
Chicago		32,809		28,932	13.4%		11,767		12,250	(3.9)%		1,432		1,373	4.3%		19,610		15,309	28.1%
Atlanta		22,926		20,525	11.7%		4,604		5,697	(19.2)%		1,209		1,058	14.3%		17,113		13,770	24.3%
Dallas-Ft. Worth		23,838		21,223	12.3%		5,401		7,320	(26.2)%		1,124		1,041	8.0%		17,313		12,862	34.6%
Houston		20,963		19,068	9.9%		6,671		7,090	(5.9)%		1,054		991	6.4%		13,238		10,987	20.5%
Philadelphia		16,121		14,549	10.8%		3,878		4,145	(6.4)%		657		674	(2.5)%		11,586		9,730	19.1%
Orlando-Daytona		16,141		14,632	10.3%		3,321		4,271	(22.2)%		832		702	18.5%		11,988		9,659	24.1%
West Palm Beach		14,529		12,300	18.1%		2,970		3,364	(11.7)%		537		521	3.1%		11,022		8,415	31.0%
Tampa		13,001		11,290	15.2%		2,864		3,630	(21.1)%		623		546	14.1%		9,514		7,114	33.7%
Charlotte		11,506		10,019	14.8%		2,071		2,547	(18.7)%		544		510	6.7%		8,891		6,962	27.7%
All other markets		213,607		191,665	11.4%		46,449		55,047	(15.6)%		10,205		9,674	5.5%		156,953		126,944	23.6%
Totals	$	680,838	$	614,418	10.8%	$	140,379	$	166,976	(15.9)%	$	26,795	$	25,369	5.6%	$	513,664	$	422,073	21.7%

‎

Same Store Facilities Operating Trends by Market (Continued)


	As of ‎June 30, 2021		For the Six Months Ended June 30,
	Number	Square	Realized Rent per								Realized Rent Per
	of	Feet	Occupied Square Foot					Average Occupancy			Available Square Foot
	Facilities	(millions)		2021		2020	Change	2021	2020	Change		2021		2020	Change
Los Angeles	214	15.3	$	26.77	$	25.77	3.9%	98.1%	95.7%	2.5%	$	26.27	$	24.66	6.5%
San Francisco	130	8.1		27.22		26.34	3.3%	97.6%	94.5%	3.3%		26.58	$	24.88	6.8%
New York	91	6.5		26.62		25.76	3.3%	96.5%	93.9%	2.8%		25.68	$	24.18	6.2%
Seattle-Tacoma	129	8.1		21.14		20.22	4.5%	95.6%	93.4%	2.4%		20.21	$	18.89	7.0%
Miami	89	5.5		21.06		19.85	6.1%	96.8%	93.0%	4.1%		20.39	$	18.46	10.5%
Washington DC	87	5.9		21.82		21.07	3.6%	95.7%	93.5%	2.4%		20.89	$	19.70	6.0%
Chicago	83	5.8		15.79		14.93	5.8%	95.8%	92.6%	3.5%		15.13	$	13.82	9.5%
Atlanta	103	6.6		13.72		13.26	3.5%	95.7%	92.0%	4.0%		13.13	$	12.21	7.5%
Dallas-Ft. Worth	92	6.4		13.96		13.37	4.4%	95.8%	92.5%	3.6%		13.38	$	12.37	8.2%
Houston	98	6.4		13.09		12.74	2.7%	94.2%	91.3%	3.2%		12.33	$	11.63	6.0%
Philadelphia	56	3.5		17.77		16.61	7.0%	97.3%	95.3%	2.1%		17.29	$	15.82	9.3%
Orlando-Daytona	50	3.8		14.06		13.55	3.8%	96.1%	94.0%	2.2%		13.52	$	12.73	6.2%
West Palm Beach	52	3.5		19.67		18.07	8.9%	96.8%	93.7%	3.3%		19.05	$	16.93	12.5%
Tampa	40	2.9		14.56		13.76	5.8%	96.1%	92.2%	4.2%		13.98	$	12.69	10.2%
Charlotte	70	4.5		11.74		11.12	5.6%	95.6%	91.4%	4.6%		11.22	$	10.16	10.4%
All other markets	894	56.1		14.85		14.04	5.8%	96.2%	93.8%	2.6%		14.28	$	13.18	8.3%
Totals	2,278	148.9	$	17.98	$	17.16	4.8%	96.3%	93.6%	2.9%	$	17.32	$	16.07	7.8%

‎

Same Store Facilities Operating Trends by Market (Continued)


	For the Six Months Ended June 30,
																Net Operating
	Revenues ($000's)					Direct Expenses ($000's)					Indirect Expenses ($000's)					Income ($000's)
		2021		2020	Change		2021		2020	Change		2021		2020	Change		2021		2020	Change
Los Angeles	$	203,937	$	192,332	6.0%	$	29,105	$	33,335	(12.7)%	$	5,598	$	5,302	5.6%	$	169,234	$	153,695	10.1%
San Francisco		109,625		103,070	6.4%		16,900		19,110	(11.6)%		3,494		3,253	7.4%		89,231		80,707	10.6%
New York		85,371		81,003	5.4%		21,477		24,606	(12.7)%		2,799		2,715	3.1%		61,095		53,682	13.8%
Seattle-Tacoma		61,046		57,500	6.2%		11,674		12,970	(10.0)%		2,115		2,064	2.5%		47,257		42,466	11.3%
Miami		61,071		55,676	9.7%		12,767		16,185	(21.1)%		2,140		2,100	1.9%		46,164		37,391	23.5%
Washington DC		58,769		55,916	5.1%		13,215		14,650	(9.8)%		2,046		1,979	3.4%		43,508		39,287	10.7%
Chicago		63,560		58,515	8.6%		24,287		26,425	(8.1)%		2,934		2,936	(0.1)%		36,339		29,154	24.6%
Atlanta		44,359		41,630	6.6%		9,266		10,607	(12.6)%		2,462		2,183	12.8%		32,631		28,840	13.1%
Dallas-Ft. Worth		46,096		42,942	7.3%		11,371		14,047	(19.1)%		2,283		2,188	4.3%		32,442		26,707	21.5%
Houston		40,813		38,744	5.3%		13,133		13,612	(3.5)%		2,169		2,141	1.3%		25,511		22,991	11.0%
Philadelphia		31,642		29,279	8.1%		7,725		8,095	(4.6)%		1,382		1,451	(4.8)%		22,535		19,733	14.2%
Orlando-Daytona		31,360		29,737	5.5%		6,866		8,210	(16.4)%		1,685		1,451	16.1%		22,809		20,076	13.6%
West Palm Beach		28,035		25,059	11.9%		6,044		6,455	(6.4)%		1,123		1,056	6.3%		20,868		17,548	18.9%
Tampa		25,156		22,980	9.5%		5,943		7,066	(15.9)%		1,270		1,131	12.3%		17,943		14,783	21.4%
Charlotte		22,255		20,326	9.5%		4,386		4,906	(10.6)%		1,116		1,070	4.3%		16,753		14,350	16.7%
All other markets		415,560		386,400	7.5%		98,192		107,840	(8.9)%		21,219		20,395	4.0%		296,149		258,165	14.7%
Totals	$	1,328,655	$	1,241,109	7.1%	$	292,351	$	328,119	(10.9)%	$	55,835	$	53,415	4.5%	$	980,469	$	859,575	14.1%

Acquired Facilities

The Acquired Facilities represent 205 facilities that we acquired in 2019, 2020, and within the first six months of 2021. As a result of the stabilization process and timing of when these facilities were acquired, year-over-year changes can be significant. The following table summarizes operating data with respect to the Acquired Facilities:



ACQUIRED FACILITIES	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change (a)		2021		2020		Change (a)
	($ amounts in thousands, except for per square foot amounts)
Revenues (b):
2019 Acquisitions	$	10,023	$	7,533	$	2,490	$	19,069	$	14,594	$	4,475
2020 Acquisitions		12,547		1,826		10,721		22,838		2,508		20,330
2021 Acquisitions		19,825		-		19,825		20,657		-		20,657
Total revenues		42,395		9,359		33,036		62,564		17,102		45,462

Cost of operations (b):
2019 Acquisitions		3,186		3,557		(371)		6,716		6,926		(210)
2020 Acquisitions		6,251		1,487		4,764		12,877		1,824		11,053
2021 Acquisitions		5,710		-		5,710		6,261		-		6,261
Total cost of operations		15,147		5,044		10,103		25,854		8,750		17,104

Net operating income:
2019 Acquisitions		6,837		3,976		2,861		12,353		7,668		4,685
2020 Acquisitions		6,296		339		5,957		9,961		684		9,277
2021 Acquisitions		14,115		-		14,115		14,396		-		14,396
Net operating income		27,248		4,315		22,933		36,710		8,352		28,358
Depreciation and
amortization expense		(42,616)		(7,751)		(34,865)		(58,311)		(15,069)		(43,242)
Net loss	$	(15,368)	$	(3,436)	$	(11,932)	$	(21,601)	$	(6,717)	$	(14,884)

At June 30:
Square foot occupancy:
2019 Acquisitions								94.9%		91.8%		3.4%
2020 Acquisitions								88.7%		68.6%		29.3%
2021 Acquisitions								86.2%		-		-
								88.6%		85.6%		3.5%
Annual contract rent per
occupied square foot:
2019 Acquisitions							$	13.72	$	10.63		29.1%
2020 Acquisitions								12.75		12.56		1.5%
2021 Acquisitions								17.97		-		-
							$	15.48	$	11.04		40.2%

Number of facilities:
2019 Acquisitions								44		44		-
2020 Acquisitions								62		15		47
2021 Acquisitions								99		-		99
								205		59		146
Net rentable square feet (in thousands):
2019 Acquisitions								3,154		3,154		-
2020 Acquisitions								5,075		1,167		3,908
2021 Acquisitions								8,148		-		8,148
								16,377		4,321		12,056


ACQUIRED FACILITIES (Continued)	As of ‎June 30, 2021
Costs to acquire (in thousands):
2019 Acquisitions	$	429,850
2020 Acquisitions		796,065
2021 Acquisitions		2,518,358
	$	3,744,273

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.

We believe that our economies of scale in marketing and operations allows us to generate higher net operating income from newly acquired facilities than was achieved by the previous owners. However, it can take 12 or more months for us to fully achieve the higher net operating income, or even longer in the case of an acquired facility with low occupancy levels and/or below market in place rents, and the ultimate levels of net operating income to be achieved can be affected by changes in general economic conditions. As a result, there can be no assurance that we will achieve our expectations with respect to these newly acquired facilities.

The Acquired Facilities have an aggregate of approximately 16.4 million net rentable square feet, including 3.5 million in Maryland, 1.9 million in Virginia, 0.9 million in Texas, 0.8 million in Florida, 0.7 million in Arizona, 0.6 million in each of Indiana, California, and Ohio, 0.5 million in each of Georgia, Idaho, Pennsylvania, Michigan, and Illinois, 0.4 million in each of Nebraska, South Carolina, Washington, North Carolina and Colorado, 0.3 million in each of Minnesota, Alabama, Massachusetts and Missouri and 1.1 million in other states.

For the six months ended June 30, 2021, the weighted average annualized yield on cost, based upon net operating income, for the 44 facilities acquired in 2019 was 5.7%. The yield for the facilities acquired in 2020 is not meaningful due to the presence of unstabilized facilities. The yield for the facilities acquired in the six months ended June 30, 2021 is not meaningful due to our limited ownership period.

On April 28, 2021, we closed the acquisition of the ezStorage portfolio consisting of 48 properties (4.1 million net rentable square feet) for acquisition cost of $1.8 billion, which includes 47 self-storage facilities and one property that is under construction. Included in the 2021 Acquisition results in the table above are revenues of $14.8 million, NOI of $11.6 million (including Direct NOI of $12.0 million) and square footage occupancy of 94.2% for these facilities.

Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities across 15 states with 3.0 million net rentable square feet, for $466.6 million.

We are actively seeking to acquire additional facilities and the environment for new acquisitions has improved. We are observing increased selling activity for both new constructed non-stabilized and stabilized properties. However, future acquisition volume will depend upon whether additional owners will be motivated to market their facilities, which will in turn depend upon factors such as economic conditions and the level of seller confidence.

‎

Analysis of Depreciation and Amortization of Acquired Facilities

Depreciation and amortization with respect to the Acquired Facilities for the three months ended June 30, 2021 and 2020 totaled $42.6 million and $7.8 million, respectively, and $58.3 million and $15.1 million for the six months ended June 30, 2021 and 2020, respectively. These amounts include (i) depreciation of the acquired buildings, which is recorded generally on a straight line basis over a 25 year period, and (ii) amortization of cost allocated to the tenants in place upon acquisition of a facility, which is recorded based upon the benefit of such existing tenants to each period and thus is highest when the facility is first acquired and declines as such tenants vacate. With respect to the Acquired Facilities owned at June 30, 2021, depreciation of buildings and amortization of tenant intangibles is expected to aggregate approximately $154.4 million in the year ending December 31, 2021. There will be additional depreciation and amortization of tenant intangibles with respect to new buildings that are acquired in the remainder of 2021.

‎

Developed and Expanded Facilities

The developed and expanded facilities include 67 facilities that were developed on new sites since January 1, 2016, and 71 facilities subject to expansion of their net rentable square footage. Of these expansions, 44 were completed at January 1, 2020, 13 were completed in the 18 months ended June 30, 2021, and 14 are currently in process or are expected to commence renovation in 2021. The following table summarizes operating data with respect to the Developed and Expanded Facilities:


DEVELOPED AND EXPANDED
FACILITIES	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change (a)		2021		2020		Change (a)
	($ amounts in thousands, except for per square foot amounts)
Revenues (b):
Developed in 2016	$	8,446	$	6,896	$	1,550	$	16,218	$	13,705	$	2,513
Developed in 2017		6,661		5,180		1,481		12,704		10,241		2,463
Developed in 2018		6,769		4,699		2,070		12,822		9,200		3,622
Developed in 2019		2,819		1,443		1,376		5,157		2,518		2,639
Developed in 2020		662		7		655		1,031		7		1,024
Developed in 2021		144		-		144		148		-		148
Expansions completed before 2020		15,480		11,076		4,404		29,202		21,760		7,442
Expansions completed in 2020 or 2021		3,396		2,437		959		6,291		4,976		1,315
Expansions in process		3,642		3,879		(237)		7,385		7,911		(526)
Total revenues		48,019		35,617		12,402		90,958		70,318		20,640

Cost of operations (b):
Developed in 2016		2,372		2,588		(216)		4,830		5,104		(274)
Developed in 2017		2,418		2,517		(99)		4,921		4,983		(62)
Developed in 2018		2,543		2,742		(199)		5,105		5,388		(283)
Developed in 2019		1,287		1,299		(12)		2,695		2,387		308
Developed in 2020		444		52		392		843		52		791
Developed in 2021		407		-		407		490		-		490
Expansions completed before 2020		6,108		5,753		355		12,189		11,115		1,074
Expansions completed in 2020 or 2021		1,728		1,084		644		3,302		2,102		1,200
Expansions in process		956		1,074		(118)		2,026		2,070		(44)
Total cost of operations		18,263		17,109		1,154		36,401		33,201		3,200

Net operating income (loss):
Developed in 2016		6,074		4,308		1,766		11,388		8,601		2,787
Developed in 2017		4,243		2,663		1,580		7,783		5,258		2,525
Developed in 2018		4,226		1,957		2,269		7,717		3,812		3,905
Developed in 2019		1,532		144		1,388		2,462		131		2,331
Developed in 2020		218		(45)		263		188		(45)		233
Developed in 2021		(263)		-		(263)		(342)		-		(342)
Expansions completed before 2020		9,372		5,323		4,049		17,013		10,645		6,368
Expansions completed in 2020 or 2021		1,668		1,353		315		2,989		2,874		115
Expansions in process		2,686		2,805		(119)		5,359		5,841		(482)
Net operating income		29,756		18,508		11,248		54,557		37,117		17,440
Depreciation and
amortization expense		(14,597)		(13,155)		(1,442)		(31,219)		(26,323)		(4,896)
Net income	$	15,159	$	5,353	$	9,806	$	23,338	$	10,794	$	12,544

‎


DEVELOPED AND EXPANDED
FACILITIES (Continued)
	As of June 30,
	2021		2020		Change (a)
	($ amounts in thousands,
	except for per square foot amounts)
Square foot occupancy:
Developed in 2016		94.3%		91.1%		3.5%
Developed in 2017		94.5%		89.8%		5.2%
Developed in 2018		92.2%		86.2%		7.0%
Developed in 2019		91.3%		80.0%		14.1%
Developed in 2020		84.6%		5.2%		1526.9%
Developed in 2021		45.7%		-		-
Expansions completed before 2020		90.8%		78.9%		15.1%
Expansions completed in 2020 or 2021		74.7%		71.7%		4.2%
Expansions in process		91.2%		86.3%		5.7%
		89.2%		81.9%		8.9%
Annual contract rent per occupied square foot:
Developed in 2016	$	16.98	$	14.08		20.6%
Developed in 2017		14.05		11.33		24.0%
Developed in 2018		14.91		11.13		34.0%
Developed in 2019		12.51		7.83		59.8%
Developed in 2020		13.01		11.08		17.4%
Developed in 2021		11.48		-		-
Expansions completed before 2020		12.47		9.77		27.6%
Expansions completed in 2020 or 2021		12.74		13.22		(3.6)%
Expansions in process		19.84		19.26		3.0%
	$	14.03	$	11.54		21.6%
Number of facilities:
Developed in 2016		16		16		-
Developed in 2017		16		16		-
Developed in 2018		18		18		-
Developed in 2019		11		11		-
Developed in 2020		3		2		1
Developed in 2021		3		-		3
Expansions completed before 2020		44		44		-
Expansions completed in 2020 or 2021		13		13		-
Expansions in process		14		14		-
		138		134		4

Net rentable square feet (in thousands) (c):
Developed in 2016		2,141		2,141		-
Developed in 2017		2,040		2,040		-
Developed in 2018		2,069		2,069		-
Developed in 2019		1,057		1,057		-
Developed in 2020		347		246		101
Developed in 2021		359		-		359
Expansions completed before 2020		5,822		5,820		2
Expansions completed in 2020 or 2021		1,695		1,044		651
Expansions in process		828		929		(101)
		16,358		15,346		1,012

	As of ‎June 30, 2021
Costs to develop (in thousands):
Developed in 2016	$	257,585
Developed in 2017		239,871
Developed in 2018		262,187
Developed in 2019		150,387
Developed in 2020		42,063
Developed in 2021		71,455
Expansions completed before 2020 (d)		381,940
Expansions completed in 2020 or 2021 (d)		110,837
	$	1,516,325

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)Revenues and cost of operations do not include tenant reinsurance and merchandise sales generated at the facilities. See “Ancillary Operations” below for more information.

(c)The facilities included above have an aggregate of approximately 16.4 million net rentable square feet at June 30, 2021, including 5.9 million in Texas, 2.2 million in Florida, 1.7 million in California, 1.5 million in Colorado, 1.1 million in Minnesota, 0.8 million in North Carolina, 0.6 million in Washington, 0.4 million in each of Missouri and Virginia, 0.3 million in each of Georgia, Michigan, New Jersey and South Carolina and 0.6 million in other states.

(d)These amounts only include the direct cost incurred to expand and renovate these facilities, and do not include (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.

It typically takes at least three to four years for a newly developed or expanded self-storage facility to stabilize with respect to revenues. Physical occupancy can be achieved as early as two to three years following completion of the development or expansion, through offering lower rental rates during fill-up. As a result, even after achieving high occupancy, there can still be a period of elevated revenue growth as the tenant base matures and higher rental rates are achieved.

We believe that our development and redevelopment activities generate favorable risk-adjusted returns over the long run. However, in the short run, our earnings are diluted during the construction and stabilization period due to the cost of capital to fund the development cost, as well as the related construction and development overhead expenses included in general and administrative expense.

Our existing unstabilized facilities continued to fill up in terms of occupancies consistent with our general expectations during the six months ended June 30, 2021, and we expect that trend to continue. Our unstabilized facilities are affected by the same market dynamics that affect our Same Store properties. Accordingly, whether we ultimately achieve our yield expectations, and the timeframe for reaching stabilized cash flows, depends largely upon the same factors affecting aggregate demand, move-ins, move-outs, and realized annual rent per occupied square foot for our Same Store Facilities as set forth under “Analysis of Same Store Revenue” above.

At June 30, 2021, we had a development pipeline to develop 22 new self-storage facilities and expand 30 existing self-storage facilities, which will add approximately 4.3 million net rentable square feet at a cost of $661.0 million. We expect to continue to seek to add projects to maintain a robust pipeline. Our ability to do so continues to be challenged by various constraints such as difficulty in finding projects that meet our risk-adjusted yield expectations, and challenges in obtaining building permits for self-storage facilities in certain municipalities.

The facilities included under “Developed in 2016” had high occupancies at June 30, 2021, but had an 18.3% year over year revenue growth during the six months ended June 30, 2021 which exceeds the 7.1% increase in year over year revenue growth in the Same Store facilities. This outperformance relative to the Same Store Facilities reflects the maturity of the existing tenant base following attainment of high occupancy, illustrating the latter stage of the stabilization process noted above. The annualized yield on cost for these facilities, based upon the net operating income for the six months ended June 30, 2021 was 8.8%.

We typically underwrite new developments to stabilize at approximately an 8.0% NOI yield on cost. Our developed facilities have thus far leased-up as expected and are at various stages of their revenue stabilization periods. The actual annualized yields that may be achieved on these facilities upon stabilization will depend on many factors, including local and current market conditions in the vicinity of each property and the level of new and existing supply.

We have 22 additional newly developed facilities in process, which will have a total of 1.9 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $307.9 million. We expect these facilities to open over the next 18 to 24 months.

The expansion of an existing facility involves the construction of new space on an existing facility, either on existing unused land or through the demolition of existing buildings in order to facilitate densification. The construction costs for an expanded facility may include, in addition to adding space, adding amenities such as climate control to existing space, improving the visual appeal of the facility, and to a much lesser extent, the replacement of existing doors, roofs, and HVAC.

The return profile on the expansion of existing facilities differs from a new facility, due to a lack of land cost, and there can be less cash flow risk because we have more direct knowledge of the local demand for space on the site as compared to a new facility. However, many expansions involve the demolition of existing revenue-generating space with the loss of the related revenues during the construction and fill-up period.

The facilities under “expansions completed” represent those facilities where the expansions have been completed at June 30, 2021. We incurred a total of $492.8 million in direct cost to expand these facilities, demolished a total of 1.0 million net rentable square feet of storage space, and built a total of 4.7 million net rentable square feet of new storage space.

The facilities under “expansions in process” represent those facilities where development is in process at June 30, 2021 or which will commence construction by December 31, 2021. We have a pipeline to add a total of 2.4 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $353.1 million.

Analysis of Depreciation and Amortization of Developed and Expanded Facilities

Depreciation and amortization with respect to the Developed and Expanded Facilities totaled $14.6 million and $31.2 million for the three and six months ended June 30, 2021, respectively, as compared to $13.2 million and $26.3 million for the same periods in 2020. These amounts represent depreciation of the developed buildings and, in the case of the expanded facilities, the legacy depreciation on the existing buildings. With respect to the Developed and Expanded Facilities completed at June 30, 2021, depreciation of buildings is expected to aggregate approximately $62.4 million in the year ending December 31, 2021. There will be additional depreciation of new buildings that are developed or expanded in the remainder of 2021.

Other non-same store facilities

The “other non-same store facilities” represent facilities which, while not newly acquired, developed, or expanded, are not fully stabilized since January 1, 2019, due primarily to casualty events such as hurricanes, floods, and fires.

The other non-same store facilities have an aggregate of 1.9 million net rentable square feet, including 0.5 million in Texas, 0.2 million in each of California, Georgia, Ohio and Tennessee and 0.6 million in other states.

The net operating income for these facilities was $3.7 million and $6.9 million in the three and six months ended June 30, 2021, respectively, as compared to $2.7 million and $5.6 million for the same periods in 2020. During the three and six months ended June 30, 2021, the average occupancy for these facilities totaled 93.0% and 91.0%, respectively, as compared to 83.3% and 79.8% for the same periods in 2020, and the realized rent per occupied square feet totaled $13.23 and $13.13, respectively, as compared to $12.79 and $13.25 for the same periods in 2020.

Over the longer term, we expect the growth in operations of these facilities to be similar to that of our Same Store facilities. However, in the short run, year over year comparisons will vary due to the impact of the underlying events which resulted in these facilities being classified as non-same store.

Depreciation and amortization with respect to the other non-same store facilities totaled $5.1 million and $10.2 million for the three and six months ended June 30, 2021, respectively, as compared to $5.1 million and $10.2 million for the same periods in 2020. We expect that depreciation for the remainder of 2021 will approximate the level experienced in the six months ended June 30, 2021.

Ancillary Operations

Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by tenants in our self-storage facilities in the U.S., management of property owned by unrelated third parties, and the sale of merchandise at our self-storage facilities. The following table sets forth our ancillary operations:



	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
	(Amounts in thousands)
Revenues:
Tenant reinsurance premiums	$	40,816	$	36,933	$	3,883	$	80,497	$	71,629	$	8,868
Merchandise		7,512		7,810		(298)		14,548		14,995		(447)
Third party property management		3,994		3,658		336		8,192		6,620		1,572
Total revenues		52,322		48,401		3,921		103,237		93,244		9,993

Cost of operations:
Tenant reinsurance		7,262		7,285		(23)		15,086		14,067		1,019
Merchandise		4,706		4,497		209		8,672		8,660		12
Third party property management		4,023		3,553		470		8,551		6,180		2,371
Total cost of operations		15,991		15,335		656		32,309		28,907		3,402

Net operating income (loss):
Tenant reinsurance		33,554		29,648		3,906		65,411		57,562		7,849
Merchandise		2,806		3,313		(507)		5,876		6,335		(459)
Third party property management		(29)		105		(134)		(359)		440		(799)

Total net operating income	$	36,331	$	33,066	$	3,265	$	70,928	$	64,337	$	6,591

Tenant reinsurance operations: Our customers have the option of purchasing insurance from a non-affiliated insurance company to cover certain losses to their goods stored at our facilities. A wholly-owned, consolidated subsidiary of Public Storage fully reinsures such policies, and thereby assumes all risk of losses under these policies and receives reinsurance premiums substantially equal to the premiums collected from our tenants, from the non-affiliated insurance company. Such reinsurance premiums are shown as “Tenant reinsurance premiums” in the above table.

Tenant reinsurance premium revenue increased $3.9 million or 10.5 % for the three months ended June 30, 2021, and increased $8.9 million or 12.4% for the six months ended June 30, 2021, in each case as compared to the

same period in 2020. The increase is due to higher average premiums and an increase in our tenant base with respect to acquired, newly developed, and expanded facilities. Tenant reinsurance revenue with respect to the Same Store Facilities totaled $33.3 million and $66.4 million for the three and six months ended June 30, 2021, respectively, as compared to $31.9 million and $62.4 million for the same periods in 2020.

We expect future growth will come primarily from customers of newly acquired and developed facilities, as well as additional tenants at our existing unstabilized self-storage facilities.

Cost of operations primarily includes claims paid as well as claims adjustment expenses. Claims expenses vary based upon the number of insured tenants and the volume of events which drive covered customer losses, such as burglary, as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Cost of operations were $7.3 million and $15.1 million for the three and six months ended June 30, 2021, respectively, as compared to $7.3 million and $14.1 million for the same periods in 2020.

Merchandise sales: We sell locks, boxes, and packing supplies at our self-storage facilities and the level of sales of these items is primarily impacted by the level of move-ins and other customer traffic at our self-storage facilities. We do not expect any significant changes in revenues or profitability from our merchandise sales in the remainder of 2021.

Third party property management: At June 30, 2021, we manage 102 facilities for unrelated third parties, and were under contract to manage 28 additional facilities including 26 facilities that are currently under construction. While we expect this business to increase in scope and size, we don’t expect any significant changes in overall profitability of this business in the near term as we seek new properties to manage and are in the earlier stages of lease-up for newly managed properties.

Equity in earnings of unconsolidated real estate entities

For all periods presented, we have equity investments in PSB and Shurgard, which we account for on the equity method and record our pro-rata share of the net income of these entities. The following table, and the discussion below, sets forth our equity in earnings of unconsolidated real estate entities:



	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
	(Amounts in thousands)
Equity in earnings:
PSB	$	20,908	$	13,228	$	7,680	$	35,384	$	34,965	$	419
Shurgard		8,158		4,427		3,731		13,138		6,658		6,480
Total equity in earnings	$	29,066	$	17,655	$	11,411	$	48,522	$	41,623	$	6,899

Investment in PSB: Throughout all periods presented, we owned 7,158,354 shares of PS Business Parks, Inc. (“PSB”) common stock and 7,305,355 limited partnership units in an operating partnership controlled by PSB, representing an approximate 42% common equity interest. The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

At June 30, 2021, PSB wholly-owned approximately 28 million rentable square feet of commercial space and had a 95% interest in a 395-unit apartment complex. PSB also manages commercial space that we own pursuant to property management agreements.

Equity in earnings from PSB increased $7.7 million and $0.4 million in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. PSB’s filings and selected financial information, including discussion of the factors that affect its earnings, can be accessed through the SEC, and on PSB’s website, www.psbusinessparks.com. Information on this website is not incorporated by reference herein and is not a part of this Quarterly Report on Form 10-Q.

Investment in Shurgard: Throughout all periods presented, we effectively owned, directly and indirectly, 31,268,459 Shurgard common shares, representing an approximate 35% equity interest in Shurgard. Shurgard’s common shares trade on Euronext Brussels under the “SHUR” symbol.

At June 30, 2021, Shurgard owned 243 self-storage facilities with approximately 13 million net rentable square feet. Shurgard pays us license fees for use of the “Shurgard” trademark, as described in more detail in Note 4 to our June 30, 2021 financial statements.

Equity in earnings from Shurgard increased $3.7 million and $6.5 million in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. Shurgard’s public filings and publicly reported information, including discussion of the factors that affect its earnings, can be obtained on its website, https://corporate.shurgard.eu and on the website of the Luxembourg Stock Exchange, http://www.bourse.lu. Information on these websites is not incorporated by reference herein and is not a part of this Quarterly Report on Form 10-Q.

For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.188 U.S. Dollars per Euro at June 30, 2021 (1.226 at December 31, 2020), and average exchange rates of 1.205 and 1.101 for the three months ended June 30, 2021 and 2020, respectively, and average exchange rates of 1.205 and 1.102 for the six months ended June 30, 2021 and 2020, respectively.

Analysis of items not allocated to segments

General and administrative expense: The following table sets forth our general and administrative expense:



	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
	(Amounts in thousands)

Share-based compensation expense	$	12,471	$	3,446	$	9,025	$	20,368	$	6,488	$	13,880
Costs of senior executives		354		327		27		1,240		1,967		(727)
Development and acquisition costs		1,955		4,255		(2,300)		3,554		6,699		(3,145)
Tax compliance costs and taxes paid		1,748		1,316		432		3,446		3,029		417
Legal costs		1,734		824		910		3,554		3,256		298
Public company costs		1,858		1,049		809		3,243		2,273		970
Other costs		7,620		5,887		1,733		11,909		11,260		649
Total	$	27,740	$	17,104	$	10,636	$	47,314	$	34,972	$	12,342

Share-based compensation expense includes the amortization of restricted share units and stock options granted to certain corporate employees and trustees, as well as related employer taxes. We corrected our prior period financial statement presentation of share-based compensation expense and dividends paid on RSUs between general and administrative expense and self-storage cost of operations. As a result, we revised our statement of income for the three and six months ended June 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $6.3 million, respectively, and a corresponding decrease to general and administrative expenses. This immaterial correction had no impact on our total expenses or net income. The correction also had no impact on the balance sheet, statements of comprehensive income, statements of equity, or cash flows as of and for the three and six months ended June 30, 2020.

Share-based compensation expense, as well as related employer taxes, for management personnel who directly and indirectly supervise the on-site property managers, as well as those employees responsible for providing shared general corporate functions to the extent their efforts are devoted to self-storage operations, are included as self-storage cost of operations. See “Same Store Facilities” for further information. Share-based compensation expense varies based upon the level of grants and their related vesting and amortization periods, forfeitures, as well as the Company’s common share price on the date of each grant.

In July 2020, our share-based compensation plans were modified to allow immediate vesting upon retirement (“Retirement Acceleration”), and to extend the exercisability of outstanding stock options up to a year after retirement, for currently outstanding and future grants. Employees are eligible for Retirement Acceleration if they meet certain conditions including length of service, age, notice of intent to retire, and facilitation of succession for their role.

For the three and six months ended June 30, 2021, share-based compensation expense increased $9.0 million and $13.9 million, respectively, as compared to the same periods in 2020, primarily due to (i) the absence of comparable performance-based share-based compensation expense for the three and six months ended June 30, 2020, (ii) the accelerated compensation costs recognized in the three and six months ended June 30, 2021 associated with modifying our share-based compensation plans in July 2020, to allow immediate vesting upon retirement and (iii) revaluation of certain awards previously classified as a liability during the second quarter of 2021.

Development and acquisition costs primarily represent internal and external expenses related to our development and acquisition of real estate facilities and varies primarily based upon the level of activities. The amounts in the above table are net of $3.3 million and $6.5 million for the three and six months ended June 30, 2021, respectively, as compared to $3.0 million and $6.1 million for the same periods in 2020, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. During the six months ended June 30, 2020, we incurred $3.2 million in costs associated with the write-off of cancelled development projects.

Tax compliance costs and taxes paid include taxes paid to various state and local authorities, the internal and external costs of filing tax returns, costs associated with complying with federal and state tax laws, and maintaining our compliance with Internal Revenue Service REIT rules. Such costs vary primarily based upon the tax rates of the various states in which we do business.

Legal costs include internal personnel as well as fees paid to legal firms and other third parties with respect to general corporate legal matters and risk management, and varies based upon the level of legal activity.

Public company costs represent the incremental costs of operating as a publicly-traded company, such as internal and external investor relations expenses, stock listing and transfer agent fees, Board costs, and costs associated with maintaining compliance with applicable laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and Sarbanes-Oxley Act of 2002.

Other costs represent certain professional and consulting fees, payroll, and overhead that are not attributable to our property operations. Such costs include nonrecurring and variable items, including $1.6 million in due diligence costs incurred in the three months ended June 30, 2020, in connection with our non-binding proposal, which we did not proceed with, to acquire 100% of the stapled securities of National Storage REIT. The level of these costs depends upon corporate activities and initiatives.

Interest and other income: Interest and other income is comprised primarily of the net operating income from our commercial operations, interest earned on cash balances, and trademark license fees received from Shurgard, as well as sundry other income items that are received from time to time in varying amounts. Net operating income of commercial operations was $2.2 million and $4.2 million in the three and six months ended June 30, 2021, respectively, as compared to the $2.1 million and $4.3 million for the same periods of 2020. Excluding amounts attributable to our commercial operations, interest and other income decreased $2.7 million and $5.7 million in the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. The reduction was primarily due to $2.0 million in interest income associated with the early repayment of a note receivable in the three and six months ended June 30, 2020 and $3.3 million of interest earned on cash balances during the six months ended June 30, 2020. The level of other interest and income items in the remainder of 2021 will be dependent upon the level of cash balances we retain, interest rates, and the level of other income items.

Interest expense: For the three and six months ended June 30, 2021, we incurred $22.7 million and $38.9 million, respectively, of interest on our outstanding debt, as compared to $14.9 million and $29.5 million for the same periods in 2020. In determining interest expense, these amounts were offset by capitalized interest of $0.7 million and $1.7 million during the three and six months ended June 30, 2021, respectively, associated with our development activities, as compared to $0.7 million and $1.7 million for the same periods in 2020. The increase of interest expense in the three and six months ended June 30, 2021, as compared to the same periods in 2020, is due to

our issuances of (i) $700 million, $650 million and $650 million of senior notes on April 23, 2021 bearing interest at an annual rate of SOFR +0.47% (reset quarterly), 1.85% and 2.30%, respectively, and (ii) $500 million of senior notes on January 19, 2021 bearing interest at an annual rate of 0.875% and maturing on February 15, 2026. At June 30, 2021, we had $5.0 billion of debt outstanding, with a weighted average interest rate of approximately 2.0%.

Future interest expense will be dependent upon the level of outstanding debt and the amount of in-process development costs.

Foreign Currency Exchange (Loss) Gain: For the three and six months ended June 30, 2021, we recorded foreign currency losses of $12.7 million and gains of $32.7 million, respectively, representing the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates. For the three and six months ended June 30, 2020, we recorded foreign currency translation losses of $19.3 million and $10.4 million, respectively. The Euro was translated at exchange rates of approximately 1.188 U.S. Dollars per Euro at June 30, 2021, 1.226 at December 31, 2020, 1.123 at June 30, 2020 and 1.122 at December 31, 2019. Future gains and losses on foreign currency will be dependent upon changes in the relative value of the Euro to the U.S. Dollar, and the level of Euro-denominated debt outstanding.

Gain on Sale of Real Estate: In the three and six months ended June 30, 2021, we recorded $4.0 million and $13.4 million in gains, respectively, and in the six months ended June 30, 2020, we recorded gains totaling $1.1 million, primarily in connection with the partial or complete sale of real estate facilities pursuant to eminent domain proceedings.

Net Income Allocable to Preferred Shareholders: Net income allocable to preferred shareholders based upon distributions decreased from $53.0 million and $105.0 million in the three and six months ended June 30, 2020, respectively, to $46.2 million and $92.3 million in the same period in 2021. This decrease is due primarily to lower average coupon rates of recently issued preferred stock compared to recent series we have redeemed. Based upon our preferred shares outstanding at June 30, 2021, our quarterly distribution to our preferred shareholders is expected to be approximately $44.6 million.

Liquidity and Capital Resources

While being a REIT allows us to minimize the payment of U.S. federal corporate income tax expense, we are required to distribute at least 90% of our taxable income to our shareholders. This requirement limits cash flow from operations that can be retained and reinvested in the business, increasing our reliance upon raising capital to fund growth.

Because raising capital is important to our growth, we endeavor to maintain a strong financial profile characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. We are one of the highest rated REITs, as rated by major rating agencies Moody’s and Standard & Poor’s. Our senior debt has an “A” credit rating by Standard & Poor’s and “A2” by Moody’s. Our credit ratings on each of our series of preferred shares are “A3” by Moody’s and “BBB+” by Standard & Poor’s. Our credit profile enable us to effectively access both the public and private capital markets to raise capital.

While we must distribute our taxable income, we are nonetheless able to retain operating cash flow to the extent that our tax depreciation exceeds our maintenance capital expenditures. In recent years, we have retained approximately $200 million to $300 million per year in cash flow.

Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, and (iii) common equity. We select among these sources of capital based upon relative cost, availability, the desire for leverage, and considering potential constraints caused by certain features of capital sources, such as debt covenants. We view our line of credit, as well as short-term bank loans, as bridge financing.

We have a $500.0 million revolving line of credit which we occasionally use as temporary “bridge” financing until we are able to raise longer term capital. As of June 30, 2021 and August 3, 2021, there were no borrowings outstanding on the revolving line of credit, however, we do have approximately $25.1 million of outstanding letters of credit which limits our borrowing capacity to $474.9 million. Our line of credit matures on April 19, 2024.

We believe that we have significant financial flexibility to adapt to changing conditions and opportunities. Currently, market rates of interest for our debt, and market coupon rates for our preferred equity, are at historically low levels and we have significant access to these sources of capital. Based upon our substantial current liquidity relative to our capital requirements noted below, we would not expect any potential capital market dislocations to have a material impact upon our expected capital and growth plans over the next 12 months. However, if capital market conditions were to change significantly in the long run, our access to or cost of debt and preferred equity capital could be negatively impacted and potentially affect future investment activities.

Liquidity and Capital Resource Analysis: We believe that our net cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing requirements for principal payments on debt, maintenance capital expenditures and distributions to our shareholders for the foreseeable future.

We expect capital resources over the next year of approximately $1.3 billion, which exceeds our currently identified capital needs of approximately $1.2 billion. Our expected capital resources include: (i) $480.8 million of cash as of June 30, 2021, (ii) $474.9 million of available borrowing capacity on our revolving line of credit and (iii) approximately $300 million of expected retained operating cash flow over 2021. Retained operating cash flow represents our expected cash flow provided by operating activities, less shareholder distributions and capital expenditures.

Our currently identified capital needs consist primarily of (i) $466.6 million in property acquisitions currently under contract, (ii) $325.0 million to redeem our Series D Preferred Shares on July 20, 2021 and (iii) $411.3 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months. We have no substantial principal payments on debt until 2022. We expect our capital needs to increase over the next year as we add projects to our development pipeline and acquire additional properties. Additional potential capital needs could result from various activities including the redemption of outstanding preferred securities, repurchases of common stock, or mergers and acquisition activities; however, there can be no assurance of any such activities transpiring in the near or longer term.

To the extent that our capital needs exceed our capital resources, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, issuing debt, or entering into joint venture arrangements to acquire or develop facilities.

Required Debt Repayments: As of June 30, 2021, the principal outstanding on our debt totaled approximately $5.0 billion, consisting of $24.2 million of secured debt, $1.0 billion of Euro-denominated unsecured debt and $4.0 billion of U.S. Dollar denominated unsecured debt. Approximate principal maturities are as follows (amounts in thousands):



Remainder of 2021	$	789
2022		502,574
2023		19,219
2024		818,910
2025		287,609
Thereafter		3,395,257
	$	5,024,358

On April 23, 2021, we completed a public offering of $700 million, $650 million and $650 million aggregate principal amount of senior notes bearing interest at an annual rate of SOFR + 0.47%, 1.85% and 2.30%, respectively, and maturing on April 23, 2024, May 1, 2028 and May 1, 2031, respectively.

Our debt is well-laddered and we have no material debt maturity until September 2022.

Capital Expenditure Requirements: Capital expenditures include general maintenance, major repairs or replacements to elements of our facilities to keep our facilities in good operating condition and maintain their visual

appeal. Capital expenditures do not include costs relating to the development of new facilities or redevelopment of existing facilities to increase their available rentable square footage.

Capital expenditures totaled $94.6 million in the first six months of 2021, and are expected to approximate $250.0 million to $300.0 million for the year ending December 31, 2021. In addition to standard capital repairs of building elements reaching the end of their useful lives, our capital expenditures in recent years have included incremental expenditures to enhance the competitive position of certain of our facilities relative to local competitors pursuant to a multi-year program. Such investments include development of more pronounced, attractive, and clearly identifiable color schemes and signage, upgrades to the configuration and layout of the offices and other customer zones to improve the customer experience. We expect to spend approximately $133 million over 2021 on this effort. In addition, we have made investments in LED lighting and the installation of solar panels, which are expected to approximate $51 million for the year ending December 31, 2021.

We believe that these incremental investments improve customer satisfaction, the attractiveness and competitiveness of our facilities to new and existing customers and, in the case of LED lighting and solar panels, reduce operating costs.

Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the Code. For each taxable year in which we qualify for taxation as a REIT, we will not be subject to U.S. federal corporate income tax on our “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed to our shareholders. We believe we have met these requirements in all periods presented herein, and we expect to continue to qualify as a REIT.

On July 28, 2021, our Board declared a regular common quarterly dividend of $2.00 per common share totaling approximately $350 million, which will be paid at the end of September 2021. Our consistent, long-term dividend policy has been to distribute our taxable income. Future quarterly distributions with respect to the common shares will continue to be determined based upon our REIT distribution requirements after taking into consideration distributions to the preferred shareholders and will be funded with cash flows from operating activities.

We estimate the annual distribution requirements with respect to our Preferred Shares outstanding at June 30, 2021 to be approximately $178.5 million per year.

We estimate we will pay approximately $6.0 million per year in distributions to noncontrolling interests outstanding at June 30, 2021.

Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. Subsequent to June 30, 2021, we acquired or were under contract to acquire 36 self-storage facilities for a total purchase price of $466.6 million. Eight of these properties are under construction and expected to close as they are completed in the remainder of 2021 and first quarter of 2022.

We are actively seeking to acquire additional facilities. However, future acquisition volume will depend upon whether additional owners will be motivated to market their facilities, which will in turn depend upon factors such as economic conditions and the level of seller confidence.

As of June 30, 2021, we had development and expansion projects at a total cost of approximately $661.0 million. Costs incurred through June 30, 2021 were $249.7 million, with the remaining cost to complete of $411.3 million expected to be incurred primarily in the next 18 to 24 months. Some of these projects are subject to contingencies such as entitlement approval. We expect to continue to seek to add projects to maintain and increase our robust pipeline. Our ability to do so continues to be challenged by various constraints such as difficulty in finding projects that meet our risk-adjusted yield expectations, and challenges in obtaining building permits for self-storage facilities in certain municipalities.

Redemption of Preferred Securities: Historically, we have taken advantage of refinancing higher coupon preferred securities with lower coupon preferred securities. In the future, we may also elect to finance the redemption

of preferred securities with proceeds from the issuance of debt. As of August 3, 2021, we have no series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice. See Note 8 to our June 30, 2021 financial statements for the redemption dates of all of our series of preferred shares. Redemption of such preferred shares will depend upon many factors, including the rate at which we could issue replacement preferred securities. None of our preferred securities are redeemable at the option of the holders.

Repurchases of Common Shares: Our Board has authorized management to repurchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. During the three months ended June 30, 2021, we did not repurchase any of our common shares. From the inception of the repurchase program through August 3, 2021, we have repurchased a total of 23,721,916 common shares at an aggregate cost of approximately $679.1 million. Future levels of common share repurchases will be dependent upon our available capital, investment alternatives and the trading price of our common shares.

Contractual Obligations

Our significant contractual obligations as June 30, 2021 and their impact on our cash flows and liquidity are summarized below for the years ending December 31 (amounts in thousands):


				Remainder
				of
		Total		2021		2022		2023		2024		2025		Thereafter


Interest and principal payments
on debt (1)	$	5,616,157	$	47,490	$	592,452	$	100,184	$	896,145	$	360,271	$	3,619,615

Leases commitments (2)		66,470		1,428		3,065		2,910		2,917		2,892		53,258

Construction commitments (3)		151,771		81,028		70,177		566		-		-		-

Total	$	5,834,398	$	129,946	$	665,694	$	103,660	$	899,062	$	363,163	$	3,672,873

(1)Represents contractual principal and interest payments. Amounts with respect to certain Euro-denominated debt are based upon exchange rates at June 30, 2021. See Note 6 to our June 30, 2021 financial statements for further information.

(2)Represents future contractual payments on land, equipment and office space under various lease commitments.

(3)Represents future expected payments for construction under contract at June 30, 2021.

We estimate the annual distribution requirements with respect to our Preferred Shares outstanding at June 30, 2021 to be approximately $178.5 million per year. Dividends are paid when and if declared by our Board and accumulate if not paid.

Off-Balance Sheet Arrangements: At June 30, 2021, we had no material off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) and the instructions thereto.

‎

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

To limit our exposure to market risk, we are capitalized primarily with preferred and common equity. Our preferred shares are redeemable at our option generally five years after issuance, but the holder has no redemption option. Our debt is our only market-risk sensitive portion of our capital structure, which totals approximately $5.0 billion and represents 57.1% of the book value of our equity at June 30, 2021.

The fair value of our debt at June 30, 2021 is approximately $5.2 billion. The table below summarizes the annual maturities of our debt, which had a weighted average effective rate of 2.0% at June 30, 2021. See Note 6 to our June 30, 2021 financial statements for further information regarding our debt (amounts in thousands).


	Remainder of
	2021			2022		2023		2024		2025		Thereafter		Total

Debt	$	789	$	502,574	$	19,219	$	818,910	$	287,609	$	3,395,257	$	5,024,358

We have foreign currency exposure at June 30, 2021 related to (i) our investment in Shurgard, with a book value of $329.4 million, and a fair value of $1.5 billion based upon the closing price of Shurgard’s stock on June 30, 2021, and (ii) €842.0 million ($1.0 billion) of Euro-denominated unsecured notes payable.

‎

ITEM 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file and submit under the Securities Exchange Act of 1934, as amended (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 our management, including our 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) and 15d-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. We also have investments in certain unconsolidated real estate entities and because we do not control these entities, our disclosure controls and procedures with respect to such entities are substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

‎


Part II.		OTHER INFORMATION


ITEM 1.	Legal Proceedings


ITEM 1A.	Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in our Annual Report on Form 10-K filed for the year ended December 31, 2020, in Part I, Item 1A, Risk Factors, and in our other filings with the SEC. These factors may materially affect our business, financial condition and operating results. There have been no material changes to the risk factors relating to the Company disclosed in our Form 10-K for the year ended December 31, 2020.

In addition, in considering the forward-looking statements contained in this Form 10-Q and elsewhere, you should refer to the qualifications and limitations on our forward-looking statements that are described in Forward Looking Statements at the beginning of Part I, Item 2 of this Form 10-Q.


ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Common Share Repurchases

Our Board has authorized management to repurchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. From the inception of the repurchase program through August 3, 2021, we have repurchased a total of 23,721,916 common shares (all purchased prior to 2010) at an aggregate cost of approximately $679.1 million. Our common share repurchase program does not have an expiration date and there are 11,278,084 common shares that may yet be repurchased under our repurchase program as of June 30, 2021. We have no current plans to repurchase shares; however, future levels of common share repurchases will be dependent upon our available capital, investment alternatives, and the trading price of our common shares.

Preferred Share Redemptions

We redeemed, pursuant to our option to redeem such shares, 8,000,000 of our 5.125% Series C preferred shares in June 2021, at $25.00 per share.


ITEM 6.	Exhibits

Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index which is incorporated herein by reference.

‎

‎

	PUBLIC STORAGE
	INDEX TO EXHIBITS (1)
	(Items 15(a)(3) and 15(c))

3.1	Articles Supplementary for Public Storage 4.000% Cumulative Preferred Shares, Series P. Filed with the Company’s Current Report on Form 8-K dated June 7, 2021 and incorporated by reference herein.

4.1	Fifth Supplemental Indenture, dated as of April 23, 2021, between Public Storage and Wells Fargo Bank, National Association, as trustee, including the form of Global Note representing the Floating Rate Notes. Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated April 23, 2021 and incorporated by reference herein.

4.2	Sixth Supplemental Indenture, dated as of April 23, 2021, between Public Storage and Wells Fargo Bank, National Association, as trustee, including the form of Global Note representing the 2028 Notes. Filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated April 23, 2021 and incorporated by reference herein.

4.3	Seventh Supplemental Indenture, dated as of April 23, 2021, between Public Storage and Wells Fargo Bank, National Association, as trustee, including the form of Global Note representing the 2031 Notes. Filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K dated April 23, 2021 and incorporated by reference herein.

10.1	Form of 2021 Plan Employee Stock Unit Agreement. Filed herewith.

10.2	Form of 2021 Plan Employee Non-Qualified Stock Option Agreement. Filed herewith.

10.3	Form of 2021 Plan Performance-Based Non-Qualified Stock Option Agreement. Filed herewith.

31.1	Rule 13a – 14(a) Certification. Filed herewith.

31.2	Rule 13a – 14(a) Certification. Filed herewith.

32	Section 1350 Certifications. Filed herewith.

101 .INS	Inline XBRL Instance Document. Filed herewith.

101 .SCH	Inline XBRL Taxonomy Extension Schema. Filed herewith.

101 .CAL	Inline XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.

101 .DEF	Inline XBRL Taxonomy Extension Definition Linkbase. Filed herewith.

101 .LAB	Inline XBRL Taxonomy Extension Label Linkbase. Filed herewith.


101 .PRE	Inline XBRL Taxonomy Extension Presentation Link. Filed herewith.

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

_ (1) SEC	File No. 001-33519 unless otherwise indicated.
‎

‎

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

4
		DATED: August 3, 2021 PUBLIC STORAGE

		By: /s/ H. Thomas Boyle
		H. Thomas Boyle ‎Senior Vice President & Chief Financial Officer ‎(Principal financial officer and duly authorized officer)
‎

Exhibit 10.1

PUBLIC STORAGE

2021 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN

STOCK UNIT AGREEMENT

THIS STOCK UNIT AGREEMENT (the “Agreement”) is made as of [Grant#Date] (the “Grant Date”), by and between Public Storage (the “Company”) and [Participant#Name] (the “Participant”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Company’s 2021 Equity and Performance-Based Incentive Compensation Plan (as amended and/or restated from time to time, the “Plan”).

WHEREAS, the Board of Trustees of the Company has duly adopted, and the shareholders of the Company have duly approved, the Plan, which provides for the grant to Service Providers of Stock Units relating to the Company’s common shares of beneficial ownership, par value $.10 per share (the “Stock”), which may be granted from time to time as the Committee so determines.

WHEREAS, the Company has determined that it is desirable and in its best interests to grant to the Participant, pursuant to the Plan, Stock Units relating to a certain number of shares of Stock as compensation for services rendered to the Company, and/or in order to provide the Participant with an incentive to advance the interests of the Company, all according to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual benefits hereinafter provided, and each intending to be legally bound, the Company and the Participant hereby agree as follows:

GRANT OF STOCK UNITS.

Subject to and pursuant to the terms of the Plan (the terms of which are incorporated by reference herein), the Company hereby grants to the Participant [No#of#RSUs#Granted] Stock Units, on the terms and subject to the conditions set forth in this Agreement.

VESTING OF STOCK UNITS.

2.1.

Generally.

Subject to the Participant’s continued Service from the Grant Date through each applicable Vesting Date, rights in respect of [Yearly#%] of the number of Stock Units shall vest on each of the first [five#eight] anniversaries of the Grant Date (each, a “Vesting Date”). Any resulting fractional shares shall be rounded to the nearest whole share and shall be rounded up or down as necessary as of the last Vesting Date; provided, in all cases, the Participant cannot vest in more than the number of Stock Units subject to this Agreement. No Stock Units shall vest after the Participant’s Service has terminated for any reason.

2.2.

Special Vesting Provisions. Notwithstanding anything to the contrary in Section 2.1:

2.2.1. Death or Disability. Upon the Participant’s death or Disability, all Stock Units granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested.

2.2.2. Retirement. If the Participant’s Service is terminated by reason of such Participant’s Retirement, all Stock Units granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of the Participant’s Retirement Date (or upon the Revocation

[Participant#Name]/[Employee#ID#No]

[Grant#Date]/[Grant#Code]

[five#eight] year vesting

Expiration Time, if applicable and later). For purposes of this Agreement, “Retirement” means the Participant’s termination of Service other than due to death, Disability, or Cause if:

(a)by the Retirement Date the Participant is at least 55 years old and has provided at least 10 years of Service as defined in the Plan and applied by the Company’s HR department (generally including service with the Company, PS Business Parks, Inc. and their Affiliates);

(b)by the Retirement Date the sum of the Participant’s age and total years of Service equals at least 80;

(c)the Participant provided the Company written notice of the Participant’s intention to retire at least 12 months’ prior to the Retirement Date;

(d)on or prior to the Retirement Date the Participant has entered into a separation agreement, in a form acceptable to the Company, which includes a full release of claims and certain restrictive covenants as of the date of Retirement, and if the execution of such separation agreement is subject to a revocation period by applicable law, the separation agreement has not been revoked and the applicable revocation period, which may not exceed 10 days, has expired (the “Revocation Expiration Time”); and

(e)subject to the Participant’s continued Service through both the Certification Date and the Retirement Date, the Equity Awards Committee has taken separate action to establish a date of termination of Service for the Participant (the “Retirement Date”) and to approve such accelerated vesting for such Participant (the date of such action by that committee, the “Certification Date”); provided, however, that (i) the Participant shall have no right to such accelerated vesting if that committee does not take action to approve such accelerated vesting for such Participant or revokes its approval before the Retirement Date; and (ii) if the Participant’s Service is terminated for any reason other than death or Disability prior to such Retirement Date, any Stock Units held by the Participant that have not vested shall terminate immediately, and the Participant shall forfeit any rights with respect to such unvested Stock Units as of such termination of Service.

2.3.

Restrictions on Transfer.

The Participant may not sell, transfer, assign, pledge, or otherwise encumber or dispose of the Stock Units.

TERMINATION OF SERVICE.

Upon the termination of the Participant’s Service for any reason, other than by reason of death, Disability, or Retirement (pursuant to Section 2.2.2), any Stock Units held by the Participant that have not vested shall terminate immediately, and the Participant shall forfeit any rights with respect to such unvested Stock Units as of such termination of Service.

Delivery of Shares.

4.1.

Delivery Dates.

Delivery of the shares of Stock represented by the Participant’s vested Stock Units shall be made as soon as administratively practicable following the date on which such Stock Units vest; provided, however, that such delivery shall occur no later than March 15th of the calendar year following the calendar year in which such Stock Units vested.

4.2.

Issuance.

On or as promptly as is practicable after the respective delivery date(s), the Company will issue the shares of Stock registered in the name of the Participant, the Participant’s authorized assignee, or the

Participant’s legal representative, as applicable. The Company may reasonably postpone the issuance of the shares of Stock until it receives satisfactory proof that the issuance of such shares of Stock will not violate any of the provisions of the Securities Act or the Exchange Act, any rules or regulations of the Securities and Exchange Commission promulgated thereunder, or the requirements of applicable state or foreign law relating to authorization, issuance, or sale of securities, or until there has been compliance with the provisions of such acts or rules; provided that the delivery shall be made at the earliest date at which the Company reasonably anticipates that it will not cause such violation. The Company may also reasonably postpone the issuance of the shares of Stock in the event of the Participant’s death until it receives such evidence as the Committee deems necessary to establish the validity of the issuance to the Participant’s estate. Notwithstanding the provisions of this Section 4.2, the Company will not act in a manner as to cause the delivery of the shares of Stock to fail to be exempt from Section 409A or to comply with the requirements of Section 409A, as applicable. Upon the issuance of the shares, Participant’s payment of the aggregate par value of the shares delivered to Participant will be deemed paid by Participant’s past Services to the Company or its Affiliates.

DIVIDEND AND VOTING RIGHTS.

The Participant shall have none of the rights of a shareholder with respect to the Stock Units. Notwithstanding the foregoing, the Participant shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of Stock, a cash payment for each Stock Unit held as of the record date for such dividend equal to the per-share dividend paid on the shares of Stock, which cash payment shall be made at the same time as the Company’s payment of a cash dividend on its outstanding shares of Stock.

WITHHOLDING OF TAXES.

The Company and any Affiliates shall have the right to deduct from payments of any kind otherwise due to the Participant any federal, state, or local taxes of any kind required by law to be withheld with respect to the Stock Units. The Participant shall pay to the Company or its Affiliates any amount that the Company or its Affiliates may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the Participant may elect to satisfy such obligations, in whole or in part, (a) by causing the Company to withhold shares of Stock otherwise deliverable or (b) by delivering to the Company shares of Stock already owned by the Participant. The shares of Stock so delivered or withheld shall have a Fair Market Value not exceeding the minimum amount of tax required to be withheld by applicable law; provided, however, that as long as Accounting Standards Update 2016-09 or a similar rule is otherwise in effect, the Committee has full discretion to choose, or to allow the Participant to elect, to withhold a number of shares of Stock having a Fair Market Value that is greater than the applicable minimum statutory amount (but such withholding may in no event be in excess of the maximum statutory withholding amount(s) in the Participant’s relevant tax jurisdictions). The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. A Participant who has made an election pursuant to this Section 6 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

DISCLAIMER OF RIGHTS.

No provision of this Agreement shall be construed to confer upon the Participant the right to continue in Service, or to interfere in any way with the right and authority of the Company or any Affiliate either to increase or decrease the compensation of the Participant at any time, or to terminate the Participant’s Service.

DATA PRIVACY.

To administer the Plan, the Company and its Affiliates may process personal data about the Participant. Such data includes, but is not limited to, the information provided in this Agreement and any changes thereto, other appropriate personal and financial data about the Participant such as home address and business addresses and other contact information, and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan. By accepting this grant, the Participant hereby gives express consent to the Company and its Affiliates to process any such personal data. The Participant also gives express consent to the Company to transfer any such personal data outside the country in which Participant works, including, with respect to non-U.S. resident participants, to the United States, to transferees who will include the Company and other persons who are designated by the Company to administer the Plan.

CONSENT TO ELECTRONIC DELIVERY OF MATERIALS.

The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grant, the Participant agrees that the Company may deliver the Plan’s prospectus and any annual reports to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, as the Participant is entitled to, the Company would be pleased to provide copies. The Participant may contact the Company’s Legal Department to request paper copies of these documents.

10.

INTERPRETATION OF THE AGREEMENT.

All decisions and interpretations made by the Committee with regard to any question arising under the Plan or this Agreement shall be binding and conclusive on the Company and the Participant and any other person. In the event that there is any inconsistency between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern.

11.

SECTION 409A.

The grant of Stock Units under this Agreement is intended to comply with Section 409A of the Code (“Section 409A”) to the extent subject thereto, and, accordingly, to the maximum extent permitted, this Agreement will be interpreted and administered to be in compliance with Section 409A. The Company, however, will have no liability to the Participant if Section 409A is determined to apply and adversely affects the Participant. With respect to payments under this Agreement, for purposes of Section 409A, each payment (if there is more than one payment) will be considered one of a series of separate payments. If at the time of the Participant’s separation from service, (a) the Participant is a “specified employee” (as defined in Section 409A and using the identification methodology selected by the Company from time to time), and (b) the Company makes a good faith determination that an amount payable on account of such separation from service to the Participant constitutes “deferred compensation” (within the meaning of Section 409A), payment to the specified employee may not be made before the date that is six months after the date of the Participant’s separation from service from the Company or its Affiliates (or, if earlier, the date of the Participant’s death).

With respect to any amount payable under this Agreement to the Participant that constitutes “deferred compensation” (within the meaning of Section 409A), payment under this Agreement may not be accelerated upon a Change in Control under the Plan, unless such Change in Control is also a “change in control” (as defined in Section 409A) or unless otherwise permitted by Section 409A. Upon a Change in Control under the Plan that is not a “change in control” (as defined in Section 409A), such payment shall be made on the next payment date permitted by Section 409A.

12.

GOVERNING LAW.

This Agreement shall be governed by the laws of the State of Maryland, except that if Participant’s principal place of employment is in California, then this Agreement will be governed by the laws of the State of California, in either case without giving effect to any choice or conflict of law provision or rule.

13.

BINDING EFFECT.

Subject to all restrictions provided for in this Agreement and by applicable law, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, transferees and assigns.

14.

CLAWBACK.

The Stock Units shall be subject to mandatory repayment by the Participant to the Company to the extent the Participant is, or in the future becomes, subject to (a) the Company’s Incentive Compensation Recoupment Policy or similar successor policy, or (b) any applicable laws which impose mandatory recoupment, under circumstances set forth in such applicable laws.

15.

ENTIRE AGREEMENT.

This Agreement and the Plan constitute the entire agreement regarding this grant and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged, or terminated except by a written instrument signed by the Company and the Participant; provided, however, that the Company unilaterally may amend, waive, discharge, or terminate any provision hereof to the extent that such amendment, waiver, discharge, or termination does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or caused this Agreement to be duly executed on their behalf, as of the Grant Date.

PARTICIPANT:		PUBLIC STORAGE:
		By:
[Participant#Name]		Name: [Officer#Name] Title: [Officer#Title]


ADDRESS FOR NOTICE TO PARTICIPANT:

[No#Street#Participant#Address] [City#State#Zip#Participant#Address]

Exhibit 10.2

PUBLIC STORAGE

2021 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made as of [Grant#Date] (the “Grant Date”), by and between Public Storage (the “Company”) and [Participant#Name] (the “Participant”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Company’s 2021 Equity and Performance-Based Incentive Compensation Plan (as amended and/or restated from time to time, the “Plan”).

WHEREAS, the Board of Trustees of the Company has duly adopted, and the shareholders of the Company have duly approved, the Plan, which provides for the grant to Service Providers of options for the purchase of shares of the Company’s common shares of beneficial interest, par value $.10 per share (the “Stock”), which may be granted from time to time as the Committee so determines.

WHEREAS, the Company has determined that it is desirable and in its best interests to grant to the Participant, pursuant to the Plan, options to purchase a certain number of shares of Stock as compensation for services rendered to the Company, and/or in order to provide the Participant with an incentive to advance the interests of the Company, all according to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and each intending to be legally bound, the Company and the Participant hereby agree as follows:

GRANT OF OPTION.

Subject to and pursuant to the terms of the Plan (the terms of which are incorporated by reference herein), the Company hereby grants to the Participant an Option to purchase from the Company, on the terms and subject to the conditions set forth in this Agreement, [No#of#Options#Granted] shares of Stock. This Option shall not constitute an incentive stock option within the meaning of Section 422 of the Code.

OPTION PRICE.

The per share purchase price (the “Option Price”) of the shares of Stock subject to the Option evidenced by this Agreement shall be [Option#Price] (which is equal to the Fair Market Value per share on the Grant Date).

VESTING AND EXERCISE OF OPTION.

Except as otherwise provided herein, the Option granted pursuant to this Agreement shall be subject to vesting and exercise as follows:

3.1.

Vesting and Time of Exercise of Option.

The Option is exercisable only before it expires and then only with respect to the vested portion of the Option. Subject to the Participant’s continued Service from the Grant Date through each applicable Vesting Date, rights to purchase [Yearly#%] of the number of shares of Stock covered by the Option shall vest on each of the first [five#eight] anniversaries of the Grant Date (each, a “Vesting Date”). Any resulting fractional shares shall be rounded to the nearest whole share and shall be rounded up or down as necessary as of the last applicable Vesting Date; provided, in all cases, the Participant cannot vest in more than the

[Participant#Name]/[Employee#ID#No]

[Grant#Date]/[Grant#Code]

[five#eight] year vesting

number of shares of Stock covered by the Option subject to this Agreement. To the extent not exercised, the vested portions of the Option shall accumulate and be exercisable, in whole or in part, at any time and from time to time, after becoming vested and exercisable and prior to the termination of the Option; provided, that no single exercise of the Option shall be for less than 100 shares, unless the number of shares purchased is the total number at the time available for purchase under the Option.

3.2.

Exercise by Participant and Compliance with Trading Blackout Periods and Company Securities Trading Policy.

During the lifetime of the Participant, only the Participant (or, in the event of the Participant’s legal incapacity or incompetency, the Participant’s guardian or legal representative) or a person or entity to whom the Participant has transferred the Option in accordance with Section 5 hereof may exercise the Option. The Participant agrees to comply with any trading blackout periods and securities trading policies implemented by the Company.

3.3.

Term of Option.

Notwithstanding anything to the contrary, the Option will expire in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Grant Date, subject to earlier termination in accordance with this Agreement or the terms of the Plan as determined by the Committee.

3.4.

Limitations on Exercise of Option.

In no event may the Option be exercised, in whole or in part, after expiration of the term of the Option, or after the occurrence of an event which results in termination of the Option. In no event may the Option be exercised for a fractional share of Stock.

3.5.

Termination of Service.

Subject to Sections 3.6, 3.7, and 3.8 hereof, upon the termination of the Participant’s Service other than by reason of death, Disability, or Retirement (as defined below), the Participant shall have the right at any time within 30 days after such termination (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise, in whole or in part, any vested Option held by such Participant at the date of such termination, to the extent such Option was exercisable as of such termination. Any unvested portion of the Option on the date of such termination of Service shall immediately terminate as of such termination, and any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window.

3.6.

Rights in the Event of Death.

If the Participant dies while in Service, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s death, and (b) the executors or administrators or legatees or distributees of the Participant’s estate shall have the right, at any time within one year after the date of the Participant’s death (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window.

3.7.

Rights in the Event of Disability.

If the Participant’s Service terminates by reason of the Participant’s Disability, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s termination, and (b) the Participant shall have the right, at any time within one year after the date of such termination (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window.

3.8.

Rights in the Event of Retirement.

If the Participant’s Service terminates by reason of the Participant’s Retirement, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s Retirement Date (or upon the Revocation Expiration Time, if applicable and later), and (b) the Participant shall have the right, at any time within one year after the date of such termination (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window. For purposes of this Agreement, “Retirement” means the Participant’s termination of Service other than due to death, Disability, or Cause if:

(b)by the Retirement Date the sum of the Participant’s age and total years of Service equals at least 80;

(c)the Participant provided the Company written notice of the Participant’s intention to retire at least 12 months’ prior to the Retirement Date;

(e)subject to the Participant’s continued Service through both the Certification Date and the Retirement Date, the Equity Awards Committee has taken separate action to establish a date of termination of Service for the Participant (the “Retirement Date”) and to approve such accelerated vesting for such Participant (the date of such action by that committee, the “Certification Date”); provided, however, that (i) the Participant shall have no right to such accelerated vesting if that committee does not take action to approve such accelerated vesting for such Participant or revokes its approval before the Retirement Date; and (ii) if the Participant’s Service is terminated for any reason other than death or Disability prior to such Retirement Date, any unvested portion of the Option on the date of such termination of Service shall immediately terminate as of such termination, and any vested portion of the Option shall be subject to Section 3.5.

3.9.

Reduction in Number of Shares Subject to Option.

The number of shares of Stock which may be purchased upon exercise of the Option pursuant to this Section 3 shall be reduced by the number of shares previously purchased upon exercise of the Option pursuant to this Section 3.

METHOD OF EXERCISE OF OPTION.

The Option may be exercised to the extent that it has become vested and exercisable hereunder by delivery to the Company on any business day, at its principal office addressed to the attention of the Committee, of written notice of exercise, which notice shall specify the number of shares for which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. Payment of the Option Price for the shares of Stock purchased pursuant to the exercise of the Option shall be made (a) in cash or by check payable to the order of the Company; (b) through the tender to the Company of shares of Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value on the date of exercise; (c) by a combination of the methods described in (a) and (b); or (d) with the consent of the Company, by withholding the number of shares of Stock that would otherwise vest or be issuable in an amount equal in value to the Option Price. Payment in full of the Option Price need not accompany the written notice of exercise provided the notice directs that the Stock certificate or certificates for the shares for which the Option is exercised be delivered to a specified licensed broker applicable to the Company as the agent for the Participant and, at the time such shares of Stock certificate or certificates are delivered, the broker tenders to the Company cash (or cash equivalents acceptable to the Company) equal to the Option Price plus the amount, if any, of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to the exercise of the Option. An attempt to exercise the Option granted other than as set forth above shall be invalid and of no force or effect. Promptly after the exercise of the Option and the payment in full of the Option Price of the shares of Stock covered thereby, the Participant shall be entitled to the issuance of a Stock certificate or certificates evidencing the Participant’s ownership of such shares.

LIMITATIONS ON TRANSFER.

The Option is not transferable by the Participant, other than by will or the laws of descent and distribution in the event of death of the Participant, and except that the Participant may transfer, not for value, the Option in whole or in part to Family Members of the Participant (or trusts for their or the Participant’s benefit), provided that the transferee, in connection with the transfer, agrees in writing to be bound by all of the terms of this Agreement and the Plan and further agrees not to transfer the Option other than by will or the laws of descent and distribution in the event of the death of the transferee. Following any transfer permitted by this Section 5, the transferee shall have all of the rights of the Participant hereunder, and the Option shall be exercisable by the transferee only to the extent that the Option would have been exercisable by the Participant had the Option not been transferred. The Option shall not be pledged or hypothecated (by operation of law or otherwise) or subject to execution, attachment, or similar processes.

RIGHTS AS SHAREHOLDER.

Neither the Participant, nor any executor, administrator, distributee, or legatee of the Participant’s estate, nor any transferee hereof shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any shares of Stock issuable hereunder unless and until such shares have been fully paid and certificates representing such shares have been endorsed, transferred, and delivered, and the name of the Participant (or of such personal representative, administrator, distributee, or legatee of the

Participant’s estate, or of such transferee) has been entered as the shareholder of record on the books of the Company.

WITHHOLDING TAXES.

Upon the request of the Company, the Participant shall promptly pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld in connection with the Option. The Company and its Affiliates shall have the right to deduct from payments of any kind otherwise due to the Participant any such taxes. The Participant shall make any such payments in cash or cash equivalents or, subject to the prior approval of the Committee, which may be withheld in the Committee’s sole discretion, the Participant may elect to satisfy the withholding obligation, in whole or in part, (a) by causing the Company to withhold shares of Stock otherwise issuable to the Participant pursuant to the Option or (b) by delivering to the Company shares of Stock already owned by the Participant. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value not exceeding the minimum amount of tax required to be withheld by applicable law; provided, however, that as long as Accounting Standards Update 2016-09 or a similar rule is otherwise in effect, the Committee has full discretion to choose, or to allow the Participant to elect, to withhold a number of shares of Stock having a Fair Market Value that is greater than the applicable minimum statutory amount (but such withholding may in no event be in excess of the maximum statutory withholding amount(s) in the Participant’s relevant tax jurisdictions). The Participant may deliver or have withheld only shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

DISCLAIMER OF RIGHTS.

No provision in this Agreement shall be construed to confer upon the Participant the right to continue in Service, or to interfere in any way with the right and authority of the Company or any Affiliate either to increase or decrease the compensation of the Participant at any time or to terminate the Participant’s Service.

DATA PRIVACY.

To administer the Plan, the Company and its Affiliates may process personal data about the Participant. Such data includes, but is not limited to, the information provided in this Agreement and any changes thereto, other appropriate personal and financial data about the Participant such as home address and business addresses and other contact information, and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan. By accepting this grant, the Participant hereby gives express consent to the Company and its Affiliates to process any such personal data. Participant also gives express consent to the Company to transfer any such personal data outside the country in which Participant works, including, with respect to non-U.S. resident Participants, to the United States, to transferees who will include the Company and other persons who are designated by the Company to administer the Plan.

10.

CONSENT TO ELECTRONIC DELIVERY OF MATERIALS.

The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grant, the Participant agrees that the Company may deliver the Plan prospectus and any annual reports to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, as Participant is entitled to, the Company would be pleased to provide copies. The Participant may contact the Company’s Legal Department to request paper copies of these documents.

11.

INTERPRETATION OF THIS AGREEMENT.

All decisions and interpretations made by the Committee with regard to any question arising under the Plan or this Agreement shall be binding and conclusive on the Company and the Participant and any other person entitled to exercise the Option as provided for herein. In the event that there is any inconsistency between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern.

12.

GOVERNING LAW.

13.

BINDING EFFECT.

Subject to all restrictions provided for in this Agreement and by applicable law relating to assignment and transfer of this Agreement and the Option provided for herein, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, transferees and assigns.

14.

NOTICE.

Any notice hereunder by the Participant to the Company shall be in writing and shall be deemed duly given if mailed or delivered to the Company at its principal office, addressed to the attention of the Corporate Secretary, or if so mailed or delivered to such other address as the Company may hereafter designate by notice to the Participant. Any notice hereunder by the Company to the Participant shall be in writing and shall be deemed duly given if mailed or delivered to the Participant at the address specified in the Company’s records, or if so mailed or delivered to such other address as the Participant may hereafter designate by written notice given to the Company.

15.

CLAWBACK.

The Option shall be subject to mandatory repayment by the Participant to the Company to the extent the Participant is, or in the future becomes, subject to (a) the Company’s Incentive Compensation Recoupment Policy or similar successor policy, or (b) any applicable laws which impose mandatory recoupment, under circumstances set forth in such applicable laws.

16.

ENTIRE AGREEMENT.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or caused this Agreement to be duly executed on their behalf, as of the Grant Date.

PARTICIPANT:		PUBLIC STORAGE
		By:
[Participant#Name]		Name: [Officer#Name] Title: [Officer#Title]

ADDRESS FOR NOTICE TO PARTICIPANT: [No#Street#Participant#Address] [City#State#Zip#Participant#Address]

Exhibit 10.3

PUBLIC STORAGE

2021 EQUITY AND PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN

NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT

THIS NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT (the “Agreement”) is made as of [Grant#Date] (the “Grant Date”), by and between Public Storage (the “Company”) and [Participant#Name] (the “Participant”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Company’s 2021 Equity and Performance-Based Incentive Compensation Plan (as amended and/or restated from time to time, the “Plan”).

WHEREAS, the Board of Trustees of the Company has duly adopted, and the shareholders of the Company have duly approved, the Plan, which provides for the grant to Service Providers of options for the purchase of shares of the Company’s common shares of beneficial interest, par value $.10 per share (the “Stock”), which may be granted from time to time as the Committee so determines.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and each intending to be legally bound, the Company and the Participant hereby agree as follows:

GRANT OF OPTION.

OPTION PRICE.

VESTING AND EXERCISE OF OPTION.

Except as otherwise provided herein, the Option granted pursuant to this Agreement shall be subject to vesting and exercise as follows:

3.1.

Vesting and Time of Exercise of Option.

The Option is exercisable only before it expires and then only with respect to the vested portion of the Option. Subject to the achievement of specific Performance Targets (as defined in Exhibit A), at the conclusion of the [three-year] Performance Period (as defined in Exhibit A) rights to purchase, [ ]% of the number of shares of Stock covered by the Option shall vest on the [third] anniversary of the Grant Date, with a further [ ]% vesting on each of the [fourth and fifth] anniversaries of the Grant Date (each of the three dates, a “Vesting Date”). Any resulting fractional shares shall be rounded to the nearest whole share

[Participant#Name]/[Employee#ID#No]

[Grant#Date]/[Grant#Code]

Performance Vesting

and shall be rounded up or down as necessary as of the last applicable Vesting Date; provided, in all cases, the Participant cannot vest in more than the number of shares of Stock covered by the Option subject to this Agreement. To the extent not exercised, the vested portions of the Option shall accumulate and be exercisable, in whole or in part, at any time and from time to time, after becoming vested and exercisable and prior to the termination of the Option; provided, that no single exercise of the Option shall be for less than 100 shares, unless the number of shares purchased is the total number at the time available for purchase under the Option.

3.2.

Exercise by Participant and Compliance with Trading Blackout Periods and Company Securities Trading Policy.

3.3.

Term of Option.

3.4.

Limitations on Exercise of Option.

3.5.

Termination of Service.

3.6.

Rights in the Event of Death.

If the Participant dies while in Service, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s death either (i) at target level in the event of the Participant’s death during the Performance Period or (ii) at the level actually achieved in the event of Participant’s death following the end of the Performance Period, and (b) the executors or administrators or legatees or distributees of the Participant’s estate shall have the right, at any time within one year after the date of the Participant’s death (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not

exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window.

3.7.

Rights in the Event of Disability.

If the Participant’s Service terminates by reason of the Participant’s Disability, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s termination either (i) at target level in the event of the Participant’s Disability during the Performance Period or (ii) at the level actually achieved in the event of Participant’s Disability following the end of the Performance Period, and (b) the Participant shall have the right, at any time within one year after the date of such termination (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window.

3.8.

Rights in the Event of Retirement.

If the Participant’s Service terminates by reason of the Participant’s Retirement, then (a) all Options granted to the Participant pursuant to this Agreement that have not previously vested shall immediately become vested as of such Participant’s Retirement Date (or upon the Revocation Expiration Time, if applicable and later), either (i) at target level in the event of the Participant’s Retirement during the Performance Period or (ii) at the level actually achieved in the event of Participant’s Retirement following the end of the Performance Period, and (b) the Participant shall have the right, at any time within one year after the date of such termination (but before the Option terminates pursuant to Sections 3.3 and 3.4 above), to exercise the vested portion of the Option (after taking into account the vesting acceleration pursuant to this Agreement). Any vested portion of the Option not exercised during such post-termination exercise window shall immediately terminate as of the end of such post-termination exercise window. For purposes of this Agreement, “Retirement” means the Participant’s termination of Service other than due to death, Disability, or Cause if:

(b)by the Retirement Date the sum of the Participant’s age and total years of Service equals at least 80;

(c)the Participant provided the Company written notice of the Participant’s intention to retire at least 12 months prior to the Retirement Date;

its approval before the Retirement Date; and (ii) if the Participant’s Service is terminated for any reason other than death or Disability prior to such Retirement Date, any unvested portion of the Option on the date of such termination of Service shall immediately terminate as of such termination, and any vested portion of the Option shall be subject to Section 3.5.

3.9.

Reduction in Number of Shares Subject to Option.

METHOD OF EXERCISE OF OPTION.

LIMITATIONS ON TRANSFER.

RIGHTS AS SHAREHOLDER.

WITHHOLDING TAXES.

DISCLAIMER OF RIGHTS.

DATA PRIVACY.

To administer the Plan, the Company and its Affiliates may process personal data about the Participant. Such data includes, but is not limited to, the information provided in this Agreement and any changes thereto, other appropriate personal and financial data about the Participant such as home address and business addresses and other contact information, and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan. By accepting this grant, the Participant hereby gives express consent to the Company and its Affiliates to process any such personal data. Participant also gives express consent to the Company to transfer any such personal data outside the country in which Participant works, including, with respect to non-U.S. resident Participants, to the United States, to transferees who will include the Company and other persons who are designated by the Company to administer the Plan.

10.

CONSENT TO ELECTRONIC DELIVERY OF MATERIALS.

The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grant, the Participant agrees that the Company may deliver the Plan prospectus and any annual reports to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, as Participant is entitled to, the Company would be pleased to provide copies. The Participant may contact the Company’s Legal Department to request paper copies of these documents.

11.

INTERPRETATION OF THIS AGREEMENT.

All decisions and interpretations made by the Committee with regard to any question arising under the Plan or this Agreement shall be binding and conclusive on the Company and the Participant and any other person entitled to exercise the Option as provided for herein. In the event that there is any inconsistency between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern.

12.

GOVERNING LAW.

13.

BINDING EFFECT.

14.

NOTICE.

15.

CLAWBACK.

16.

ENTIRE AGREEMENT.

Company unilaterally may amend, waive, discharge, or terminate any provision hereof to the extent that such amendment, waiver, discharge, or termination does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or caused this Agreement to be duly executed on their behalf, as of the Grant Date.

PARTICIPANT:		PUBLIC STORAGE
		By:
[Participant#Name]		Name:[Officer#Name] Title:[Officer#Title]

ADDRESS FOR NOTICE TO PARTICIPANT: [No#Street#Participant#Address] [City#State#Zip#Participant#Address]

Signature Page to the Non-Qualified Stock Option Agreement; [Grant#Code]

EXHIBIT A TO THE NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT

The Performance Period is a [three]-year performance measurement period. The first grant Performance Period will span [ ]-[ ]. The Performance Period will change each year a grant is made under the Plan.

The Company will measure Performance Targets on [two] metrics: (a) [net asset value per share growth]; and (b) [total shareholder value growth]. Performance thresholds for the [ ]-[ ] Performance Period are outlined in the following table:

Total Shareholder Value [ ]-[ ]	Net Asset Value Growth [ ]-[ ]	Percentage of Target Award
Below [ ]%	Below [ ]%	None
[ ]-[ ]%	[ ]-[ ]%	[ ]%
[ ]-[ ]%	[ ]-[ ]%	[ ]%
>[ ]%	Above [ ]%	[ ]%

RULE 13A – 14(a) CERTIFICATION

I, Joseph D. Russell, Jr., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Public Storage;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Joseph D. Russell, Jr.

Name:Joseph D. Russell, Jr.

Title:Chief Executive Officer and President

Date:August 3, 2021

Exhibit 31.1

RULE 13A – 14(a) CERTIFICATION

I, H. Thomas Boyle, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Public Storage;

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ H. Thomas Boyle

Name:H. Thomas Boyle

Title:Chief Financial Officer

Date:August 3, 2021

Exhibit 31.2

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Public Storage (the “Company”) for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), Joseph D. Russell, Jr., as Chief Executive Officer and President of the Company and H. Thomas Boyle, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), that:

(1)

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joseph D. Russell, Jr.

Name:Joseph D. Russell, Jr.

Title:Chief Executive Officer and President

Date:August 3, 2021

/s/ H. Thomas Boyle

Name:H. Thomas Boyle

Title:Chief Financial Officer

Date:August 3, 2021

This certification accompanies the Report pursuant to §906 of Sarbanes-Oxley and shall not, except to the extent required by Sarbanes-Oxley, be deemed filed by the Company for purposes of §18 of the Exchange Act.

A signed original of this written statement required by §906 of Sarbanes-Oxley has been provided to the Company, and will be retained and furnished to the SEC or its staff upon request.

Exhibit 32