2021.

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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 cautionary statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of 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.

Discussion of our Business

Our principal business activities include the ownership and operation of self-storage facilities and other related operations including tenant reinsurance and third-party self-storage management. We are the industry leading owner and operator of self-storage properties with a recognizable brand, including the ubiquitous orange color, which is one of the most recognizable within the industry.

We also manage 332021, we held interests in and consolidated 2,787 self-storage facilities for third parties.  We are seeking to expand our third-party management operations to further increase our economies(an aggregate of scale and leverage our brand; however, there is no

assurance that we will be able to do so.  We also own 0.8198 million net rentable square feet of space) operating under the Public Storage® name.

a public company traded on Euronext Brussels under the “SHUR” symbol. At December 31, 2021, Shurgard owned and operated 253 self-storage facilities (14 million net rentable square feet) located in seven countries in Western Europe under the Shurgard® name.

In the last three years, there has been a marked increase in development of new self-storage facilities in many of the markets we operate in, due to the favorable economics of development which we have also taken advantage of.  These newly developed facilities compete with many of the facilities we own, negatively impacting our occupancies, rental rates, and rental growth.  This increase in supply has been most notable in Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, New York, and Portland.

Ownership and operation of self-storage facilities is highly fragmented.  As the largest owner of self-storage facilities,However, we believe that we own approximately 7%the economies of thescale inherent in this business result in our being able to operate self-storage facilities at a materially higher level of cash flow per square footage in the U.S. and that collectively the five largest self-storage owners in the U.S. own approximately 15%, with the remaining 85% owned by numerous regional and local operators. 

We generally own facilities in major markets.  foot than other operators without our scale.

Industry fragmentation also provides opportunities forenabled us to acquire additional facilities; however, weoperate and compete more effectively by providing customers with a wide variety of institutions and other investors who also view self-storage facilities as attractive investments.  The amount of capital available for real estate investments greatly influences the competition for ownership interests in facilities and, by extension, the yields that we can achieve on newly acquired investments. 

Business Attributes

We believe that we possess several primary business attributes that permit us to compete effectively:

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Marketing economies of scale: Our major-market concentration relative to the fragmented ownership and operation of the rest of the industry, combined with our well-recognized brand name, improves our prominence in unpaid online search results for self-storage and reduces our average cost per “click” for multiple-keyword advertising.  The large number of facilities we have in major metropolitan centers enables us to efficiently use television advertising from time to time.  Our competitors generally do not use television advertising because they lack the scale in major metropolitan centers. 

Brand name recognition: We believe that the “Public Storage” brand name is the most recognized and established name in the self-storage industry, due to our national reach in major markets in 38 states, our highly visible facilities, and our facilities’ distinct orange colored doors and signage.  We believe the “Public Storage” name is one of the most frequently used search terms used by customers using Internet search engines for self-storage.  We believe that the “Shurgard” brand, used by Shurgard Europe, is a well-established and valuable brand in Europe.  We believe that the awareness of our brand name results in a high percentage of potential storage customers considering our facilities relative to other operators. 

Growth and Investment Strategies

Our growth strategies consist of: (i) improving the operating performance of our

Participate in the growth of PS Business Parks, Inc.:Our investment in PSB provides diversification into another asset type.  PSB is a stand-alone public company traded on the NYSE.  As of December 31, 2018, we have a 42% equity interest in PSB.

PSB seeks to grow its asset base in favorable markets as well as increase the cash flows from its existing portfolio.  As of December 31, 2018, PSB owned and operated approximately 28.2 million rentable square feet of commercial space, and had an enterprise value of approximately $5.5 billion (based upon the trading price of PSB’s common stock combined with the liquidation value of its preferred stock as of December 31, 2018). 

Participate in the growth of Shurgard Europe:  We believe Shurgard Europe is the largest self-storage company in Western Europe.  It owns and operates 232 self-storage facilities with approximately 13 million net rentable square feet in: France (principally Paris), Sweden (principally Stockholm), the United Kingdom (principally London), the Netherlands, Denmark (principally Copenhagen), Belgium and Germany.  On October 15, 2018, Shurgard Europe completed an initial global offering (the “Offering”) of 25.0 million of its common shares for €575 million in gross proceeds, and its shares commenced trading on Euronext Brussels under the “SHUR” symbol. 

As a result of the Offering (we did not acquire any additional common shares or sell any of our existing shares in the Offering), our equity interest in Shurgard Europe decreased from 49% to 35.2%.

Customer awareness and availability of self-storage is significantly lower in Europe than in the U.S.  However, with more awareness and product supply, we believe there is potential for increased demand for storage space in Europe.  We believe Shurgard Europe can capitalize on potential increased demand through the development of new facilities and acquiring existing facilities.  From 2014 through 2018, Shurgard Europe acquired 36 facilities with an approximate 1.8 million net rentable square feet in Germany, the Netherlands, the United Kingdom, Sweden and France for an aggregate purchase price of approximately $380.5 million.  In addition, from 2014 through 2018,  Shurgard Europe opened eight development properties in the United Kingdom, Germany and Sweden containing 636,000 net rentable square feet at a cost of $100.7 million.

Financing of the Company’s Growth Strategies

Overview of financing strategy and sources of capital:  As a REIT, we generally distribute 100% of our taxable income to our shareholders which, relative to a taxable C corporation, limits the amount of cash flow from operations that we can retain for investments.  As a result, in order to grow our asset base, access to capital is important. 

Our financial profile is 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 and ratings enable us to effectively access both the public and private capital markets to raise capital.

Sources of capital available to us include retained operating cash flow, the issuance of preferred and common securities, the issuance of medium and long-term debt, joint venture financing and the sale of properties.  We view our line of credit, as well as short-term bank loans, as bridge financing.  

Historically, we have financed our cash investment activities primarily with retained operating cash flow and the issuance of preferred securities.  While we have issued common shares, such issuances have been minimal, because preferred securities have had a more attractive cost of capital.  In 2015 and 2016, we issued Euro-denominated medium-term debt primarily as a hedge to our Euro-denominated investment in Shurgard Europe.  On September 18, 2017, we completed a public offering of $1.0 billion in aggregate principal amount of unsecured notes in two equal tranches (collectively, the “U.S. Dollar Notes”), one maturing in September 2022 bearing interest at 2.370%, and another maturing in September 2027 bearing interest at 3.094%.    While we have increased the level of debt in our capital structure, we expect to continue to remain conservatively capitalized and not subject ourselves to significant refinancing risk.

We have no current plans to use joint venture financing or the sale of properties as sources of capital.

We select among the sources of capital available to us based upon relative cost, availability, the desire for leverage, and considering potential constraints caused by certain features of capital sources, such as debt covenants.

Retained operating cash flow:  Although we are generally required to distribute 100% of our taxable income to our shareholders, 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. 

Preferred equity:  As noted above, we view preferred equity as an important source of capital over the long term.  However, rates and market conditions for the issuance of preferred securities can be volatile or inefficient from time to time, particularly so in the last few years.  Since 2013, we have issued preferred securities at fixed rates ranging from 4.900% to 6.375%.  Most recently, in August 2017, we issued $300 million of preferred securities at a fixed rate of 5.050%.  We believe that the market coupon rate of our preferred securities is influenced by long-term interest

rates, as well as demand specifically from retail investors.  Institutional investors are generally not buyers of our preferred securities. 

At December 31, 2018, we have approximately $4.0 billion in preferred securities outstanding.  On February 22, 2019, we called for redemption on March 28, 2019 our 6.375% Series Y Preferred Shares, at par ($285 million).  Our preferred securities outstanding at December 31, 2018, excluding the Series Y Preferred Shares that were called for redemption had an average coupon rate of 5.3% and an average market yield of 5.9%.  As of February 27, 2019, we have the option to redeem, with 30 days’ notice, the following additional series of preferred securities; our 5.625% Series U Preferred Shares  ($288 million), our 5.375% Series V Preferred Shares ($495 million), our 5.200% Series W Preferred Shares ($500 million), and our 5.200% Series X Preferred Shares ($225 million).  Our 6.000% Series Z Preferred Shares ($288 million) become callable on June 4, 2019.  Redemption of such preferred shares will dependdependent upon many factors, including the ratecost and availability of land, the cost and availability of construction materials and labor, zoning and permitting limitations, our cost of capital, the cost of acquiring facilities relative to developing new facilities, as well as local demand and economic conditions.

At December 31, 2018,  we have $1.0 billionour capital expenditures, earnings or competitive position. We are committed to a long-term environmental stewardship program that reduces emissions of U.S. Dollar Noteshazardous materials into the environment and approximately €342 millionthe remediation of Euro-denominated senior unsecured notes (the “Euro Notes”) outstanding, which were issuedidentified existing environmental concerns, including environmentally-friendly capital initiatives and building and operating properties with a high structural resilience and low obsolescence. We accrue environmental assessments and estimated remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. Our current practice is to institutional investors in 2015 and 2016.  

Common equity:  Exceptconduct environmental investigations in connection with mergers, most notably a merger in 2006 with Shurgard Storage Centers, we have not raised capital through the issuance of common equity because lower cost alternatives have been available.  However, we believe that the market for our common equity is liquid and, as a result, common equity is a significant potential source of capital. 

Bridge financing:  We have a $500.0 million revolving line of credit which we occasionally use as temporary “bridge” financing, along with short-term bank loans, until we are able to raise longer-term capital.  As of December 31, 2018, there were no borrowings outstanding on our revolving line of credit and no short-term bank loans.  

Unlikely capital alternatives: We have issued both our common and preferred securities in exchange for real estate and other investments in the past.  We do not expect such issuances to be a material source of capital in the future, though there can be no assurance. 

We have participated in joint ventures with institutional investors in the past to acquire, develop, and operate self-storage facilities, most notably our joint venture to own Shurgard Europe, prior to its Offering.  We do not presently expect joint venture financing to be a material source of capital in the future because we have other sources of capital that are currently less expensive and because of potential constraints resulting from joint management and ownership.    

Generally, we have disposed of self-storage facilities only when compelled to do so through condemnation proceedings.  Because we believe that we are an optimal operator of self-storage facilities, we have generally found that we cannot obtain sufficient value in selling properties.  As a result, we do not presently expect to raise significant capital selling self-storage facilities; however,property acquisitions. Although there can be no assurance, we are not aware of any environmental contamination of any of our facilities, which individually or in the aggregate would be material to our overall business, financial condition, or results of operations.

Investmentsdo, which serve as the cornerstone of our corporate culture, we believe that this commitment facilitates employee engagement and their commitment to Public Storage. While most of our employees join without experience in Real Estatethe self-storage industry, many find career success with us given our emphasis on training, development, and Unconsolidated Real Estate Entities

Investment Policiespromotion from within.

Facilities Owned by Unconsolidated Real Estate Entities

At December 31, 2018, we had ownership interests in PSB and Shurgard Europe (each discussed above), which we do not control or consolidate. 

PSBbusiness.

Canadian self-storage facilities owned by Former Chairman and Members of Board of Trustees 

At December 31, 2018, B. Wayne Hughes and Tamara Hughes Gustavson together owned and controlled 62 self-storage facilities in Canada.  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 $1.3 million, $1.1 million and $848,000 for the years ended December 31, 2018, 2017 and 2016, respectively.  Our right to continue receiving these premiums may be qualified.

Limitations on Debt

Our revolving credit facility, U.S. Dollar Notes and Euro Notes contain various customary financial covenants, including limitationsprogress, is accessible on our ability to encumber our properties with mortgages and limitations on the level of indebtedness.  We believe we complied with each of these covenants as of December 31, 2018.

Employees

We had approximately 5,600 employees in the U.S.website at December 31, 2018 who are engaged primarily in property operations.    

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price, including:

as well as other governmental actions. Our property tax expense, which totaled approximately $256.9$335.1 million during the year ended December 31, 2018,2021, generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies, and accordingly could be subject to substantial increases if such agencies changed their valuation approaches or opinions or if new laws are enacted.  

enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or geographies where we have a high concentration of facilities. See also “We have exposure to increased property tax in California” below.

The Hughes Family could control us and take actions adverse to other shareholders.

At December 31, 2018, B. Wayne Hughes, our former Chairman and his family, which includes his daughter, Tamara Hughes Gustavson and his son, B. Wayne Hughes, Jr., who are both members of our Board of Trustees (collectively, the “Hughes Family”), owned approximately 14.5% of our aggregate outstanding common shares. Our declaration of trust permits the Hughes Family to own up to 35.66% of our outstanding common shares while it generally restricts the ownership by other persons and entities to 3% of our outstanding common shares. Consequently, the Hughes Family may significantly influence matters submitted to a vote of our shareholders, including electing trustees, amending our organizational documents, dissolving and approving other extraordinary transactions, such as a takeover attempt, resulting in an outcome that may not be favorableable to pursue separately, or it could take actions that we do not agree with.

our cash available for distributions to shareholders and could negatively affect our stock price. However, for years in which we failed to qualify as a REIT, we would not beeconomic activity. Our business is subject to REIT rules which require us to distribute substantially allrisks from the COVID Pandemic, including, among others:

In addition, certain local and state governments have imposed taxes on self-storage rent.  While in most cases those taxes are paid by our customers, they increase the cost of self-storage rental to our customers and can negativelymarket constraints could also significantly impact our revenues.  Other local and state governments may impose self-storage rent taxes in the future. 

We have exposure to increased property tax in California.

Approximately $565 million of our 2018 net operating income is from our properties in California, and we incurred approximately $41 million in related property tax expense.  Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is less than it would be if the properties were assessed at current values.  From time to time,  proposals have been made to reduce the beneficial impact of Proposition 13, particularly with respect to commercial and industrial (non-residential) real estate, which would include self-storage facilities.  In late 2018, an initiative qualified for California’s November 2020 statewide ballot that would create a “split roll,” generally making Proposition 13’s protections only applicable to residential real estate.  We cannot predict whether the initiative will actually be on the ballot in 2020, or what the prospects for passage might be, or whether other changes to Proposition 13 may be proposed or adopted.  If the initiative or a similar proposal were to be adopted, it would end the beneficial effect of Proposition 13 for our properties, and our property tax expense could increase substantially, adversely affecting our cash flow from operations and net income. 

financial results.

systems are subject to damage or interruption from power outages, computer and telecommunications failures, hackers, including through a ransomware attack, computer worms, viruses and other destructive or disruptive security breaches and catastrophic events. Such incidents could also result in significant costs to repair or replace such networks or information systems.systems, as well as actual monetary losses in case of a breach that resulted in fraudulent payments or other cash transactions. As a result, our operations could be severely impacted by a natural disaster, terrorist attack, attack by hackers, acts of vandalism, data theft, misplaced or lost data, programming or human error, or other circumstance that results in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures.

Description of Self-Storage Facilities:Self-storageself-storage spaces, a more imposing and visible retail presence, and a

Accrual for Uncertain and Contingent Liabilities:  We accrue for certain contingent and other liabilities that have significant uncertain elements, such as property taxes, workers compensation claims, tenant reinsurance claims, as well as other legal claims and disputes involving customers, employees, governmental agencies and other third parties.  We estimate such liabilities based upon many factors such as assumptions of past and future trends and our evaluation of likely outcomes.  However, the estimates of known liabilities could be incorrect or we may not be aware of all such liabilities, in which case our accrued liabilities and net income could be misstated. 

Accounting

transactions,