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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
or
☐ 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
Depositary Shares Each Representing 1/1,000 of a 3.950% Cum Pref Share, Series Q, $0.01 par value PSAPrQ New York Stock Exchange
0.875% Senior Notes due 2032 PSA32 New York Stock Exchange
0.500% Senior Notes due 2030 PSA30 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.
☒ 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).
☒ 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
☒ ☐ ☐ ☐ ☐
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 ☒ No
Indicate the number of the registrant’s outstanding common shares of beneficial interest, as of October 28, 2021:
Common Shares of beneficial interest, $0.10 par value per share – 175,354,560 shares


PUBLIC STORAGE
INDEX
PART I FINANCIAL INFORMATION Pages
     
Item 1. Financial Statements (Unaudited)  
     
 
Balance Sheets at September 30, 2021 and December 31, 2020
1
   
 
Statements of Income for the Three and Nine Months Ended September 30, 2021 and 2020
2
   
 
Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020
3
   
 
Statements of Equity for the Three and Nine Months Ended September 30, 2021 and 2020
4-7
   
 
Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020
8-9
   
  Condensed Notes to Financial Statements
10-27
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
28-58
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
59
   
Item 4. Controls and Procedures
59
   
PART II
OTHER INFORMATION (Items 3, 4 and 5 are not applicable)
   
Item 1. Legal Proceedings
60
   
Item 1A. Risk Factors
60
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
60
     
Item 6. Exhibits
60




PUBLIC STORAGE
BALANCE SHEETS
(Amounts in thousands, except share data)

  September 30,
2021 		December 31,
2020
(Unaudited)
ASSETS
 (Unaudited)
  
     
Cash and equivalents $ 958,247  $ 257,560 
Real estate facilities, at cost:
Land 4,864,520  4,375,588 
Buildings 15,592,003  12,997,039 
20,456,523  17,372,627 
Accumulated depreciation (7,598,496) (7,152,135)
12,858,027  10,220,492 
Construction in process 228,379  188,079 
13,086,406  10,408,571 
Investments in unconsolidated real estate entities 779,272  773,046 
Goodwill and other intangible assets, net 258,949  204,654 
Other assets 201,812  172,715 
Total assets $ 15,284,686  $ 11,816,546 
       
LIABILITIES AND EQUITY      
     
Notes payable $ 5,773,190  $ 2,544,992 
Preferred shares called for redemption (Note 8) —  300,000 
Accrued and other liabilities 474,198  394,655 
Total liabilities 6,247,388  3,239,647 
     
Commitments and contingencies (Note 12)
  
  
       
Equity:      
Public Storage shareholders’ equity:      
Preferred Shares, $0.01 par value, 100,000,000 shares authorized, 160,600 shares issued (in series) and outstanding, (151,700 at December 31, 2020) at liquidation preference
4,015,000  3,792,500 
Common Shares, $0.10 par value, 650,000,000 shares authorized, 175,048,260 shares issued and outstanding (174,581,742 shares at December 31, 2020)
17,505  17,458 
Paid-in capital 5,808,943  5,707,101 
Accumulated deficit (771,114) (914,791)
Accumulated other comprehensive loss (52,980) (43,401)
Total Public Storage shareholders’ equity 9,017,354  8,558,867 
Noncontrolling interests 19,944  18,032 
Total equity 9,037,298  8,576,899 
Total liabilities and equity $ 15,284,686  $ 11,816,546 

See accompanying notes.
1

PUBLIC STORAGE
STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)

  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
Revenues:
Self-storage facilities $ 840,510  $ 683,949  $ 2,333,850  $ 2,022,692 
Ancillary operations 54,421  50,596  157,658  143,840 
894,931  734,545  2,491,508  2,166,532 
Expenses:
Self-storage cost of operations 216,999  209,179  631,699  637,229 
Ancillary cost of operations 19,735  15,174  52,044  44,081 
Depreciation and amortization 188,552  138,333  508,139  411,851 
General and administrative 31,682  18,262  78,996  53,234 
Interest expense 23,736  14,282  60,980  42,048 
  480,704  395,230  1,331,858  1,188,443 
Other increases (decreases) to net income:
Interest and other income 3,356  7,192  9,321  18,976 
Equity in earnings of unconsolidated real estate entities 32,860  21,240  81,382  62,863 
Foreign currency exchange gain (loss) 40,906  (41,900) 73,584  (52,250)
Gain on sale of real estate 279  —  13,683  1,117 
Net income 491,628  325,847  1,337,620  1,008,795 
Allocation to noncontrolling interests (1,537) (980) (4,067) (2,849)
Net income allocable to Public Storage shareholders 490,091  324,867  1,333,553  1,005,946 
Allocation of net income to:
Preferred shareholders (46,237) (53,892) (138,500) (158,849)
Preferred shareholders - redemptions (Note 8) —  (23,313) (16,989) (38,382)
Restricted share units (1,527) (746) (3,678) (2,546)
Net income allocable to common shareholders $ 442,327  $ 246,916  $ 1,174,386  $ 806,169 
Net income per common share:
Basic $ 2.53  $ 1.41  $ 6.72  $ 4.62 
Diluted $ 2.52  $ 1.41  $ 6.70  $ 4.62 
Basic weighted average common shares outstanding 174,926 174,503 174,787 174,481
Diluted weighted average common shares outstanding 175,806 174,626 175,398 174,606

See accompanying notes.
2

PUBLIC STORAGE
STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)

  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
Net income $ 491,628  $ 325,847  $ 1,337,620  $ 1,008,795 
Foreign currency exchange (loss) gain on investment in Shurgard (6,898) 10,792  (9,579) 2,546 
Total comprehensive income 484,730  336,639  1,328,041  1,011,341 
Allocation to noncontrolling interests (1,537) (980) (4,067) (2,849)
Comprehensive income allocable to Public Storage shareholders $ 483,193  $ 335,659  $ 1,323,974  $ 1,008,492 

See accompanying notes.
3

PUBLIC STORAGE
STATEMENT OF EQUITY
Three Months Ended September 30, 2021
(Amounts in thousands, except share and per share amounts)
(Unaudited)

  Cumulative Preferred Shares Common Shares Paid-in Capital Accumulated Deficit Accumulated
Other Comprehensive Loss 		Total
Public Storage Shareholders' Equity 		Noncontrolling Interests Total Equity
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 
Issuance of 5,750 preferred shares (Note 8)
143,750  —  (4,777) —  —  138,973  —  138,973 
Issuance of common shares in connection with share-based compensation (183,823 shares)
—  19  33,795  —  —  33,814  —  33,814 
Share-based compensation expense, net of cash paid in lieu of common shares —  —  15,253  —  —  15,253  —  15,253 
Contributions by noncontrolling interests —  —  —  —  —  —  594  594 
Net income —  —  —  491,628  —  491,628  —  491,628 
Net income allocated to noncontrolling interests —  —  —  (1,537) —  (1,537) 1,537  — 
Distributions to:
Preferred shareholders (Note 8) —  —  —  (46,237) —  (46,237) —  (46,237)
Noncontrolling interests —  —  —  —  —  —  (1,706) (1,706)
Common shareholders and restricted share unitholders ($2.00 per share) (Note 8)
—  —  —  (351,226) —  (351,226) —  (351,226)
Other comprehensive loss (Note 2) —  —  —  —  (6,898) (6,898) —  (6,898)
Balances at September 30, 2021
$ 4,015,000  $ 17,505  $ 5,808,943  $ (771,114) $ (52,980) $ 9,017,354  $ 19,944  $ 9,037,298 
See accompanying notes.
4

PUBLIC STORAGE
STATEMENT OF EQUITY
Three Months Ended September 30, 2020
(Amounts in thousands, except share and per share amounts)
(Unaudited)

  Cumulative Preferred Shares Common Shares Paid-in Capital Accumulated Deficit Accumulated
Other Comprehensive Loss 		Total
Public Storage Shareholders' Equity 		Noncontrolling Interests Total Equity
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 
Issuance of 9,200 preferred shares (Note 8)
230,000  —  (5,429) —  —  224,571  —  224,571 
Redemption of 29,000 preferred shares (Note 8)
(725,000) —  —  —  —  (725,000) —  (725,000)
Issuance of common shares in connection with share-based compensation (13,152 shares)
—  1  1,818  —  —  1,819  —  1,819 
Share-based compensation expense, net of cash paid in lieu of common shares —  —  8,115  —  —  8,115  —  8,115 
Contributions by noncontrolling interests —  —  —  —  —  —  858  858 
Net income —  —  —  325,847  —  325,847  —  325,847 
Net income allocated to noncontrolling interests —  —  —  (980) —  (980) 980  — 
Distributions to:
Preferred shareholders (Note 8) —  —  —  (53,892) —  (53,892) —  (53,892)
Noncontrolling interests —  —  —  —  —  —  (1,418) (1,418)
Common shareholders and restricted share unitholders ($2.00 per share) (Note 8)
—  —  —  (349,836) —  (349,836) —  (349,836)
Other comprehensive income (Note 2) —  —  —  —  10,792  10,792  —  10,792 
Balances at September 30, 2020
$ 3,640,000  $ 17,451  $ 5,706,970  $ (867,950) $ (62,344) $ 8,434,127  $ 17,927  $ 8,452,054 

See accompanying notes.
5

PUBLIC STORAGE
STATEMENT OF EQUITY
Nine Months Ended September 30, 2021
(Amounts in thousands, except share and per share amounts)
(Unaudited)
  Cumulative Preferred Shares Common Shares Paid-in Capital Accumulated Deficit Accumulated
Other Comprehensive Loss 		Total
Public Storage Shareholders' Equity 		Noncontrolling Interests Total 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 29,900 preferred shares (Note 8)
747,500  —  (22,189) —  —  725,311  —  725,311 
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 (466,518 shares) (Note 10)
—  47  81,365  —  —  81,412  —  81,412 
Share-based compensation expense, net of cash paid in lieu of common shares (Note 10) —  —  42,698  —  —  42,698  —  42,698 
Acquisition of noncontrolling interests —  —  (32) —  —  (32) (1) (33)
Contributions by noncontrolling interests —  —  —  —  —  —  2,359  2,359 
Net income —  —  —  1,337,620  —  1,337,620  —  1,337,620 
Net income allocated to noncontrolling interests —  —  —  (4,067) —  (4,067) 4,067  — 
Distributions to:
Preferred shareholders (Note 8) —  —  —  (138,500) —  (138,500) —  (138,500)
Noncontrolling interests —  —  —  —  —  —  (4,513) (4,513)
Common shareholders and restricted share unitholders ($6.00 per share) (Note 8)
—  —  —  (1,051,376) —  (1,051,376) —  (1,051,376)
Other comprehensive loss (Note 2) —  —  —  —  (9,579) (9,579) —  (9,579)
Balances at September 30, 2021
$ 4,015,000  $ 17,505  $ 5,808,943  $ (771,114) $ (52,980) $ 9,017,354  $ 19,944  $ 9,037,298 
See accompanying notes.
6

PUBLIC STORAGE
STATEMENT OF EQUITY
Nine Months Ended September 30, 2020
(Amounts in thousands, except share and per share amounts)
(Unaudited)

  Cumulative Preferred Shares Common Shares Paid-in Capital Accumulated Deficit Accumulated
Other Comprehensive Loss 		Total
Public Storage Shareholders' Equity 		Noncontrolling Interests Total 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 31,800 preferred shares (Note 8)
795,000  —  (21,259) —  —  773,741  —  773,741 
Redemption of 48,800 preferred shares (Note 8)
(1,220,000) —  —  —  —  (1,220,000) —  (1,220,000)
Issuance of common shares in connection with share-based compensation (93,455 shares)
—  9  5,496  —  —  5,505  —  5,505 
Share-based compensation expense, net of cash paid in lieu of common shares —  —  11,831  —  —  11,831  —  11,831 
Acquisition of noncontrolling interests —  —  (32) —  —  (32) (1) (33)
Contributions by noncontrolling interests —  —  —  —  —  —  2,291  2,291 
Net income —  —  —  1,008,795  —  1,008,795  —  1,008,795 
Net income allocated to noncontrolling interests —  —  —  (2,849) —  (2,849) 2,849  — 
Distributions to:
Preferred shareholders (Note 8) —  —  —  (158,849) —  (158,849) —  (158,849)
Noncontrolling interests —  —  —  —  —  —  (3,968) (3,968)
Common shareholders and restricted share unitholders ($6.00 per share) (Note 8)
—  —  —  (1,049,472) —  (1,049,472) —  (1,049,472)
Other comprehensive income (Note 2) —  —  —  —  2,546  2,546  —  2,546 
Balances at September 30, 2020
$ 3,640,000  $ 17,451  $ 5,706,970  $ (867,950) $ (62,344) $ 8,434,127  $ 17,927  $ 8,452,054 

See accompanying notes.
7

PUBLIC STORAGE
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

 
For the Nine Months Ended September 30,
  2021 2020
Cash flows from operating activities:      
Net income $ 1,337,620  $ 1,008,795 
Adjustments to reconcile net income to net cash flows from operating activities:
Gain on sale of real estate (13,683) (1,117)
Depreciation and amortization 508,139  411,851 
Equity in earnings of unconsolidated real estate entities (81,382) (62,863)
Distributions from cumulative equity in earnings of unconsolidated real estate entities 59,251  52,499 
Foreign currency exchange (gain) loss (73,584) 52,250 
Share-based compensation expense 47,647  21,535 
Other 30,712  47,390 
Total adjustments 477,100  521,545 
Net cash flows from operating activities 1,814,720  1,530,340 
Cash flows from investing activities:      
Capital expenditures to maintain real estate facilities (169,103) (132,969)
Development and expansion of real estate facilities (201,527) (132,476)
Acquisition of real estate facilities and intangible assets (2,845,284) (282,417)
Distributions in excess of cumulative equity in earnings from unconsolidated real estate entities 8,765  10,803 
Repayment of note receivable —  7,509 
Proceeds from sale of real estate investments 16,070  1,399 
Net cash flows used in investing activities (3,191,079) (528,151)
Cash flows from financing activities:      
Repayments on notes payable (1,585) (1,505)
Issuance of notes payable, net of issuance costs 3,300,160  545,151 
Issuance of preferred shares 725,311  773,741 
Issuance of common shares 81,412  5,505 
Redemption of preferred shares (825,000) (1,220,000)
Cash paid upon vesting of restricted share units (10,438) (9,704)
Acquisition of noncontrolling interests (33) (33)
Contributions by noncontrolling interests 2,359  2,291 
Distributions paid to preferred shareholders, common shareholders and restricted share unitholders (1,189,876) (1,208,321)
Distributions paid to noncontrolling interests (4,513) (3,968)
Net cash flows provided by financing activities 2,077,797  (1,116,843)
Net cash flows from operating, investing, and financing activities 701,438  (114,654)
Net effect of foreign exchange impact on cash and equivalents, including restricted cash 313  (192)
Increase (decrease) in cash and equivalents, including restricted cash $ 701,751  $ (114,846)
See accompanying notes.
8

PUBLIC STORAGE
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

 
For the Nine Months Ended September 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 $ 958,247  $ 293,955 
Restricted cash included in other assets 26,104  24,753 
  $ 984,351  $ 318,708 
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 $ (18,243) $ (9,434)
Construction or expansion of real estate facilities (39,305) (34,715)
Accrued and other liabilities 57,548  44,149 

See accompanying notes.
9
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 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 that 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 September 30, 2021, we have direct and indirect equity interests in 2,678 self-storage facilities (with approximately 186.4 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 an approximate 35% common equity interest in Shurgard Self Storage SA (“Shurgard”), a public company traded on Euronext Brussels under the “SHUR” symbol, which owns 247 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 present fairly 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 September 30, 2020 financial statements have been reclassified to conform to the September 30, 2021 presentation, including revenues and cost operations from our third party management activities of $3.9 million and $3.8 million, respectively, for the three months ended September 30, 2020, and $10.5 million and $10.0 million, respectively, for the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $9.4 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 nine months ended September 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
10
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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 consolidated through contractual rights, three limited liability companies that were considered VIEs, which owned 48 self-storage properties acquired on April 28, 2021 known as the ezStorage portfolio. During the third quarter of 2021, we became the sole member of these three limited liability companies and therefore consolidated them through our voting interests. Accordingly, we have no involvement with any material VIEs as of September 30, 2021. We consolidate all other entities when we control them through voting shares or contractual rights. We refer to the entities we consolidate, for the period in which the reference applies, collectively as the “Subsidiaries,” and we eliminate intercompany transactions and balances.
We account for our investments in entities that we do not consolidate but over which we have significant influence using the equity method of accounting. We refer to these entities, for the periods in which the reference applies, collectively as the “Unconsolidated Real Estate Entities,” and 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.”
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 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 September 30, 2021, we had no tax benefits that were not recognized.
Real Estate Facilities
We record real estate facilities 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. We expense the costs of demolition of existing facilities associated with a renovation 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.
We expense costs associated with dispositions of real estate, as well as repairs and maintenance costs, 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
11
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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 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 September 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 consist of goodwill, the Shurgard® trade name, and finite-lived assets.
Goodwill totaled $165.8 million at September 30, 2021 ($165.8 million at December 31, 2020). The Shurgard® trade name, which Shurgard uses pursuant to a fee-based licensing agreement, has a book value of
12
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
$18.8 million at September 30, 2021 and December 31, 2020. Goodwill and the Shurgard® trade name have indefinite lives and are not amortized.
Our finite-lived assets consist 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 September 30, 2021, these intangibles had a net book value of $74.4 million ($20.1 million at December 31, 2020). Accumulated amortization totaled $59.4 million at September 30, 2021 ($27.3 million at December 31, 2020). A total of $23.3 million and $49.0 million in amortization expense was recorded in the three and nine months ended September 30, 2021, respectively, and $3.0 million and $12.0 million in the same periods in 2020.
The estimated future amortization expense for our finite-lived intangible assets at September 30, 2021 is approximately $18.7 million in the remainder of 2021, $39.1 million in 2022 and $16.6 million thereafter. During the nine months ended September 30, 2021, intangibles increased $103.3 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 quarterly. 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
We recognize revenues from self-storage facilities, which primarily comprise rental income earned pursuant to month-to-month leases, as well as associated late charges and administrative fees, as earned. Promotional discounts reduce rental income over the promotional period, which is generally one month. We recognize ancillary revenues 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. We expense cost of operations (including advertising expenditures), general and administrative expense, and interest expense 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).
13
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 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 1.159 U.S. Dollars per Euro at September 30, 2021 (1.226 at December 31, 2020), and average exchange rates of 1.179 and 1.168 for the three months ended September 30, 2021 and 2020, respectively, and average exchange rates of 1.196 and 1.124 for the nine months ended September 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 primarily comprised of foreign currency translation gains and losses on our investment in Shurgard.
Net Income per Common Share
We allocate net income 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.
We calculate basic and diluted net income per common share 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
September 30, 		Nine Months Ended
September 30,
  2021 2020 2021 2020
Weighted average common shares and equivalents outstanding:
Basic weighted average common shares outstanding 174,926 174,503 174,787 174,481
Net effect of dilutive stock options - based on treasury stock method 880 123 611 125
Diluted weighted average common shares outstanding 175,806 174,626 175,398 174,606

14
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
3.Real Estate Facilities

Activity in real estate facilities during the nine months ended September 30, 2021 is as follows:
  Nine Months Ended
September 30, 2021
  (Amounts in thousands)
Operating facilities, at cost:
Beginning balance $ 17,372,627 
Capital expenditures to maintain real estate facilities 177,641 
Acquisitions 2,741,952 
Dispositions (6,783)
Developed or expanded facilities opened for operation 171,086 
Ending balance 20,456,523 
Accumulated depreciation:
Beginning balance (7,152,135)
Depreciation expense (450,757)
Dispositions 4,396 
Ending balance (7,598,496)
Construction in process:
Beginning balance 188,079 
Costs incurred to develop and expand real estate facilities 211,386 
Developed or expanded facilities opened for operation (171,086)
Ending balance 228,379 
Total real estate facilities at September 30, 2021
$ 13,086,406 
During the nine months ended September 30, 2021, we acquired 126 self-storage facilities (10,295,000 net rentable square feet of storage space), for a total cost of $2.8 billion in cash. Approximately $103.3 million of the total cost was allocated to intangible assets. We completed development and redevelopment activities costing $171.1 million during the nine months ended September 30, 2021, adding 1.2 million net rentable square feet of self-storage space. Construction in process at September 30, 2021 consists of projects to develop new self-storage facilities and expand existing self-storage facilities.
During the nine months ended September 30, 2021, our accrual for unpaid construction costs increased $7.4 million (a $2.9 million increase for the same period in 2020). During the nine months ended September 30, 2021, our accrual for capital expenditures to maintain real estate facilities increased $7.9 million (a $6.9 million decrease for the same period in 2020).
During the nine months ended September 30, 2021, we sold portions of real estate facilities in connection with eminent domain proceedings for $16.1 million in cash proceeds and recorded a related gain on sale of real estate of approximately $13.7 million.

15
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 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
  September 30, 2021 December 31, 2020
PSB $ 451,336 $ 431,963
Shurgard 327,936 341,083
Total $ 779,272 $ 773,046
  Equity in Earnings of Unconsolidated Real Estate Entities for the
  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
PSB $ 27,110 $ 16,548 $ 62,494 $ 51,513
Shurgard 5,750 4,692 18,888 11,350
Total $ 32,860 $ 21,240 $ 81,382 $ 62,863
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 September 30, 2021 ($156.74 per share of PSB common stock), the shares and units we owned had a market value of approximately $2.3 billion.
Our equity in earnings of PSB comprised our equity share of PSB’s net income, less amortization of the PSB Basis Differential (defined below).
During each of the nine month periods ended September 30, 2021 and 2020, we received cash distributions from PSB totaling $45.6 million.
At September 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 $2.8 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 $0.6 million during each of the nine month periods ended September 30, 2021 and 2020.
PSB is a publicly held entity traded on the New York Stock Exchange under the symbol “PSB”.
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 September 30, 2021 (€47.35 per share of Shurgard common stock, at 1.159 exchange rate of US Dollars to the Euro), the shares we owned had a market value of approximately $1.7 billion.
Our equity in earnings of Shurgard comprised our equity share of Shurgard’s net income, less amortization of the Shurgard Basis Differential (defined below). We eliminated $0.9 million and $0.8 million intra-entity profits and losses for the nine month periods ended September 30, 2021 and 2020, respectively, representing our equity share of
16
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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 nine months ended September 30, 2021 and 2020, respectively, of which our share totaled $21.5 million and $17.0 million, respectively.
At September 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 $75.8 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 $7.3 million and $9.5 million during the nine month periods ended September 30, 2021 and 2020, respectively.
As of September 30, 2021 and 2020, we translated the book value of our investment in Shurgard from Euro to U.S. Dollar and recorded $9.6 million other comprehensive loss and $2.5 million other comprehensive income during the nine month periods ended September 30, 2021 and 2020, 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 that 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 0.75% at September 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 (0.10% per annum at September 30, 2021). At September 30, 2021 and November 1, 2021, we had no outstanding borrowings under this Credit Facility. We had undrawn standby letters of credit, which reduce our borrowing capacity, totaling $21.2 million at September 30, 2021 ($24.3 million at December 31, 2020). The Credit Facility has various customary restrictive covenants, with which we were in compliance at September 30, 2021.
17
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 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 September 30, 2021 and December 31, 2020 are set forth in the tables below:
     
Amounts at September 30, 2021
  Coupon Rate Effective Rate  Principal Unamortized Costs Book
 Value 		Fair
 Value
      ($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022
2.370% 2.483% $ 500,000  $ (495) $ 499,505  $ 509,800 
Notes due April 23, 2024
SOFR+0.47%
0.596% 700,000  (1,804) 698,196  704,200 
Notes due February 15, 2026
0.875% 1.030% 500,000  (3,246) 496,754  493,515 
Notes due September 15, 2027
3.094% 3.218% 500,000  (3,152) 496,848  546,757 
Notes due May 1, 2028
1.850% 1.962% 650,000  (4,446) 645,554  653,619 
Notes due May 1, 2029
3.385% 3.459% 500,000  (2,334) 497,666  549,252 
Notes due May 1, 2031
2.300% 2.419% 650,000  (6,554) 643,446  658,400 
  4,000,000  (22,031) 3,977,969  4,115,543 
Euro Denominated Unsecured Debt
Notes due April 12, 2024
1.540% 1.540% 115,896  —  115,896  120,868 
Notes due November 3, 2025
2.175% 2.175% 280,484  —  280,484  303,644 
Notes due September 9, 2030 0.500% 0.640% 811,272  (10,010) 801,262  795,777 
Notes due January 24, 2032
0.875% 0.978% 579,480  (5,528) 573,952  581,103 
      1,787,132  (15,538) 1,771,594  1,801,392 
 Mortgage Debt, secured by 27 real estate facilities with a net book value of $96.6 million
3.905% 3.903% 23,627  —  23,627  24,939 
  $ 5,810,759  $ (37,569) $ 5,773,190  $ 5,941,874 
  Amounts at
  December 31, 2020
  Book Value Fair 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 
18
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 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 $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 September 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, with which we were in compliance at September 30, 2021. Included in these covenants are (a) a maximum Debt to Total Assets of 65% (approximately 14% at September 30, 2021) and (b) a minimum ratio of Adjusted EBITDA to Interest Expense of 1.5x (approximately 33x for the twelve months ended September 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 four 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, (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, and (iv) €700.0 million issued in a public offering on September 9, 2021 for $817.6 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 and September 9, 2021. 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 gain (loss)” on our income statement (gains of $40.9 million and $73.6 million for the three and nine months ended September 30, 2021, respectively, as compared to losses of $41.9 million and $52.3 million for the three and nine months ended September 30, 2020 respectively).
Mortgage Notes
We assumed our non-recourse mortgage debt in connection with property acquisitions, and we recorded such debt at fair value with any premium or discount to the stated note balance amortized using the effective interest method.
At September 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.
At September 30, 2021, approximate principal maturities of our Notes Payable are as follows (amounts in thousands):
19
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
  Unsecured Debt Mortgage Debt Total
Remainder of 2021
$ — $ 251 $ 251
2022 500,000 2,574 502,574
2023 — 19,219 19,219
2024 815,896 124 816,020
2025 280,484 131 280,615
Thereafter 4,190,752 1,328 4,192,080
$ 5,787,132 $ 23,627 $ 5,810,759
Weighted average effective rate 1.8% 3.9% 1.8%
Cash paid for interest totaled $49.8 million and $40.2 million for the nine months ended September 30, 2021 and 2020, respectively. Interest capitalized as real estate totaled $2.6 million and $2.5 million for the nine month periods ended September 30, 2021 and 2020, respectively.
7.Noncontrolling Interests
At September 30, 2021, the noncontrolling interests represent (i) third-party equity interests in subsidiaries owning 24 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 September 30, 2021, the Noncontrolling Interests cannot require us to redeem their interests, other than pursuant to a liquidation of the subsidiary.
During the nine months ended September 30, 2021 and 2020, we allocated a total of $4.1 million and $2.8 million, respectively, of income to these interests; and we paid $4.5 million and $4.0 million, respectively, in distributions to these interests.
During the nine months ended September 30, 2021 and 2020, Noncontrolling Interests contributed $2.4 million and $2.3 million, respectively, to our subsidiaries.
20
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
8.Shareholders’ Equity

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

     
At September 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  —  — 
Series Q 8/17/2026 3.950  % 5,750  143,750  —  — 
Total Preferred Shares 160,600  $ 4,015,000  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 September 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.
21
PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
On June 16, 2021, we issued approximately 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 nine months ended September 30, 2021 in connection with this redemption.
On July 20, 2021, we redeemed our 4.950% Series D Preferred Shares, at par. We recorded a $10.6 million allocation of income from our common shareholders to the holders of our Preferred Shares in the nine months ended September 30, 2021 in connection with this redemption.
On August 17, 2021, we issued approximately 5.8 million depositary shares, each representing 0.001 of a share of our 3.950% Series Q Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of $143.8 million in gross proceeds, and we incurred $4.8 million in issuance costs.
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.
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 nine months ended September 30, 2020 in connection with this redemption.
On August 14, 2020, we issued 9.2 million depositary shares, each representing 0.001 of a share of our 4.125% Series M Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of $230.0 million in gross proceeds, and we incurred $5.4 million in issuance costs.
On September 30, 2020, we redeemed our 5.200% Series W and Series X Preferred Shares, at par. We recorded a $23.3 million allocation of income from our common shareholders to the holders of our Preferred Shares in the three and nine months ended September 30, 2020 in connection with these redemptions.
Dividends
Common share dividends, including amounts paid to our restricted share unitholders, totaled $351.2 million ($2.00 per share) and $349.8 million ($2.00 per share) for the three months ended September 30, 2021 and 2020, respectively, and $1.05 billion ($6.00 per share) for each of the nine months ended September 30, 2021 and 2020, respectively. Preferred share dividends totaled $46.2 million and $53.9 million for the three months ended September 30, 2021 and 2020, respectively, and $138.5 million and $158.8 million for the nine months ended September 30, 2021 and 2020, respectively.
9.Related Party Transactions
At September 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 $1.5 million and $1.1 million for the nine months ended September 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.
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PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
We consider stock options and RSUs “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).
We recorded share-based compensation expense associated with stock options and RSUs in the various expense categories in the Statement of Income as set forth in the following table. In addition, $0.8 million and $3.1 million share-based compensation cost was capitalized as real estate facilities for the three and nine months ended September 30, 2021, respectively.
  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
  (Amounts in thousands)
Self-storage cost of operations $ 4,506  $ 3,488  $ 16,272  $ 10,550 
Ancillary cost of operations 343  —  1,394  — 
General and administrative 9,746  5,278  30,019  11,080 
Total $ 14,595  $ 8,766  $ 47,685  $ 21,630 
In July 2020, we modified our share-based compensation plans 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 $4.8 million and $15.8 million in accelerated compensation expense during the three and nine months ended September 30, 2021, respectively, as compared to $2.6 million for each of the three and nine months ended September 30, 2020, respectively.
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 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.
Stock Options
Stock options vest over 3 to 5 years, expire 10 years after the grant date, and have an exercise price 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.
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PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
For the three and nine months ended September 30, 2021, we recorded share-based compensation expense for outstanding stock options of $5.5 million and $20.5 million, respectively, as compared to $0.8 million and $3.2 million for the same periods in 2020. The amounts for the three and nine months ended September 30, 2021 includes $0.4 million and $4.9 million, respectively, as compared to $0.1 million for each of the same periods in 2020, in connection with the Retirement Acceleration as discussed above.
During the nine months ended September 30, 2021, 385,000 stock options were awarded, 411,467 options were exercised and 10,000 options were forfeited. In addition, we expect an incremental 175,000 stock options to be paid out based on the estimated achievement of performance targets. A total of 3,099,700 stock options were outstanding at September 30, 2021, (2,961,167 at December 31, 2020) and have an average exercise price of $216.45.
During the nine months ended September 30, 2021, we incurred share-based compensation expense of $1.1 million in connection with the initial 15,000 stock option awards issued to each of the five trustees who joined our Board in January 2021.
During the nine months ended September 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 September 30, 2021, these targets are expected to be met at 100% achievement. These options resulted in $5.7 million in related compensation expense during the nine months ended September 30, 2021.
During the nine months ended September 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 September 30, 2021, these targets are expected to be met at 125% achievement, an increase from 100% as of December 31, 2020, resulting in $9.6 million in related compensation expense during the nine months ended September 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 nine months ended September 30, 2021, 78,040 RSUs were granted, 26,414 RSUs were forfeited and 81,193 RSUs vested. In addition, we expect an incremental 9,250 RSUs to be paid out based on the estimated achievement of performance targets. The vesting resulted in the issuance of 54,914 common shares. In addition, tax deposits totaling $10.4 million ($9.7 million for the same period in 2020) were made on behalf of employees in exchange for 26,279 common shares withheld upon vesting. A total of 532,471 RSUs were outstanding at September 30, 2021 (552,788 at December 31, 2020). During the nine months ended September 30, 2021, 37,000 RSUs were awarded where vesting is dependent upon meeting certain performance targets for 2021. As of September 30, 2021, these targets are expected to be met at 125% achievement. These RSUs resulted in $4.6 million in related compensation expense during the nine months ended September 30, 2021.
A total of $10.0 million and $30.2 million in RSU cost was recorded for the three and nine months ended September 30, 2021, respectively, as compared to $8.0 million and $18.4 million for the same periods in 2020. The amount for the three and nine months ended September 30, 2021 includes $4.4 million and $10.9 million, respectively, as compared to $2.5 million for each of the same periods in 2020, 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
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PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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.
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.
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PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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 September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
   (amounts in thousands)
Self-Storage Segment
Revenue $ 840,510  $ 683,949  $ 2,333,850  $ 2,022,692 
Cost of operations (216,999) (209,179) (631,699) (637,229)
   Net operating income 623,511  474,770  1,702,151  1,385,463 
Depreciation and amortization (188,552) (138,333) (508,139) (411,851)
   Net income 434,959  336,437  1,194,012  973,612 
Ancillary Segment
Revenue 54,421  50,596  157,658  143,840 
Cost of operations (19,735) (15,174) (52,044) (44,081)
   Net operating income 34,686  35,422  105,614  99,759 
Investment in PSB Segment (a) - Equity in earnings of unconsolidated entities 27,110  16,548  62,494  51,513 
Investment in Shurgard Segment (a) - Equity in earnings of unconsolidated entities 5,750  4,692  18,888  11,350 
    Total net income allocated to segments 502,505  393,099  1,381,008  1,136,234 
Other items not allocated to segments:
General and administrative (31,682) (18,262) (78,996) (53,234)
Interest and other income 3,356  7,192  9,321  18,976 
Interest expense (23,736) (14,282) (60,980) (42,048)
Foreign currency exchange gain (loss) 40,906  (41,900) 73,584  (52,250)
Gain on sale of real estate 279  —  13,683  1,117 
     Net income $ 491,628  $ 325,847  $ 1,337,620  $ 1,008,795 
(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
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PUBLIC STORAGE
NOTES TO FINANCIAL STATEMENTS
September 30, 2021
(unaudited)
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 September 30, 2021, there were approximately 1.1 million certificates held by our self-storage customers, representing aggregate coverage of approximately $4.7 billion.
Commitments
We have construction commitments representing future expected payments for construction under contract totaling $134.1 million at September 30, 2021. We expect to pay approximately $38.3 million in the remainder of 2021, $93.9 million in 2022 and $1.9 million in 2023 for these construction commitments.
We have future contractual payments on land, equipment and office space under various lease commitments totaling $66.3 million at September 30, 2021. We expect to pay approximately $0.7 million in the remainder of 2021, $3.1 million in 2022, $3.0 million in 2023, $2.9 million in each of 2024 and 2025 and $53.7 million thereafter for these commitments.
13.Subsequent Events
Subsequent to September 30, 2021, we acquired or were under contract to acquire 107 self-storage facilities across 16 states with 11.8 million net rentable square feet, for $2.3 billion, including the issuance of partnership units of approximately $80.0 million. These include a portfolio of 56 properties (7.5 million net rentable square feet) currently operated under the brand name of All Storage that we are under contract to purchase for $1.5 billion in cash. The acquisition, which is subject to the satisfaction of customary closing conditions, is expected to close in two separate tranches, with seven self-storage facilities closing in November 2021 and 49 self-storage facilities closing in December 2021.









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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 that 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 risk that the COVID Pandemic could adversely impact our ability to retain and hire employees, including as a result of vaccine or testing mandates;
•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;
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•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 that 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.
29

During the nine months ended September 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 nine months ended September 30, 2021, revenues generated by our Same Store Facilities (as defined below) increased 14.0% and 9.4%, 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 September 30, 2021, contract rent per occupied foot was 10.7% higher and square foot occupancy was 1.2% higher for our Same Store Facilities as compared to September 30, 2020, suggesting continued revenue growth during the remainder of 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 expansion of our existing self-storage facilities. Since the beginning of 2019, we acquired a total of 232 facilities with 18.5 million net rentable square feet for $4.1 billion, and within our non-same store portfolio have developed and expanded self-storage space for a total cost of $1.6 billion, adding 17.0 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.

Subsequent to September 30, 2021, we are under contract to acquire the All Storage portfolio consisting of 56 properties (7.5 million net rentable square feet) for $1.5 billion. These properties are located in submarkets with strong demand drivers and other desirable characteristics across Dallas-Ft. Worth (52 properties) and Oklahoma City. The acquisition, which is subject to the satisfaction of customary closing conditions, is expected to close in two separate tranches, with seven self-storage facilities closing in November 2021 and 49 self-storage facilities closing in December 2021.

Our strong financial profile continues to enable effective access to capital markets in order to support our growth, and during the nine months ended September 30, 2021, we raised an aggregate of $3.3 billion in three public debt offerings and $747.5 million in two public offerings 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, to include 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 $120.0 million in 2021 on this effort.
Results of Operations

Operating Results for the Three Months Ended September 30, 2021 and 2020

For the three months ended September 30, 2021, net income allocable to our common shareholders was $442.3 million or $2.52 per diluted common share, compared to $246.9 million or $1.41 per diluted common share in 2020 representing an increase of $195.4 million or $1.11 per diluted common share. The increase is due primarily to (i) a $148.7 million increase in self-storage net operating income (described below), (ii) a $82.8 million increase due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, (iii) a $23.3 million increase due to the impact of the redemption of preferred shares in the three months ended September 30, 2020, partially offset by (iv) a $50.2 million increase in depreciation and amortization expense.

The $148.7 million increase in self-storage net operating income is a result of a $96.2 million increase in our Same Store Facilities (as defined below), and a $52.5 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 14.0% or $87.8 million in the three months ended September 30, 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot
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occupancy. Cost of operations for the Same Store Facilities decreased by 4.6% or $8.5 million in the three months ended September 30, 2021 as compared to 2020, due primarily to a 43.3% ($7.0 million) decrease in marketing expenses, an 8.4% ($2.6 million) decrease in on-site property manager payroll, and a change in property tax timing contributing to a 2.7% ($2.0 million) decrease in property tax expense. The increase in net operating income of $52.5 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 Nine Months Ended September 30, 2021 and 2020

For the nine months ended September 30, 2021, net income allocable to our common shareholders was $1,174.4 million or $6.70 per diluted common share, compared to $806.2 million or $4.62 per diluted common share in 2020 representing an increase of $368.2 million or $2.08 per diluted common share. The increase is due primarily to (i) a $316.7 million increase in self-storage net operating income (described below), (ii) a $125.8 million increase due to the impact of foreign currency exchange gains and losses associated with our Euro denominated debt, partially offset by (iii) a $96.3 million increase in depreciation and amortization expense and (iv) a $25.8 million increase in general and administrative expense due primarily to increased share-based compensation expense.

The $316.7 million increase in self-storage net operating income is a result of a $216.9 million increase in our Same Store Facilities (as defined below), and a $99.8 million increase in our Non-Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 9.4% or $175.2 million in the nine months ended September 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 7.4% or $41.7 million in the nine months ended September 30, 2021 as compared to 2020, due primarily to (i) a 19.5% ($20.0 million) decrease in on-site property manager payroll, (ii) a 37.1% ($18.0 million) decrease in marketing expenses and (iii) a change in property tax timing contributing to our 6.2% ($13.4 million) decrease in property tax expense. The increase in net operating income of $99.8 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 September 30, 2021, FFO was $3.61 per diluted common share, as compared to $2.28 per diluted common share for the same period in 2020, representing an increase of 58.3%, or $1.33 per diluted common share.
For the nine months ended September 30, 2021, FFO was $9.69 per diluted common share, as compared to $7.18 per diluted common share for the same period in 2020, representing an increase of 35.0%, or $2.51 per diluted common share.
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The following tables reconcile diluted earnings per share to FFO per share and set forth the computation of FFO per share:

  Three Months Ended
September 30, 		Nine Months Ended
September 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 $ 2.52  $ 1.41  $ 6.70  $ 4.62 
Eliminate amounts per share excluded from FFO:            
Depreciation and amortization 1.17  0.88  3.17  2.63 
Gains on sale of real estate investments, including our equity share from investments (0.08) (0.01) (0.18) (0.07)
FFO per share $ 3.61  $ 2.28  $ 9.69  $ 7.18 
Computation of FFO per Share:
Net income allocable to common shareholders $ 442,327  $ 246,916  $ 1,174,386  $ 806,169 
Eliminate items excluded from FFO:
Depreciation and amortization 187,611  137,526  505,218  409,484 
Depreciation from unconsolidated real estate investments 19,209  17,492  54,485  52,607 
Depreciation allocated to noncontrolling interests and restricted share unitholders (1,318) (954) (3,413) (2,853)
Gains on sale of real estate investments, including our equity share from investments (12,572) (3,174) (31,156) (12,415)
FFO allocable to common shares $ 635,257  $ 397,806  $ 1,699,520  $ 1,252,992 
Diluted weighted average common shares 175,806  174,626  175,398  174,606 
FFO per share $ 3.61  $ 2.28  $ 9.69  $ 7.18 
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 non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of 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.
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The following table reconciles FFO per share to Core FFO per share:
  Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2021 2020 Percentage Change 2021 2020 Percentage Change
FFO per share $ 3.61  $ 2.28  58.3  % $ 9.69  $ 7.18  35.0  %
Eliminate the per share impact of items excluded from Core FFO, including our equity share from investments:
Foreign currency exchange (gain) loss (0.23) 0.24  (0.42) 0.30 
Preferred share redemption charge —  0.13  0.10  0.22 
Property losses and tenant claims due to casualties 0.03  —  0.03  — 
Other items 0.01  (0.02) (0.01) (0.02)
Core FFO per share $ 3.42  $ 2.63  30.0  % $ 9.39  $ 7.68  22.3  %
Analysis of Net Income by Reportable Segment
The following discussion and analysis is presented and organized in accordance with Note 11 to our September 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 2,274 facilities that we have owned and operated on a stabilized basis since January 1, 2019 (the “Same Store Facilities”), (ii) 232 facilities we acquired after December 31, 2018 (the “Acquired facilities”), (iii) 139 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) 33 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 September 30, 2021 financial statements “Segment Information,” for a reconciliation of the amounts in the tables below to our total net income.
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Self-Storage Operations    
Summary Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 Percentage Change 2021 2020 Percentage Change
  (Dollar amounts and square footage in thousands)
Revenues:
Same Store facilities $ 716,050  $ 628,286  14.0  % $ 2,042,832  $ 1,867,663  9.4  %
Acquired facilities 62,187  11,001  465.3  % 124,751  28,103  343.9  %
Newly developed and expanded facilities 55,100  38,375  43.6  % 145,960  108,449  34.6  %
Other non-same store facilities 7,173  6,287  14.1  % 20,307  18,477  9.9  %
840,510  683,949  22.9  % 2,333,850  2,022,692  15.4  %
Cost of operations (a):
Same Store facilities 175,609  184,068  (4.6) % 523,323  565,057  (7.4) %
Acquired facilities 20,064  4,880  311.1  % 45,918  13,630  236.9  %
Newly developed and expanded facilities 19,059  17,735  7.5  % 55,572  51,016  8.9  %
Other non-same store facilities 2,267  2,496  (9.2) % 6,886  7,526  (8.5) %
216,999  209,179  3.7  % 631,699  637,229  (0.9) %
Net operating income (b):
Same Store facilities 540,441  444,218  21.7  % 1,519,509  1,302,606  16.7  %
Acquired facilities 42,123  6,121  588.2  % 78,833  14,473  444.7  %
Newly developed and expanded facilities 36,041  20,640  74.6  % 90,388  57,433  57.4  %
Other non-same store facilities 4,906  3,791  29.4  % 13,421  10,951  22.6  %
Total net operating income 623,511  474,770  31.3  % 1,702,151  1,385,463  22.9  %
Depreciation and amortization expense:
Same Store facilities (112,656) (112,092) 0.5  % (332,079) (333,650) (0.5) %
Acquired facilities (55,986) (7,223) 675.1  % (114,297) (22,292) 412.7  %
Newly developed and expanded facilities (14,977) (13,596) 10.2  % (46,126) (39,796) 15.9  %
Other non-same store facilities (4,933) (5,422) (9.0) % (15,637) (16,113) (3.0) %
Total depreciation and amortization expense (188,552) (138,333) 36.3  % (508,139) (411,851) 23.4  %
Net income (loss):
Same Store facilities 427,785  332,126  28.8  % 1,187,430  968,956  22.5  %
Acquired facilities (13,863) (1,102) 1158.0  % (35,464) (7,819) 353.6  %
Newly developed and expanded facilities 21,064  7,044  199.0  % 44,262  17,637  151.0  %
Other non-same store facilities (27) (1,631) (98.3) % (2,216) (5,162) (57.1) %
Total net income $ 434,959  $ 336,437  29.3  % $ 1,194,012  $ 973,612  22.6  %
Number of facilities at period end:
Same Store facilities 2,274  2,274  —
Acquired facilities 232  63  268.3  %
Newly developed and expanded facilities 139  133  4.5  %
Other non-same store facilities 33  34  (2.9) %
2,678  2,504  6.9  %
Net rentable square footage at period end:
Same Store facilities 148,695  148,695  —
Acquired facilities 18,524  4,539  308.1  %
Newly developed and expanded facilities 17,000  15,469  9.9  %
Other non-same store facilities 2,158  2,303  (6.3) %
186,377  171,006  9.0  %
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(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 nine months ended September 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $9.4 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 nine months ended September 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 September 30, 2021 financial statements for a reconciliation of NOI to our total net income for all periods presented.
Same Store Facilities

The Same Store Facilities consist of facilities we have owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2019. Our Same Store Facilities decreased from 2,278 facilities at June 30, 2021 to 2,274 facilities at September 30, 2021. The composition of our Same Store Facilities allows us more effectively to 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 investors and analysts use Same Store information 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 2,274 facilities (148.7 million net rentable square feet) that represent approximately 80% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at September 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.

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Selected Operating Data for the Same Store Facilities (2,274 facilities)

  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 Percentage Change 2021 2020 Percentage Change
  (Dollar amounts in thousands, except for per square foot data)
Revenues (a):
Rental income $ 694,589  $ 609,150  14.0% $ 1,982,274  $ 1,803,659  9.9%
Late charges and administrative fees 21,461  19,136  12.1% 60,558  64,004  (5.4)%
Total revenues 716,050  628,286  14.0% 2,042,832  1,867,663  9.4%
Direct cost of operations (a):
Property taxes 69,573  71,533  (2.7)% 203,172  216,595  (6.2)%
On-site property manager payroll 28,116  30,701  (8.4)% 82,412  102,390  (19.5)%
Repairs and maintenance 13,078  12,954  1.0% 39,139  37,302  4.9%
Utilities 11,051  11,278  (2.0)% 31,102  31,665  (1.8)%
Marketing 9,143  16,131  (43.3)% 30,535  48,512  (37.1)%
Other direct property costs 18,851  17,071  10.4% 55,433  50,872  9.0%
Total direct cost of operations 149,812  159,668  (6.2)% 441,793  487,336  (9.3)%
Direct net operating income (b) 566,238  468,618  20.8% 1,601,039  1,380,327  16.0%
Indirect cost of operations (a):
Supervisory payroll (8,320) (9,831) (15.4)% (27,768) (31,786) (12.6)%
Centralized management costs (13,757) (11,464) 20.0% (39,990) (36,510) 9.5%
Share-based compensation (3,720) (3,105) 19.8% (13,772) (9,425) 46.1%
Net operating income 540,441  444,218  21.7% 1,519,509  1,302,606  16.7%
Depreciation and amortization expense (112,656) (112,092) 0.5% (332,079) (333,650) (0.5)%
Net income $ 427,785  $ 332,126  28.8% $ 1,187,430  $ 968,956  22.5%
Gross margin (before indirect costs, depreciation and amortization expense) 79.1% 74.6% 6.0% 78.4% 73.9% 6.1%
Gross margin (before depreciation and amortization expense) 75.5% 70.7% 6.8% 74.4% 69.7% 6.7%
Weighted average for the period:
Square foot occupancy 96.8% 95.5% 1.4% 96.5% 94.3% 2.3%
Realized annual rental income per (c):
Occupied square foot $ 19.30 $ 17.16 12.5% $ 18.42 $ 17.16 7.3%
Available square foot $ 18.68 $ 16.39 14.0% $ 17.77 $ 16.18 9.8%
At September 30:
Square foot occupancy 95.7% 94.6% 1.2%
Annual contract rent per occupied square foot (d) $ 19.56 $ 17.67 10.7%
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(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 who 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 14.0% and 9.4% for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase is due primarily to (i) a 12.5% and 7.3% increase in realized annual rent per occupied square foot for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020, and (ii) a 1.4% and 2.3% increase in average occupancy for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The same store revenue growth for the nine months ended September 30, 2021 was partially offset by a 5.4% 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 nine months ended September 30, 2021 as compared to the same period in 2020 was evident in substantially all of our markets including each of our top 15 markets.
For the three and nine months ended September 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 during 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 nine months ended September 30, 2021 as compared to the same periods in 2020 was due to (i) a 23.5% and 28.1% year over year increase in average rates per square foot charged to new tenants moving in during the three and nine 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 September 30, 2021, annual contract rent per occupied square foot was 10.7% higher as compared to September 30, 2020.
We experienced high occupancy levels throughout the first nine months of 2021. Our average square foot occupancy levels increased 1.4% and 2.3% on a year over year basis during the three and nine months ended September 30, 2021, respectively. At September 30, 2021, our square foot occupancy was 95.7%. The improvement in occupancy trends was due primarily to improved trends in move-outs, with year over year move-outs down 6.1% and 8.9% in the three and nine months ended September 30, 2021, respectively. This resulted in an increased average length of stay for the three and nine months ended September 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
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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 nine months ended September 30, 2021 by 70.3% and 49.2%, 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 12.1% for the three months ended September 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 5.4% year over year for the nine months ended September 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 (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 nine months ended September 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 September 30, Nine Months Ended September 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 $ 18.47  $ 14.95  23.5% $ 16.92  $ 13.21  28.1%
Square footage 23,590  26,548  (11.1)% 71,356  80,138  (11.0)%
Contract revenue gained from move-ins $ 108,927  $ 99,223  9.8% $ 905,508  $ 793,967  14.0%
Promotional discounts given $ 5,858  $ 19,697  (70.3)% $ 29,996  $ 59,105  (49.2)%
Tenants moving out during the period:
Average annual contract rent per square foot $ 18.24  $ 15.52  17.5% $ 17.21  $ 15.52  10.9%
Square footage 24,885  26,496  (6.1)% 68,914  75,611  (8.9)%
Contract revenue lost from move-outs $ 113,476  $ 102,804  10.4% $ 889,507  $ 880,112  1.1%

Revenue Expectations
At September 30, 2021, in place contractual rent was 11.9% higher on a year-over-year basis (comprised of a 1.2% increase in square foot occupancy and a 10.7% increase in annual contract rent per occupied foot).
For the remainder of 2021, we expect continued year-over-year revenue growth supported by strength in rates as a result of stable customer demand.
Analysis of Same Store Cost of Operations
Cost of operations (excluding depreciation and amortization) decreased 4.6% and 7.4% in the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020, due primarily to decreased marketing, on-site property manager payroll, and property tax expense.
Property tax expense decreased 2.7% and 6.2% in the three and nine months ended September 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 4.8% for the year ending December 31, 2021 compared to
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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. Amount for the three months ended December 31, 2021 is 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 $ 66,481 $ 72,692
June 30 67,118 72,370
September 30 69,573 71,533
December 31 66,737 41,164
$ 269,909 $ 257,759
On-site property manager payroll expense decreased 8.4% and 19.5% in the three and nine months ended September 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 in response to 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. In addition, since the second quarter of 2021, we have been experiencing very competitive labor conditions in most geographical markets. In response, on October 1, 2021, we increased the wages of all of our property employees by an average of 7.5%, bringing our average pay for non-resident property employees, those not receiving rent and utility free housing, to $15 per hour.
Repairs and maintenance expense increased 1.0% and 4.9% in the three and nine months ended September 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 consist 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 2.0% and 1.8% in the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The decrease experienced in the three and nine months ended September 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 comprised principally Internet advertising and the operating costs of our telephone reservation center. Internet advertising expense, comprising primarily 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 43.3% and 37.1% in the three and nine months ended September 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 10.4% and 9.0% in the three and nine months ended September 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 15.4% and 12.6% in the three and nine months ended September 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
39

management costs increased 20.0% and 9.5% in the three and nine months ended September 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. 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 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 nine months ended September 30, 2021, share-based compensation expense increased 19.8% and 46.1%, 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 nine months ended September 30, 2020 and the accelerated compensation costs recognized in the three and nine months ended September 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 increased 0.5% and decreased 0.5% in the three and nine months ended September 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.
40

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 $ 646,897 $ 679,885 $ 716,050
2020 $ 625,818 $ 613,559 $ 628,286 $ 637,256 $ 2,504,919
Total cost of operations:
2021 $ 180,768 $ 166,946 $ 175,609
2020 $ 188,922 $ 192,067 $ 184,068 $ 146,394 $ 711,451
Property taxes:
2021 $ 66,481 $ 67,118 $ 69,573
2020 $ 72,692 $ 72,370 $ 71,533 $ 41,164 $ 257,759
Repairs and maintenance:
2021 $ 13,008 $ 13,053 $ 13,078      
2020 $ 12,698 $ 11,650 $ 12,954 $ 13,461 $ 50,763
Marketing:
2021 $ 14,558 $ 6,834 $ 9,143
2020 $ 14,782 $ 17,599 $ 16,131 $ 13,505 $ 62,017
REVPAF:
2021 $ 16.86 $ 17.77 $ 18.68
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 $ 19.30
2020 $ 17.33 $ 17.00 $ 17.16 $ 17.46 $ 17.24
Weighted average occupancy levels for the period:
2021 95.6% 97.0% 96.8%
2020 93.0% 94.2% 95.5% 95.2% 94.5%
41

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 September 30, 2021
For the Three Months Ended September 30,
  Number
of
Facilities 		Square
Feet
(millions) 		Realized Rent per
Occupied Square Foot 		Average Occupancy Realized Rent per
Available Square Foot
  2021 2020 Change 2021 2020 Change 2021 2020 Change
Los Angeles 213 15.2 $ 27.98  $ 25.96  7.8  % 98.4  % 97.4  % 1.0  % $ 27.53  $ 25.29  8.9  %
San Francisco 130 8.1 28.57  26.37  8.3  % 97.1  % 97.5  % (0.4) % 27.74  25.71  7.9  %
New York 90 6.4 27.94  25.71  8.7  % 96.5  % 96.7  % (0.2) % 26.98  24.86  8.5  %
Seattle-Tacoma 87 5.9 22.69  20.26  12.0  % 96.1  % 95.3  % 0.8  % 21.80  19.32  12.8  %
Miami 83 5.8 23.19  19.40  19.5  % 97.5  % 95.5  % 2.1  % 22.60  18.52  22.0  %
Washington DC 89 5.5 23.44  20.98  11.7  % 95.4  % 95.6  % (0.2) % 22.37  20.06  11.5  %
Chicago 129 8.1 17.31  14.78  17.1  % 96.2  % 95.6  % 0.6  % 16.66  14.13  17.9  %
Atlanta 98 6.4 15.09  12.99  16.2  % 97.1  % 93.5  % 3.9  % 14.65  12.15  20.6  %
Dallas-Ft. Worth 102 6.6 15.29  13.28  15.1  % 96.2  % 93.7  % 2.7  % 14.71  12.45  18.2  %
Houston 92 6.4 14.12  12.46  13.3  % 94.7  % 92.8  % 2.0  % 13.37  11.56  15.7  %
Orlando-Daytona 70 4.5 15.29  13.49  13.3  % 96.3  % 94.7  % 1.7  % 14.72  12.78  15.2  %
Philadelphia 56 3.5 19.09  16.95  12.6  % 97.5  % 97.0  % 0.5  % 18.62  16.45  13.2  %
West Palm Beach 40 2.9 21.73  17.87  21.6  % 96.6  % 95.3  % 1.4  % 21.00  17.03  23.3  %
Tampa 52 3.5 16.12  13.52  19.2  % 96.7  % 94.3  % 2.5  % 15.59  12.75  22.3  %
Charlotte 50 3.8 12.94  10.97  18.0  % 96.7  % 94.1  % 2.8  % 12.51  10.32  21.2  %
All other markets 893 56.1 16.08  14.13  13.8  % 96.8  % 95.5  % 1.4  % 15.57  13.50  15.3  %
Totals 2,274 148.7 $ 19.30  $ 17.16  12.5  % 96.8  % 95.5  % 1.4  % $ 18.68  $ 16.39  14.0  %

42

Same Store Facilities Operating Trends by Market (Continued)

 
For the Three Months Ended September 30,
  Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)
  2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change
Los Angeles $ 106,385  $ 97,749  8.8  % $ 14,802  $ 15,875  (6.8) % $ 2,503  $ 2,351  6.5  % $ 89,080  $ 79,523  12.0  %
San Francisco 57,351  52,987  8.2  % 9,243  9,124  1.3  % 1,604  1,501  6.9  % 46,504  42,362  9.8  %
New York 44,463  40,787  9.0  % 10,589  11,598  (8.7) % 1,304  1,201  8.6  % 32,570  27,988  16.4  %
Seattle-Tacoma 32,951  29,251  12.6  % 5,620  6,091  (7.7) % 999  1,015  (1.6) % 26,332  22,145  18.9  %
Miami 33,813  27,763  21.8  % 7,437  7,976  (6.8) % 959  960  (0.1) % 25,417  18,827  35.0  %
Washington DC 31,506  28,253  11.5  % 6,622  7,006  (5.5) % 929  879  5.7  % 23,955  20,368  17.6  %
Chicago 35,024  29,753  17.7  % 13,904  14,020  (0.8) % 1,396  1,298  7.6  % 19,724  14,435  36.6  %
Atlanta 24,695  20,524  20.3  % 4,414  5,001  (11.7) % 1,094  1,013  8.0  % 19,187  14,510  32.2  %
Dallas-Ft. Worth 25,106  21,283  18.0  % 5,836  6,747  (13.5) % 1,037  984  5.4  % 18,233  13,552  34.5  %
Houston 22,119  19,145  15.5  % 7,021  6,921  1.4  % 1,014  954  6.3  % 14,084  11,270  25.0  %
Orlando-Daytona 17,036  14,824  14.9  % 3,309  3,992  (17.1) % 792  705  12.3  % 12,935  10,127  27.7  %
Philadelphia 17,053  15,075  13.1  % 3,728  4,030  (7.5) % 651  663  (1.8) % 12,674  10,382  22.1  %
West Palm Beach 15,436  12,530  23.2  % 3,362  3,258  3.2  % 510  497  2.6  % 11,564  8,775  31.8  %
Tampa 13,999  11,476  22.0  % 3,127  3,442  (9.2) % 575  510  12.7  % 10,297  7,524  36.9  %
Charlotte 12,404  10,264  20.8  % 2,421  2,420  —  % 511  481  6.2  % 9,472  7,363  28.6  %
All other markets 226,709  196,622  15.3  % 48,377  52,167  (7.3) % 9,919  9,388  5.7  % 168,413  135,067  24.7  %
Totals $ 716,050  $ 628,286  14.0  % $ 149,812  $ 159,668  (6.2) % $ 25,797  $ 24,400  5.7  % $ 540,441  $ 444,218  21.7  %

43

Same Store Facilities Operating Trends by Market (Continued)

 
As of September 30, 2021
For the Nine Months Ended September 30,
  Number
of
Facilities 		Square
Feet
(millions) 		Realized Rent per
Occupied Square Foot 		Average Occupancy Realized Rent per
Available Square Foot
  2021 2020 Change 2021 2020 Change 2021 2020 Change
Los Angeles 213 15.2 $ 27.20  $ 25.87  5.1  % 98.2  % 96.3  % 2.0  % $ 26.72  $ 24.90  7.3  %
San Francisco 130 8.1 27.67  26.35  5.0  % 97.5  % 95.5  % 2.1  % 26.96  25.15  7.2  %
New York 90 6.4 27.08  25.76  5.1  % 96.5  % 94.8  % 1.8  % 26.13  24.43  7.0  %
Seattle-Tacoma 87 5.9 21.66  20.23  7.1  % 95.8  % 94.0  % 1.9  % 20.74  19.03  9.0  %
Miami 83 5.8 21.77  19.70  10.5  % 97.0  % 93.8  % 3.4  % 21.12  18.48  14.3  %
Washington DC 89 5.5 22.36  21.04  6.3  % 95.6  % 94.2  % 1.5  % 21.38  19.82  7.9  %
Chicago 129 8.1 16.30  14.88  9.5  % 96.0  % 93.6  % 2.6  % 15.64  13.92  12.4  %
Atlanta 98 6.4 14.18  13.17  7.7  % 96.2  % 92.5  % 4.0  % 13.64  12.19  11.9  %
Dallas-Ft. Worth 102 6.6 14.43  13.37  7.9  % 96.0  % 92.9  % 3.3  % 13.84  12.42  11.4  %
Houston 92 6.4 13.43  12.64  6.2  % 94.4  % 91.8  % 2.8  % 12.68  11.61  9.2  %
Orlando-Daytona 70 4.5 14.47  13.53  6.9  % 96.2  % 94.2  % 2.1  % 13.92  12.75  9.2  %
Philadelphia 56 3.5 18.21  16.72  8.9  % 97.4  % 95.8  % 1.7  % 17.73  16.03  10.6  %
West Palm Beach 40 2.9 20.35  18.00  13.1  % 96.8  % 94.2  % 2.8  % 19.70  16.96  16.2  %
Tampa 52 3.5 15.08  13.68  10.2  % 96.3  % 92.9  % 3.7  % 14.52  12.71  14.2  %
Charlotte 50 3.8 12.14  11.07  9.7  % 95.9  % 92.3  % 3.9  % 11.65  10.22  14.0  %
All other markets 893 56.1 15.26  14.07  8.5  % 96.4  % 94.4  % 2.1  % 14.71  13.28  10.8  %
Totals 2,274 148.7 $ 18.42  $ 17.16  7.3  % 96.5  % 94.3  % 2.3  % $ 17.77  $ 16.18  9.8  %

44

Same Store Facilities Operating Trends by Market (Continued)

 
For the Nine Months Ended September 30,
  Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)
  2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change
Los Angeles $ 309,560  $ 289,372  7.0  % $ 43,786  $ 49,067  (10.8) % $ 8,076  $ 7,630  5.8  % $ 257,698  $ 232,675  10.8  %
San Francisco 166,975  156,057  7.0  % 26,144  28,237  (7.4) % 5,097  4,752  7.3  % 135,734  123,068  10.3  %
New York 129,251  121,249  6.6  % 31,942  36,059  (11.4) % 4,076  3,890  4.8  % 93,233  81,300  14.7  %
Seattle-Tacoma 93,997  86,751  8.4  % 17,291  19,058  (9.3) % 3,116  3,081  1.1  % 73,590  64,612  13.9  %
Miami 94,884  83,440  13.7  % 20,204  24,161  (16.4) % 3,099  3,060  1.3  % 71,581  56,219  27.3  %
Washington DC 90,275  84,169  7.3  % 19,835  21,656  (8.4) % 2,977  2,857  4.2  % 67,463  59,656  13.1  %
Chicago 98,584  88,269  11.7  % 38,191  40,447  (5.6) % 4,330  4,233  2.3  % 56,063  43,589  28.6  %
Atlanta 69,054  62,154  11.1  % 13,681  15,608  (12.3) % 3,555  3,196  11.2  % 51,818  43,350  19.5  %
Dallas-Ft. Worth 70,909  63,964  10.9  % 17,132  20,695  (17.2) % 3,297  3,151  4.6  % 50,480  40,118  25.8  %
Houston 62,932  57,889  8.7  % 20,153  20,533  (1.9) % 3,184  3,095  2.9  % 39,595  34,261  15.6  %
Orlando-Daytona 48,397  44,561  8.6  % 10,174  12,202  (16.6) % 2,478  2,156  14.9  % 35,745  30,203  18.3  %
Philadelphia 48,695  44,354  9.8  % 11,455  12,126  (5.5) % 2,031  2,114  (3.9) % 35,209  30,114  16.9  %
West Palm Beach 43,471  37,589  15.6  % 9,404  9,713  (3.2) % 1,634  1,553  5.2  % 32,433  26,323  23.2  %
Tampa 39,156  34,456  13.6  % 9,068  10,510  (13.7) % 1,847  1,639  12.7  % 28,241  22,307  26.6  %
Charlotte 34,659  30,590  13.3  % 6,808  7,326  (7.1) % 1,626  1,551  4.8  % 26,225  21,713  20.8  %
All other markets 642,033  582,799  10.2  % 146,525  159,938  (8.4) % 31,107  29,763  4.5  % 464,401  393,098  18.1  %
Totals $ 2,042,832  $ 1,867,663  9.4  % $ 441,793  $ 487,336  (9.3) % $ 81,530  $ 77,721  4.9  % $ 1,519,509  $ 1,302,606  16.7  %

45

Acquired Facilities
The Acquired Facilities represent 232 facilities that we acquired in 2019, 2020, and within the first nine 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 September 30, Nine Months Ended September 30,
2021 2020 Change (a) 2021 2020 Change (a)
($ amounts in thousands, except for per square foot amounts)
Revenues (b):
2019 Acquisitions
$ 11,180 $ 8,141 $ 3,039  $ 30,249 $ 22,735 $ 7,514
2020 Acquisitions
15,613 2,860 12,753  38,451 5,368 33,083
2021 Acquisitions
35,394 — 35,394  56,051 — 56,051
    Total revenues 62,187 11,001 51,186  124,751 28,103 96,648
Cost of operations (b):
2019 Acquisitions
3,509 3,034 475  10,225 9,960 265
2020 Acquisitions
6,113 1,846 4,267  18,990 3,670 15,320
2021 Acquisitions
10,442 — 10,442  16,703 — 16,703
    Total cost of operations 20,064 4,880 15,184  45,918 13,630 32,288
Net operating income:
2019 Acquisitions
7,671 5,107  2,564  20,024 12,775 7,249
2020 Acquisitions
9,500 1,014  8,486  19,461 1,698 17,763
2021 Acquisitions
24,952 —  24,952  39,348 — 39,348
    Net operating income 42,123 6,121  36,002  78,833 14,473 64,360
Depreciation and amortization expense (55,986) (7,223) (48,763) (114,297) (22,292) (92,005)
   Net loss $ (13,863) $ (1,102) $ (12,761) $ (35,464) $ (7,819) $ (27,645)
At September 30:
Square foot occupancy:
2019 Acquisitions
94.0% 91.5% 2.7%
2020 Acquisitions
90.0% 80.0% 12.5%
2021 Acquisitions
87.0% — —
89.1% 88.0% 1.3%
Annual contract rent per occupied square foot:
2019 Acquisitions
$ 14.96 $ 11.41 31.1%
2020 Acquisitions
14.03 13.00 7.9%
2021 Acquisitions
17.57 — —
$ 16.12 $ 11.85 36.0%
Number of facilities:
2019 Acquisitions
44 44 —
2020 Acquisitions
62 19 43
2021 Acquisitions
126 — 126
232 63 169
Net rentable square feet (in thousands):
2019 Acquisitions
3,154 3,154 —
2020 Acquisitions
5,075 1,385 3,690
2021 Acquisitions
10,295 — 10,295
18,524 4,539 13,985
46

ACQUIRED FACILITIES (Continued)
As of
September 30, 2021
Costs to acquire (in thousands):   
2019 Acquisitions
$ 429,850
2020 Acquisitions
796,065
2021 Acquisitions
2,845,284
  $ 4,071,199
(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 18.5 million net rentable square feet, including 3.6 million in Maryland, 1.9 million in Virginia, 1.8 million in Texas, 0.8 million in Florida, 0.7 million in each of Arizona and Georgia, 0.6 million in each of California, Illinois, Indiana, Ohio and South Carolina, 0.5 million in each of Idaho, Michigan, Nebraska, North Carolina and Pennsylvania, 0.4 million in each of Colorado, Minnesota and Washington, 0.3 million in each of Alabama, Massachusetts, Missouri and Tennessee and 1.1 million in other states.
For the nine months ended September 30, 2021, the weighted average annualized yield on cost, based upon net operating income, for the 44 facilities acquired in 2019 was 6.2%. 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 nine months ended September 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 $22.7 million, NOI of $17.8 million (including Direct NOI of $18.4 million) and square footage occupancy of 93.8% for the three months ended September 30, 2021.
Subsequent to September 30, 2021, we acquired or were under contract to acquire 107 self-storage facilities across 16 states with 11.8 million net rentable square feet, for $2.3 billion. These include the All Storage portfolio of 56 properties (7.5 million net rentable square feet) that we are under contract to acquire for $1.5 billion. The acquisition, which is subject to the satisfaction of customary closing conditions, is expected to close in two separate tranches, with seven self-storage facilities closing in November 2021 and 49 self-storage facilities closing in December 2021.
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 September 30, 2021 and 2020 totaled $56.0 million and $7.2 million, respectively, and $114.3 million and $22.3 million for the nine months ended September 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 September 30, 2021, depreciation of buildings and amortization of tenant intangibles is expected to aggregate approximately $166.2 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.
47

Developed and Expanded Facilities
The developed and expanded facilities include 68 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, 19 were completed in the 21 months ended September 30, 2021, and 8 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 September 30, Nine Months Ended September 30,
2021 2020 Change (a) 2021 2020 Change (a)
($ amounts in thousands, except for per square foot amounts)
Revenues (b):
Developed in 2016 $ 9,241 $ 7,237 $ 2,004 $ 25,459 $ 20,942 $ 4,517
Developed in 2017 7,317 5,520 1,797 20,021 15,761 4,260
Developed in 2018 7,569 5,267 2,302 20,391 14,467 5,924
Developed in 2019 3,313 1,831 1,482 8,470 4,349 4,121
Developed in 2020 1,062 79 983 2,093 86 2,007
Developed in 2021 558 — 558 706 — 706
Expansions completed before 2020 17,568 11,978 5,590 46,770 33,738 13,032
Expansions completed in 2020 or 2021 6,554 3,935 2,619 16,178 11,601 4,577
Expansions in process 1,918 2,528 (610) 5,872 7,505 (1,633)
     Total revenues 55,100 38,375 16,725 145,960 108,449 37,511
Cost of operations (b):
Developed in 2016 2,384 2,480 (96) 7,214 7,584 (370)
Developed in 2017 2,540 2,702 (162) 7,461 7,685 (224)
Developed in 2018 2,669 2,605 64 7,774 7,993 (219)
Developed in 2019 1,222 1,159 63 3,917 3,546 371
Developed in 2020 432 157 275 1,275 209 1,066
Developed in 2021 400 — 400 890 — 890
Expansions completed before 2020 6,323 6,456 (133) 18,512 17,571 941
Expansions completed in 2020 or 2021 2,615 1,559 1,056 6,981 4,560 2,421
Expansions in process 474 617 (143) 1,548 1,868 (320)
     Total cost of operations 19,059 17,735 1,324 55,572 51,016 4,556
Net operating income (loss):
Developed in 2016 6,857 4,757 2,100 18,245 13,358 4,887
Developed in 2017 4,777 2,818 1,959 12,560 8,076 4,484
Developed in 2018 4,900 2,662 2,238 12,617 6,474 6,143
Developed in 2019 2,091 672 1,419 4,553 803 3,750
Developed in 2020 630 (78) 708 818 (123) 941
Developed in 2021 158 — 158 (184) — (184)
Expansions completed before 2020 11,245 5,522 5,723 28,258 16,167 12,091
Expansions completed in 2020 or 2021 3,939 2,376 1,563 9,197 7,041 2,156
Expansions in process 1,444 1,911 (467) 4,324 5,637 (1,313)
     Net operating income 36,041 20,640 15,401 90,388 57,433 32,955
Depreciation and amortization expense (14,977) (13,596) (1,381) (46,126) (39,796) (6,330)
     Net income $ 21,064 $ 7,044 $ 14,020 $ 44,262 $ 17,637  $ 26,625 

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DEVELOPED AND EXPANDED FACILITIES (Continued)
 
As of September 30,
  2021 2020 Change (a)
  ($ amounts in thousands, except for per square foot amounts)
Square foot occupancy:        
Developed in 2016 93.0% 91.8% 1.3%
Developed in 2017 91.7% 89.2% 2.8%
Developed in 2018 90.5% 87.1% 3.9%
Developed in 2019 89.9% 84.7% 6.1%
Developed in 2020 90.0% 31.7% 183.9%
Developed in 2021 44.0% — —
Expansions completed before 2020 89.9% 82.3% 9.2%
Expansions completed in 2020 or 2021 78.3% 67.1% 16.7%
Expansions in process 82.5% 82.9% (0.5)%
87.3% 83.0% 5.2%
Annual contract rent per occupied square foot:
Developed in 2016 $ 18.26 $ 14.73 24.0%
Developed in 2017 15.35 12.08 27.1%
Developed in 2018 16.18 11.99 34.9%
Developed in 2019 13.65 8.64 58.0%
Developed in 2020 15.16 8.96 69.2%
Developed in 2021 13.64 — —
Expansions completed before 2020 13.43 10.25 31.0%
Expansions completed in 2020 or 2021 15.33 15.14 1.3%
Expansions in process 20.12 18.59 8.2%
  $ 15.15 $ 11.99 26.4%
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 4 — 4
Expansions completed before 2020 44 44 —
Expansions completed in 2020 or 2021 19 18 1
Expansions in process 8 8 —
  139 133 6
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 502 — 502
Expansions completed before 2020 5,822 5,818 4
Expansions completed in 2020 or 2021 2,576 1,619 957
Expansions in process 446 479 (33)
  17,000 15,469 1,531
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As of
September 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 89,125
Expansions completed before 2020 (d) 381,940
Expansions completed in 2020 or 2021 (d) 178,768
  $ 1,601,926
(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 17.0 million net rentable square feet at September 30, 2021, including 6.0 million in Texas, 2.6 million in Florida, 1.9 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 0.5 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 nine months ended September 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 September 30, 2021, we had a development pipeline to develop 21 new self-storage facilities and expand 31 existing self-storage facilities, which will add approximately 4.6 million net rentable square feet at a cost of $730.6 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.
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 we may achieve 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 21 additional newly developed facilities in process, which will have a total of 1.7 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $272.8 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
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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 September 30, 2021 We incurred a total of $560.7 million in direct cost to expand these facilities, demolished a total of 1.1 million net rentable square feet of storage space, and built a total of 5.3 million net rentable square feet of new storage space.
The facilities under “expansions in process” represent those facilities where development is in process at September 30, 2021 or which will commence construction by December 31, 2021. We have a pipeline to add a total of 2.9 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $457.8 million.
Analysis of Depreciation and Amortization of Developed and Expanded Facilities
Depreciation and amortization with respect to the Developed and Expanded Facilities totaled $15.0 million and $46.1 million for the three and nine months ended September 30, 2021, respectively, as compared to $13.6 million and $39.8 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 September 30, 2021, depreciation of buildings is expected to aggregate approximately $62.5 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 2.2 million net rentable square feet, including 0.6 million in Texas, 0.3 million in California, 0.2 million in each of Georgia, Ohio and Tennessee and 0.7 million in other states.
The net operating income for these facilities was $4.9 million and $13.4 million in the three and nine months ended September 30, 2021, respectively, as compared to $3.8 million and $11.0 million for the same periods in 2020. During the three and nine months ended September 30, 2021, the average occupancy for these facilities totaled 93.1% and 91.8%, respectively, as compared to 89.8% and 84.2% for the same periods in 2020, and the realized rent per occupied square feet totaled $14.27 and $13.66, respectively, as compared to $12.77 and $13.31 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 $4.9 million and $15.6 million for the three and nine months ended September 30, 2021, respectively, as compared to $5.4 million and $16.1 million for the same periods in 2020. We expect that depreciation for the remainder of 2021 will approximate the level experienced in the nine months ended September 30, 2021.

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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 September 30, Nine Months Ended September 30,
  2021 2020 Change 2021 2020 Change
  (Amounts in thousands)
Revenues:
Tenant reinsurance premiums $ 42,774 $ 38,698 $ 4,076 $ 123,271 $ 110,327 $ 12,944
Merchandise 7,384 8,010 (626) 21,932 23,005 (1,073)
Third party property management 4,263 3,888 375 12,455 10,508 1,947
Total revenues 54,421 50,596 3,825 157,658 143,840 13,818
Cost of operations:
Tenant reinsurance 11,029 6,544 4,485 26,115 20,611 5,504
Merchandise 4,476 4,850 (374) 13,148 13,510 (362)
Third party property management 4,230 3,780 450 12,781 9,960 2,821
Total cost of operations 19,735 15,174 4,561 52,044 44,081 7,963
Net operating income (loss):
Tenant reinsurance 31,745 32,154 (409) 97,156 89,716 7,440
Merchandise 2,908 3,160 (252) 8,784 9,495 (711)
Third party property management 33 108 (75) (326) 548 (874)
Total net operating income $ 34,686 $ 35,422 $ (736) $ 105,614 $ 99,759 $ 5,855
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 $4.1 million or 10.5% for the three months ended September 30, 2021, and increased $12.9 million or 11.7% for the nine months ended September 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 $33.7 million and $100.0 million for the three and nine months ended September 30, 2021, respectively, as compared to $32.8 million and $95.2 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 $11.0 million and $26.1 million for the three and nine months ended September 30, 2021, respectively, as compared to $6.5 million and $20.6 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 September 30, 2021, we manage 102 facilities for unrelated third parties, and were under contract to manage 43 additional facilities including 37 facilities that are currently under construction. While we expect this business to increase in scope and size, we do not 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.
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Revenues and cost operations from our third party management activities of $3.9 million and $3.8 million, respectively, for the three months ended September 30, 2020, and $10.5 million and $10.0 million, respectively, for the nine months ended September 30, 2020, previously reported within interest and other income, have been reclassified to third party property management revenues and third party property management cost of operations, respectively, to conform to the September 30, 2021 presentation.
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 September 30, Nine Months Ended September 30,
  2021 2020 Change 2021 2020 Change
  (Amounts in thousands)
Equity in earnings:
PSB $ 27,110 $ 16,548 $ 10,562 $ 62,494 $ 51,513 $ 10,981
Shurgard 5,750 4,692 1,058 18,888 11,350 7,538
Total equity in earnings $ 32,860 $ 21,240 $ 11,620 $ 81,382 $ 62,863 $ 18,519
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 September 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 $10.6 million and $11.0 million in the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. Included in our equity earnings from PSB is our equity share of gains on sale of real estate totaling $12.4 million and $20.3 million for the three and nine months ended September 30, 2021, respectively, as compared to $3.2 million and $11.3 million in 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 September 30, 2021, Shurgard owned 247 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 September 30, 2021 financial statements.
Equity in earnings from Shurgard increased $1.1 million and $7.5 million in the three and nine months ended September 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 1.159 U.S. Dollars per Euro at September 30, 2021 (1.226 at December 31, 2020), and average exchange rates of 1.179 and 1.168 for the three months ended September 30, 2021 and 2020, respectively, and average exchange rates of 1.196 and 1.124 for the nine months ended September 30, 2021 and 2020, respectively.


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Analysis of items not allocated to segments

General and administrative expense: The following table sets forth our general and administrative expense:
  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 Change 2021 2020 Change
  (Amounts in thousands)
Share-based compensation expense $ 9,746 $ 5,278 $ 4,468 $ 30,019 $ 11,080 $ 18,939
Costs of senior executives 850 327 523 2,550 2,294 256
Development and acquisition costs 1,857 1,620 237 5,411 8,319 (2,908)
Tax compliance costs and taxes paid 4,433 1,711 2,722 7,879 4,740 3,139
Legal costs 4,065 1,933 2,132 7,619 5,189 2,430
Public company costs 1,723 963 760 4,940 3,171 1,769
Other costs 9,008 6,430 2,578 20,578 18,441 2,137
Total $ 31,682 $ 18,262 $ 13,420 $ 78,996 $ 53,234 $ 25,762
Share-based compensation expense includes the amortization of restricted share units and stock options granted to certain corporate employees and trustees. 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 nine months ended September 30, 2020 with an increase in self-storage cost of operations of $3.1 million and $9.4 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 nine months ended September 30, 2020.
Share-based compensation expense 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 nine months ended September 30, 2021, share-based compensation expense increased $4.5 million and $18.9 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 nine months ended September 30, 2020, (ii) the accelerated compensation costs recognized in the three and nine months ended September 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 $3.5 million and $10.0 million for the three and nine months ended September 30, 2021, respectively, as compared to $2.8 million and $8.9 million for the same periods in 2020, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. During the nine months ended September 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 costs of filing tax returns, and other costs associated with complying with federal and state tax laws. Such costs vary primarily based upon the tax rates and the level of our operations of the various states in which we do business. For the three and nine months ended September 30, 2021, state income tax increased $2.8 million and $3.2 million, respectively, as compared to the same
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periods in 2020, due to rising taxable income in certain states where there are differences between federal and state tax laws. We expect continued increases in state income taxes through the end of 2021.
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 September 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 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. Amounts attributable to commercial operations was $2.0 million and $6.2 million in the three and nine months ended September 30, 2021, respectively, as compared to the $2.1 million and $6.4 million for the same periods of 2020. Excluding the aforementioned amounts attributable to our commercial operations, interest and other income decreased $3.7 million and $9.4 million in the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The reduction was primarily due to $3.5 million and $5.5 million in aggregate received during the three and nine months ended September 30, 2020, respectively, related to litigation settlements and the early repayment of notes receivable. Interest earned on cash balances decreased by $3.4 million from the nine months ended September 30, 2020 to the same period in 2021, reflecting a year-over-year decrease in average interest rate as well as average cash balance on hand. 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 nine months ended September 30, 2021, we incurred $24.6 million and $63.6 million, respectively, of interest on our outstanding debt, as compared to $15.1 million and $44.6 million for the same periods in 2020. In determining interest expense, these amounts were offset by capitalized interest of $0.9 million and $2.6 million during the three and nine months ended September 30, 2021, respectively, associated with our development activities, as compared to $0.8 million and $2.5 million for the same periods in 2020. The increase of interest expense in the three and nine months ended September 30, 2021, as compared to the same periods in 2020, is due to our issuances of (i) $500 million of senior notes on January 19, 2021 bearing interest at an annual rate of 0.875% and maturing on February 15, 2026, (ii) $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 (iii) €700 million of Euro-denominated unsecured notes on September 9, 2021 bearing interest at an annual rate of 0.500% and maturing on September 9, 2030. At September 30, 2021, we had $5.8 billion of debt outstanding, with a weighted average interest rate of approximately 1.8%.
Foreign Currency Exchange Gain (Loss): For the three and nine months ended September 30, 2021, we recorded foreign currency gains of $40.9 million and $73.6 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 nine months ended September 30, 2020, we recorded foreign currency translation losses of $41.9 million and $52.3 million, respectively. The Euro was translated at exchange rates of approximately 1.159 U.S. Dollars per Euro at September 30, 2021, 1.226 at December 31, 2020, 1.172 at September 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 nine months ended September 30, 2021, we recorded $0.3 million and $13.7 million in gains, respectively, and in the nine months ended September 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 $53.9 million and $158.8 million in the three and nine months ended September 30, 2020, respectively, to $46.2 million and $138.5 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. We also allocated income from our common shareholders to the holders of our preferred shares of $17.0 million in the nine months ended September 30, 2021, and $23.3 million and $38.4 million in the three and nine months ended September 30, 2020,
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respectively, in connection with the redemption of preferred securities. Based upon our preferred shares outstanding at September 30, 2021, our quarterly distribution to our preferred shareholders is expected to be approximately $46.1 million.
Liquidity and Capital Resources
While operating as 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 any 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 September 30, 2021 and November 1, 2021, there were no borrowings outstanding on the revolving line of credit, however, we do have approximately $21.2 million of outstanding letters of credit which limits our borrowing capacity to $478.8 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 interest payments on debt, maintenance capital expenditures and distributions to our shareholders for the foreseeable future.
Our expected capital resources include: (i) $958.2 million of cash as of September 30, 2021 and (ii) approximately $600.0 million of expected retained operating cash flow over the next twelve months. 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) $2.3 billion in property acquisitions currently under contract, (ii) $502.2 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months, and (iii) $502.6 million in scheduled principal repayments in 2022, including $500.0 million for our senior notes which mature on September 15, 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.
In the near term, to fund property acquisitions under contract including our $1.5 billion acquisition of All Storage portfolio, we expect to issue unsecured debt. Over the long 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 September 30, 2021, the principal outstanding on our debt totaled approximately $5.8 billion, consisting of $23.6 million of secured debt, $1.8 billion of Euro-denominated unsecured debt
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and $4.0 billion of U.S. Dollar denominated unsecured debt. Approximate principal maturities are as follows (amounts in thousands):
Remainder of 2021
$ 251
2022 502,574
2023 19,219
2024 816,020
2025 280,615
Thereafter 4,192,080
  $ 5,810,759
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. 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. On September 9, 2021, we completed a public offering of €700.0 million aggregate principal amount of senior notes bearing interest at an annual rate of 0.500% and maturing on September 9, 2030.
Our debt is well-laddered and we plan to refinance our 2022 unsecured notes when it comes due in 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 $177.6 million in the first nine months of 2021, and are expected to approximate $250.0 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 $120 million in 2021 on this effort. In addition, we have made investments in LED lighting and the installation of solar panels, which are expected to approximate $36 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 October 27, 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 December 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.
The annual distribution requirement with respect to our Preferred Shares outstanding at September 30, 2021 is approximately $184.2 million per year.
We estimate we will pay approximately $6.2 million per year in distributions to noncontrolling interests outstanding at September 30, 2021.
Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. Subsequent to September 30, 2021, we acquired or were under contract to acquire 107 self-storage facilities for a
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total purchase price of $2.3 billion. 10 of these properties are under construction and expected to close as they are completed in the remainder of 2021 and 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 September 30, 2021, we had development and expansion projects at a total cost of approximately $730.6 million. Costs incurred through September 30, 2021 were $228.4 million, with the remaining cost to complete of $502.2 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 November 1, 2021, our 4.900% Series E Preferred Shares ($350 million) is eligible for redemption, at our option and with 30 days’ notice. See Note 8 to our September 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 September 30, 2021, we did not repurchase any of our common shares. From the inception of the repurchase program through November 1, 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 September 30, 2021 and their impact on our cash flows and liquidity are summarized below for the years ending December 31 (amounts in thousands):
   Total
Remainder of
2021
2022 2023 2024 2025  Thereafter
Interest and principal payments on debt (1) $ 6,412,827 $ 24,531 $ 596,188 $ 103,920 $ 897,029 $ 357,120 $ 4,434,039
Leases commitments (2) 66,325 668 3,122 2,966 2,934 2,897 53,738
Construction commitments (3) 134,064 38,313 93,871 1,880 — — —
Total $ 6,613,216 $ 63,512 $ 693,181 $ 108,766 $ 899,963 $ 360,017 $ 4,487,777
(1)Represents contractual principal and interest payments. Amounts with respect to certain Euro-denominated debt are based upon exchange rates at September 30, 2021. See Note 6 to our September 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 September 30, 2021.
The annual distribution requirement with respect to our Preferred Shares outstanding at September 30, 2021 is approximately $184.2 million per year. Dividends are paid when and if declared by our Board and accumulate if not paid.
Off-Balance Sheet Arrangements: At September 30, 2021, we had no material off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) and the instructions thereto.
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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 $5.8 billion and represents 64.0% of the book value of our equity at September 30, 2021.
The fair value of our debt at September 30, 2021 is approximately $5.9 billion. The table below summarizes the annual maturities of our debt, which had a weighted average effective rate of 1.8% at September 30, 2021. See Note 6 to our September 30, 2021 financial statements for further information regarding our debt (amounts in thousands).
Remainder of
2021
2022 2023 2024 2025  Thereafter  Total
Debt $ 251 $ 502,574 $ 19,219 $ 816,020 $ 280,615 $ 4,192,080 $ 5,810,759
We have foreign currency exposure at September 30, 2021 related to (i) our investment in Shurgard, with a book value of $327.9 million, and a fair value of $1.7 billion based upon the closing price of Shurgard’s stock on September 30, 2021, and (ii) €1.5 billion ($1.8 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 September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II.        OTHER INFORMATION
ITEM 1.    Legal Proceedings
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.
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 November 1, 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 September 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, 13,000,000 of our 4.950% Series D preferred shares in July 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.
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PUBLIC STORAGE
INDEX TO EXHIBITS (1)
(Items 15(a)(3) and 15(c)
3.1
4.1
31.1
31.2
32
101 .INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
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.
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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.
 
DATED: November 1, 2021
  PUBLIC STORAGE
  By: /s/ H. Thomas Boyle
  H. Thomas Boyle
Senior Vice President & Chief Financial Officer
(Principal financial officer and duly authorized officer)

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