Public Storage Reports Results for the Fourth Quarter and Year Ended December 31, 2016

Public Storage (NYSE:PSA) announced today operating results for the quarter and year ended December 31, 2016.

Operating Results for the Three Months Ended December 31, 2016

For the three months ended December 31, 2016, net income allocable to our common shareholders was $352.8 million or $2.03 per diluted common share, compared to $303.0 million or $1.74 per share in 2015 representing an increase of $49.8 million or $0.29 per share. The increase is due primarily to a $32.0 million increase in self-storage net operating income (described below) and a $23.3 million increase in foreign exchange translation gains associated with our euro denominated debt.

The $32.0 million increase in self-storage net operating income is a result of a $20.6 million increase in our Same Store Facilities (as defined below) and an $11.4 million increase in our Non Same Store Facilities (as defined below). Revenues for the Same Store Facilities increased 4.6% or $23.5 million in the three months ended December 31, 2016 as compared to 2015, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.7% or $2.9 million in the three months ended December 31, 2016 as compared to 2015, due primarily to increased property taxes, repairs and maintenance and advertising and selling costs, offset partially by reduced allocated overhead costs. The increase in net operating income for the Non Same Store Facilities is due primarily to the impact of 337 self-storage facilities acquired, developed or expanded since January 2013.

Operating Results for the Year Ended December 31, 2016

For the year ended December 31, 2016, net income allocable to our common shareholders was $1,183.9 million or $6.81 per diluted common share, compared to $1,053.1 million or $6.07 per share in 2015 representing an increase of $130.8 million or $0.74 per share. The increase is primarily due to (i) a $139.1 million increase in self-storage net operating income and (ii) a $17.3 million increase in foreign exchange translation gains associated with our euro denominated debt offset partially by (iii) a $29.0 million reduction in gains on sales of real estate investments, including our equity share and (iv) a $20.0 million increase in EITF D-42 charges, including our equity share, as a result of preferred redemption activities.

The $139.1 million increase in self-storage net operating income is a result of a $96.9 million increase in our Same Store Facilities and a $42.2 million increase in our Non Same Store Facilities. Revenues for the Same Store Facilities increased 5.5% or $110.0 million in the year ended December 31, 2016 as compared to 2015, due primarily to higher realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.5% or $13.1 million in the year ended December 31, 2016 as compared to 2015, due primarily to increased property taxes, on-site property manager payroll and repairs and maintenance, offset partially by lower snow removal costs. The increase in net operating income for the Non Same Store Facilities is due primarily to the impact of 337 self-storage facilities acquired, developed or expanded since January 2013.

Funds from Operations

For the three months ended December 31, 2016, funds from operations (“FFO”) was $2.77 per diluted common share, as compared to $2.46 in 2015, representing an increase of 12.6%. FFO is a non-GAAP (generally accepted accounting principles) term defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation, gains and losses and impairment charges with respect to real estate assets.

For the year ended December 31, 2016, FFO was $9.70 per diluted common share, as compared to $8.79 in 2015, representing an increase of 10.4%.

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) EITF D-42 charges related to the redemption of preferred securities, (iii) general and administrative expenses associated with the acquisition of self-storage facilities and (iv) certain other non-cash and/or nonrecurring income or expense items. We review Core FFO per share to evaluate our ongoing operating performance, and we believe it is used by investors and REIT analysts in a similar manner. However, Core FFO per share is not a substitute for net income per share. Because other REITs may not compute Core FFO per share in the same manner as we do, may not use the same terminology or may not present such a measure, Core FFO per share may not be comparable among REITs.

The following table reconciles from FFO per share to Core FFO per share (unaudited):

Property Operations – Same Store Facilities

The Same Store Facilities represent those facilities that have been owned and operated on a stabilized level of occupancy, revenues and cost of operations since January 1, 2014. We review the operations of our Same Store Facilities, which excludes facilities whose operating trends are significantly affected by factors such as casualty events, as well as recently developed or acquired facilities, to more effectively evaluate the ongoing performance of our self-storage portfolio in 2014, 2015 and 2016. We believe the Same Store information is used by investors and analysts in a similar manner. The following table summarizes the historical operating results of these 2,000 facilities (127.2 million net rentable square feet) that represent approximately 83% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2016.

The following table summarizes selected quarterly financial data with respect to the Same Store Facilities (unaudited):

Property Operations – Non Same Store Facilities

The Non Same Store Facilities at December 31, 2016 represent 337 facilities that were not stabilized with respect to occupancies or rental rates since January 1, 2014 or that we did not own as of January 1, 2014. The following table summarizes operating data with respect to the Non Same Store Facilities (unaudited):

Investing and Capital Markets Activities

During the three months ended December 31, 2016, we acquired 23 self-storage facilities (13 located in Oklahoma, four each in Ohio and Tennessee and one each in California and Texas) with 1.8 million net rentable square feet for $159 million. For the year ended December 31, 2016, we acquired 55 self-storage facilities with 4.1 million net rentable square feet for $429 million. Subsequent to December 31, 2016, we acquired or were under contract to acquire five self-storage facilities (two in Ohio and one each in Minnesota, New York and North Carolina) with 0.3 million net rentable square feet for $26 million.

During the three months ended December 31, 2016, we completed six newly developed facilities and various expansion projects (0.8 million net rentable square feet) costing $107 million. For the year ended December 31, 2016, we completed 16 newly developed facilities and various expansion projects (2.3 million net rentable square feet) costing an aggregate of $269 million. At December 31, 2016, we had various facilities in development (4.2 million net rentable square feet) estimated to cost $520 million and various expansion projects (1.1 million net rentable square feet) estimated to cost $140 million. The remaining $430 million of development costs for these projects is expected to be incurred primarily in the next 18 months.

On October 14, 2016, we issued our 4.90% Series E Preferred Shares for gross proceeds of $350 million.

During the year ended December 31, 2016, we issued four series of Preferred Shares for total gross proceeds of $1,175 million and an average coupon rate of 5.1%. During 2016, we also issued €100 million ($113.6 million) of Euro denominated Senior Unsecured Notes to an institutional investor, bearing interest at a fixed rate of 1.54% and maturing in eight years.

During 2016, we redeemed two series of Preferred Shares with an average coupon rate of 6.4% at par for a total of $862.5 million.

Distributions Declared

On February 22, 2017, our Board of Trustees declared a regular common quarterly dividend of $2.00 per common share. The Board also declared dividends with respect to our various series of preferred shares. All the dividends are payable on March 30, 2017 to shareholders of record as of March 15, 2017.

Fourth Quarter Conference Call

A conference call is scheduled for February 23, 2017 at 10:00 a.m. (PST) to discuss the fourth quarter earnings results. The domestic dial-in number is (866) 406-5408, and the international dial-in number is (973) 582-2770 (conference ID number for either domestic or international is 60310587). A simultaneous audio webcast may be accessed by using the link at www.publicstorage.com under “Company Info, Investor Relations, News and Events, Events Calendar.” A replay of the conference call may be accessed through March 9, 2017 by calling (800) 585-8367 (domestic) or (404) 537-3406 (international) or by using the link at www.publicstorage.com under “Company Info, Investor Relations, News and Events, Events Calendar.” All forms of replay utilize conference ID number 60310587.

About Public Storage

Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns and operates self-storage facilities. The Company’s headquarters are located in Glendale, California. At December 31, 2016, we had interests in 2,348 self-storage facilities located in 38 states with approximately 154 million net rentable square feet in the United States and 219 storage facilities located in seven Western European nations with approximately 12 million net rentable square feet operated under the “Shurgard” brand. We also own a 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned and operated approximately 28 million rentable square feet of commercial space at December 31, 2016.

Additional information about Public Storage is available on our website, www.publicstorage.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this press release, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words “expects,” “believes,” “anticipates,” “should,” “estimates” and similar expressions. These forward-looking statements involve known and unknown risks and uncertainties, which may cause 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 filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2016 and in our other filings with the SEC and the following: general risks associated with the ownership and operation of real estate, including changes in demand, risk related to development 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; the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations and manage acquired and developed properties; risks 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 regulatory environment as well as national, state and local laws and regulations including, without limitation, those governing environmental, taxes, our tenant reinsurance business and labor, and 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 REIT, or with challenges to the determination of taxable income for our taxable REIT subsidiaries; changes in federal or state tax laws related to the taxation of REITs and other corporations; security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships; 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 in the development process; ongoing litigation and other legal and regulatory actions which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; and economic uncertainty due to the impact of war or terrorism. These forward-looking statements speak only as of the date of this press release. All of our forward-looking statements, including those in this press release, are qualified in their entirety by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of this press release, except where expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this press release, or which management may make orally or in writing from time to time, as predictions of future events nor guarantees of future performance.

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