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Public Storage

Public StoragePSAEarnings & Financial Report

NYSE · Real Estate · Self-Storage REITs

Public Storage, headquartered in Glendale, California, is a real estate investment trust that invests in self storage. It is the largest brand of self-storage services in the US and owns approximately 9% of the self storage square footage in the U.S. As of December 31, 2024, the company operated 3,073 self-storage facilities containing an aggregate of 221 million net rentable square feet of space.

What changed in Public Storage's 10-K — 2022 vs 2023

Top changes in Public Storage's 2023 10-K

298 paragraphs added · 318 removed · 216 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

51 edited+13 added−44 removed33 unchanged
We seek to update the structure, layout, and content of our website regularly in order to enhance our placement in “unpaid” search in Google and related websites, to improve the efficiency of our bids in “paid” search campaigns, and to maximize users’ likelihood of reserving space on our website. • Our Customer Care Center: Our customer care center is staffed by skilled sales specialists and customer service representatives.
We seek to update the structure, layout, and content of our website regularly to enhance our placement in “unpaid” search in Google and related websites, to improve the efficiency of our bids in “paid” search campaigns, and to maximize users’ likelihood of reserving space on our website. • Our Customer Care Center: Our customer care center is staffed by skilled sales specialists and customer service representatives.
However, we believe that the economies of scale inherent in this business result in our being able to operate self-storage facilities at a materially higher level of cash flow per square foot than other operators without our scale. 2 Technology We believe technology enables revenue optimization and cost efficiencies.
However, we believe that the economies of scale inherent in this business result in our being able to operate self-storage facilities at a materially higher level of cash flow per square foot than other operators without our scale. Technology We believe technology enables revenue optimization and cost efficiencies.
We maximize revenues through striking the appropriate balance between occupancy and rates to new and existing 3 tenants by regularly adjusting (i) our promotional and other discounts, (ii) the rental rates we charge to new and existing customers, and (iii) our marketing spending and intensity.
We maximize revenues through striking the appropriate balance between occupancy and rates to new and existing tenants by regularly adjusting (i) our promotional and other discounts, (ii) the rental rates we charge to new and existing customers, and (iii) our marketing spending and intensity.
Acquire existing properties: We seek to capitalize on the fragmentation of the self-storage industry through acquiring attractively priced, well-located existing self-storage facilities. We believe our presence in and knowledge of substantially all of the major markets in the U.S. enhances our ability to identify attractive acquisition opportunities.
Acquire existing properties: We seek to capitalize on the fragmentation of the self-storage industry through acquiring attractively priced, well-located existing self-storage facilities. We believe our presence in and knowledge of substantially all of the major markets in the U.S. enhance our ability to identify attractive acquisition opportunities.
We reinsure all risks in this program but purchase insurance from an independent third party insurer to cover this exposure for a limit of $15.0 million for losses in excess of $5.0 million per occurrence. At December 31, 2022, there were approximately 1.2 million certificates of insurance held by our self-storage customers, representing aggregate coverage of approximately $5.6 billion.
We reinsure all risks in this program but purchase insurance from an independent third party insurer to cover this exposure for a limit of $15.0 million for losses in excess of $5.0 million per occurrence. At December 31, 2023, there were approximately 1.3 million certificates of insurance held by our self-storage customers, representing aggregate coverage of approximately $6.2 billion.
We believe that these fluctuations result in part from increased moving activity during the summer months.
We believe that these fluctuations result in part from increased moving activity during the summer months. 7
As the largest owner of self-storage facilities, we believe that we own approximately 9% of the self-storage square footage in the U.S. and that collectively the five largest self-storage owners in the U.S. own approximately 20%, with the remaining 80% owned by regional and local operators.
As the largest owner of self-storage facilities, we believe that we own approximately 9% of the self-storage square footage in the U.S. and that collectively the four largest self-storage owners in the U.S. own approximately 20%, with the remaining 80% owned by regional and local operators.
We inform these pricing and marketing decisions by observing their impact on web and customer care center traffic, reservations, move-ins, move-outs, tenant length of stay, and other indicators of response.
We adjust these pricing and marketing decisions by observing their impact on web and customer care center traffic, reservations, move-ins, move-outs, tenant length of stay, and other indicators of response.
In regard to climate, we assess risks and opportunities in conjunction with ongoing operating and risk management processes across the company. We give primary consideration to physical, regulatory, legal, market, and 7 reputational risks. Examples of these risks include heat/water stress, natural disasters, pandemics, temperature change, and regulatory compliance.
Regarding climate, we assess risks and opportunities in conjunction with ongoing operating and risk management processes across the company. We give primary consideration to physical, regulatory, legal, market, and reputational risks. Examples of these risks include heat/water stress, natural disasters, pandemics, temperature change, and regulatory compliance.
We also have live Internet chat capability as another channel for our customers to engage our agents, cost effectively improving customer responsiveness. • Our Properties: Customers can also shop for available space at any one of our facilities.
We also have live Internet chat augmented with ChatBot capability as another channel for our customers to engage our agents, cost effectively improving customer responsiveness. • Our Properties: Customers can also shop for available space at any one of our facilities.
Develop new self-storage facilities and expand existing facilities: The development of new self-storage locations and the expansion of existing facilities has been an important source of our growth. Our operating experience in major markets and experience in stabilizing new properties provides us advantages in developing new facilities.
Develop new self-storage facilities and expand existing facilities: The development of new self-storage locations and the expansion of existing facilities have been an important source of our growth. Our operating experience in major markets and experience in stabilizing new properties provide us advantages in developing new facilities.
Approximately 79% of our move-ins in 2022 were sourced through our website and we believe that many of our other customers who reserved directly through our customer care center or arrived at a facility and moved in without a reservation, have reviewed our pricing and availability online through our website.
Approximately 81% of our move-ins in 2023 were sourced through our website, and we believe that many of our other customers who reserved directly through our customer care center or arrived at a facility and moved in without a reservation reviewed our pricing and availability online through our website.
Grow ancillary business activities: We pursue growth initiatives aimed at increasing our insurance offering coverage for tenants who choose to protect their stored items against loss and desire to maximize their storage experience. As we grow our self-storage portfolio we have the opportunity to increase the growth profile of our tenant reinsurance business.
Grow ancillary business activities: We pursue growth initiatives aimed at increasing our insurance offering coverage for tenants who choose to protect their stored items against loss and desire to maximize their experience. As we grow our self-storage portfolio through acquisition, development and third-party management, we have the opportunity to increase the growth profile of our tenant reinsurance business.
At December 31, 2022, we managed 114 facilities for third parties, and were under contract to manage 78 additional facilities including 73 facilities that are currently under construction. In addition, we sell merchandise, primarily locks and cardboard boxes at our self-storage facilities. We hold a 35% interest in Shurgard Self Storage Limited (“Shurgard”).
At December 31, 2023, we managed 210 facilities for third parties, and were under contract to manage 114 additional facilities including 105 facilities that are currently under construction. In addition, we sell merchandise, primarily locks and cardboard boxes, at our self-storage facilities. We hold a 35% interest in Shurgard Self Storage Limited (“Shurgard”).
(“Life Storage”), 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, expectations regarding the impacts from inflation and a potential future recession, 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.
Forward-looking statements include statements relating to our 2024 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; expectations regarding the impacts from inflation and a potential future recession; 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.
These include changes in demand for our facilities, impacts of natural disasters, adverse changes in laws and regulations including governing property tax, evictions, rental rates, minimum wage levels, and insurance, our ability to consummate acquisition transactions, including our proposed acquisition of Life Storage, and to realize the intended benefits of such transactions, adverse economic effects from the COVID-19 Pandemic, international military conflicts, or similar events impacting public health and/or economic activity, increases in the costs of our primary customer acquisition channels, adverse impacts to us and our customers from inflation, unfavorable foreign currency rate fluctuations, changes in federal or state tax laws related to the taxation of REITs, security breaches, including ransomware, or a failure of our networks, systems, or technology.
These include changes in demand for our facilities; impacts of natural disasters; adverse changes in laws and regulations including governing property tax, evictions, rental rates, minimum wage levels, and insurance; adverse economic effects from public health emergencies, international military conflicts, or similar events impacting public health and/or economic activity; increases in the costs of our primary customer acquisition channels; adverse impacts to us and our customers from high interest rates, inflation, unfavorable foreign currency rate fluctuations, or changes in federal or state tax laws related to the taxation of REITs; security breaches, including ransomware; or a failure of our networks, systems, or technology.
Customers reach our customer care center by calling our advertised toll-free telephone numbers provided on search engines, from our website, the Public Storage App, or from our in-store kiosks.
Customers can reach our customer care center and complete their rental over the phone by calling our advertised toll-free telephone numbers provided on search engines, from our website, the Public Storage App, or from our in-store kiosks.
More than half of customers utilized our eRental® process during 2022. Public Storage App: We maintain an industry leading customer smartphone application. The Public Storage App provides our customers with digital access to our properties, as well as payment and other account management functions.
Approximately 60% of customers utilized our eRental® and Rent by Phone process during 2023. Public Storage App: We maintain an industry leading customer smartphone application. The Public Storage App provides our customers with digital access to our properties, as well as payment and other account management functions.
A wholly-owned, consolidated subsidiary of Public Storage fully reinsures these policies and thereby assumes all risk of losses under the policies. This subsidiary receives from the non-affiliated insurance company reinsurance premiums substantially equal to the premiums collected from our tenants. These policies cover claims for losses related to specified events up to a maximum limit of $5,000 per storage unit.
This subsidiary receives from the non-affiliated insurance company reinsurance premiums substantially equal to the premiums collected from our tenants. These policies cover claims for losses related to specified events up to a maximum limit of $5,000 per storage unit.
Shurgard is a public company traded on Euronext Brussels under the “SHUR” symbol. At December 31, 2022, Shurgard owned and operated 266 self-storage facilities (15 million net rentable square feet) located in seven countries in Western Europe under the Shurgard® name. We previously held a significant equity interest in PS Business Parks, Inc.
Shurgard is a public company traded on Euronext Brussels under the “SHUR” symbol. At December 31, 2023, Shurgard owned and operated 275 self-storage facilities (15 million net rentable square feet) located in seven countries in Western Europe under the Shurgard® name.
All new hires in leadership roles complete property-level training that gives them a hands-on view of our day-to-day operations at our properties to provide our leaders with an understanding of the fundamentals of our business and operations. We also provide numerous career development opportunities for existing employees across Public Storage, including management training programs.
For those new hires in leadership roles, we provide property-level training that exposes our leaders to daily property operations and is intended to provide them with an understanding of the fundamentals of our business and operations. We also offer numerous career development opportunities for existing employees across Public Storage, including management training programs.
We achieve these objectives by committing to our employees to provide a diverse and inclusive workplace, regular and open communication, competitive and supportive compensation and benefits programs, and opportunities for career growth and development.
We achieve these objectives by committing to our employees to provide a diverse and welcoming working environment, regular and transparent communication, competitive compensation, comprehensive benefits, and opportunities for career growth and development.
Together with our core values of doing the right thing and integrity in all that we do, which serve as the cornerstone of our corporate culture, we believe that this commitment facilitates employee engagement and their commitment to Public Storage.
We believe that this approach, together with the core principles of our corporate culture, doing the right thing and upholding integrity in all that we do, promotes employee engagement and a commitment to Public Storage.
Our principal business activities include the ownership, development, and operation of self-storage facilities and other related operations including tenant reinsurance and third-party self-storage management. We are the industry leading owner and operator of self-storage properties, with the most recognized brand in the self-storage industry, including our ubiquitous orange color.
General Discussion of our Business Public Storage is a Maryland real estate investment trust (“REIT”) engaged in the ownership, development, and operation of self-storage facilities and other related operations including tenant reinsurance and third-party self-storage management. We are the industry leading owner of self-storage properties, with the most recognized brand in the self-storage industry, including our ubiquitous orange color.
We are committed to a long-term environmental stewardship program that reduces emissions of hazardous materials into the environment and the remediation of identified existing environmental concerns, including environmentally-friendly capital initiatives and building and operating properties with high structural resilience and low obsolescence.
Further, our insurance activities are subject to state insurance laws and regulations as determined by the particular insurance commission for each state in accordance with certain federal regulations. 4 We are committed to a long-term environmental stewardship program that reduces emissions of hazardous materials into the environment and the remediation of identified existing environmental concerns, including environmentally-friendly capital initiatives and building and operating properties with high structural resilience and low obsolescence.
Refer to Item 1A, “Risk Factors” below for a discussion of certain risks related to government regulations, including risks related to environmental regulations, emergency regulations adopted in response to wildfires, flooding, or public health crises that restrict access to our facilities or the rents we can charge our customers, wage regulations, income tax regulations including relating to REIT qualification, and property tax regulations. 4 Aside from the regulations discussed therein, we are not aware of any government regulations that have resulted or that we expect will result in compliance costs that had or will have a material effect on our capital expenditures, earnings, or competitive position.
Refer to Item 1A, “Risk Factors” below for a discussion of certain risks related to government regulations, including risks related to environmental regulations, emergency regulations adopted in response to wildfires, flooding, or public health crises that restrict access to our facilities or the rents we can charge our customers, wage regulations, income tax regulations including relating to REIT qualification, and property tax regulations.
(“PSB”), which we sold in July 2022 in connection with PSB’s merger with an unaffiliated third party. For all periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”).
For all periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code of 1986, as amended (the “Code”).
Most new hires join us as property managers without any experience in the self-storage industry. We provide a hands-on new hire training program that provides close coaching and development.
The majority of our new hires join Public Storage as property managers without prior experience in the self-storage industry. We provide a hands-on new employee training program that includes coaching and development.
ITEM 1. Business Cautionary Statement Regarding Forward Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to our 2023 outlook and all underlying assumptions, our proposal to acquire Life Storage, Inc.
ITEM 1. Business Cautionary Statement Regarding Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
We provide affordable health plans and programs to virtually all our employees. Anyone working 20 hours or more is eligible to participate in our health benefit offerings, which include medical, dental, vision, flexible and health savings accounts, discount programs, and income protection plans.
We offer affordable health plans and programs to virtually all of our employees. Full-time employees are eligible to participate in our comprehensive employee benefit offerings, which include medical, dental, vision, flexible and health savings accounts, discount programs, income protection plans, and our 401(k) plan.
Human Capital Resources Our employees are the foundation of our business and fundamental to our ability to execute our corporate strategies and build long-term value for our stakeholders. In order to maintain a strong foundation, our key human capital management objectives are to attract, develop, and retain the highest quality talent.
Human Capital Resources Our employees are the foundation of our business and fundamental to our ability to execute our corporate strategies and create long-term value for our stakeholders. Our human capital management strategy focuses on attracting, developing, and retaining the highest quality talent.
The high level of ownership fragmentation in the industry is partially attributable to the relative simplicity of managing a local self-storage facility, such that small-scale owners can operate self-storage facilities at a basic level of profitability without significant managerial or operational infrastructure.
We believe our Public Storage® brand awareness, as well as the innovative improvements we have made to the customer experience described below, provide us with a competitive advantage in acquiring and retaining customers relative to other self-storage operators. 2 The high level of ownership fragmentation in the industry is partially attributable to the relative simplicity of managing a local self-storage facility, such that small-scale owners can operate self-storage facilities at a basic level of profitability without significant managerial or operational infrastructure.
At December 31, 2022, we held interests in and consolidated 2,869 self-storage facilities (an aggregate of 204 million net rentable square feet of space) operating under the Public Storage® name. 1 Other Operations: We manage insurance programs whereby customers at our facilities, including those we manage for third parties, have the option of purchasing insurance from a non-affiliated insurance company to cover certain losses to their stored goods.
Other Operations: We manage insurance programs whereby customers at our facilities, including those we manage for third parties, have the option of purchasing insurance from a non-affiliated insurance company to cover certain losses to their stored goods. A wholly-owned, consolidated subsidiary of Public Storage fully reinsures these policies and thereby assumes all risk of losses under the policies.
Growth and Investment Strategies Our ongoing growth strategies consist of: (i) improving the operating performance of our existing self-storage facilities, (ii) acquiring and developing facilities, and (iii) growing ancillary business activities including tenant reinsurance and third-party management services.
Our network allows us to quickly change each of our individual property’s pricing and promotions, and drive marketing spending, such as the relative level of bidding for various paid search terms on paid search engines. 3 Growth and Investment Strategies Our ongoing growth strategies consist of: (i) improving the operating performance of our existing self-storage facilities, (ii) acquiring and developing facilities, and (iii) growing ancillary business activities including tenant reinsurance and third-party management services.
We have approximately 5,900 employees, including 5,090 customer facing roles (such as property level and customer care center personnel), 380 field management employees, and 430 employees in our corporate operations.
We have approximately 6,200 employees, including 5,380 customer facing roles (such as property level and customer care center personnel), 390 field management employees, and 430 employees in our corporate operations. The following is an overview of our key programs and initiatives focused on attracting, developing, and retaining the highest quality talent.
We publicly disclose our annual Consolidated EEO-1 report, which reflects the race, ethnicity, and gender composition of our workforce, on the Investor Relations section of our website. 5 Communication and Engagement Given the geographically dispersed nature of our business, regular and clear communication is critical to ensuring that employees feel informed, included, and engaged.
Communication and Engagement Given the geographically dispersed nature of our business, regular and clear communication is critical to ensuring that our employees feel informed, included, valued, and engaged.
We also offer a 401(k) plan with generous matching employer contributions to help our employees prepare for retirement. In addition to these programs, we maintain various employee support programs, including access to counseling, life planning tools, and discount programs for fitness, legal services, and home, auto, and pet insurance.
Additionally, we maintain various employee support programs, including access to counseling, life planning tools, and discount programs for fitness, legal services, and home, auto, and pet insurance. Finally, we offer educational resources and tools, including a dedicated health and wellness website, to encourage employees to maintain a healthy and balanced lifestyle.
Compensation, Health, Wellness, and Safety Public Storage maintains compensation and benefits programs designed to incentivize, reward, and support our employees. We believe in aligning employee compensation with our short- and long-term performance goals and providing the compensation and incentives needed to attract, motivate, and retain employees who are crucial to our success.
We believe that employee compensation should align with our short- and long-term performance goals and provide the competitive compensation and incentives needed to attract, motivate, and retain employees who are crucial to our success. We tailor our compensation programs to each employee group to ensure market competitiveness and enhance overall employee engagement.
Among other recognitions, we are proud to be named in 2022 a Great Place to Work® and included on the 2022 Forbes and Statista “America’s Best Large Employers” award list. We have also been recognized by Comparably, Inc. as a “Choice Employer” with an “A+” Culture Score based on employee responses across 18 culture metrics, among other recognitions.
We have also been recognized by Comparably, Inc. as a “Choice Employer” with an “A+” Culture Score based on employee responses across 18 culture metrics, among other recognitions. Compensation, Health, Wellness, and Safety Public Storage maintains compensation and benefits programs designed to incentivize, reward, and support our employees.
We communicate through various channels, including email communications, a monthly newsletter and town halls, where we provide employees company strategy and performance updates, employee recognitions and other information and the opportunity to ask questions of our leaders.
We use various communication channels, including emails, newsletters, videos, virtual and in-person meetings, and town halls, to provide updates on company strategy, performance, employee recognition, and other information, as well as the opportunity to ask questions of our leadership.
We also maintain a policy of requiring that diverse candidate slates be considered for all director positions and above. Adherence to our practice of hiring “the best” has fostered a diverse and inclusive employee base that reflects the diversity of the customers we serve. Our commitment to diversity is evident at all levels of the organization.
We maintain policies regarding diversity, equal opportunity, pay-for-performance, discrimination, harassment, and labor (including opposition to child and compulsory labor). We also maintain a policy of requiring that diverse candidates be considered for all director-level positions and above. Our commitments to excellence and hiring “the best” have fostered an inclusive team that reflects the diversity of the customers we serve.
Training, Development, Growth, and Recognition We provide robust training and development programs across all levels of Public Storage that are intended to provide our employees with the skills, tools, and knowledge they need to not only grow as individuals but also contribute to the value of the organization through strong engagement.
These programs are intended to provide our employees with the skills, tools, and knowledge they need to be successful in their roles and to contribute to the value of the organization. They are also intended to foster individual growth and strong employee engagement.
We will continue to utilize our unique competitive advantages in furthering our environmental stewardship efforts and addressing the effects of climate change.
We will continue to utilize our unique competitive advantages in furthering our environmental stewardship efforts and addressing the effects of climate change. Please refer to our Sustainability Report for further information. Seasonality We experience minor seasonal fluctuations in the demand for self-storage space, with demand and rental rates generally higher in the summer months than in the winter months.
Climate Change and Environmental Stewardship We are committed to managing climate-related risks and opportunities.
This collaborative approach to talent management works to ensure that employees are given opportunities to grow beyond their current roles and responsibilities. Climate Change and Environmental Stewardship We are committed to managing climate-related risks and opportunities.
Finally, we offer a range of educational tools and resources, including a dedicated health and wellness website, to help empower our employees to maintain a healthy and balanced lifestyle. We are committed to providing safe self-storage facilities for our customers and employees. We conduct monthly safety trainings at all of our properties and an annual safety training at our headquarters.
We periodically consider employee feedback received through our engagement processes in the composition and design of our compensation and benefits programs. We are committed to providing safe self-storage facilities for our customers and employees. We conduct monthly safety trainings at all of our properties and an annual safety training at our headquarters.
Self-storage Operations : We acquire, develop, own, and operate self-storage facilities, which offer storage spaces for lease on a month-to-month basis, for personal and business use. We are the largest owner and operator of self-storage facilities in the United States (“U.S.”), with physical presence in most major markets and 40 states.
We are the largest owner of self-storage facilities in the United States (“U.S.”), with physical presence in most major markets and 40 states. We believe our scale, brand name, and technology platform afford us competitive advantages.
Centralized information network: Our centralized reporting and information network enables us to identify changing market conditions and operating trends and analyze customer data. Our network allows us to quickly change each of our individual property’s pricing and promotions, and drive marketing spending, such as the relative level of bidding for various paid search terms on paid search engines.
Centralized information network: Our centralized reporting and information network enables us to identify changing market conditions and operating trends and analyze customer data.
We did not have any fatal injuries in 2022 and we publicly disclose our employee health and safety data in our annual Sustainability Report.
We publicly disclose our employee health and safety data in our annual Sustainability Report. Training and Development At Public Storage, we offer comprehensive training and development programs at every level of the organization.
We are committed to continuous listening and improvement for our employees, and our feedback tools have guided enhancements for our employees, including the development of additional career progression opportunities and enhancements to our employee compensation and benefits programs. We believe that the success of our engagement strategies can also be seen through third party surveys and recognition.
We believe that the success of our engagement strategies can also be seen through third party surveys and recognition. Among other recognitions, we are proud again to be named a Great Place to Work® in 2023.
Public Storage hires based on skills, personality, and experience, without regard to age, gender, race, ethnicity, religion, sexual orientation, or other protected characteristic. We maintain policies regarding diversity, equal opportunity, pay-for-performance, discrimination, harassment, and labor (including opposition to child, forced, and compulsory labor).
Diversity and Inclusion We are committed to creating a workplace that values diversity and inclusion, where every employee feels valued, included, and able to be their authentic self as part of our best-in-class team. Public Storage hires based on skills, personality, and experience, without regard to age, gender, race, ethnicity, religion, sexual orientation, or other protected characteristic.
In order to better understand the effectiveness of our engagement strategies, we conduct various surveys that measure employee commitment, motivation, and engagement, and solicit employee feedback that helps us improve. In 2022, 85% of our employees participated in our employee engagement survey, an increase from 80% in 2021, and we achieved employee engagement of 76%.
To better understand the effectiveness of our engagement strategies, we conduct various surveys to evaluate employee commitment, motivation, and engagement, and to seek employee feedback. We use this feedback to refine and enhance our policies and programs for our employees. This includes the creation of additional career advancement opportunities and development programs.
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General Discussion of our Business Public Storage (referred to herein as the “Company,” “we,” “us,” or “our”), a Maryland real estate investment trust that has elected to be taxed as a real estate investment trust (“REIT”), was organized in 1980.
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On August 14, 2023, we completed a reorganization that resulted in us holding the interests in our facilities through an operating partnership, Public Storage OP, L.P. and its subsidiaries including Public Storage Operating Company, formerly known as Public Storage, which was organized in 1980. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
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We believe our scale, brand name, and technology platform afford us competitive advantages.
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Subsequent to the reorganization, the primary assets of the parent entity, Public Storage, are general partner and limited partner interests in Public Storage OP, L.P.
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We believe our Public Storage® brand awareness, as well as our digital customer experience described below, provide us with a competitive advantage in acquiring and retaining customers relative to other self-storage operators.
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Unless stated otherwise or the context otherwise requires, references to “Public Storage” or the “Company” mean Public Storage, references to “PSA OP” mean Public Storage OP, L.P., and references to “PSOC” mean Public Storage Operating Company.
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Further, our insurance activities are subject to state insurance laws and regulations as determined by the particular insurance commissioner for each state in accordance with certain federal regulations.
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References to "we," "us," and "our" mean collectively Public Storage, PSA OP, PSOC and those entities/subsidiaries owned or controlled by Public Storage, PSA OP, and PSOC. 1 Self-storage Operations : We acquire, develop, own, and operate self-storage facilities, which offer storage spaces for lease on a month-to-month basis, for personal and business use.
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The following is an overview of our key programs and initiatives focused on attracting, developing, and retaining the highest quality talent: Diversity and Inclusion We are committed to creating an inclusive and diverse workplace where all employees feel valued, included, and excited to be part of a best-in-class team.
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At December 31, 2023, we held interests in and consolidated 3,044 self-storage facilities (an aggregate of 218 million net rentable square feet of space) operating under the Public Storage® name.
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Our employees come from all different races, backgrounds, and life experiences, and we celebrate inclusion and value the diversity each person brings to Public Storage. Our commitment to diversity and inclusion makes us a stronger company and instills a sense of pride across our teams as we serve our customers.
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We recently launched the Savvy Storage Insurance Program (“Savvy”), a program to provide other owner operators of self-storage facilities a tenant insurance offering for their tenants. We believe this offering will provide owners and their tenants simplified onboarding and implementation, experienced and dedicated support, and significantly higher customer adoption rates than the offerings available in the market today.
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In 2021, our Chief Executive Officer signed the CEO Action for Diversity & Inclusion pledge, reflecting our commitment to foster an environment where everyone feels valued and included. This commitment extends not just throughout Public Storage but across the real estate industry.
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Aside from the regulations discussed therein, we are not aware of any government regulations that have resulted or that we expect will result in compliance costs that had or will have a material effect on our capital expenditures, earnings, or competitive position.
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In this regard, in 2022, we made a founding donor contribution to the Nareit Dividends through Diversity, Equity & Inclusion Giving Campaign, which is directed at taking actionable and sustainable measures that support the recruitment, inclusion, development, and advancement of women, black professionals, other people of color, ethnically diverse individuals, and members of other under-represented groups in REITs and the publicly traded real estate industry.
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For detailed information regarding such programs and initiatives, including our sustainability efforts, strategies, commitments, and progress, please refer to our 2023 Sustainability Report, which is available on our website at publicstorage.com. The information contained on our website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K.
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Additionally, by having a balanced mix of generations in the organization, we gain from the experiences each age group brings – our employees are 9% Boomer, 38% Gen X, 36% Gen Y and 17% Gen Z.
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Our diversity is evident at all levels of the organization. The data in the table below reflects our employee diversity as of December 31, 2023. 5 We publicly disclose our annual Consolidated EEO-1 report, which reflects the race, ethnicity, and gender composition of our workforce, on the Investor Relations section of our website.
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We tailor our compensation programs to each employee group to ensure competitiveness in the market and to drive employee engagement. We are committed to the total well-being of all our employees and provide resources to help support them in times of need along with access to targeted solutions to help them achieve their personal and financial goals.
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Many of our training and career development programs use our online learning platform of training courses and reference materials. In addition to formal training programs, we also offer one-on-one coaching, job shadowing, and mentoring opportunities. In 2023, we introduced a leadership accelerator program specifically for high potential women and diverse employees.
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Many of our training and career development programs leverage our online learning platform of training courses and reference materials. Public Storage employees completed over 430,000 formal training hours in 2022.
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This program includes individual mentorship and practical experiences designed to further enhance our bench of high potential leaders, thereby supporting management succession planning. 6 Performance Management and Succession Planning Our performance management processes are designed to encourage collaboration between employees and their managers.
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In addition to formal training programs, we also offer a variety of one-on-one coaching, job shadowing, and mentoring programs. 6 Performance Management and Succession Planning Our performance management processes are designed to be collaborative, where employees and management work together to plan, monitor, and review the employee’s objectives and career aspirations and set short- and long-term goals to achieve outcomes.
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Employees and managers work together to plan, monitor, and review the employee’s objectives and career aspirations and to establish and hold employees accountable to short- and long-term goals aligned with the Company’s strategy. This is a continuous process intended to provide regular opportunities for employees and their managers to share and receive feedback.
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This process is continual, with regular opportunities for management and employees to give and receive feedback. Succession planning is a top priority for management and our Board of Trustees (our “Board”) to ensure business continuity.
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Succession planning is a priority for management and our Board, and is viewed as critical to ensuring business continuity and providing for the Company’s long-term growth and success. Periodically throughout each year, the executive team meets to review and assess the Company’s succession bench strength, evaluate talent, and provide recommendations for developing and preparing future leaders within the organization.
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Leaders at all levels review development opportunities, provide feedback, and facilitate career progression conversations on an ongoing basis to ensure that employees can reach their full potential.
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Additionally, in 2022, we began development of a new leadership accelerator program for women and diverse employees, which includes individual mentorship and hands-on experiences directed at further enhancing our bench of women and minority leaders and management succession planning.
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No less than annually, the executive teams meet to review succession bench strength, calibrate talent, and provide recommendations to prepare succession candidates for future leadership roles within the organization. This broad and collaborative approach to talent management works to ensure opportunities are made available to employees to grow outside of their current function and responsibilities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers, or damage our reputation, any of which could adversely affect our results of operations, reputation, and competitive position.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers, or damage to our reputation, any of which could adversely affect our results of operations, reputation, and competitive position.
Currently, our Board has opted not to subject the Company to these provisions of Maryland law, but it could choose to do so in the future without shareholder approval. • To protect against the loss of our REIT status due to concentration of ownership levels, our declaration of trust generally limits the ability of a person, other than the Hughes family or “designated investment entities” (each as defined in our declaration of trust), to own, actually or constructively, more than 3% of our outstanding common shares or 9.9% of the outstanding shares of any class or series of preferred or equity shares.
Currently, our Board has opted not to subject the Company to these provisions of Maryland law, but it could choose to do so in the future without shareholder approval. 14 • To protect against the loss of our REIT status due to concentration of ownership levels, our declaration of trust generally limits the ability of a person, other than the Hughes family or “designated investment entities” (each as defined in our declaration of trust), to own, actually or constructively, more than 3% of our outstanding common shares or 9.9% of the outstanding shares of any class or series of preferred or equity shares.
Preferred shareholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred shareholders. • The Company has in the past, and could in the future, issue additional preferred shares that, while pari passu to the existing preferred shares, increases the risk that there would not be sufficient funds to pay distributions to the preferred shareholders. • While the Company has no plans to do so, if the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status.
Preferred shareholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred shareholders. • The Company has in the past, and could in the future, issue additional preferred shares that, while pari passu to the existing preferred shares, increases the risk that there would not be sufficient funds to pay distributions to the preferred shareholders. 15 • While the Company has no plans to do so, if the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status.
We cannot predict whether, when, or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted, but these changes might include, in particular, increases in the U.S. federal income tax rates that apply to us or our shareholders in certain circumstances, possibly with retroactive effect. We may pay some taxes, reducing cash available for shareholders.
We cannot predict whether, when, or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted, but these changes might include, in particular, increases in the U.S. federal income tax rates that apply to us or our shareholders in certain circumstances, possibly with retroactive effect. 16 We may pay some taxes, reducing cash available for shareholders.
We could be subject to increases in property or other taxes, repair and maintenance costs, payroll, utility costs, insurance premiums, workers compensation, and other operating expenses due to various factors such as inflation, labor shortages, commodity and energy price increases, weather, increases to minimum wage rates, supply chain disruptions, and 10 changes to governmental safety and real estate use limitations and other governmental actions.
We could be subject to increases in property or other taxes, repair and maintenance costs, payroll, utility costs, insurance premiums, workers compensation, and other operating expenses due to various factors such as inflation, labor shortages, commodity and energy price increases, weather, increases to minimum wage rates, supply chain disruptions, and changes to governmental safety and real estate use limitations and other governmental actions.
See also “We have exposure to increased property tax in California” below. The acquisition of existing properties or self-storage operating companies is subject to risks that may adversely affect our growth and financial results. We have acquired self-storage facilities and self-storage operating companies in the past, and we expect to continue to do so in the future.
See also “We have exposure to increased property tax in California” below. 8 The acquisition of existing properties or self-storage operating companies is subject to risks that may adversely affect our growth and financial results. We have acquired self-storage facilities and self-storage operating companies in the past, and we expect to continue to do so in the future.
Our revenues and operating cash flow can be negatively impacted by reductions in employment and population levels, household and disposable income, and 12 other general economic factors that lead to a reduction in demand for self-storage space in each of the markets in which we operate.
Our revenues and operating cash flow can be negatively impacted by reductions in employment and population levels, household and disposable income, and other general economic factors that lead to a reduction in demand for self-storage space in each of the markets in which we operate.
Failure to comply with applicable laws, regulations, and policies may subject us to increased litigation and regulatory actions and negatively affect our business and operations or reputation. On November 3, 2020, Californians passed a ballot measure that creates the California Privacy Rights Act (“CPRA”).
Failure to comply with applicable laws, regulations, and policies may subject us to increased litigation and regulatory actions and negatively affect our business and operations or reputation. 17 On November 3, 2020, Californians passed a ballot measure that creates the California Privacy Rights Act (“CPRA”).
Resolution of these claims and actions may divert time and attention by our management and could involve payment of damages or expenses by us, all of which may 14 be significant, and could damage our reputation and our brand. In addition, any such resolution could involve our agreement to terms that restrict the operation of our business.
Resolution of these claims and actions may divert time and attention by our management and could involve payment of damages or expenses by us, all of which may be significant, and could damage our reputation and our brand. In addition, any such resolution could involve our agreement to terms that restrict the operation of our business.
Development of self-storage facilities by other operators could increase, due to increases in availability of funds for investment or other reasons, and further intensify competition. 11 Demand for self-storage facilities may be affected by customer perceptions and factors outside of our control.
Development of self-storage facilities by other operators could increase, due to increases in availability of funds for investment or other reasons, and further intensify competition. Demand for self-storage facilities may be affected by customer perceptions and factors outside of our control.
The CPRA amends and expands the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020. The CPRA, which went into effect on January 1, 2023, provides new rights and amends existing rights 18 found in the CCPA. It also creates a new privacy enforcement authority, the California Privacy Protection Agency (“CalPPA”).
The CPRA amends and expands the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020. The CPRA, which went into effect on January 1, 2023, provides new rights and amends existing rights found in the CCPA. It also creates a new privacy enforcement authority, the California Privacy Protection Agency (“CalPPA”).
Our newly developed and expanded facilities, and facilities that we manage for third party owners, may negatively impact the revenues of our existing facilities. We continue to develop new self-storage facilities and expand our existing self-storage facilities.
Our newly developed and expanded facilities, and facilities that we manage for third party owners, may negatively impact the revenues of our legacy facilities. We continue to develop new self-storage facilities and expand our existing self-storage facilities.
These same potential governmental, political, and social pressure could in the future result in (i) costly changes to newly developed facilities or retrofits of our existing facilities to reduce carbon emissions through multiple avenues, including changes to insulation, space configuration, lighting, heating, and air conditioning, (ii) increased energy costs as a result of transitioning to less carbon-intensive, but more expensive, sources of energy to operate our facilities, and (iii) consumers reducing their individual carbon footprints by owning fewer durable material consumer goods, collectibles, and other such items requiring storage, resulting in a reduced demand for our self-storage space.
These same potential governmental, political, and social pressures could in the future result in (i) costly changes to newly developed facilities or retrofits of our existing facilities to reduce carbon emissions through multiple avenues, including changes to insulation, space configuration, lighting, heating, and air conditioning, (ii) increased energy costs as a result of transitioning to less carbon-intensive, but more expensive, sources of energy to operate our facilities, and (iii) consumers reducing their individual carbon footprints by owning fewer durable material consumer goods and other such items requiring storage, resulting in a reduced demand for our self-storage space.
Our business is subject to risks from public health and other crises like the COVID-19 Pandemic, including, among others: • risk of illness or death of our employees or customers; • negative impacts on economic conditions in our markets, which may reduce the demand for self-storage; • risk that there could be an out-migration of population from certain high-cost major markets; • government restrictions that (i) limit or prevent use of our facilities, (ii) limit our ability to increase rent or otherwise limit the rent we can charge, (iii) limit our ability to collect rent or evict delinquent tenants, or (iv) limit our ability to complete development and redevelopment projects; • 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, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; and • risk of negative impacts on the cost and availability of debt and equity capital, which could have a material impact upon our capital and growth plans.
Our business is subject to risks from public health and other crises like the COVID-19 pandemic, including, among others: • risk of illness or death of our employees or customers; • negative impacts on economic conditions in our markets, which may reduce the demand for self-storage; • risk that there could be an out-migration of population from major markets where we operate; • government restrictions that (i) limit or prevent use of our facilities, (ii) limit our ability to increase rent or otherwise limit the rent we can charge, (iii) limit our ability to collect rent or evict delinquent tenants, or (iv) limit our ability to complete development and redevelopment projects; • 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, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; and 11 • risk of negative impacts on the cost and availability of debt and equity capital, which could have a material impact upon our capital and growth plans.
As a result, our operations could be severely impacted by a natural disaster, terrorist attack, attack by hackers, acts of vandalism, data theft, misplaced or lost data, programming or human error, or other circumstance that results in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures.
Our operations could be severely impacted by a natural disaster, terrorist attack, attack by hackers, acts of vandalism, data theft, misplaced or lost data, programming or human error, or other circumstance that results in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures.
Marketing initiatives, including our increasing dependence on Google to source customers, may fail to be effective and could negatively impact financial performance. Approximately 65% of our new storage customers in 2022 were sourced directly or indirectly through “unpaid” search and “paid” search campaigns on Google.
Marketing initiatives, including our increasing dependence on Google to source customers, may fail to be effective and could negatively impact financial performance. Approximately 65% of our new storage customers in 2023 were sourced directly or indirectly through “unpaid” search and “paid” search campaigns on Google.
Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is less than it would be if the properties were assessed at current values.
Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is less than it would be if the properties were assessed at current estimated market values.
In addition, for tax years beginning after December 31, 2022, we would possibly also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the corporate alternative minimum tax and nondeductible one percent excise tax on certain stock repurchases.
In addition, for tax years beginning after December 31, 2022, we could also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the corporate alternative minimum tax and nondeductible one percent excise tax on certain stock repurchases.
Our property tax expense, which totaled approximately $386.7 million during the year ended December 31, 2022, generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies and, accordingly, could be subject to substantial increases if such agencies change their valuation approaches or opinions or if new laws are enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or geographies where we have a high concentration of facilities.
Our property tax expense, which totaled approximately $413.2 million during the year ended December 31, 2023, generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies and, accordingly, could be subject to substantial increases if such agencies change their valuation approaches or opinions or if new laws are enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or geographies where we have a high concentration of facilities.
Such incidents could also result in significant costs to repair or replace such networks or information systems, as well as actual monetary losses in case of a breach that resulted in fraudulent payments or other cash transactions.
Such incidents could also result in significant costs to repair or replace such networks or information systems, as well as actual monetary losses in case of a cybersecurity incident that resulted in fraudulent payments or other cash transactions.
However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods, or changes in our circumstances, as well as share ownership limits in our declaration of trust that do not necessarily ensure that our shareholder base is sufficiently diverse for us to qualify as a REIT.
However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods, or changes in our circumstances, as well as share ownership limits in our declaration of trust that may fail to ensure that our shareholder base is sufficiently diverse for us to qualify as a REIT.
There are significant risks involved in developing self-storage facilities, such as delays or cost increases due to changes in or failure to meet government or regulatory requirements, failure of revenue to meet our underwriting estimates, delays caused by weather issues, unforeseen site conditions, or personnel problems.
There are significant risks involved in developing self-storage facilities, such as delays, cost increases, or inability to complete development projects due to changes in or failure to meet government or regulatory requirements, failure of revenue to meet our underwriting estimates, delays caused by weather issues, unforeseen site conditions, or personnel problems.
As a result, Shurgard may be precluded from taking advantage of opportunities that we would find attractive but that we may not be able to pursue separately, or it could take actions that we do not agree with. 13 Public health and other crises, such as the COVID-19 Pandemic, have adversely impacted, and may in the future adversely impact, our business.
As a result, Shurgard may be precluded from taking advantage of opportunities that we would find attractive but that we may not be able to pursue separately, or it could take actions that we do not agree with. Public health and other crises have adversely impacted, and may in the future adversely impact, our business.
Our self-storage facilities are located in areas that may be subject to the direct impacts of climate change, such as increased destructive weather events like floods, fires, and drought, which could result in significant damage to our facilities, increased capital expenditures, increased expenses, reduced revenues, or reduced demand for our facilities.
Our self-storage facilities are located in areas that may be subject to the direct impacts of climate change, such as increased destructive weather events like floods, fires, drought, and prolonged periods of extreme temperature or other extreme weather, which could result in significant damage to our facilities, increased capital expenditures, increased expenses, reduced revenues, or reduced demand for our facilities.
In addition, our preferred shareholders have the right to elect two additional 16 directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive. Preferred Shareholders are subject to certain risks.
In addition, our preferred shareholders have the right to elect two additional directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business from multiple regulatory agencies at the local, state, federal, or international level, compliance with those requirement could also result in additional costs, or we could fail to comply with those requirements due to various reasons such as not being aware of them.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business from multiple regulatory agencies at the local, state, federal, or international level, compliance with those requirements could also result in additional costs, or we could fail to comply with those requirements due to various reasons.
Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations. The maximum U.S. federal income tax rate for qualified dividends paid by domestic non-REIT corporations to U.S. stockholders that are individuals, trusts, or estates is generally 20%.
Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends. Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations. The maximum U.S. federal income tax rate for qualified dividends paid by domestic non-REIT corporations to U.S. stockholders that are individuals, trusts, or estates is generally 20%.
As a result of regulatory or private action in any jurisdiction, we may be temporarily or permanently suspended from continuing some or all of our reinsurance activities , or otherwise fined, penalized, or subject to an adverse judgment, which could reduce our net income.
As a result of regulatory or private action in any jurisdiction, we may be temporarily or permanently suspended from continuing some or all of our reinsurance activities , or otherwise fined, penalized, or subject to an adverse judgment, which could reduce our net income. ITEM 1B. Unresolved Staff Comments None.
While in most cases those taxes are paid by our customers, they increase the cost of self-storage rental to our customers and can negatively impact our revenues. Other local and state governments may impose self-storage rent taxes in the future. We have exposure to increased property tax in California.
While in most cases those taxes are paid by our customers, they increase the cost of self-storage rental to our customers and can negatively impact our revenues. Other local and state governments may impose self-storage rent taxes in the future.
Economic conditions can adversely affect our business, financial condition, growth, and access to capital. Economic downturns or adverse economic or industry conditions, including those related to high levels of inflation, could adversely impact our financial results, growth, and access to capital.
Quantitative and Qualitative Disclosures About Market Risk”. Economic conditions can adversely affect our business, financial condition, growth, and access to capital. Economic downturns or adverse economic or industry conditions, including those related to high levels of inflation, could adversely impact our financial results, growth, and access to capital.
Our development program subjects us to risks. At December 31, 2022, we had a pipeline of development projects totaling $979.6 million (subject to contingencies), and we expect to continue to seek additional development projects.
Our development program subjects us to risks. At December 31, 2023, we had a pipeline of development projects totaling $766.2 million (subject to contingencies), and we expect to continue to seek additional development projects.
These systems are subject to damage or interruption from power outages, computer and telecommunications failures, hackers, including through a ransomware attack, computer worms, viruses, and other destructive or disruptive security breaches, and catastrophic events.
These systems are subject to damage or interruption from power outages, system, network, internet and telecommunications failures, hackers, including through a ransomware attack, computer worms, viruses, and other destructive or disruptive cybersecurity incidents, and catastrophic events.
While we believe that this aggressive pricing allows us to increase our market share relative to our competitors and increase the cash flows of these properties, such pricing and the added capacity may also negatively impact our existing stabilized self-storage facilities that are near these unstabilized facilities.
While we believe that this aggressive pricing allows us to increase our market share relative to our competitors and increase the cash flows of these properties, such pricing and the added capacity may also negatively impact our existing stabilized self-storage facilities that are near these unstabilized facilities. 9 We may incur significant liabilities from environmental contamination or moisture infiltration.
The secure processing and maintenance of this information is critical to our operations and business strategy. Although we believe we have taken commercially reasonable steps to protect the security of our confidential information, information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyberattacks.
Although we believe we have taken commercially reasonable steps to protect the security of our confidential information, information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyberattacks.
Approximately $767.2 million of our 2022 net operating income is from our properties in California, and we incurred approximately $47.2 million in related property tax expense.
Approximately $821.2 million of our 2023 net operating income is from our properties in California, and we incurred approximately $49.1 million in related property tax expense.
A qualifying REIT does not generally incur U.S. federal corporate income tax on its “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to its shareholders.
A qualifying REIT does not generally incur U.S. federal corporate income tax on its “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to its shareholders. Our REIT status is also dependent upon the REIT qualification of PS Business Parks, Inc.
We have approximately 5,900 employees and 1.8 million customers, and we conduct business at facilities in 40 states.
We have approximately 6,200 employees and 1.9 million customers, and we conduct business at facilities in 40 states.
Our REIT status is also dependent upon the REIT qualification of PSB through the end of its taxable year ended December 31, 2022, as a result of our substantial ownership interest in it prior to the closing of the PSB merger with and unaffiliated third party.
(“PSB”) through the end of its taxable year ended December 31, 2022, as a result of our substantial ownership interest in it prior to the closing of the PSB merger with an unaffiliated third party. We believe we have qualified as a REIT and we intend to continue to maintain our REIT status.
We are subject to risks from the consequences of climate change, including severe weather events, as well as the transition to a low-carbon economy and other steps taken to prevent or mitigate climate change.
In addition, customer perceptions about the risk of property loss from these events could negatively impact self-storage demand. We are subject to risks from the consequences of climate change, including severe weather events, as well as the transition to a low-carbon economy and other steps taken to prevent or mitigate climate change.
Shurgard, as an owner, operator, and developer of self-storage facilities, is subject to many of the same risks we are with respect to self-storage.
We recognized $27.9 million in equity in earnings and received $39.0 million in dividends in 2023 with respect to Shurgard. 10 Shurgard, as an owner, operator, and developer of self-storage facilities, is subject to many of the same risks we are with respect to self-storage.
Such events could lead to lost future revenues and adversely affect our results of operations, or result in remedial and other costs, fines, or lawsuits, which could be in excess of any available insurance that we have procured.
In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to discontinue leasing our self-storage facilities. Such events could lead to lost future revenues and adversely affect our results of operations, or result in remedial and other costs, fines, or lawsuits, which could exceed any available insurance that we have procured.
We own approximately 35% of the common shares of Shurgard, and this investment has a $275.8 million book value and a $1.4 billion market value (based upon the closing trading price of Shurgard’s common stock) at December 31, 2022. We recognized $26.4 million in equity in earnings and received $37.8 million in dividends in 2022 with respect to Shurgard.
We own approximately 35% of the common shares of Shurgard, and this investment has a $390.2 million book value and a $1.7 billion market value (based upon the closing trading price of Shurgard’s common stock) at December 31, 2023.
Any such legal claims, proceedings, and regulatory enforcement actions could negatively impact our operating results, cash flow available for distribution or reinvestment, and/or the price of our common shares. In addition, through exercising their authority to regulate our activities, governmental agencies can otherwise negatively impact our business by increasing costs or decreasing revenues.
Any such legal claims, proceedings, and regulatory enforcement actions could negatively impact our operating results, cash flow available for distribution or reinvestment, and/or the price of our common shares.
Ineffective succession planning for our CEO and executive management, as well as for our other key employees, may impact the execution of our strategic plan. We may not effectively or appropriately identify ready-now succession candidates for our CEO and executive management team, which may negatively impact our ability to meet key strategic goals.
We may not effectively or appropriately identify ready-now succession candidates for our CEO and executive management team, which may negatively impact our ability to meet key strategic goals. Failure to implement succession plans for other key employees may leave us vulnerable to retirements and turnover. We may fail to protect our intellectual property adequately.
In addition, we have made investments in LED lighting and the installation of solar panels of approximately $100 million since 2021 through December 31, 2022. Governmental, political, and societal pressures, including expectations of institutional and activist investors and other interest groups, could require us to accelerate our initiatives and, with it, the costs of their implementation.
Governmental, political, and societal pressures, including expectations of institutional and activist investors and other interest groups, could require us to accelerate our initiatives and, with it, the costs of their implementation.
If our confidential information is compromised or corrupted, including as a result of a cybersecurity breach, our reputation and business relationships could be damaged, which could adversely affect our financial condition and operating results. In the ordinary course of our business we acquire and store sensitive data, including personally identifiable information of our prospective and current customers and our employees.
If our confidential information is compromised or corrupted, including as a result of a cybersecurity incident, our reputation and business relationships could be damaged and our financial condition and operating results could be adversely affected.
However, for years in which we failed to qualify as a REIT, we would not be subject to REIT rules that require us to distribute substantially all of our taxable income to our shareholders. 17 Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.
Any taxes, interest, and penalties incurred would reduce our cash available for distributions to shareholders and could negatively affect our stock price. However, for years in which we failed to qualify as a REIT, we would not be subject to REIT rules that require us to distribute substantially all of our taxable income to our shareholders.
See Note 14 to our December 31, 2022 consolidated financial statements for a description of the risks of losses that are not covered by third-party insurance contracts. In addition, customer perceptions about the risk of property loss from these events could negatively impact self-storage demand.
See Note 15 to our December 31, 2023 consolidated financial statements for a description of the risks of losses that are not covered by third-party insurance contracts. Our exposure to these types of events is increased by potential tenant claims associated with our tenant reinsurance business.
Failure to implement succession plans for other key employees may leave us vulnerable to retirements and turnover. We may fail to protect our intellectual property adequately. We maintain a portfolio of trademarks and trade dress that we believe are fundamental to the success of the Public Storage® brand.
We maintain a portfolio of trademarks and trade dress that we believe are fundamental to the success of the Public Storage® brand. While we actively seek to enforce and expand our rights, failure to adequately protect our rights could lead to loss of such trademark and trade dress protection.
Despite our security measures, we have experienced security breaches due to cyberattacks and additional breaches could occur in the future. In these cases, our information technology and infrastructure could be vulnerable and our or our customers’ or employees’ confidential information could be compromised or misappropriated. Any such breach could result in serious and harmful consequences for us or our tenants.
Despite our security measures, we face cybersecurity threats, including system, network, or Internet failures; cyberattacks, ransomware, and other malware; social engineering; and phishing schemes. In these cases, our information technology and infrastructure could be vulnerable and our or our customers’ or employees’ confidential information could be compromised or misappropriated.
Removed
Consistent with our commitment to sustainability in our business operations, we have undertaken a number of initiatives to reduce emissions and energy consumption, water usage, and waste, including through our Property of Tomorrow program, pursuant to which we are upgrading all of our older properties by the end of 2025, which has already resulted in investment of approximately $370 million in improvements through December 31, 2022.
Added
For example, beginning in 2026, we expect to be required to disclose our Scope 1, 2, and 3 emissions data and certain climate-related risk matters under California SB 253 and SB 261, which we expect to result in increased compliance costs.
Removed
On February 5, 2023, we disclosed that we have made a proposal to acquire all of the outstanding shares and units of Life Storage for consideration consisting of our common shares. Our public offer followed prior rebuffs by Life Storage of our attempts to negotiate privately, and on February 16, 2023, Life Storage announced it had rejected the offer.
Added
Recent significant increases in interest rates could adversely impact us and our tenants. In response to high inflation, the Federal Reserve has significantly increased the benchmark federal funds rate since early 2022. These actions have significantly increased interest rates.
Removed
While we currently intend to engage in discussions with Life Storage, there can be no assurance that Life Storage will engage with us regarding our proposal or that we and Life Storage will agree to an acquisition transaction.
Added
As a result, if we issued new debt or preferred shares or refinanced our indebtedness, our debt service costs or preferred share dividend yields would be, based on current interest rates, significantly higher than current financing costs. These interest rate increases have also adversely impacted the relative attractiveness of the dividend yield on our common shares.
Removed
Additionally, Life Storage can avail itself of various takeover defenses, including the ability unilaterally to classify its board of trustees under the Maryland Unsolicited Takeover Act (MUTA). Even if we reach an agreement with Life Storage, there can be no assurance that the conditions to closing such transaction would be satisfied in a timely manner or at all.
Added
Increases in our cost of capital impact our assessment of the yields we consider appropriate to support pursuing property acquisition and development opportunities and thus can impact our external growth prospects.
Removed
Further, if a transaction is consummated, there can be no assurance that we will realize the benefits we hope to achieve through the transaction, and the complexities of combining the two companies may result in unknown liabilities and unforeseen increased expenses. If a transaction is not consummated, we nevertheless may incur significant costs associated with our pursuit of the transaction.
Added
The degree and pace of these changes have had and may continue to have adverse macroeconomic effects that have and may continue to have adverse impacts on our tenants, including as a result of economic recession, increased unemployment, and increased financing costs. For more information on interest rate risk, see Part II, “Item 7A.
Removed
Many of our existing self-storage facilities may be at a competitive disadvantage to newly developed facilities. There is a significant level of development of new self-storage facilities, by us and other operators.
Added
In addition, through exercising their authority to regulate our activities, governmental agencies can otherwise negatively impact our business by increasing costs or decreasing revenues. 12 Our use of or failure to adopt advancements in information technology may hinder or prevent us from achieving strategic objectives or otherwise harm our business.
Removed
These newly developed facilities are generally of high quality, with a more fresh and vibrant appearance, more amenities (such as climate control), more attractive office configurations, newer elements, and a more attractive retail presence as compared to many of our existing stabilized self-storage facilities, some of which were built as much as 50 years ago.
Added
Our use of or inability to adopt and deliver new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence and machine learning, may put us at a competitive disadvantage; cause us to miss opportunities to innovate, achieve efficiencies, or improve the customer experience; or adversely impact our business, reputation, results of operations, and financial condition.
Removed
Such qualitative differentials may negatively impact our ability to compete with these facilities for new tenants and our existing tenants may move to newly developed facilities. We may incur significant liabilities from environmental contamination or moisture infiltration.
Added
Legislative activity in the privacy area may also result in new laws that are applicable to us and that may hinder our business, including by restricting our use of customer data or otherwise regulating the use of algorithms and automated processing in ways that could materially affect our business or lead to significant increases in the cost of compliance.
Removed
Our failure to modernize and adopt advancements in information technology may hinder or prevent us from achieving strategic objectives. Our inability to adapt and deliver new capabilities in time with strategic requirements may cause the organization to miss market competitive timing, first mover position, or to suffer material loss due to failed technology choices or implementation.
Added
In addition, the use of emerging technologies entails risks including risks relating to the possibility of intellectual property infringement or misappropriation; data privacy; new or enhanced governmental or regulatory scrutiny, requirements, litigation, or other liability; ethical concerns; negative consumer perceptions as to automation and artificial intelligence; or other complications or liabilities that could adversely affect our business, reputation, results of operations, or financial results.
Removed
Our confidential information may also be compromised due to programming or human error or malfeasance. We must continually evaluate and adapt our systems and processes to address the evolving threat landscape, and therefore there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data.
Added
While we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Removed
In addition, our customers could lose confidence in our ability to protect their 15 personal information, which could cause them to discontinue leasing our self-storage facilities.
Added
In the ordinary course of our business we acquire and store sensitive data, including personally identifiable information of our prospective and current customers and our employees. The secure processing and maintenance of this information is critical to our operations and business strategy.
Removed
While we actively seek to enforce and expand our rights, our trademark and trade dress could be deemed generic and indistinct and lose protection.
Added
Any such cybersecurity incident, including those impacting personal information, could result in serious and harmful consequences for us or our customers. A cybersecurity incident could also interfere with our ability to comply with financial reporting requirements.
Removed
We believe we have qualified as a REIT and we intend to continue to maintain our REIT status.
Added
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and threats, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Removed
Any taxes, interest, and penalties incurred would reduce our cash available for distributions to shareholders and could negatively affect our stock price.
Added
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. 13 Our confidential information may also be compromised due to programming or human error, negligence, or fraud.
Added
Although we and our third-party service providers make efforts to maintain the security and integrity of our information, including the implementation of security measures, required employee awareness training, and the existence of a disaster recovery plan, there is no guarantee that they will be adequate to safeguard against all cybersecurity incidents or misuses of data.
Added
We have identified and expect to continue to identify cyberattacks and cybersecurity incidents on our systems and those of third parties, but none of the cyberattacks and incidents we have identified to date has had a material impact on our business or operations.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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 December 31, 2022.
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 December 31, 2023.
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 February 21, 2023, 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 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 February 20, 2024, 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.
ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common shares of beneficial interest (NYSE: PSA) have been listed on the NYSE since October 19, 1984. As of February 16, 2023, there were approximately 10,071 holders of record of our common shares.
ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common shares of beneficial interest (NYSE: PSA) have been listed on the NYSE since October 19, 1984. As of February 13, 2024, there were approximately 9,586 holders of record of our common shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The increase is due primarily to (i) a $2.1 billion gain on sale of our equity investment in PSB and (ii) a $614.3 million increase in self-storage net operating income, partially offset by (iii) a $174.7 million increase in depreciation and amortization expense, (iv) a $125.1 million decrease in equity in earnings of unconsolidated real estate entities due to sale of our equity investment in PSB, and (v) a $45.5 million increase in interest expense.
The increase is due primarily to (i) a $2.1 billion gain on sale of our equity investment in PSB and (ii) a $614.3 million increase in self-storage net operating income, partially offset by (iii) a $174.7 million increase in depreciation and amortization expense, (iv) a $125.1 million decrease in equity in earnings of unconsolidated real estate entities due to the sale of our equity investment in PSB, and (v) a $45.5 million increase in interest expense.
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.
We utilize NOI in determining current property values, evaluating property performance, and 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.
For individual and small portfolio acquisitions, we estimate the fair value of buildings primarily based upon the estimated current replacement cost, which we calculate by estimating the replacement cost of new purpose-built self-storage facilities in similar geographic regions and adjusting for age, quality, amenities, and configuration associated with 22 the buildings acquired.
For individual and small portfolio acquisitions, we estimate the fair value of buildings primarily based upon the estimated current replacement cost, which we calculate by estimating the replacement cost of new purpose-built self-storage facilities in similar geographic regions and adjusting for age, quality, amenities, and configuration associated with the buildings acquired.
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 represents net income before real estate-related 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.
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.
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 Internal Revenue Code.
The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2020, 2021, and 2022 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.
The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2021, 2022, and 2023 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe investors and analysts use Same Store Facilities information in a similar manner.
(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.
(c) 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.
The increase in 2022 is due primarily to (i) a 16.4% increase in realized annual rent per occupied square foot for 2022 as compared to 2021, partially offset by (ii) a 1.5% decrease in average occupancy for 2022 as compared to 2021.
The increase in 2022 is due primarily to (i) a 16.7% increase in realized annual rent per occupied square foot for 2022 as compared to 2021, partially offset by (ii) a 1.5% decrease in average occupancy for 2022 as compared to 2021.
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 years ended December 31, 2022, 2021, and 2020.
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 years ended December 31, 2023, 2022, and 2021.
Over the long term, to the extent that our cash requirements 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. 47 Cash Requirements The following summarizes our expected material cash requirements, which comprise (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, maintenance capital expenditures and dividends paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including acquisitions and developments and repurchases of our securities.
Over the long term, to the extent that our cash requirements exceed our capital resources, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, debt, and limited partnership interests, or entering into joint venture arrangements to acquire or develop facilities. 49 Cash Requirements The following summarizes our expected material cash requirements, which comprise (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, maintenance capital expenditures and dividends paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including acquisitions and developments and repurchases of our securities.
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 2022, we did not repurchase any of our common shares.
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 2023, we did not repurchase any of our common shares.
Others could come to materially different conclusions as to the estimated fair values of land and buildings, which would result in different depreciation and amortization expense, gains and losses on sale of real estate assets, as well as the level of land and buildings on our consolidated balance sheet.
Others could come to materially different conclusions as to the estimated fair values of land, buildings and acquired customers in place, which would result in different depreciation and amortization expense, gains and losses on sale of real estate assets, as well as the level of land and buildings on our consolidated balance sheet.
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.
Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, (iii) limited partnership interests, and (iv) 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.
The results of these components for the years ended December 31, 2021 compared to December 31, 2020 was included in our Annual Report on Form 10-K for the year ended December 31, 2021 on page 23, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 22, 2022.
The results of these components for the years ended December 31, 2022 compared to December 31, 2021 was included in our Annual Report on Form 10-K for the year ended December 31, 2022 on page 22, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 21, 2023.
We expect continued increases in depreciation expense in 2023 as a result of elevated levels of capital expenditures and new facilities that are acquired, developed or expanded in 2023. 43 The following discussion and analysis of the components of net income, including Ancillary Operations and items not allocated to segments, present a comparison for the year ended December 31, 2022 to the year ended December 31, 2021.
We expect continued increases in depreciation expense in 2024 as a result of elevated levels of capital expenditures and new facilities that are acquired, developed or expanded in 2024. 44 The following discussion and analysis of the components of net income, including Ancillary Operations and certain items not allocated to segments, present a comparison for the year ended December 31, 2023 to the year ended December 31, 2022.
These increases were due primarily to an increase in credit card fees as result of year-over-year increases in revenues, and to a lesser extent, a long-term trend of more customers paying with credit cards rather than cash, checks, or other methods of payment with lower transaction costs.
These increases were due primarily to an increase in credit card fees as a result of year-over-year increases in revenues, combined with a long-term trend of more customers paying with credit cards rather than cash, checks, or other methods of payment with lower transaction costs.
See Note 9 to our December 31, 2022 consolidated 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.
See Note 10 to our December 31, 2023 consolidated 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.
Such investments include development of more pronounced, attractive, and clearly identifiable color schemes and signage and upgrades to the configuration and layout of the offices and other customer zones to improve the customer experience. We spent approximately $189 million in 2022 and expect to spend $160 million in 2023 on this effort.
Such investments include development of more pronounced, attractive, and clearly identifiable color schemes and signage and upgrades to the configuration and layout of the offices and other customer zones to improve the customer experience. We spent approximately $160 million in 2023 and expect to spend $150 million in 2024 on this effort.
In particular, these estimates are sensitive to significant assumptions, such as the projections of future rental rates, stabilized occupancy level, future profit margin, discount rates, and capitalization rates, all of which could be affected by our expectations about future market or economic conditions. Others could come to materially different conclusions.
In particular, these estimates are sensitive to significant assumptions, such as the projections of future rental rates, stabilized occupancy level, future profit margin, discount rates, and capitalization rates, all of which could be affected by our expectations about future market or economic conditions.
The facilities under “expansion in process” represent those facilities where construction is in process at December 31, 2022, and together with additional future expansion activities primarily related to our Same Store Facilities at December 31, 2022, we expect to add a total of 2.5 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $487.3 million. 42 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, 2020, including facilities undergoing fill-up as well as facilities damaged in casualty events such as hurricanes, floods, and fires.
The facilities under “expansion in process” represent those facilities where construction is in process at December 31, 2023, and together with additional future expansion activities primarily related to our Same Store Facilities at December 31, 2023, we expect to add a total of 1.3 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $304.8 million. 43 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, 2021, including facilities undergoing fill-up as well as facilities damaged in casualty events such as hurricanes, floods, and fires.
See Note 13 to our December 31, 2022 consolidated 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, 2020.
See Note 14 to our December 31, 2023 consolidated 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, 2021.
The increase in net operating income of $157.9 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2021 and 2020 and the fill-up of recently developed and expanded facilities. 24 Funds from Operations and Core Funds from Operations Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by Nareit.
The increase in net operating income of $223.7 million for the non-same store facilities is due primarily to the impact of facilities acquired in 2021 and the fill-up of recently developed and expanded facilities. 25 Funds from Operations and Core Funds from Operations Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by Nareit.
At December 31, 2022, we had 22 additional facilities in development, which will have a total of 2.1 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $492.3 million. We expect these facilities to open over the next 18 to 24 months.
At December 31, 2023, we had 23 additional facilities in development, which will have a total of 2.3 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $461.4 million. We expect these facilities to open over the next 18 to 24 months.
We expect to satisfy these cash requirements through operating cash flow and opportunistic debt and equity financings. Required Debt Repayments: As of December 31, 2022, the principal outstanding on our debt totaled approximately $6.9 billion, consisting of $10.1 million of secured notes payable, $1.7 billion of Euro-denominated unsecured notes payable and $5.3 billion of U.S. Dollar denominated unsecured notes payable.
We expect to satisfy these cash requirements through operating cash flow and opportunistic debt and equity financings. Required Debt Repayments: As of December 31, 2023, the principal outstanding on our debt totaled approximately $9.2 billion, consisting of $7.5 billion of U.S. Dollar denominated unsecured notes payable, $1.7 billion of Euro-denominated unsecured notes payable, and $1.8 million of mortgage notes payable.
Future acquisition volume is likely to be impacted by increasing cost of capital requirements and overall macro-economic uncertainties. 39 Developed and Expanded Facilities The developed and expanded facilities include 62 facilities that were developed on new sites since January 1, 2017, and 91 facilities expanded to increase their net rentable square footage.
Future acquisition volume is likely to be impacted by increasing cost of capital requirements and overall macro-economic uncertainties. 40 Developed and Expanded Facilities The developed and expanded facilities include 57 facilities that were developed on new sites since January 1, 2018, and 88 facilities expanded to increase their net rentable square footage.
Cost of operations for the Same Store Facilities increased by 5.7% or $39.9 million in 2022 as compared to 2021, due primarily to increased property tax expense, on-site property manager payroll expense, marketing expense, other direct property costs, and centralized management costs.
Cost of operations for the Same Store Facilities increased by 5.7% or $41.7 million in 2022 as compared to 2021, due primarily to increased property tax expense, marketing expense, other direct property costs, and centralized management costs.
The increase in net operating income of $244.2 million for the non-same store facilities is due primarily to the impact of facilities acquired in 2021 and the fill-up of recently developed and expanded facilities.
The increase in net operating income of $113.6 million for the non-same store facilities is due primarily to the impact of facilities acquired in 2021, 2022, and 2023 and the fill-up of recently developed and expanded facilities.
Third-party property management: At December 31, 2022, in our third-party property management program, we managed 114 facilities for unrelated third parties, and were under contract to manage 78 additional facilities including 73 44 facilities that are currently under construction.
Third-party property management: At December 31, 2023, in our third-party property management program, we managed 210 facilities for unrelated third parties, and were under contract to manage 114 additional facilities including 105 facilities that are currently under construction.
Results of Operations Operating Results for 2022 and 2021 In 2022, net income allocable to our common shareholders was $4,142.3 million or $23.50 per diluted common share, compared to $1,732.4 million or $9.87 per diluted common share in 2021, representing an increase of $2,409.9 million or $13.63 per diluted common share.
Operating Results for 2022 and 2021 In 2022, net income allocable to our common shareholders was $4.1 billion or $23.50 per diluted common share, compared to $1.7 billion or $9.87 per diluted common share in 2021, representing an increase of $2.4 billion or $13.63 per diluted common share.
Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates (gains of $111.8 million for 2021). The Euro was translated at exchange rates of approximately 1.070 U.S. Dollars per Euro at December 31, 2022 and 1.134 at December 31, 2021.
Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates (gains of $98.3 million for 2022). The Euro was translated at exchange rates of approximately 1.104 U.S. Dollars per Euro at December 31, 2023 and 1.070 at December 31, 2022.
Our current and expected capital resources include: (i) $775.3 million of cash as of December 31, 2022 and (ii) approximately $500.0 million of expected retained operating cash flow over the next twelve months.
Our current and expected capital resources include: (i) $370.0 million of cash as of December 31, 2023 and (ii) approximately $450 million of expected retained operating cash flow over the next twelve months.
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 notes payable outstanding.
Future gains and losses on foreign currency will be dependent upon changes in the relative value of the Euro to the U.S.
As of February 21, 2023, we have two series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice: our 5.150% Series F Preferred Shares ($280.0 million) and our 5.050% Series G Preferred Shares ($300.0 million).
As of February 20, 2024, we have three series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice: our 5.150% Series F Preferred Shares ($280.0 million), 5.050% Series G Preferred Shares ($300.0 million), and 5.600% Series H Preferred Shares ($285.0 million).
At December 31, 2022, we had $6.9 billion of notes payable outstanding, with a weighted average interest rate of approximately 2.0%. Foreign Currency Exchange Gain: For 2022, we recorded foreign currency gains of $98.3 million, representing primarily the changes in the U.S.
At December 31, 2023, we had $9.1 billion of notes payable outstanding, with a weighted average interest rate of approximately 3.1%. Foreign currency exchange (loss) gain: For 2023, we recorded foreign currency losses of $51.2 million, representing primarily the changes in the U.S.
Accordingly, a significant portion of management’s time is devoted to maximizing cash flows from our existing self-storage facility portfolio. During 2022, revenues generated by our Same Store Facilities increased by 14.8% ($409.9 million), as compared to 2021, while Same Store cost of operations increased by 5.7% ($39.9 million).
Accordingly, a significant portion of management’s time is devoted to maximizing cash flows from our existing self-storage facility portfolio. During 2023, revenues generated by our Same Store Facilities increased by 4.7% ($154.0 million), as compared to 2022, while Same Store cost of operations increased by 4.7% ($35.9 million).
Revenues for the Same Store Facilities increased 14.8% or $409.9 million in 2022 as compared to 2021, due primarily to higher realized annual rent per occupied square foot, partially offset by a decline in occupancy.
Revenues for the Same Store Facilities increased 15.2% or $432.2 million in 2022 as compared to 2021, due primarily to higher realized annual rent per available square foot, partially offset by a decline in occupancy.
During 2021, we acquired the All Storage portfolio, consisting of 56 properties (7.5 million net rentable square feet) for $1.5 billion. Included in the Acquisition results in the table above are All Storage portfolio revenues of $79.2 million, NOI of $48.4 million (including Direct NOI of $51.2 million), and average square footage occupancy of 79.4% for 2022.
Included in the 2021 Acquisition results in the table above are ezStorage portfolio revenues of $105.1 million, NOI of $82.2 million (including Direct NOI of $84.5 million), and average square footage occupancy of 86.3% for 2023. During 2021, we acquired the All Storage portfolio, consisting of 56 properties (7.5 million net rentable square feet) for $1.5 billion.
For the year ended December 31, 2022, FFO was $16.46 per diluted common share as compared to $13.36 and $9.75 per diluted common share for the years ended December 31, 2021 and 2020, respectively, representing an increase in 2022 of 23.2%, or $3.10 per diluted common share, as compared to 2021.
For the year ended December 31, 2023, FFO was $16.60 per diluted common share as compared to $16.46 and $13.36 per diluted common share for the years ended December 31, 2022 and 2021, respectively, representing an increase in 2023 of 0.9%, or $0.14 per diluted common share, as compared to 2022.
We also present “Core FFO” and “Core FFO per share” non-GAAP measures that represent FFO and 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 and casualties, unrealized gain on private equity investments and our equity share of merger transaction costs, severance of a senior executive, lease termination income, and casualties from our equity investees .
We also present “Core FFO” and “Core FFO per share” non-GAAP measures that represent FFO and 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 and resolutions, casualties, due diligence costs incurred in pursuit of strategic transactions, unrealized gain on private equity investments, UPREIT reorganization costs, Simply integration costs, amortization of acquired non real estate-related intangibles from the Simply Acquisition and our equity share of deferred tax benefits of a change in tax status, merger transaction costs, severance of a senior executive, lease termination income, and casualties from our equity investees.
The $614.3 million increase in self-storage net operating income in 2022 as compared to 2021 is a result of a $370.1 million increase attributable to our Same Store Facilities and a $244.2 million increase attributable to our non-same store facilities.
The $614.3 million increase in self-storage net operating income in 2022 as compared to 2021 is a result of a $390.6 million increase in our Same Store Facilities and a $223.7 million increase in our non-same store facilities.
The Other Non-Same Store Facilities have an aggregate of 5.7 million net rentable square feet, including 1.1 million in Texas, 0.6 million in each of Florida and Washington, 0.4 million in each of California and Virginia, 0.3 million in each of Indiana and South Carolina, 0.2 million in each of Arizona, Georgia, Kentucky, Massachusetts, and Tennessee, and 1.0 million in other states.
The Other Non-Same Store Facilities have an aggregate of 7.3 million net rentable square feet, including 1.3 million in Texas, 0.5 million in Pennsylvania, 0.4 million in each of California, Florida, Illinois, Michigan, Minnesota, Ohio, and Washington, 0.3 million in each of Arizona, Georgia, and South Carolina, 0.2 million in each of Alabama, Colorado, Missouri, and Virginia, and 1.0 million in other states.
As of December 31, 2022 and February 21, 2023, there were no borrowings outstanding on the revolving line of credit; however, we do have approximately $18.6 million of outstanding letters of credit, which limits our borrowing capacity to $481.4 million as of February 21, 2023. Our line of credit matures on April 19, 2024.
As of December 31, 2023 and February 20, 2024, there were no borrowings outstanding on the revolving line of credit; however, we do have approximately $14.6 million of outstanding letters of credit, which limits our borrowing capacity to $1,485.4 million as of February 20, 2024. Our line of credit matures on June 12, 2027.
The increase in 2022 is due to (i) higher late charges collected on delinquent accounts driven by more delinquent accounts compared to 2021 and to a lesser extent (ii) higher administrative fees charged per move-in combined with higher move-in volumes.
The increase in 2023 is due to (i) higher late charges collected on delinquent accounts driven by more delinquent accounts and to a lesser extent (ii) higher administrative fees resulting from higher move-in volumes.
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.
However, if capital market conditions deteriorate significantly for a long period of time, our access to or cost of debt and preferred equity capital could be negatively impacted and potentially affect future investment activities.
Late Charges and Administrative Fees Late charges and administrative fees increased 23.0% in 2022 and decreased 1.8% in 2021, in each case as compared to the previous year.
Late Charges and Administrative Fees Late charges and administrative fees increased 10.1% and 23.4% in 2023 and 2022, in each case as compared to the previous year.
These costs increased 10.0% in 2022 as compared to 2021 and 7.8% in 2021 as compared to 2020.
These costs increased 8.8% in 2023 as compared to 2022 and 10.1% in 2022 as compared to 2021.
Such functions include information technology support, hardware, and software, as well as centralized administration of payroll, benefits, training, facilities management, customer service, pricing and marketing, operational accounting and finance, and legal costs. Centralized management costs increased 11.9% in 2022 as compared to 2021 and 12.7% in 2021 as compared to 2020.
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, legal costs, and costs from field management executives. Centralized management costs decreased 5.0% in 2023 as compared to 2022 and increased 12.3% in 2022 as compared to 2021.
Allocating Purchase Price for Acquired Real Estate Facilities : We estimate the fair values of the assets and liabilities of acquired real estate facilities, which consist principally of land and buildings, for purposes of allocating the aggregate purchase price of acquired real estate facilities.
Others could come to materially different conclusions. 23 Allocating Purchase Price for Acquired Real Estate Facilities : We estimate the fair values of the assets and liabilities of acquired real estate facilities, which consist principally of land, buildings and acquired customers in place, for purposes of allocating the aggregate purchase price of acquired real estate facilities.
The following table summarizes the historical operating results of these 2,276 facilities (149.1 million net rentable square feet) that represent approximately 73% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2022.
The following table summarizes the historical operating results (for all periods presented) of these 2,339 facilities (154.9 million net rentable square feet) that represent approximately 71% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2023.
Revenues generated by our Same Store Facilities increased 14.8% and 10.6% in 2022 and 2021, respectively, in each case as compared to the previous year.
Revenues generated by our Same Store Facilities increased 4.7% and 15.2% in 2023 and 2022, respectively, in each case as compared to the previous year.
Of these expansions, 51 were completed before 2021, 27 were completed in 2021 or 2022, and 13 are currently in process at December 31, 2022.
Of these expansions, 61 were completed before 2022, 22 were completed in 2022 or 2023, and five are currently in process at December 31, 2023.
Investment in Shurgard: Included in our equity earnings from Shurgard for the year ended December 31, 2022 is our equity share of gains on sale of real estate totaling $3.5 million. For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.070 U.S.
Dollars per Euro at December 31, 2023 (1.070 at December 31, 2022), and average exchange rates of 1.081 for 2023 and 1.054 for 2022. Included in our equity earnings from Shurgard for the year ended December 31, 2022 is our equity share of gains on sale of real estate totaling $3.5 million (none for 2023).
Demand fluctuates due to various local and regional factors, including the overall economy. Demand for our facilities is also impacted by new supply of self-storage space and alternatives to self-storage.
Typical seasonal demand patterns returned in the second half of 2023 with decreased demand during the fall and winter months. Demand fluctuates due to various local and regional factors, including the overall economy. Demand for our facilities is also impacted by new supply of self-storage space and alternatives to self-storage.
Tenant reinsurance premium revenue generated from tenants at our Same-Store Facilities were $139.0 million and $133.9 million in 2022 and 2021, respectively, representing a 3.8% year over year increase in 2022. 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.
Tenant reinsurance premium revenue generated from tenants at our Same-Store Facilities were $149.8 million and $144.4 million in 2023 and 2022, respectively, representing a 3.7% year over year increase in 2023. We expect future growth will come primarily from customers of newly acquired and developed facilities and the increase of tenant insurance participation at our same store facilities.
Our equity share of earnings from PSB contributed $57.7 million and $99.3 million to Core FFO in 2022 and 2021, respectively. As a result of closing the sale of PSB, we will no longer recognize equity in earnings from PSB in the future.
Our equity share of earnings from PSB contributed $57.7 million to Core FFO in 2022. Since the sale of PSB in July 2022, we no longer recognize equity in earnings from PSB.
We expect a moderate increase in other direct property costs in 2023 primarily driven by increase in credit card fees. 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.
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.
We expect centralized managements costs to remain flat in 2023 compared to 2022. 33 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 December 31, 2022 Year Ended December 31, Number of Facilities Square Feet (millions) Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot 2022 2021 Change 2022 2021 Change 2022 2021 Change Los Angeles 212 15.3 $ 32.55 $ 27.32 19.1 % 96.9 % 98.2 % (1.3) % $ 31.55 $ 26.83 17.6 % San Francisco 128 7.8 31.43 28.08 11.9 % 95.3 % 97.2 % (2.0) % 29.95 27.29 9.7 % New York 90 6.4 30.60 27.44 11.5 % 94.5 % 96.3 % (1.9) % 28.92 26.43 9.4 % Miami 83 5.8 27.92 22.42 24.5 % 95.6 % 97.1 % (1.5) % 26.70 21.77 22.6 % Seattle-Tacoma 86 5.7 25.11 21.95 14.4 % 94.2 % 95.3 % (1.2) % 23.67 20.93 13.1 % Washington DC 90 5.5 25.42 22.65 12.2 % 93.4 % 95.3 % (2.0) % 23.74 21.58 10.0 % Chicago 129 8.1 19.28 16.63 15.9 % 93.6 % 95.7 % (2.2) % 18.05 15.92 13.4 % Dallas-Ft.
The increase in 2022 was due primarily to an increase in technology and data team costs that support property operations. 34 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 December 31, 2023 Year Ended December 31, Number of Facilities Square Feet (millions) Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot 2023 2022 Change 2023 2022 Change 2023 2022 Change Los Angeles 214 15.5 $ 35.92 $ 32.40 10.9 % 95.4 % 96.9 % (1.5) % $ 34.28 $ 31.38 9.2 % San Francisco 129 7.9 32.41 31.28 3.6 % 94.4 % 95.2 % (0.8) % 30.59 29.78 2.7 % New York 92 6.8 32.13 30.51 5.3 % 93.3 % 94.3 % (1.1) % 29.99 28.78 4.2 % Miami 86 6.2 30.10 28.09 7.2 % 93.6 % 95.6 % (2.1) % 28.16 26.86 4.8 % Seattle-Tacoma 89 6.0 26.05 25.06 4.0 % 92.6 % 94.1 % (1.6) % 24.11 23.57 2.3 % Washington DC 90 5.5 26.55 25.42 4.4 % 92.7 % 93.4 % (0.7) % 24.60 23.74 3.6 % Dallas-Ft.
The amounts in the above table are net of $17.4 million and $14.6 million in 2022 and 2021, respectively, in development costs that were capitalized to newly developed and redeveloped self-storage facilities.
These amounts are net of $18.0 million, $17.4 million and $14.6 million in 2023, 2022 and 2021, respectively, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. During 2023 and 2022, we wrote off $11.7 million and $7.0 million, respectively, of accumulated development costs for cancelled development and redevelopment projects.
The increase in 2021 is due primarily to (i) an 8.9% increase in realized annual rent per occupied square foot for 2021 as compared to 2020 and, to a lesser extent, (ii) a 1.9% increase in average occupancy for 2021 as compared to 2020.
The increase in 2023 is due primarily to (i) a 6.3% increase in realized annual rent per occupied square foot for 2023 as compared to 2022, partially offset by (ii) a 1.6% decrease in average occupancy for 2023 as compared to 2022.
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.
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. The facilities under “expansions completed” represent those facilities where the expansions have been completed at December 31, 2023.
The $437.4 million increase in self-storage net operating income in 2021 as compared to 2020 is a result of a $279.5 million increase in our Same Store Facilities and a $157.9 million increase in our non-Same Store Facilities.
The $231.8 million increase in self-storage net operating income in 2023 as compared to 2022 is a result of a $118.2 million increase attributable to our Same Store Facilities and a $113.6 million increase attributable to our non-same store facilities.
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.
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. 50 The annual distribution requirement with respect to our preferred shares outstanding at December 31, 2023 is approximately $194.7 million per year.
In order to enhance the competitive position of certain of our facilities relative to local competitors (including newly developed facilities), we have embarked on our multi-year Property of Tomorrow program to (i) rebrand our properties with more pronounced, attractive, and clearly identifiable color schemes and signage, (ii) enhance the energy efficiency of our properties, and (iii) upgrade the configuration and layout of the offices and other customer zones to improve the customer experience.
We have implemented various initiatives to manage the adverse impacts, such as enhancements in operational processes and investments in technology to reduce payroll hours, achievement of economies of scale from recent acquisitions with supervisory payroll and centralized management costs allocated over a broader number of self-storage facilities, and investments in solar power and LED lights to lower utility usage. 24 In order to enhance the competitive position of certain of our facilities relative to local competitors (including newly developed facilities), we have embarked on our multi-year Property of Tomorrow program to (i) rebrand our properties with more pronounced, attractive, and clearly identifiable color schemes and signage, (ii) enhance the energy efficiency of our properties, and (iii) upgrade the configuration and layout of the offices and other customer zones to improve the customer experience.
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 fill-up for newly managed properties.
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 fill-up for newly managed properties. 45 Analysis of items not allocated to segments Equity in earnings of unconsolidated real estate entities We account for the equity investments in Shurgard and PSB (prior to the sale of our investment in PSB) using the equity method and record our pro-rata share of the net income of these entities.
The facilities under “expansions completed” represent those facilities where the expansions have been completed at December 31, 2022. We incurred a total of $709.9 million in direct cost to expand these facilities, demolished a total of 1.2 million net rentable square feet of storage space, and built a total of 6.3 million net rentable square feet of new storage space.
We incurred a total of $775.0 million in direct cost to expand these facilities, demolished a total of 1.3 million net rentable square feet of storage space, and built a total of 6.8 million net rentable square feet of new storage space.
From the inception of the repurchase program through February 21, 2023, 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. 49
From the inception of the repurchase program through February 20, 2024, we have repurchased a total of 23,721,916 common shares at an aggregate cost of approximately $679.1 million.
As described below, our current committed cash requirements consist of (i) $70.5 million in property acquisitions currently under contract and (ii) $606.6 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months.
As described below, our current committed cash requirements consist of (i) $420.7 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months and (ii) $810 million in scheduled principal repayments on our unsecured notes in the next twelve months, which we plan to refinance as they come due in April 2024.
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 December 31, 2022, we had development and expansion projects at a total cost of approximately $979.6 million.
Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. 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.
The following table sets forth our ancillary operations: Year Ended December 31, 2022 2021 Change (Amounts in thousands) Revenues: Tenant reinsurance premiums $ 188,201 $ 166,585 $ 21,616 Merchandise 28,303 28,466 (163) Third party property management 19,631 17,207 2,424 Total revenues 236,135 212,258 23,877 Cost of operations: Tenant reinsurance 36,830 33,932 2,898 Merchandise 17,113 17,274 (161) Third party property management 18,755 17,362 1,393 Total cost of operations 72,698 68,568 4,130 Net operating income (loss): Tenant reinsurance 151,371 132,653 18,718 Merchandise 11,190 11,192 (2) Third party property management 876 (155) 1,031 Total net operating income $ 163,437 $ 143,690 $ 19,747 Tenant reinsurance operations: Tenant reinsurance premium revenue increased $21.6 million or 13.0% in 2022 over 2021, as a result of an increase in our tenant base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage.
The following table sets forth our ancillary operations: Year Ended December 31, 2023 2022 Change (Amounts in thousands) Revenues: Tenant reinsurance premiums $ 203,503 $ 188,201 $ 15,302 Merchandise 27,511 28,303 (792) Third party property management 27,063 19,631 7,432 Total revenues 258,077 236,135 21,942 Cost of operations: Tenant reinsurance 42,366 36,830 5,536 Merchandise 17,137 17,113 24 Third party property management 26,493 18,755 7,738 Total cost of operations 85,996 72,698 13,298 Net operating income: Tenant reinsurance 161,137 151,371 9,766 Merchandise 10,374 11,190 (816) Third party property management 570 876 (306) Total net operating income $ 172,081 $ 163,437 $ 8,644 Tenant reinsurance operations: Tenant reinsurance premium revenue increased $15.3 million or 8.1% in 2023 over 2022, as a result of an increase in our tenant base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage, as well as the increase of tenant insurance participation at our same store facilities.
Depreciation and amortization expense Depreciation and amortization expense for Self-Storage Operations increased $174.7 million in 2022 as compared to 2021 and increased $160.2 million in 2021 as compared to 2020, primarily due to newly acquired facilities of $5.1 billion in 2021.
Depreciation and amortization expense Depreciation and amortization expense for Self-Storage Operations increased $81.9 million in 2023 as compared to 2022 and increased $174.7 million in 2022 as compared to 2021, due to elevated levels of capital expenditures and new facilities that are recently acquired and developed.
The increase is due primarily to (i) a $437.4 million increase in self-storage net operating income, (ii) a $209.7 million increase in foreign currency exchange gains associated with our Euro denominated notes payable, and (iii) our $149.0 million equity share of gains on sale of real estate recorded by PSB in 2021, partially offset by (iv) a $160.2 million increase in depreciation and amortization expense.
(“PSB”) in July 2022, (ii) a $149.5 million increase in foreign currency exchange losses primarily associated with our Euro denominated notes payable, (iii) a $79.1 million decrease in equity in earnings of unconsolidated real estate entities due to our sale of PSB in July 2022, and (iv) a $64.8 million increase in interest expense, partially offset by (v) a $231.8 million increase in self-storage net operating income and (vi) a $45.0 million increase in interest and other income.
Notwithstanding this requirement, our annual operating retained cash flow increased from $200 million to $300 million per year in recent years to approximately $700 million in 2021 and $1 billion in 2022. Retained operating cash flow represents our expected cash flow provided by operating activities (including property operating costs and interest payments described below), less shareholder distributions and capital expenditures.
Notwithstanding this requirement, our annual operating retained cash flow increased from $200 million to $300 million per year in recent years to approximately $700 million in 2021, $1 billion in 2022 and $480 million for 2023 after a 50% increase in annual dividend in 2023.
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. We typically underwrite new developments to stabilize at approximately an 8.0% NOI yield on cost.
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, the related construction and development overhead expenses included in general and administrative expense, and the net operating loss from newly developed facilities undergoing fill-up.
In addition, we have made investments in LED lighting and the installation of solar panels, which approximated $56 million for the year ended December 31, 2022 and we expect to spend $132 million in 2023.
In addition, we have spent $65 million in LED lighting and the installation of solar panels in 2023 and we expect to spend $120 million in 2024.
Demand and operating trends softened in the second half of 2022 and returned to historical seasonal patterns as compared to what we experienced in 2020 and 2021. We expect the trends to continue in 2023.
Demand and operating trends softened in the second half of 2022 continuing through 2023 as compared to what we experienced in 2020 and 2021, and we expect this to continue in 2024. 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.
Revenues for the Same Store Facilities increased 10.6% or $265.8 million in 2021 as compared to 2020, due primarily to higher realized annual rent per available square foot and weighted average square foot occupancy.
Revenues for the Same Store Facilities increased 4.7% or $154.0 million in 2023 as compared to 2022, due primarily to higher realized annual rent per occupied square foot, partially offset by a decline in occupancy.
In our non-same store portfolio, we also have developed and expanded self-storage facilities of 17.7 million net rentable square feet for a total cost of $1.6 billion. During 2022, net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 98.2% ($226.3 million), as compared to 2021.
For development and expansions completed by December 31, 2023, we incurred a total cost of $1.6 billion. During 2023, combined net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 28.7% ($109.4 million), as compared to 2022.
We increased marketing expense by 15.7% in 2022 as compared to 2021, by utilizing a higher volume of online paid search programs to attract new tenants.
We increased marketing expense by 44.5% and 15.5% in 2023 and 2022, respectively, in each case as compared to the previous year, by utilizing a higher volume of online paid search programs to attract new tenants. We plan to continue to use internet advertising and other advertising channels to support move-in volumes in 2024.
(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.
(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. (c) We have completed the expansion projects on facilities acquired in 2021 for $26.9 million, adding 179,000 net rentable square feet of storage space as of December 31, 2023.
The following table summarizes operating data with respect to the Acquired Facilities: ACQUIRED FACILITIES Year Ended December 31, Year Ended December 31, 2022 2021 Change (a) 2021 2020 Change (a) ($ amounts in thousands, except for per square foot amounts) Revenues (b): 2020 Acquisitions $ 75,647 $ 54,890 $ 20,757 $ 54,890 $ 11,365 $ 43,525 2021 Acquisitions 312,300 106,474 205,826 106,474 — 106,474 2022 Acquisitions 14,945 — 14,945 — — — Total revenues 402,892 161,364 241,528 161,364 11,365 149,999 Cost of operations (b): 2020 Acquisitions 26,168 25,216 952 25,216 6,742 18,474 2021 Acquisitions 101,859 32,705 69,154 32,705 — 32,705 2022 Acquisitions 7,884 — 7,884 — — — Total cost of operations 135,911 57,921 77,990 57,921 6,742 51,179 Net operating income: 2020 Acquisitions 49,479 29,674 19,805 29,674 4,623 25,051 2021 Acquisitions 210,441 73,769 136,672 73,769 — 73,769 2022 Acquisitions 7,061 — 7,061 — — — Net operating income 266,981 103,443 163,538 103,443 4,623 98,820 Depreciation and amortization expense (309,312) (167,119) (142,193) (167,119) (11,904) (155,215) Net loss $ (42,331) $ (63,676) $ 21,345 $ (63,676) $ (7,281) $ (56,395) At December 31: Square foot occupancy: 2020 Acquisitions 88.4% 88.2% 0.2% 88.2% 63.5% 38.9% 2021 Acquisitions 83.1% 79.9% 4.0% 79.9% — — 2022 Acquisitions 79.4% — — — — — 83.4% 81.4% 2.5% 81.4% 63.5% 28.2% Annual contract rent per occupied square foot: 2020 Acquisitions $ 17.39 $ 14.82 17.3% $ 14.82 $ 12.50 18.6% 2021 Acquisitions 17.81 15.62 14.0% 15.62 — — 2022 Acquisitions 11.48 — — — — — $ 16.84 $ 15.46 8.9% $ 15.46 $ 12.50 23.7% Number of facilities: 2020 Acquisitions 62 62 — 62 62 — 2021 Acquisitions 232 232 — 232 — 232 2022 Acquisitions 74 — 74 — — — 368 294 74 294 62 232 Net rentable square feet (in thousands) (c): 2020 Acquisitions 5,075 5,075 — 5,075 5,075 — 2021 Acquisitions 21,908 21,830 78 21,830 — 21,830 2022 Acquisitions 4,726 — 4,726 — — — 31,709 26,905 4,804 26,905 5,075 21,830 38 ACQUIRED FACILITIES (Continued) As of December 31, 2022 Costs to acquire (in thousands): 2020 Acquisitions $ 796,065 2021 Acquisitions 5,115,276 2022 Acquisitions 730,480 $ 6,641,821 (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.
The following table summarizes operating data with respect to the Acquired Facilities: ACQUIRED FACILITIES Year Ended December 31, Year Ended December 31, 2023 2022 Change (a) 2022 2021 Change (a) ($ amounts in thousands, except for per square foot amounts) Revenues (b): 2021 Acquisitions $ 345,061 $ 312,300 $ 32,761 $ 312,300 $ 106,474 $ 205,826 2022 Acquisitions 50,105 14,945 35,160 14,945 — 14,945 2023 Acquisitions 55,487 — 55,487 — — — Total revenues 450,653 327,245 123,408 327,245 106,474 220,771 Cost of operations (b): 2021 Acquisitions 104,665 101,859 2,806 101,859 32,705 69,154 2022 Acquisitions 19,911 7,885 12,026 7,885 — 7,885 2023 Acquisitions 19,922 — 19,922 — — — Total cost of operations 144,498 109,744 34,754 109,744 32,705 77,039 Net operating income: 2021 Acquisitions 240,396 210,441 29,955 210,441 73,769 136,672 2022 Acquisitions 30,194 7,060 23,134 7,060 — 7,060 2023 Acquisitions 35,565 — 35,565 — — — Net operating income 306,155 217,501 88,654 217,501 73,769 143,732 Depreciation and amortization expense (323,796) (280,871) (42,925) (280,871) (131,998) (148,873) Net (loss) income $ (17,641) $ (63,370) $ 45,729 $ (63,370) $ (58,229) $ (5,141) At December 31: Square foot occupancy: 2021 Acquisitions 81.5% 83.1% (1.9)% 83.1% 79.9% 4.0% 2022 Acquisitions 82.2% 79.4% 3.5% 79.4% —% —% 2023 Acquisitions 83.1% —% —% —% —% —% 82.1% 82.5% (0.5)% 82.5% 79.9% 3.3% Annual contract rent per occupied square foot: 2021 Acquisitions $ 18.72 $ 17.81 5.1% $ 17.81 $ 15.62 14.0% 2022 Acquisitions 13.06 11.48 13.8% 11.48 — —% 2023 Acquisitions 16.78 — —% — — —% $ 17.41 $ 16.73 4.1% $ 16.73 $ 15.62 7.1% Number of facilities: 2021 Acquisitions 232 232 — 232 232 — 2022 Acquisitions 74 74 — 74 — 74 2023 Acquisitions 164 — 164 — — — 470 306 164 306 232 74 Net rentable square feet (in thousands): 2021 Acquisitions (c) 22,009 21,908 101 21,908 21,830 78 2022 Acquisitions 4,740 4,726 14 4,726 — 4,726 2023 Acquisitions 12,067 — 12,067 — — — 38,816 26,634 12,182 26,634 21,830 4,804 39 ACQUIRED FACILITIES (Continued) As of December 31, 2023 Costs to acquire (in thousands): 2021 Acquisitions (c) $ 5,115,276 2022 Acquisitions 730,957 2023 Acquisitions (d) 2,674,840 $ 8,521,073 (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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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ITEM 8. Financial Statements and Supplementary Data The financial statements and supplementary data appearing on pages F-3 to F-34 are incorporated herein by reference. ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable.
ITEM 8. Financial Statements and Supplementary Data The financial statements and supplementary data appearing on pages F-3 to F-35 are incorporated herein by reference. ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable.
Our debt, which totals approximately $6.9 billion at December 31, 2022, is the only market-risk sensitive portion of our capital structure. The fair value of our debt at December 31, 2022 is approximately $6.0 billion. The table below summarizes the annual maturities of our debt, which had a weighted average effective rate of 2.0% at December 31, 2022.
Our debt, which totals approximately $9.1 billion at December 31, 2023, is the only market-risk sensitive portion of our capital structure. The fair value of our debt at December 31, 2023 is approximately $8.6 billion. The table below summarizes the annual maturities of our debt, which had a weighted average effective rate of 3.1% at December 31, 2023.
See Note 7 to our December 31, 2022 consolidated financial statements for further information regarding our debt (amounts in thousands). 2023 2024 2025 2026 2027 Thereafter Total Debt $ 8,270 $ 807,159 $ 259,170 $ 1,150,138 $ 500,140 $ 4,185,709 $ 6,910,586 We have foreign currency exposure at December 31, 2022 related to (i) our investment in Shurgard, with a book value of $275.8 million, and a fair value of $1.4 billion based upon the closing price of Shurgard’s stock on December 31, 2022, and (ii) €1.5 billion ($1.7 billion) of Euro-denominated unsecured notes payable, providing a natural hedge against the fair value of our investment in Shurgard.
See Note 8 to our December 31, 2023 consolidated financial statements for further information regarding our debt (amounts in thousands). 2024 2025 2026 2027 2028 Thereafter Total Debt $ 810,496 $ 667,247 $ 1,150,138 $ 500,146 $ 1,200,129 $ 4,825,634 $ 9,153,790 We have foreign currency exposure at December 31, 2023 related to (i) our investment in Shurgard, with a book value of $390.2 million, and a fair value of $1.7 billion based upon the closing price of Shurgard’s stock on December 31, 2023, and (ii) €1.5 billion ($1.7 billion) of Euro-denominated unsecured notes payable, providing a natural hedge against the fair value of our investment in Shurgard.

Other PSA 10-K year-over-year comparisons