UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended September 30, 2009

                                       or

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

For the transition period from               to               .
                               -------------    --------------

Commission File Number:  001-33519
                         ---------

                                 PUBLIC STORAGE
                                 --------------
             (Exact name of registrant as specified in its charter)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for at least the past 90 days.

                                 [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files).

                                 [X] Yes [ ] No

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

   Large Accelerated Filer [X] Accelerated Filer [ ] Non-accelerated Filer [ ]
                          Smaller Reporting Company [ ]


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

                                 [ ] Yes [X] No

Indicate the number of the registrant's  outstanding common shares of beneficial
interest, as of November 5, 2009:

Common  Shares of  beneficial  interest,  $.10 par value per share - 169,539,239
shares





                                 PUBLIC STORAGE

                                      INDEX


                                                                          Pages

PART I.    FINANCIAL INFORMATION
           ---------------------

Item 1.    Financial Statements (Unaudited)

           Condensed Consolidated Balance Sheets at
              September 30, 2009 and December 31, 2008                        1

           Condensed Consolidated Statements of Income for the
              Three and Nine Months Ended September 30, 2009 and 2008         2

           Condensed Consolidated Statement of Equity
              for the Nine Months Ended September 30, 2009                    3

           Condensed Consolidated Statements of Cash Flows
              for the Nine Months Ended September 30, 2009 and 2008       4 - 5

           Notes to Condensed Consolidated Financial Statements          6 - 36

Item 2.    Management's Discussion and Analysis of
              Financial Condition and Results of Operations             37 - 63

Item 3.    Quantitative and Qualitative Disclosures about Market Risk        64

Item 4.    Controls and Procedures                                           65

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

Item 1.    Legal Proceedings                                                 66

Item 1A.   Risk Factors                                                      66

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds  66 - 67

Item 6.    Exhibits                                                          67







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



                                                                                   September 30,         December 31,
                                                                                       2009                  2008
                                                                                  ---------------       ---------------
                                      ASSETS

                                                                                                  
Cash and cash equivalents....................................................     $     670,928         $     680,701
Real estate facilities, at cost:
   Land......................................................................         2,715,851             2,716,254
   Buildings.................................................................         7,551,179             7,490,768
                                                                                  ---------------       ---------------
                                                                                     10,267,030            10,207,022
   Accumulated depreciation..................................................        (2,650,793)           (2,405,473)
                                                                                  ---------------       ---------------
                                                                                      7,616,237             7,801,549
   Construction in process...................................................            17,735                20,340
                                                                                  ---------------       ---------------
                                                                                      7,633,972             7,821,889

Investment in real estate entities...........................................           613,800               544,598
Goodwill, net................................................................           174,634               174,634
Intangible assets, net.......................................................            39,366                52,005
Loan receivable from Shurgard Europe.........................................           571,783               552,361
Other assets.................................................................           104,892               109,857
                                                                                  ---------------       ---------------
              Total assets...................................................     $   9,809,375         $   9,936,045
                                                                                  ===============       ===============
                              LIABILITIES AND EQUITY

Notes payable................................................................     $     521,662         $     643,811
Accrued and other liabilities................................................           236,461               212,353
                                                                                  ---------------       ---------------
         Total liabilities...................................................           758,123               856,164

Redeemable noncontrolling interests in subsidiaries (Note 7).................            12,810                12,777

Commitments and contingencies (Note 12)
Equity:
   Public Storage shareholders' equity:
    Cumulative Preferred Shares of beneficial interest, $0.01 par value,
       100,000,000 shares authorized, 886,140 shares issued (in series) and
       outstanding, (887,122 at December 31, 2008) at liquidation
       preference............................................................         3,399,777             3,424,327
    Common Shares of beneficial interest, $0.10 par value, 650,000,000 shares
      authorized, 168,392,420 shares issued and outstanding (168,279,732 at
      December 31, 2008).....................................................            16,840                16,829
    Equity Shares of beneficial interest, Series A, $0.01 par value,
       100,000,000 shares authorized, 8,377.193 shares issued and
       outstanding...........................................................                 -                     -
    Paid-in capital..........................................................         5,677,367             5,590,093
    Retained deficit.........................................................          (177,603)             (290,323)
    Accumulated other comprehensive loss.....................................           (12,275)              (31,931)
                                                                                  ---------------       ---------------
          Total Public Storage shareholders' equity..........................         8,904,106             8,708,995
   Equity of permanent noncontrolling interests in subsidiaries (Note 7) ....           134,336               358,109
                                                                                  ---------------       ---------------
      Total equity...........................................................         9,038,442             9,067,104
                                                                                  ---------------       ---------------
              Total liabilities and equity...................................     $   9,809,375         $   9,936,045
                                                                                  ===============       ===============


                            See accompanying notes.
                                       1



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


                                                                       Three Months Ended                Nine Months Ended
                                                                         September 30,                     September 30,
                                                                  ----------------------------    ------------------------------
                                                                     2009             2008             2009             2008
                                                                  ------------    ------------    -------------    -------------

Revenues:
                                                                                                       
   Self-storage facilities...................................     $   378,207     $   392,738     $  1,121,076     $  1,197,781
   Ancillary operations......................................          27,800          26,946           81,741           83,693
   Interest and other income.................................           6,857          11,485           22,006           25,343
                                                                  ------------    ------------    -------------    -------------
                                                                      412,864         431,169        1,224,823        1,306,817
                                                                  ------------    ------------    -------------    -------------
Expenses:
  Cost of operations:
      Self-storage facilities................................         121,261         121,579          379,213          406,358
      Ancillary operations...................................           7,493           3,756           27,520           27,124
  Depreciation and amortization..............................          85,908          91,084          254,670          308,153
  General and administrative.................................           8,654           8,879           26,532           56,968
  Interest expense...........................................           7,289           9,099           22,705           35,187
                                                                  ------------    ------------    -------------    -------------
                                                                      230,605         234,397          710,640          833,790
                                                                  ------------    ------------    -------------    -------------
Income from continuing operations before equity in earnings
   of real estate entities, gains on disposition of real
   estate investments, net, casualty loss, gain on early
   retirement of debt and foreign currency exchange gain
   (loss)....................................................         182,259         196,772          514,183          473,027
Equity in earnings of real estate entities...................           8,824           6,318           39,033           13,679
Gains on disposition of real estate investments, net.........          30,573           1,024           33,295          342,797
Casualty loss................................................               -            (525)               -             (525)
Gain on early retirement of debt.............................               -               -            4,114                -
Foreign currency exchange gain (loss)........................          21,429         (53,172)          19,901          (12,203)
                                                                  ------------    ------------    -------------    -------------
Income from continuing operations............................         243,085         150,417          610,526          816,775
Discontinued operations......................................             866          (2,475)          (7,759)          (4,937)
                                                                  ------------    ------------    -------------    -------------
Net income...................................................         243,951         147,942          602,767          811,838
Net income allocated (to) from noncontrolling equity
   interests:
   Based upon income of the consolidated entities............          (6,642)        (10,611)         (21,284)         (28,352)
   Based upon repurchases of preferred partnership units.....               -               -           72,000                -
                                                                  ------------    ------------    -------------    -------------
Net income allocable to Public Storage shareholders..........     $   237,309     $   137,331     $    653,483     $    783,486
                                                                  ============    ============    =============    =============
Allocation of net income to (from) Public Storage
   shareholders:
   Preferred shareholders based on distributions paid........     $    58,108     $    60,333     $    174,324     $    180,999
   Preferred shareholders based on repurchases...............               -               -           (6,218)               -
   Equity Shares, Series A...................................           5,131           5,356           15,393           16,068
   Restricted share units ...................................             577             183            1,509            2,154
   Common shareholders.......................................         173,493          71,459          468,475          584,265
                                                                  ------------    ------------    -------------    -------------
                                                                  $   237,309     $   137,331     $    653,483     $    783,486
                                                                  ============    ============    =============    =============
Net income per common share - basic
   Continuing operations.....................................     $      1.02     $      0.44     $       2.83     $       3.50
   Discontinued operations...................................            0.01           (0.01)           (0.05)           (0.03)
                                                                  ------------    ------------    -------------    -------------
                                                                  $      1.03     $      0.43     $       2.78     $       3.47
                                                                  ============    ============    =============    =============
Net income per common share - diluted
   Continuing operations.....................................     $      1.02     $      0.43     $       2.83     $       3.49
   Discontinued operations...................................            0.01           (0.01)           (0.05)           (0.03)
                                                                  ------------    ------------    -------------    -------------
                                                                  $      1.03     $      0.42     $       2.78     $      3.46
                                                                  ============    ============    =============    =============

Basic weighted average common shares outstanding.............         168,373         168,133          168,344          168,248
                                                                  ============    ============    =============    =============
Diluted weighted average common shares outstanding...........         169,043         168,560          168,681          168,673
                                                                  ============    ============    =============    =============
Equity Shares, Series A (basic and diluted):
     Net income per share ...................................     $      0.61     $      0.61     $       1.84     $       1.84
                                                                  ============    ============    =============    =============
     Weighted average depositary shares......................           8,377           8,744            8,377            8,744
                                                                  ============    ============    =============    =============

                            See accompanying notes.
                                       2


                                 PUBLIC STORAGE
                   CONDENSED CONSOLIDATED STATEMENT OF EQUITY
                    (Amounts in thousands, except share data)
                                   (Unaudited)



                                                                                                               Accumulated
                                                       Cumulative                                Retained         Other
                                                       Preferred       Common      Paid-in       Earnings     Comprehensive
                                                         Shares        Shares      Capital       (Defict)          Loss
                                                      -------------  ----------  -------------  ------------  -------------
                                                                                               
Balance at December 31, 2008.......................   $  3,424,327   $  16,829   $  5,590,093   $  (290,323)  $  (31,931)
Repurchase of cumulative preferred shares (982,000
  shares) (Note 8).................................        (24,550)          -          7,015             -            -
Repurchase of preferred partnership units (Note 7).              -           -         72,000             -            -
Issuance of common shares in connection with
   share-based compensation (112,688 shares)
   (Note 10).......................................              -          11          1,888             -            -
Stock-based compensation expense, net of cash
   compensation in lieu of common shares (Note 10).              -           -          6,371             -            -
 Adjustments of redeemable noncontrolling
   interests in subsidiaries to liquidation value
   (Note 7)........................................              -           -              -          (256)           -
Net income.........................................              -           -              -       602,767            -
Net income allocated based upon income of the
   consolidated entities to (Note 7):
    Redeemable noncontrolling interests in
      subsidiaries.................................              -           -              -          (753)           -
    Permanent noncontrolling equity interests......              -           -              -       (20,531)           -
Distributions to equity holders:
   Cumulative preferred shares (Note 8)............              -           -              -      (174,324)           -
   Permanent noncontrolling interests in
     subsidiaries .................................              -           -              -             -            -
   Equity Shares, Series A ($1.838 per depositary
     share)........................................              -           -              -       (15,393)           -
   Holders of unvested restricted share units......              -           -              -        (1,006)           -
   Common Shares ($1.65 per share).................              -           -              -      (277,784)           -
Other comprehensive income: Currency translation
  adjustments (Note 2).............................              -           -              -             -       19,656
                                                      -------------  ----------  -------------  ------------  -------------
Balance at September 30, 2009......................   $  3,399,777   $  16,840   $  5,677,367   $  (177,603)  $  (12,275)
                                                      =============  ==========  =============  ============  =============




                                                                        Equity of
                                                       Total Public     Permanent
                                                         Storage      Noncontrolling
                                                       Shareholders'    Interests
                                                            Equity   In Subsidiaries  Total Equity
                                                      -------------- ---------------  ------------
                                                                             
Balance at December 31, 2008.......................   $  8,708,995   $    358,109     $ 9,067,104
Repurchase of cumulative preferred shares (982,000
  shares) (Note 8).................................        (17,535)             -         (17,535)
Repurchase of preferred partnership units (Note 7).         72,000       (225,000)       (153,000)
Issuance of common shares in connection with
   share-based compensation (112,688 shares)
   (Note 10).......................................          1,899              -           1,899
Stock-based compensation expense, net of cash
   compensation in lieu of common shares (Note 10).          6,371              -           6,371
 Adjustments of redeemable noncontrolling
   interests in subsidiaries to liquidation value
   (Note 7)........................................           (256)             -            (256)
Net income.........................................        602,767              -         602,767
Net income allocated based upon income of the
   consolidated entities to (Note 7):
    Redeemable noncontrolling interests in
      subsidiaries.................................           (753)             -            (753)
    Permanent noncontrolling equity interests......        (20,531)        20,531               -
Distributions to equity holders:
   Cumulative preferred shares (Note 8)............       (174,324)             -        (174,324)
   Permanent noncontrolling interests in
     subsidiaries .................................              -        (19,304)        (19,304)
   Equity Shares, Series A ($1.838 per depositary
     share)........................................        (15,393)             -         (15,393)
   Holders of unvested restricted share units......         (1,006)             -          (1,006)
   Common Shares ($1.65 per share).................       (277,784)             -        (277,784)
Other comprehensive income: Currency translation
  adjustments (Note 2).............................         19,656              -          19,656
                                                      -------------- ---------------  ------------
Balance at September 30, 2009......................   $  8,904,106   $    134,336     $ 9,038,442
                                                      ============== ===============  ============

                            See accompanying notes.
                                       3




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



                                                                                       For the Nine Months Ended
                                                                                             September 30,
                                                                                    -----------------------------
                                                                                         2009            2008
                                                                                    -------------   -------------
Cash flows from operating activities:
                                                                                              
   Net income...............................................................        $   602,767     $   811,838
   Adjustments to reconcile net income to net cash provided by operating
     activities:
    Gain on disposition of real estate investments, including amounts in
       discontinued operations..............................................            (39,313)       (342,797)
    Gain on early retirement of debt........................................             (4,114)              -
    Impairment charge on intangible asset...................................              8,205               -
    Depreciation and amortization including amounts in discontinued
       operations...........................................................            256,108         309,911
    Pro-rata share of PSB's income allocations from preferred repurchases...            (16,284)              -
    Distributions received from real estate entities in excess of other
       equity in earnings...................................................             13,391          17,792
    Foreign currency exchange (gain) loss...................................            (19,901)         12,203
    Adjustments for stock-based compensation, amortization of note premium,
       and other............................................................             36,670             314
                                                                                    -------------   -------------
       Total adjustments....................................................            234,762          (2,577)
                                                                                    -------------   -------------
       Net cash provided by operating activities............................            837,529         809,261
                                                                                    -------------   -------------
Cash flows from investing activities:
    Capital improvements to real estate facilities .........................            (52,449)        (72,629)
    Construction in process.................................................            (11,029)        (57,972)
    Acquisitions of real estate facilities..................................                  -         (31,608)
    Proceeds from the disposition of interest in Shurgard Europe (Note 3)...                  -         609,059
    Proceeds from sales of real estate and other real estate investments....             10,464           1,133
    Deconsolidation of Shurgard Europe (Note 3).............................                  -         (34,588)
    Acquisition of common stock of  PS Business Parks.......................            (17,825)              -
    Investment in Shurgard Europe...........................................                  -         (54,702)
    Other acquisitions of investments in real estate entities...............                  -         (11,961)
    Other investing activities..............................................             (4,321)         22,417
                                                                                    -------------   -------------
       Net cash (used in) provided by investing activities..................            (75,160)        369,149
                                                                                    -------------   -------------
Cash flows from financing activities:
    Principal payments on notes payable.....................................             (5,601)        (44,698)
    Redemption of senior unsecured notes payable............................           (109,622)              -
    Proceeds from borrowing on debt of Existing European Joint Ventures.....                  -          14,654
    Net proceeds from the issuance of common shares.........................              1,899           9,868
    Repurchases of common shares............................................                  -        (111,903)
    Repurchases of cumulative preferred shares..............................            (17,535)              -
    Repurchases of permanent noncontrolling equity interests................           (153,000)              -
    Distributions paid to Public Storage shareholders.......................           (468,507)       (475,569)
    Distributions paid to noncontrolling equity interests...................            (20,280)        (28,936)
                                                                                    -------------   -------------
       Net cash used in financing activities................................           (772,646)       (636,584)
                                                                                    -------------   -------------
Net (decrease) increase in cash and cash equivalents........................            (10,277)        541,826
Net effect of foreign exchange translation on cash..........................                504           2,024
Cash and cash equivalents at the beginning of the period....................            680,701         245,444
                                                                                    -------------   -------------
Cash and cash equivalents at the end of the period..........................        $   670,928     $   789,294
                                                                                    =============   =============

                            See accompanying notes.
                                       4



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

                                   (Continued)



                                                                                For the Nine Months Ended
                                                                                     September 30,
                                                                              -----------------------------
                                                                                  2009            2008
                                                                              -------------   -------------
Supplemental schedule of non cash investing and financing activities:

   FOREIGN CURRENCY TRANSLATION ADJUSTMENT:
                                                                                        
       Real estate facilities, net of accumulated depreciation...........     $    (1,440)    $   (94,488)
       Construction in process...........................................               -            (956)
       Investment in real estate entities................................         (18,191)         31,410
       Intangible assets, net............................................               -          (4,536)
       Loan receivable from Shurgard Europe..............................         (19,422)         52,738
       Other assets......................................................               -          (3,699)
       Notes payable.....................................................               -          28,912
       Accrued and other liabilities.....................................               -           5,879
       Permanent noncontrolling interests in subsidiaries................               -           7,249
       Accumulated other comprehensive income............................          39,557         (20,485)

   Deconsolidation of Shurgard Europe (Note 3):
       Real estate facilities, net of accumulated depreciation...........               -       1,693,524
       Construction in process...........................................               -          10,886
       Investment in real estate entities................................               -        (594,330)
       Loan receivable from Shurgard Europe..............................               -        (618,822)
       Intangible assets, net............................................               -          78,135
       Other assets......................................................               -          68,486
       Notes payable.....................................................               -        (424,995)
       Accrued and other liabilities.....................................               -         (98,571)
       Permanent noncontrolling equity interests in subsidiaries.........               -        (148,901)

   Real estate disposed of in exchange for other asset...................           2,941               -
   Other asset received in exchange for disposal of real estate..........          (2,941)              -

   Real estate acquired in exchange for assumption of mortgage note......               -         (10,250)
   Mortgage note assumed in connection with the acquisition of real
          estate.........................................................               -          10,250

   Revaluation of notes payable:
       Notes payable.....................................................               -             224
       Other assets......................................................               -            (224)

   Revaluation of redeemable noncontrolling interests:
       Retained deficit..................................................            (256)              -
       Redeemable noncontrolling interests................................            256               -



                            See accompanying notes.
                                       5



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009


1.   Description of the Business
     ---------------------------

              Public Storage (referred to herein as "the Company",  "the Trust",
     "we",  "us",  or "our"),  a Maryland  real  estate  investment  trust,  was
     organized  in  1980.  Our  principal   business   activities   include  the
     acquisition,   development,   ownership  and   operation  of   self-storage
     facilities   which  offer  storage   spaces  for  lease,   generally  on  a
     month-to-month  basis,  for  personal and  business  use. Our  self-storage
     facilities  are located  primarily in the United States  ("U.S.").  We also
     have interests in self-storage facilities located in seven Western European
     countries.

              At September 30, 2009, we had direct and indirect equity interests
     in 2,010  self-storage  facilities located in 38 states operating under the
     "Public  Storage" name, and 187 self-storage  facilities  located in Europe
     which operate under the "Shurgard  Storage  Centers" name.  Included in the
     2,010  self-storage  facilities  is one facility for which we  discontinued
     operations  during the nine months ended  September  30, 2009 in connection
     with an eminent domain proceeding.  We also have direct and indirect equity
     interests  in   approximately  21  million  net  rentable  square  feet  of
     commercial space located in 11 states in the U.S.  primarily operated by PS
     Business Parks, Inc. ("PSB") under the "PS Business Parks" name.

              Any reference to the number of properties,  square footage, number
     of tenant  reinsurance  policies  outstanding and the aggregate coverage of
     such  reinsurance  policies  are  unaudited  and  outside  the scope of our
     independent  registered  public  accounting  firm's review and audit of our
     financial statements in accordance with the standards of the Public Company
     Accounting Oversight Board.

2.   Summary of Significant Accounting Policies
     ------------------------------------------

     Basis of Presentation
     ---------------------

              The  accompanying   unaudited  condensed   consolidated  financial
     statements  have been prepared in accordance with U.S.  generally  accepted
     accounting  principles  ("GAAP")  as  defined in the  Financial  Accounting
     Standards Board Accounting  Standards  Codification  (the  "Codification"),
     including  the  related   guidance   with  respect  to  interim   financial
     information,  and in  conformity  with the  instructions  to Form  10-Q and
     Article 10 of Regulation S-X.  Accordingly,  they do not include all of the
     information and notes required by GAAP for complete  financial  statements.
     In the opinion of  management,  all  adjustments  (consisting of normal and
     recurring  adjustments)  considered  necessary for a fair presentation have
     been  reflected  in  these  unaudited  condensed   consolidated   financial
     statements. Operating results for the three and nine months ended September
     30, 2009 are not necessarily indicative of the results that may be expected
     for the year ending December 31, 2009 due to seasonality and other factors.
     The accompanying  unaudited  condensed  consolidated  financial  statements
     should be read  together with the  consolidated  financial  statements  and
     related notes included in the Company's  Annual Report on Form 10-K for the
     year ended December 31, 2008.

              Certain amounts  previously  reported in our December 31, 2008 and
     September 30, 2008 financial  statements have been  reclassified to conform
     to the September 30, 2009 presentation,  including discontinued operations,
     the grouping of the separate captions "cumulative earnings" and "cumulative
     distributions"  into  "retained  deficit"  on  our  condensed  consolidated
     balance sheet, as well as  reclassifications  required by newly implemented
     accounting standards described below.

              The Company has evaluated  subsequent  events through  November 6,
     2009,  which  represents  the  filing  date  of this  Form  10-Q  with  the
     Securities and Exchange  Commission  ("SEC"). As of November 6, 2009, there
     were  no  undisclosed  subsequent  events  which  required  recognition  or
     disclosure.

                                       6


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     Adjustments due to accounting  pronouncements becoming effective
     ----------------------------------------------------------------
     January 1, 2009
     ---------------

              On January 1, 2009,  accounting standards  promulgated by the FASB
     became effective which affected the  classification of ownership  interests
     other than those in the Company,  such as limited partnership  interests in
     entities that are consolidated in the financial  statements of the Company.
     In  accordance  with  these  standards,  we have  reclassified  the  equity
     interests previously referred to as minority interests on our balance sheet
     at  December   31,  2008  to   "permanent   noncontrolling   interests   in
     subsidiaries"  or "redeemable  noncontrolling  interests in  subsidiaries."
     These  reclassifications   increased  equity  by  $351,640,000,   increased
     retained  deficit  by  $6,469,000,   increased  redeemable   noncontrolling
     interests in subsidiaries by $12,777,000,  and decreased  minority interest
     by  $364,417,000,  as compared to the amounts  previously  presented  as of
     December  31,  2008.  On our  condensed  consolidated  statement of income,
     income allocations to the aforementioned equity interests were reclassified
     from  "minority  interest in income",  a  reduction  to income,  to "income
     allocated to  noncontrolling  interests in  subsidiaries," an allocation of
     net income in calculating net income allocable to our common  shareholders.
     These adjustments  increased net income $10,611,000 and $28,352,000 for the
     three and nine months ended  September 30, 2008,  respectively,  but had no
     impact upon net income allocable to our common  shareholders or on earnings
     per common share, as compared to amounts previously presented.

              In addition, FASB accounting standards became effective January 1,
     2009 which  required  the "two  class"  method of  allocating  income  with
     respect  to our  restricted  share  units to  determine  basic and  diluted
     earnings per common  share.  Previously,  all  restricted  share units were
     included in weighted  average  diluted  shares,  using the  treasury  stock
     method.  This  change  resulted in a decrease  in income  allocable  to our
     common shareholders of approximately $183,000 and $2,154,000 and a decrease
     in diluted  weighted  average  common  shares  outstanding  of 359,000  and
     315,000  for  the  three  and  nine  months  ended   September   30,  2008,
     respectively.  As a result of these changes, basic and diluted earnings per
     common share each decreased approximately $0.02 and $0.01, respectively, as
     compared  to  amounts  previously  presented  for  the  nine  months  ended
     September  30, 2008.  These  changes had no impact on the basic and diluted
     earnings per common share amounts previously presented for the three months
     ended September 30, 2008.

     Consolidation Policy
     --------------------

              Pursuant to Codification Section 810-10-15-14, any entity where a)
     the equity is  insufficient  to finance its activities  without  additional
     subordinated  financial  support provided by any parties,  or b) the equity
     holders  as a  group  lack  specific  characteristics,  as  defined  in the
     Codification, of a controlling financial interest, is considered a Variable
     Interest Entities ("VIE"). VIEs in which we are the primary beneficiary are
     consolidated. Entities that are not VIEs that we control are consolidated.

              When we are the general  partner,  we are  presumed to control the
     partnership  unless the limited  partners possess either a) the substantive
     ability to  dissolve  the  partnership  or  otherwise  remove us as general
     partner without cause (commonly  referred to as "kick-out  rights"),  or b)
     the right to participate in substantive  operating and financial  decisions
     of the limited  partnership  that are  expected to be made in the course of
     the partnership's business.

              The accounts of the  entities we control,  along with the accounts
     of the VIE's for which we are the primary beneficiary,  are included in our
     condensed consolidated financial statements,  and all intercompany balances
     and transactions are eliminated.  We account for our investment in entities
     that we do not consolidate  using the equity method of accounting or, if we

                                       7


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     do not have the ability to exercise significant influence over an investee,
     the  cost  method  of  accounting.  Changes  in  consolidation  status  are
     reflected  effective  the date the change of control  or  determination  of
     primary  beneficiary status occurred,  and previously  reported periods are
     not restated. The entities that we consolidate during the periods, to which
     the reference  applies,  are referred to hereinafter  as the  "Consolidated
     Entities." The entities that we have an interest in but do not  consolidate
     during  the  periods,  to which the  reference  applies,  are  referred  to
     hereinafter as the "Unconsolidated Entities."

              Collectively,   at  September  30,  2009,   the  Company  and  the
     Consolidated  Entities  own  a  total  of  2,000  real  estate  facilities,
     consisting of 1,991  self-storage  facilities in the U.S., one self-storage
     facility in London, England and eight commercial facilities in the U.S.

              At September 30, 2009, the  Unconsolidated  Entities are comprised
     of PSB,  Shurgard  Europe,  as well as various  limited  and joint  venture
     partnerships  (referred to as the "Other  Investments").  At September  30,
     2009,  PSB  owns   approximately  19.6  million  rentable  square  feet  of
     commercial  space,  Shurgard  Europe  has  interests  in  186  self-storage
     facilities  in Europe with 9.9 million net rentable  square  feet,  and the
     Other  Investments  own in aggregate 19  self-storage  facilities  with 1.1
     million net rentable square feet in the U.S.

     Use of Estimates
     ----------------

              The preparation of the condensed consolidated financial statements
     in  conformity  with  GAAP  requires   management  to  make  estimates  and
     assumptions that affect the amounts reported in the consolidated  financial
     statements and accompanying  notes.  Actual results could differ from those
     estimates.

     Income Taxes
     ------------

              For  all  taxable  years  subsequent  to  1980,  the  Company  has
     qualified  and intends to  continue to qualify as a real estate  investment
     trust ("REIT"),  as defined in Section 856 of the Internal Revenue Code. As
     a REIT, we do not incur federal or significant state tax on that portion of
     our taxable income which is distributed to our shareholders,  provided that
     we meet certain  tests.  We believe we have met these tests during 2008 and
     we expect to meet these tests  during 2009 and,  accordingly,  no provision
     for  federal  income  taxes  has been  made in the  accompanying  condensed
     consolidated  financial  statements on income  produced and  distributed on
     real estate rental operations.  We have business operations in taxable REIT
     subsidiaries  that are subject to regular  corporate  tax on their  taxable
     income,  and such  corporate  taxes  are  presented  in  ancillary  cost of
     operations in our accompanying condensed consolidated statements of income.
     We also are subject to certain state taxes,  which are presented in general
     and  administrative  expense  in our  accompanying  condensed  consolidated
     statements  of income.  We have  concluded  that  there are no  significant
     uncertain tax positions requiring  recognition in our financial  statements
     with respect to all tax periods  which  remain  subject to  examination  by
     major tax jurisdictions as of September 30, 2009, as well as the nine month
     interim period ended September 30, 2009.

     Real Estate Facilities
     ----------------------

              Real estate facilities are recorded at cost. Costs associated with
     the acquisition,  development,  construction, renovation and improvement of
     properties  are  capitalized.  Interest,  property  taxes and  other  costs
     associated with  development  incurred during the  construction  period are
     capitalized as building cost. Costs associated with the sale of real estate
     facilities  or  interests  in  real  estate  investments  are  expensed  as
     incurred.  The purchase cost of existing  self-storage  facilities  that we
     acquire are allocated based upon relative fair value of the land,  building
     and tenant intangible components of the real estate facility.  Expenditures
     for  repairs and  maintenance  are  expensed  when  incurred.  Depreciation
     expense is  computed  using the  straight-line  method  over the  estimated
     useful lives of the buildings and improvements,  which generally range from
     5 to 25 years.

                                       8


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     Other Assets
     ------------

              Other assets primarily consist of prepaid expenses, investments in
     held-to-maturity debt securities, accounts receivable, interest receivable,
     and restricted cash.

     Accrued and Other Liabilities
     -----------------------------

              Accrued and other liabilities consist primarily of trade payables,
     property  tax  accruals,  tenant  prepayments  of rents,  accrued  interest
     payable,  accrued payroll,  losses and loss adjustment  liabilities for our
     own  exposures  and  estimated  losses  related  to  our  tenant  insurance
     activities.  Contingent  losses are accrued when they are  determined to be
     probable,  and to the extent that they are  estimable.  When it is at least
     reasonably  possible  that a  significant  unaccrued  contingent  loss  has
     occurred,  we  disclose  the nature of that  potential  loss  under  "Legal
     Matters" in Note 12 "Commitments and Contingencies".

     Financial Instruments
     ---------------------

              We have  estimated  the fair  value of our  financial  instruments
     using available market information and appropriate valuation methodologies.
     Considerable  judgment is required in  interpreting  market data to develop
     estimates  of market  value.  Accordingly,  estimated  fair  values are not
     necessarily  indicative  of the  amounts  that could be realized in current
     market exchanges.

              For purposes of financial statement presentation,  we consider all
     highly liquid financial instruments such as short-term treasury securities,
     money  market  funds with daily  liquidity  and a rating of at least AAA by
     Standard and Poor's,  or investment grade (rated A1 by Standard and Poor's)
     short-term  commercial  paper with remaining  maturities of three months or
     less at the date of acquisition to be cash  equivalents.  Any such cash and
     cash   equivalents   which  are  restricted  from  general   corporate  use
     (restricted  cash) due to  insurance  or other  regulations,  or based upon
     contractual requirements, are included in other assets.

              Due to the short  maturity and the underlying  characteristics  of
     our cash  and  cash  equivalents,  other  assets,  and  accrued  and  other
     liabilities,   we  believe  the   carrying   values  as  presented  on  the
     consolidated balance sheets are reasonable estimates of fair value.

              Financial assets that are exposed to credit risk consist primarily
     of cash and cash equivalents as well as accounts  receivable and restricted
     cash  which are  included  in other  assets on our  accompanying  condensed
     consolidated balance sheets. Cash and cash equivalents and restricted cash,
     consisting of short-term investments,  including commercial paper, are only
     invested in investment instruments with an investment grade rating. We have
     a loan receivable from Shurgard Europe.  See "Loan Receivable from Shurgard
     Europe" below for information  regarding our fair value measurement of this
     instrument.

              At September 30, 2009, due primarily to our investment in and loan
     receivable from Shurgard Europe,  our operations and our financial position
     are affected by fluctuations in the exchange rates between the Euro, and to
     a lesser extent, other European currencies, against the U.S. Dollar.

              We estimate the fair value of our notes payable to be $527,646,000
     at September 30, 2009,  based primarily upon discounting the future current
     cash flows under each respective note at an interest rate that approximates
     those of loans with similar credit quality and term to maturity.

                                       9


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     Goodwill
     --------

              Goodwill  represents the excess of acquisition  cost over the fair
     value of net  tangible  and  identifiable  intangible  assets  acquired  in
     business  combinations.  Each business  combination from which our goodwill
     arose was for the  acquisition of single  businesses and  accordingly,  the
     allocation  of our goodwill to our business  segments is based  directly on
     such  acquisitions.  Our goodwill has an  indeterminate  life. Our goodwill
     balance of  $174,634,000  is reported net of  accumulated  amortization  of
     $85,085,000  as of  September  30,  2009  and  December  31,  2008  in  our
     accompanying condensed consolidated balance sheets.

              We evaluate  impairment  of goodwill  annually  by  comparing  the
     aggregate book value  (including  goodwill) of each reporting unit to their
     respective  estimated  fair  value.  No  impairment  of  our  goodwill  was
     identified  in our annual  evaluation  at December 31, 2008.  No impairment
     indicators were noted as of September 30, 2009 which would have required an
     interim evaluation of goodwill for impairment.

     Intangible Assets
     -----------------

              We acquire finite-lived  intangible assets representing  primarily
     the estimated value of the tenants in place (a "Tenant  Intangible") at the
     date  of the  acquisition  of each  respective  acquired  facility.  Tenant
     Intangibles  are amortized  relative to the benefit of the tenants in place
     to  each  period.  With  respect  to each  balance  sheet  date  presented,
     accumulated amortization and original cost is eliminated in the disclosures
     below with respect to facilities  where the related Tenant  Intangibles are
     fully amortized.

              At September  30,  2009,  our Tenant  Intangibles  have a net book
     value of  $20,542,000  ($33,181,000  at  December  31,  2008).  Accumulated
     amortization   with  respect  to  properties   where  the  related   Tenant
     Intangibles  had not yet become  fully  amortized  totaled  $13,592,000  at
     September  30,  2009  ($142,976,000  at December  31, 2008 with  respect to
     properties  where the related Tenant  Intangibles  had not yet become fully
     amortized).

              Amortization expense of $1,145,000 and $7,239,000 was recorded for
     our Tenant  Intangibles  for the three months ended  September 30, 2009 and
     2008, respectively and $4,434,000 and $47,372,000 was recorded for the nine
     months ended  September  30, 2009 and 2008,  respectively.  Also during the
     nine months ended  September 30, 2009, we recorded an impairment  charge of
     $8,205,000 in connection  with an eminent  domain  proceeding at one of our
     facilities.   This  impairment  charge  is  reflected  under  "discontinued
     operations"  on  our  condensed   consolidated  statement  of  income.  The
     estimated  future  amortization  expense  for our  finite-lived  intangible
     assets will  approximate  $1 million for the  remainder of 2009, $2 million
     annually in 2010 through 2012, and $1 million in 2013, with an aggregate of
     $13 million remaining to be amortized in 2014 and beyond.

              We also have an  intangible  asset  representing  the value of the
     "Shurgard"  trade  name,  which is used by  Shurgard  Europe  pursuant to a
     licensing agreement, with a book value of $18,824,000 at September 30, 2009
     and December 31, 2008. The Shurgard trade name has an indefinite  life and,
     accordingly,  we do not  amortize  this asset but instead  analyze it on an
     annual basis for impairment. No impairments have been noted from any of our
     annual evaluations.

     Evaluation of Asset Impairment
     ------------------------------

              We evaluate our real estate and Tenant  Intangibles for impairment
     on a quarterly  basis.  We first  evaluate  these assets for  indicators of
     impairment,  and if any  indicators of impairment  are noted,  we determine
     whether  the  carrying  value of such  assets is in  excess  of the  future
     estimated undiscounted cash flows attributable to these assets. If there is

                                       10


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     excess  carrying  value  over  such  future  undiscounted  cash  flows,  an
     impairment  charge is booked  for the  excess of  carrying  value  over the
     assets' estimated fair value. Any long-lived assets which we expect to sell
     or otherwise  dispose of prior to their estimated useful life are stated at
     the lower of their  estimated net realizable  value  (estimated  fair value
     less cost to sell) or their  carrying  value.  No impairment was identified
     from our evaluations in any periods presented in the accompanying condensed
     consolidated  financial  statements,  other  than the  impairment  totaling
     $8,205,000  described  above with respect to intangible  assets recorded in
     the nine months ended September 30, 2009.

     Revenue and Expense Recognition
     -------------------------------

              Rental   income,   which   is   generally   earned   pursuant   to
     month-to-month  leases  for  storage  space,  as well as late  charges  and
     administrative  fees, are recognized as earned.  Promotional  discounts are
     recognized  as a reduction to rental  income over the  promotional  period,
     which is generally during the first month of occupancy.  Ancillary revenues
     and interest and other income is recognized when earned. Equity in earnings
     of real estate  entities is recognized  based on our ownership  interest in
     the earnings of each of the Unconsolidated Entities.

              We accrue for  property  tax  expense  based upon  actual  amounts
     billed for the  related  time  periods  and, in some  circumstances  due to
     taxing  authority  assessment  timing and  disputes  of  assessed  amounts,
     estimates and historical  trends.  If these  estimates are  incorrect,  the
     timing  and  amount  of  expense  recognition  could be  affected.  Cost of
     operations,  general and administrative expense,  interest expense, as well
     as television, yellow page, and other advertising expenditures are expensed
     as  incurred.  Casualty  losses or gains are  recognized  in the period the
     casualty  occurs,  based upon the  differential  between  the book value of
     assets destroyed and estimated insurance  proceeds,  if any, that we expect
     to receive in accordance with our insurance contracts. Such casualty losses
     and gains are included in  "casualty  loss" on our  condensed  consolidated
     statements of income.

     Foreign Currency Exchange Translation
     -------------------------------------

              The local  currency  is the  functional  currency  for the foreign
     operations for which we have an interest.  Assets and liabilities  included
     on  our  condensed  consolidated  balance  sheets,   including  our  equity
     investment in Shurgard  Europe,  are translated at  end-of-period  exchange
     rates, while revenues, expenses, and equity in earnings in the related real
     estate  entities,  are  translated at the average  exchange rates in effect
     during the period. The Euro, which represents the functional  currency used
     by a majority of the foreign operations for which we have an interest,  was
     translated at an end-of-period  exchange rate of  approximately  1.459 U.S.
     Dollars per Euro at September  30, 2009 (1.409 at December 31,  2008),  and
     average  exchange  rates of 1.428  and 1.504  for the  three  months  ended
     September 30, 2009 and 2008,  respectively and 1.365 and 1.521 for the nine
     months  ended  September  30,  2009  and  2008,  respectively.   Equity  is
     translated at historical  rates and the  resulting  cumulative  translation
     adjustments,  to the extent not  included in net income,  are included as a
     component  of  accumulated  other  comprehensive  income  (loss)  until the
     translation  adjustments  are realized.  See "Other  Comprehensive  Income"
     below for further  information  regarding our foreign currency  translation
     gains and losses.

     Fair Value Accounting
     ---------------------

              In 2006,  the FASB  clarified in  accounting  pronouncements  that
     "fair value" as the term is used in GAAP is an exit price, representing the
     amount  that  would be  received  to sell an asset  or paid to  transfer  a
     liability  in an  orderly  transaction  between  market  participants,  and
     established a three-tier fair value hierarchy, which prioritizes the inputs
     used in measuring fair value.  The Company  adopted the provisions of these
     revised  accounting  pronouncements  on  January  1, 2008 with  respect  to

                                       11


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     financial  assets and  liabilities  and on January 1, 2009 with  respect to
     non-financial assets and liabilities,  which had no effect on our financial
     position,  operating  results  or cash  flows.  See "Loan  Receivable  from
     Shurgard Europe" and "Financial  Instruments" below, as well as "Redeemable
     Noncontrolling    Interests   in   Subsidiaries"   and   "Other   Permanent
     Noncontrolling  Interests  in  Subsidiaries"  in  Note  7  for  information
     regarding our fair value measurements.

     Loan Receivable from Shurgard Europe
     ------------------------------------

              As of September 30, 2009, we had a loan  receivable  from Shurgard
     Europe totaling $571,783,000 ($552,361,000 at December 31, 2008).

              The loan bears interest at a fixed rate of 7.5% per annum, and had
     an initial term of one year  expiring  March 31, 2009 which was extended by
     Shurgard  Europe  pursuant to the terms of the  original  note to March 31,
     2010. If Shurgard Europe acquires its partner's interests in First Shurgard
     and Second Shurgard (collectively, the "Existing European Joint Ventures"),
     we have agreed to provide  additional loans to Shurgard  Europe,  under the
     same terms as the  existing  loans,  for up to  (euro)185  million  ($269.9
     million as of September 30,  2009).  This  commitment  was also extended to
     March 31, 2010 and was originally for (euro)305 million, but was reduced as
     the result of refinancing  one of the joint venture loans.  Shurgard Europe
     has no obligation to acquire these interests,  and the acquisition of these
     interests is contingent on a number of items,  including  whether we assent
     to the acquisition.  Loan fees collected from Shurgard Europe are amortized
     on a  straight-line  basis as interest  income over the applicable  term to
     which the fee applies.

              The loan  receivable  from Shurgard Europe is denominated in Euros
     and is converted to U.S. Dollars for financial statement  purposes.  During
     each applicable  period,  because we expected repayment within two years of
     each  respective  balance sheet date, we have recognized  foreign  exchange
     rate  gains or losses in income as a result of changes  in  exchange  rates
     between the Euro and the U.S. Dollar during the three and nine months ended
     September 30, 2009 and 2008. For the three and nine months ended  September
     30, 2009,  we recorded  interest  income of  approximately  $6,038,000  and
     $17,012,000,  respectively,  related  to the  loan.  For the three and nine
     months  ended   September  30,  2008,  we  recorded   interest   income  of
     approximately and $6,152,000 and $12,471,000,  respectively, related to the
     loan.

              Interest  income for each period reflects the gross amount charged
     to Shurgard Europe less our 49% pro-rata portion which is reflected as part
     of our equity in earnings of real estate  entities rather than interest and
     other income.

              Although  there can be no  assurance,  we  believe  that  Shurgard
     Europe has  sufficient  liquidity and  collateral,  and we have  sufficient
     creditor rights, such that credit risk is minimal. In addition,  we believe
     the interest rate on the loan  approximates  the market rate for loans with
     similar credit  characteristics  and tenor,  and that the carrying value of
     the loan  approximates  fair  value.  The  characteristics  of the loan and
     comparative  metrics  utilized  in  our  evaluation  represent  significant
     unobservable  inputs, which are "Level 3" inputs as the term is utilized in
     FASB Codification Section 820-10-35-52.

              See Note 13,  "Subsequent  Events"  regarding our loan  receivable
     from Shurgard Europe.

     Other Comprehensive Income
     --------------------------

              We reflect  other  comprehensive  income  (loss) for our  pro-rata
     share of currency translation adjustments related to the foreign operations
     for which we have an  interest  that is not already  recognized  in our net
     income.  Such other  comprehensive  income  (loss) is reflected as a direct
     adjustment  to  "Accumulated  Other  Comprehensive  Income"  in the  equity
     section of our  consolidated  balance sheet, and is added to our net income
     in determining total comprehensive income for the period.

                                       12


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

              The  following   table   reflects  the  components  of  our  other
     comprehensive  (loss) income, and our total comprehensive  income, for each
     respective period:



                                                   For the Three Months Ended        For the Nine Months Ended
                                                         September 30,                    September 30,
                                                  -----------------------------    ------------------------------
                                                      2009            2008             2009             2008
                                                  -------------- --------------    -------------   --------------
                                                                    (Amounts in thousands)
                                                                                         
     Net income................................    $   243,951     $   147,942      $   602,767      $   811,838
     Other comprehensive income (loss):
        Aggregate foreign currency translation
           adjustments for the period..........         27,244         (85,760)          39,557          (20,485)
        Less: foreign currency translation
           adjustments recognized during the
           period and reflected in "Gain
           (loss) on disposition of real
           estate investments".................              -               -                -          (37,854)
        Less: foreign currency translation
           adjustments reflected in net income
           as "Foreign currency (gain) loss"...        (21,429)         53,172          (19,901)          12,203
                                                  -------------- --------------    -------------   --------------
     Other comprehensive income (loss) income
           for the period......................          5,815         (32,588)          19,656          (46,136)
                                                  -------------- --------------    -------------   --------------
     Total comprehensive income................    $   249,766     $   115,354      $   622,423      $   765,702
                                                  ============== ==============    =============   =============


     Discontinued Operations
     -----------------------

              We  segregate  all  of our  discontinued  operations  that  can be
     distinguished  from the rest of the Company and will be eliminated from the
     ongoing  operations of the Company.  During the nine months ended September
     30,  2009,  we  decided to  terminate  our truck  rental and  containerized
     storage business units.  Truck operations  ceased as of March 31, 2009, and
     the  containerized  operations have been actively marketed for sale and are
     expected to be fully  disposed of by December  31,  2009.  As a result,  we
     reclassified  all  of  the  historical   revenues  and  expenses  of  these
     operations   from   ancillary   revenues  and  ancillary   expenses,   into
     "discontinued  operations." Included in discontinued operations in the nine
     months  ended  September  30,  2009 are  $3.5  million  in  truck  disposal
     expenses,  an $8.2 million  impairment charge on intangible assets incurred
     in connection with an eminent domain proceeding and gains on disposition of
     real estate facilities of approximately $6.0 million.

     Net Income per Common Share
     ---------------------------

              We first  allocate net income to our  noncontrolling  interests in
     subsidiaries  (Note 7) and preferred  shareholders  to arrive at net income
     allocable  to our  common  shareholders  and Equity  Shares,  Series A. Net
     income allocated to preferred  shareholders or noncontrolling  interests in
     subsidiaries  includes  any  excess  of the cash  required  to  redeem  any
     preferred  securities in the period over the net proceeds from the original
     issuance of the  securities  (or, if securities  are redeemed for less than
     the  original  issuance  proceeds,  income  allocated to the holders of the
     redeemed securities is reduced).

              The  remaining  net income is allocated  among our regular  common
     shares,  restricted share units, and our Equity Shares, Series A based upon
     the dividends  declared (or  accumulated)  for each security in the period,
     combined  with  each  security's   participation  rights  in  undistributed
     earnings.

                                       13


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

              Net income  allocated to our regular common shares from continuing
     operations  is  computed  by  eliminating  the  net  income  or  loss  from
     discontinued  operations  allocable to our regular common shares,  from net
     income allocated to our regular common shares.

              Basic  net  income  per  share,   basic  net  income  (loss)  from
     discontinued  operations  per share,  and basic net income from  continuing
     operations per share are computed using the weighted  average common shares
     outstanding.  Diluted net income per share,  diluted net income (loss) from
     discontinued  operations per share,  and diluted net income from continuing
     operations per share are computed using the weighted  average common shares
     outstanding,  adjusted  for the  impact,  if  dilutive,  of  stock  options
     outstanding  (Note  10).  Diluted  net loss  per  share  from  discontinued
     operations  does not  include  the  impact  of stock  options  outstanding,
     because including stock options would be anti-dilutive  when applied to the
     loss on discontinued operations for each period presented.

              The following table reflects the components of the calculations of
     our basic and  diluted  net income per share,  basic and diluted net income
     (loss) from  discontinued  operations per share,  and basic and diluted net
     income from continuing operations per share which are not already otherwise
     set forth on the face of our condensed consolidated statements of income:



                                                          For the Three Months Ended       For the Nine Months Ended
                                                                September 30,                    September 30,
                                                          ---------------------------     ---------------------------
                                                              2009           2008             2009          2008
                                                          ------------   ------------     ------------  -------------
                                                                            (Amounts in thousands)

 Net income allocable to common shareholders from
 ------------------------------------------------
  continuing operations and discontinued operations:
  --------------------------------------------------

                                                                                             
  Net income allocable to common shareholders..........   $   173,493     $   71,459       $  468,475    $  584,265

  Eliminate: Discontinued operations allocable to
     common shareholders ..............................          (866)         2,475            7,759         4,937
                                                          ------------   ------------     ------------  -------------
  Net income from continuing operations allocable to
     common shareholders...............................   $   172,627     $   73,934       $  476,234    $  589,202
                                                          ============   ============     ============  =============
Weighted average common shares and equivalents
   outstanding:
   Basic weighted average common shares outstanding....       168,373        168,133          168,344       168,248
   Net effect of dilutive stock options - based on
     treasury stock method using average market price .           670            427              337           425
                                                          ------------   ------------     ------------  -------------
   Diluted weighted average common shares outstanding..       169,043        168,560          168,681       168,673
                                                          ============   ============     ============  =============


     Accounting Pronouncements Not Yet In Effect Which May Have an Impact on the
     ---------------------------------------------------------------------------
     Company
     -------

              In June 2009,  the FASB  issued  accounting  pronouncements  which
     become  effective in our fiscal year ending  December 31, 2010, and require
     restatement  of  previously  reported  financial   statements  on  the  new
     accounting basis. We have not yet determined  whether these  pronouncements
     will have an effect on our financial statements.  One pronouncement affects
     accounting for Variable Interest  Entities,  by (i) eliminating the concept
     of   a   qualifying   special   purpose   entity,    (ii)   replacing   the
     quantitative-based  risks and rewards  calculation  for  determining  which
     enterprise  has a  controlling  financial  interest in a variable  interest
     entity and the  obligation  to absorb  losses of the entity or the right to
     receive  benefits  from the  entity,  and (iii)  providing  for  additional
     disclosures about an entity's  involvement with a variable interest entity.
     Another  pronouncement  affects the  accounting  for transfers of financial
     assets,  by (i)  eliminating  the concept of a qualifying  special  purpose
     entity,  (ii)  amending  the  derecognition  criteria  for a transfer to be
     accounted for as a sale, and (iii)  requiring  additional  disclosure  over
     transfers accounted for as a sale.

                                       14


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

3.   Disposition of an Interest in Shurgard Europe
     ---------------------------------------------

              On March  31,  2008,  an  institutional  investor  acquired  a 51%
     interest in Shurgard European Holdings LLC, a newly formed Delaware limited
     liability  company and the holding company for Shurgard  Europe  ("Shurgard
     Holdings").  We own the remaining 49% interest and are the managing  member
     of Shurgard Holdings.

              Our net proceeds  from the  transaction  aggregated  $609,059,000,
     comprised  of  $613,201,000  paid  by  the   institutional   investor  less
     $4,142,000 in legal, accounting,  and other expenses incurred in connection
     with the  transaction.  As a result  of the  disposition,  we  reduced  our
     investment in Shurgard  Europe by  approximately  $305,048,000  for the pro
     rata portion of our March 31, 2008 investment that was sold, and recognized
     a gain  of  $304,011,000  upon  disposition,  representing  the  difference
     between the net proceeds  received of $609,059,000 and the pro rata portion
     of our investment sold of $305,048,000.

              In addition,  as a result of our  disposition of this interest,  a
     portion  of the  cumulative  currency  exchange  gains  we  had  previously
     recognized in Other  Comprehensive  Income with respect to Shurgard  Europe
     was realized.  Accordingly,  we recognized a cumulative  currency  exchange
     gain of  $37,854,000,  representing  51% (the pro rata  portion of Shurgard
     Europe that was sold) of the cumulative  currency  exchange gain previously
     included in Other Comprehensive Income.

              The gain upon disposition of $304,011,000 and associated  realized
     currency  exchange  gain  totaling  $37,854,000  are both  included  in the
     line-item  "gains on  disposition of real estate  investments,  net" in our
     condensed  consolidated  statement  of  income  for the nine  months  ended
     September 30, 2008.

              The results of operations of Shurgard Europe have been included in
     our condensed consolidated  statements of income for the three months ended
     March 31, 2008.  Commencing  with the quarter  beginning April 1, 2008, our
     pro rata  share of  operations  of  Shurgard  Europe  is  reflected  on our
     condensed consolidated statement of income under equity in earnings of real
     estate entities.


                                       15


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

4.   Real Estate Facilities
     ----------------------

       Activity in real estate facilities is as follows:

                                                                Nine Months
                                                                   Ended
                                                               September 30,
                                                                   2009
                                                              ---------------
                                                               (Amounts in
                                                                thousands)

Operating facilities, at cost:
  Beginning balance.......................................     $ 10,207,022
  Capital improvements....................................           52,449
  Newly developed facilities opened for operations........           13,634
  Disposition of real estate facilities...................           (8,093)
  Impact of foreign exchange rate changes.................            2,018
                                                              ---------------
  Ending balance..........................................       10,267,030
                                                              ---------------
Accumulated depreciation:
  Beginning balance.......................................       (2,405,473)
  Depreciation expense....................................         (248,450)
  Disposition of real estate facilities...................            3,708
  Impact of foreign exchange rate changes.................             (578)
                                                              ---------------
  Ending balance..........................................       (2,650,793)
                                                              ---------------
Construction in process:
   Beginning balance......................................           20,340
   Current development....................................           11,029
   Newly developed facilities opened for operation........          (13,634)
                                                              ---------------
   Ending balance.........................................           17,735
                                                              ---------------
 Total real estate facilities at September 30, 2009.......     $  7,633,972
                                                              ===============

              During  the nine  months  ended  September  30,  2009,  we sold an
     existing  real estate  facility as well as disposed of a portion of certain
     real  estate   facilities   primarily  in  connection   with   condemnation
     proceedings,  for aggregate cash proceeds totaling $10,464,000 and an other
     asset valued at $2,941,000.  We recorded an aggregate gain of approximately
     $9,020,000,  of which $6,018,000 is included in discontinued operations and
     $3,002,000 is included in "gains on disposition of real estate investments,
     net."

              Construction  in  process  at  September  30,  2009  includes  the
     development  costs  relating  primarily to various  expansions  to existing
     self-storage facilities.

5.   Investments in Real Estate Entities
     -----------------------------------

              The following  table sets forth our investments in the real estate
     entities at September  30, 2009 and  December  31, 2008,  and our equity in
     earnings  of real  estate  entities  for the  three and nine  months  ended
     September 30, 2009 and 2008 (amounts in thousands):

                                       16


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009


                                       Investments in Real Estate
                                               Entities at
                                     ------------------------------
                                     September 30,     December 31,
                                          2009             2008
                                     -------------     ------------
     PSB                              $   327,155       $   265,650
     Shurgard Europe................      272,668           264,145
     Other Investments..............       13,977            14,803
                                     -------------     ------------
         Total......................  $   613,800       $   544,598
                                     =============     ============



                                       Equity in Earnings of Real        Equity in Earnings of Real
                                         Estate Entities for the          Estate Entities for the
                                           Three Months Ended                Nine Months Ended
                                              September 30,                    September 30,
                                    ------------------------------     ------------------------------
                                        2009              2008             2009            2008
                                    -------------     ------------     ------------  ----------------
                                                                          
     PSB                               $   4,684       $    3,320      $  30,351      $   8,512
     Shurgard Europe................       3,631            2,260          7,239          3,717
     Other Investments..............         509              738          1,443          1,450
                                    -------------     ------------     ------------  ----------------
         Total......................   $   8,824       $    6,318      $  39,033      $  13,679
                                    =============     ============     ============  ================


              During  the  nine  months  ended  September  30,  2009  and  2008,
     respectively,  we received cash distributions from the Real Estate Entities
     totaling  $36,140,000 and $31,741,000,  respectively.  Included in earnings
     recognized  for the nine months ended  September  30, 2009 is  $16,284,000,
     representing  our share of the  earnings  allocated  from  PSB's  preferred
     shareholders,  as a result  of PSB's  repurchases  of  preferred  stock and
     preferred  units for amounts  that were less than the  related  book value,
     during the period.

              During the nine months ended  September  30, 2009,  in addition to
     the impact of earnings  recognized  and cash  distributions  received,  our
     investments in real estate entities increased by $18,191,000 due to foreign
     currency translation  adjustments and $17,825,000 due to our acquisition of
     an additional  383,333 shares of PSB common stock.  During the three months
     ended  September 30, 2009, we recorded a gain of  $30,293,000 in connection
     with PSB's  sale of common  stock in a public  offering,  and this gain was
     included in "gains on disposition of real estate  investments,  net" on our
     condensed consolidated  statements of income. Our investment in real estate
     entities increased by $30,293,000 as a result of this gain. See "Investment
     in PSB" below for further information on this gain.

     INVESTMENT IN PSB
     -----------------

              PSB is a REIT  traded  on  the  New  York  Stock  Exchange,  which
     controls an operating partnership (collectively, the REIT and the operating
     partnership are referred to as "PSB"). At September 30, 2009, PSB owned and
     operated  approximately 19.6 million net rentable square feet of commercial
     space and manages certain of our commercial space.

              During the quarter ended  September 30, 2009,  PSB sold  3,450,000
     shares of its common stock in a public  offering for net proceeds of $153.6
     million  during the three months ended  September  30, 2009.  In accordance
     with EITF 08-6 "Equity Method Investment  Considerations",  we recognized a
     gain totaling $30,293,000 on the share issuance by PSB, as if we had sold a
     proportionate share of our investment in PSB.

              Concurrent  with the public  offering,  we purchased an additional
     383,333  shares of PSB common stock from PSB at the same price per share as
     the public offering for a total cost of $17.8 million.

                                       17


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

              We have a 41.4% common equity  interest in PSB as of September 30,
     2009 (46% as of December 31, 2008), comprised of our ownership of 5,801,606
     shares of PSB's common stock and 7,305,355 limited partnership units in the
     operating partnership (5,418,273 shares of PSB's common stock and 7,305,355
     limited  partnership  units at December 31, 2008). The limited  partnership
     units are convertible at our option,  subject to certain  conditions,  on a
     one-for-one  basis into PSB common  stock.  Based upon the closing price at
     September 30, 2009 ($51.32 per share of PSB common  stock),  the shares and
     units had a market value of  approximately  $672.6 million as compared to a
     book value of $327.2 million.

              The following table sets forth selected  financial  information of
     PSB;  the amounts  represent  100% of PSB's  balances  and not our pro-rata
     share.

                                                           2009         2008
                                                        -----------  -----------
                                                          (Amounts in thousands)
 For the nine months ended September 30,
 --------------------------------------
   Total revenue....................................... $  205,791   $ 212,571
   Costs of operations and general and administrative
      expense..........................................    (70,781)    (73,101)
   Depreciation and amortization.......................    (63,631)    (75,270)
   Other items.........................................       (817)     (1,957)
                                                        -----------  -----------
     Net income........................................ $   70,562   $  62,243
                                                        ===========  ===========




                                                        At September 30,  At December 31,
                                                             2009             2008
                                                        ---------------  ----------------
                                                          (Amounts in thousands)

                                                                    
   Total assets (primarily real estate)................  $ 1,571,321      $ 1,469,323
   Debt and other liabilities..........................      103,923          105,736
   Equity..............................................    1,467,398        1,363,587



     INVESTMENT IN SHURGARD EUROPE
     -----------------------------

              At September  30, 2009 we had a 49% equity  investment in Shurgard
     Europe.  As a result of our disposition of an interest in Shurgard  Europe,
     we deconsolidated Shurgard Europe effective March 31, 2008 (see Note 3).

              For the  three  and nine  months  ended  September  30,  2009,  we
     recorded an aggregate of $3,631,000 and $7,239,000, respectively, in equity
     in  earnings  of  Shurgard  Europe.  For the  three and nine  months  ended
     September 30, 2008, we recorded an aggregate of $2,260,000 and  $3,717,000,
     respectively,  in equity in earnings of  Shurgard  Europe.  During the nine
     months ended September 30, 2009 and 2008, our investment in Shurgard Europe
     increased  by  approximately  $18,191,000  and  decreased  by  $31,410,000,
     respectively,  due to the impact of changes  in foreign  currency  exchange
     rates, primarily between the Euro and the U.S. Dollar.

              The following table sets forth selected  financial  information of
     Shurgard  Europe.  These  amounts are based upon 100% of Shurgard  Europe's
     balances,  rather  than our pro  rata  share,  and are  based  upon  Public
     Storage's historical acquired book basis.

              Amounts  for  all  periods  are  presented,  notwithstanding  that
     Shurgard Europe was deconsolidated  effective March 31, 2008.  Accordingly,
     only the amounts (net of intercompany  eliminations) prior to April 1, 2008
     are included in our consolidated financial statements.

                                       18


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009




                                                              For the Three Months Ended    For the Nine Months Ended
                                                                     September 30,               September 30,
                                                          ------------------------------   ----------------------------
                                                               2009             2008          2009              2008
                                                          ------------    --------------   ------------    ------------
                                                                            (Amounts in thousands

                                                                                               
   Self-storage and ancillary revenues..................  $   59,457       $   62,605      $  164,114      $   185,626
   Interest and other income (expense)..................         178              217             371              573
   Self-storage and ancillary cost of operations........     (25,546)         (25,721)        (74,929)         (79,284)
   Trademark license fee payable to Public Storage......        (423)            (450)         (1,169)          (1,510)
   Depreciation and amortization........................     (18,922)         (23,200)        (53,734)         (70,675)
   General and administrative...........................      (1,475)          (2,690)         (6,557)          (9,724)
   Interest expense on third party debt ................      (3,905)          (6,719)        (12,328)         (20,846)
   Interest expense on loan payable to Public Storage...     (11,839)         (12,063)        (33,356)         (34,861)
   Income (expenses) from foreign currency exchange ....         466           (2,006)            851           (1,351)
   Discontinued operations..............................           -               (6)              8              (26)
                                                          ------------    --------------   ------------    ------------
     Net loss (a).......................................  $   (2,009)      $  (10,033)     $  (16,729)     $   (32,078)
                                                          ============    ==============   ============    ============


     (a)  Approximately  $2,841,000 in net income and $2,133,000 in net loss was
          allocated to permanent noncontrolling equity interests in subsidiaries
          for the three months ended September 30, 2009 and 2008,  respectively,
          of  which   $2,994,000  and  $3,287,000,   respectively,   represented
          depreciation  and amortization  expense.  During the nine months ended
          September  30, 2009 and 2008,  approximately  $3,019,000 in net income
          and $5,911,000 in net loss,  respectively,  was allocated to permanent
          noncontrolling  equity interests in subsidiaries,  of which $8,591,000
          and   $9,919,000,    respectively,    represented   depreciation   and
          amortization expense.



                                                     At September 30, At December 31,
                                                         2009            2008
                                                     --------------- ----------------
                                                         (Amounts in thousands)

                                                               
   Total assets (primarily self-storage facilities)..  $ 1,667,710   $  1,615,370
   Total debt to third parties.......................      343,018        362,352
   Total debt to Public Storage......................      571,783        552,361
   Other liabilities.................................       82,409         82,247
   Equity............................................      670,500        618,410




              Our equity in earnings  of Shurgard  Europe for the three and nine
     months  ended  September  30,  2009  totaling  $3,631,000  and  $7,239,000,
     respectively,  and  $2,260,000 and $3,717,000 for the three and nine months
     ended  September  30, 2008,  respectively,  are  comprised of (i) losses of
     $2,377,000 and  $9,677,000  for the respective  2009 periods and $3,871,000
     and  $8,690,000  for the  respective  2008  periods,  representing  our 49%
     pro-rata share of Shurgard Europe's net loss for the respective periods and
     (ii) income of $6,008,000 and  $16,916,000  for the respective 2009 periods
     and  $6,131,000   and   $12,407,000   for  the  respective   2008  periods,
     representing  our 49% pro-rata  share of the interest  income and trademark
     license fees received from Shurgard Europe for the respective periods (such
     amounts are presented as equity in earnings of real estate  entities rather
     than interest and other income).

                                       19


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     OTHER INVESTMENTS
     -----------------

              At  September  30,  2009,  the  "other  investments"   include  an
     aggregate  common equity  ownership of  approximately  24% in entities that
     collectively own 19 self-storage facilities.

              The  following  table  sets  forth  certain  condensed   financial
     information  (representing  100% of these  entities'  balances  and not our
     pro-rata  share) with respect to the 19 facilities that we have an interest
     in at September 30, 2009:

                                              2009         2008
                                          -----------  -----------
                                           (Amounts in thousands)
 For the nine months ended
 -------------------------
 September 30,
 -------------
 Total revenue........................    $   12,512   $   12,910
 Cost of operations and other expenses        (4,776)      (4,840)
 Depreciation and amortization........        (1,515)      (1,578)
                                          -----------  -----------
     Net income.......................    $    6,221   $    6,492
                                          ===========  ===========

                                          At September 30,  At December 31,
                                                2009             2008
                                          ----------------  ---------------
                                               (Amounts in thousands)

 Total assets (primarily self- storage
     facilities)......................     $   37,624         $   40,168
 Total accrued and other liabilities..          1,075                888
 Total Partners' equity..............,         36,549             39,280



                                       20


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

6.   Notes Payable and Line of Credit
     --------------------------------

              The carrying  amounts of our notes  payable at September  30, 2009
     and  December  31,  2008  consist  of  the  following  (dollar  amounts  in
     thousands):



                                                                              September 30,    December 31,
                                                                                  2009             2008
                                                                              --------------  --------------
                                                                                  (Amounts in thousands)

          UNSECURED NOTES PAYABLE:
                                                                                      
          5.875%  effective and stated note rate,  interest only and payable
             semi-annually, matures in March 2013...........................  $    186,460     $    200,000
          5.73% effective rate,  7.75% stated note rate,  interest only and
             payable  semi-annually,  matures in  February  2011  (carrying
             amount  includes  $2,348 of  unamortized  premium at September
             30, 2009 and $7,433 at December 31, 2008) ....................        105,665          207,433

          SECURED NOTES PAYABLE:

          5.47% average effective rate fixed rate mortgage notes payable,
             secured by 89 real estate facilities with a net book value of
             $561,904 at September 30, 2009 and stated note rates between 4.95%
             and 8.00%, maturing at varying dates between October 2009 and
             August 2015 (carrying amount includes $4,393 of
             unamortized  premium  at  September 30,   2009  and  $5,634  at
             December 31, 2008) ............................................       229,537          236,378
                                                                              --------------  --------------
                 Total notes payable........................................   $   521,662      $   643,811
                                                                              ==============  ==============


              Substantially  all of our debt was acquired in  connection  with a
     property  or other  acquisition,  and in such cases an  initial  premium or
     discount is established for any difference  between the stated note balance
     and  estimated  fair value.  This initial  premium or discount is amortized
     over the remaining term of the notes using the effective  interest  method.
     Estimated  fair  values are based upon  discounting  the future  cash flows
     under each respective note at an interest rate that  approximates  those of
     loans with  similar  credit  characteristics  and term to  maturity.  These
     inputs for fair value represent significant  unobservable inputs, which are
     "Level 3" inputs as the term is defined in the Codification.

              At September 30, 2009, we have a revolving  credit  agreement (the
     "Credit  Agreement")  which  expires on March 27,  2012,  with an aggregate
     limit with  respect to  borrowings  and letters of credit of $300  million.
     Amounts drawn on the Credit  Agreement bear an annual interest rate ranging
     from the London  Interbank  Offered Rate ("LIBOR") plus 0.35% to LIBOR plus
     1.00%  depending on our credit  ratings  (LIBOR plus 0.35% at September 30,
     2009). In addition, we are required to pay a quarterly facility fee ranging
     from 0.10% per annum to 0.25% per annum  depending  on our  credit  ratings
     (0.10% per annum at September 30, 2009).  We had no outstanding  borrowings
     on our Credit  Agreement at September  30, 2009 or at November 6, 2009.  At
     September 30, 2009, we had undrawn standby letters of credit,  which reduce
     our borrowing  capability  with respect to our line of credit by the amount
     of the letters of credit, totaling $18,270,000 ($17,736,000 at December 31,
     2008).

              On  February  12,  2009,  we  acquired  $110,223,000  face  amount
     ($113,736,000  book value) of our existing  unsecured  notes  pursuant to a
     tender offer for an  aggregate of  $109,622,000  in cash  (including  costs

                                       21


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     associated  with  the  tender  of  $414,000)  plus  accrued  interest.   In
     connection  with this  transaction,  we recognized a gain of $4,114,000 for
     the nine months ended  September  30,  2009,  representing  the  difference
     between the book value of $113,736,000 and the retirement  amount paid plus
     tender offer costs.

              Our notes  payable  and our  Credit  Agreement  each have  various
     customary  restrictive  covenants,  all of which have been met at September
     30, 2009.

              At September  30, 2009,  approximate  principal  maturities of our
     notes payable are as follows (amounts in thousands):

                                     Unsecured    Mortgage Notes
                                   Notes Payable     Payable           Total
                                  -------------- ---------------   -------------
2009.........................     $         -    $     2,289        $    2,289
2010.........................           2,052         11,037            13,089
2011.........................         103,613         27,819           131,432
2012.........................               -         55,575            55,575
2013.........................         186,460         64,961           251,421
Thereafter...................               -         67,856            67,856
                                  -------------- ---------------   -------------
                                  $   292,125    $   229,537        $  521,662
                                  ============== ===============   =============
Weighted average effective rate          5.8%           5.5%              5.7%
                                  ============== ===============   =============

              We incurred interest expense  (including  interest  capitalized as
     real estate  totaling  $547,000 and $1,630,000,  respectively  for the nine
     months  ended  September  30,  2009 and  2008)  with  respect  to our notes
     payable,  capital leases,  debt to joint venture partner and line of credit
     aggregating $23,252,000 and $36,817,000 for the nine months ended September
     30,  2009  and  2008,   respectively.   These  amounts  were  comprised  of
     $26,065,000  and  $40,462,000  in cash  paid  for  the  nine  months  ended
     September 30, 2009 and 2008,  respectively,  less $2,813,000 and $3,645,000
     in amortization of premium, respectively.

7.   Noncontrolling Interests in Subsidiaries
     ----------------------------------------

              In  consolidation,  we  classify  ownership  interests  in the net
     assets  of each of the  Consolidated  Entities,  other  than  our  own,  as
     "noncontrolling interests in subsidiaries." Interests that have the ability
     to require us, except in an entity  liquidation,  to redeem the  underlying
     securities for cash,  assets,  or other  securities  that would not also be
     classified  as equity are presented on our balance sheet outside of equity.
     At the end of each  reporting  period,  if the book  value is less than the
     estimated  amount to be paid upon a  redemption  occurring  on the  related
     balance  sheet  date,  these  interests  are  increased  to adjust to their
     estimated  liquidation  value (which  approximates  fair  value),  with the
     offset against retained  earnings.  All other  noncontrolling  interests in
     subsidiaries   are   presented  as  a  component   of  equity,   "permanent
     noncontrolling interests in subsidiaries."

              Redeemable Noncontrolling Interests in Subsidiaries
              ---------------------------------------------------

              At  September  30,  2009,  the  Other  Redeemable   Noncontrolling
     Interests in Subsidiaries represent equity interests in three entities that
     own in aggregate 14 self-storage  facilities.  At December 31, 2008,  these
     interests were increased and retained earnings (deficit) was decreased by a
     total of $6,469,000 in connection with the  implementation of SFAS No. 160,
     to adjust to their estimated  liquidation  value (which  approximates  fair
     value).  We  estimate  the  amount  to be paid  upon  redemption  of  these
     interests by applying the related provisions of the governing  documents to
     our estimate of the fair value of the  underlying  net assets  (principally
     real estate assets).

              During the three and nine months  ended  September  30,  2009,  we
     allocated  a total of $247,000  and  $753,000,  respectively,  in income to
     these  interests.  During the same periods in 2008, we allocated a total of

                                       22


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     $310,000 and $823,000,  respectively,  of income to these interests. During
     the nine months ended September 30, 2009, these interests were increased by
     $256,000 to adjust to their estimated liquidation value (which approximates
     fair value).  During the nine months ended  September 30, 2009 and 2008, we
     paid  distributions  to these  interests  totaling  $976,000 and  $926,000,
     respectively.

              In 2007, we sold an  approximately  0.6% common equity interest in
     Shurgard  Europe to various  officers of the Company  (the "PS  Officers"),
     other than our chief  executive  officer.  For periods  commencing from the
     sale  of the  interest  through  March  31,  2008,  the PS  Officers'  were
     allocated their pro rata share of the earnings of Shurgard Europe, and this
     was   included   in   "Other   Redeemable   noncontrolling   interests   in
     subsidiaries." As described in Note 3, on March 31, 2008, we deconsolidated
     Shurgard Europe and, as a result,  noncontrolling interests in subsidiaries
     with  respect to the PS Officers'  investment  was  eliminated.  See Note 5
     under  "Investment in Shurgard Europe" for further  historical  information
     regarding Shurgard Europe.

     Permanent Noncontrolling Interests in Subsidiaries
     --------------------------------------------------

              At  September  30,  2009,  the  Other   Permanent   Noncontrolling
     Interests in Subsidiaries  represent  equity  interests in 28 entities that
     own an  aggregate  of 94  self-storage  facilities  (the  "Other  Permanent
     Noncontrolling  Interests  in  Subsidiaries")  and  our  various  preferred
     partnership units (the "Preferred Partnership Interests").  These interests
     are  presented as equity  because the holders of the  interests do not have
     the ability to require us to redeem them for cash or other assets, or other
     securities that would not also be classified as equity.

              Preferred Partnership Interests
              -------------------------------

              At December 31, 2008, our preferred  partnership units outstanding
     were  comprised of 8,000,000  units of our 6.400%  Series NN  ($200,000,000
     carrying amount,  redeemable March 17, 2010), 1,000,000 units of our 6.250%
     Series Z ($25,000,000  carrying amount,  redeemable  October 12, 2009), and
     4,000,000  units of our  7.250%  Series J  ($100,000,000  carrying  amount,
     redeemable May 9, 2011) preferred partnership units.

              In March 2009,  we acquired  all of the 6.40%  Series NN preferred
     partnership  units from a third party ($200.0 million  carrying amount) for
     approximately  $128.0 million,  plus accrued and unpaid  distributions from
     December 31, 2008 through the closing date. This transaction resulted in an
     increase in paid-in  capital of  approximately  $72.0  million for the nine
     months  ended  September  30,  2009,  based upon the excess of the carrying
     amount over the amount paid.

              Also  in  March  2009,  we  acquired  all of the  6.25%  Series  Z
     preferred  partnership  units from a third party  ($25.0  million  carrying
     amount) for $25.0 million. This resulted in no increase in income allocated
     to the common shareholders as they were acquired at par.

              At September 30, 2009, our preferred partnership units outstanding
     were  comprised of 4,000,000  units of our 7.250% Series J preferred  units
     ($100,000,000 carrying amount,  redeemable May 9, 2011). Subject to certain
     conditions,  the Series J preferred  units are  convertible  into our 7.25%
     Series J Cumulative Preferred Shares.

              During the three and nine months  ended  September  30,  2009,  we
     allocated a total of $1,813,000 and $7,643,000,  respectively, in income to
     these interests based upon  distributions  paid. During the same periods in
     2008, we allocated a total of $5,403,000 and $16,209,000,  respectively, in
     income to these interests based upon distributions paid.

              In addition,  during the nine months ended  September 30, 2009, we
     allocated  $72,000,000 in income from these  interests in  determining  net

                                       23


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     income   allocable   to  Public   Storage   shareholders   based  upon  the
     aforementioned  redemption  of the 6.40%  Series NN  preferred  partnership
     units for a cash  payment that was  $72,000,000  less than the related book
     value.


              Other Permanent Noncontrolling Interests in Subsidiaries
              --------------------------------------------------------


              At  September  30,  2009,  the  Other   Permanent   Noncontrolling
     Interests  in  Subsidiaries  represent  equity  interests  in  28  entities
     (generally partnerships) that own in aggregate 94 self-storage facilities.

              During the three and nine months  ended  September  30,  2009,  we
     allocated a total of $4,582,000 and $12,888,000, respectively, in income to
     these  interests.  During the same periods in 2008, we allocated a total of
     $4,898,000 and  $11,320,000,  respectively,  of income to these  interests.
     During  the  nine  months  ended  September  30,  2009  and  2008,  we paid
     distributions  to these interests  totaling  $11,661,000  and  $11,801,000,
     respectively.


                                       24


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

8.   Public Storage Shareholders' Equity
     -----------------------------------

              Cumulative Preferred Shares
              ---------------------------

              At September  30, 2009 and December 31, 2008, we had the following
     series of Cumulative Preferred Shares of beneficial interest outstanding:



                                                       At September 30, 2009          At December 31, 2008
                        Earliest                  ---------------------------     -------------------------
                       Redemption     Dividend       Shares       Liquidation       Shares      Liquidation
       Series             Date          Rate       Outstanding    Preference      Outstanding    Preference
---------------       ------------   ----------   ------------- -------------     -----------  ------------
                                                                  (Dollar amounts in thousands)
                                                                             
Series V                9/30/07         7.500%         6,200    $   155,000           6,900    $   172,500
Series W                10/6/08         6.500%         5,300        132,500           5,300        132,500
Series X               11/13/08         6.450%         4,800        120,000           4,800        120,000
Series Y                 1/2/09         6.850%       750,900         18,772         750,900         18,772
Series Z                 3/5/09         6.250%         4,500        112,500           4,500        112,500
Series A                3/31/09         6.125%         4,600        115,000           4,600        115,000
Series B                6/30/09         7.125%         4,350        108,750           4,350        108,750
Series C                9/13/09         6.600%         4,425        110,625           4,600        115,000
Series D                2/28/10         6.180%         5,400        135,000           5,400        135,000
Series E                4/27/10         6.750%         5,650        141,250           5,650        141,250
Series F                8/23/10         6.450%         9,893        247,325          10,000        250,000
Series G               12/12/10         7.000%         4,000        100,000           4,000        100,000
Series H                1/19/11         6.950%         4,200        105,000           4,200        105,000
Series I                 5/3/11         7.250%        20,700        517,500          20,700        517,500
Series K                 8/8/11         7.250%        16,990        424,756          16,990        424,756
Series L               10/20/11         6.750%         8,267        206,665           8,267        206,665
Series M                 1/9/12         6.625%        19,065        476,634          19,065        476,634
Series N                 7/2/12         7.000%         6,900        172,500           6,900        172,500
                                                  ------------- -------------     -----------  ------------
     Total Cumulative Preferred Shares               886,140    $ 3,399,777         887,122    $ 3,424,327
                                                  ============= =============     ===========  ============


              The  holders  of our  Cumulative  Preferred  Shares  have  general
     preference rights with respect to liquidation and quarterly  distributions.
     Holders of the preferred  shares,  except under certain  conditions  and as
     noted below, will not be entitled to vote on most matters.  In the event of
     a cumulative  arrearage  equal to six quarterly  dividends,  holders of all
     outstanding  series of preferred  shares  (voting as a single class without
     regard to series)  will have the right to elect two  additional  members to
     serve on our Board of Trustees until events of default have been cured.  At
     September 30, 2009, there were no dividends in arrears.

              Except  under  certain   conditions   relating  to  the  Company's
     qualification as a REIT, the Cumulative Preferred Shares are not redeemable
     prior the dates  indicated on the table above.  On or after the  respective
     dates,  each  of  the  series  of  Cumulative   Preferred  Shares  will  be
     redeemable,  at the option of the Company,  in whole or in part,  at $25.00
     per share (or depositary share as the case may be), plus accrued and unpaid
     dividends. Holders of the Cumulative Preferred Shares do not have the right
     to require the Company to redeem such shares.

                                       25


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

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

              During  March  2009,  we  repurchased  certain  of our  Cumulative
     Preferred Shares in privately negotiated  transactions as follows: Series V
     - 700,000  depositary shares,  each representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total  cost of  $13,230,000,  Series C -
     175,000  depositary  shares,  each  representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total cost of $2,695,000  and Series F -
     107,000  depositary  shares,  each  representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total cost of  $1,610,000.  The carrying
     value of the  shares  repurchased  totaled  $23.8  million  ($24.6  million
     liquidation  preference less $0.8 million of original issuance costs),  and
     exceeded the aggregate  repurchase  cost of $17.5 million by  approximately
     $6.2  million.  For purposes of  determining  net income per share,  income
     allocated to our preferred shareholders was reduced by the $6.2 million for
     the nine months ended September 30, 2009.

     Common Shares
     -------------

              Common Shares
              -------------

              During the nine months ended September 30, 2009, we issued 112,688
     common shares in connection with employee stock-based compensation.

              Our Board of Trustees  previously  authorized the repurchase  from
     time to time of up to 35,000,000 of our common shares on the open market or
     in  privately  negotiated  transactions.   During  the  nine  months  ended
     September 30, 2009, we did not repurchase any of our common shares. Through
     September 30, 2009, we have repurchased a total of 23,721,916 of our common
     shares pursuant to this authorization.

              Equity Shares, Series A
              -----------------------

              At September  30, 2009 and December 31, 2008,  we had 8,377,193 of
     depositary  shares  outstanding,  each  representing  1/1,000  of an Equity
     Share, Series A. The Equity Shares, Series A rank on parity with our common
     shares  and  junior to the  Cumulative  Preferred  Shares  with  respect to
     general preference rights and have a liquidation amount which cannot exceed
     $24.50 per share. Distributions with respect to each depositary share shall
     be the  lesser  of:  (i) five  times the per share  dividend  on our common
     shares or (ii) $2.45 per annum. We have no obligation to pay  distributions
     on  the  depositary   shares  if  no  distributions   are  paid  to  common
     shareholders.  During the nine months ended September 30, 2009 and 2008, we
     paid quarterly  distributions to the holders of the Equity Shares, Series A
     of $0.6125 per share for each of the  quarters  ended March 31, June 30 and
     September 30.

              Except in order to  preserve  the  Company's  Federal  income  tax
     status as a REIT, we may not redeem the depositary shares  representing the
     Equity Shares,  Series A before March 31, 2010. On or after March 31, 2010,
     we  may,  at our  option,  redeem  the  depositary  shares  at  $24.50  per
     depositary  share.  If the Company fails to preserve its Federal income tax
     status as a REIT, each of the depositary  shares will be convertible at the
     option of the shareholder  into .956 common shares.  The depositary  shares
     are otherwise not  convertible  into common  shares.  Holders of depositary
     shares  vote as a  single  class  with  holders  of our  common  shares  on
     shareholder  matters,  but the  depositary  shares have the  equivalent  of
     one-tenth of a vote per depositary share.

                                       26


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

              Equity Shares, Series AAA
              -------------------------

              In  November  1999,  we sold  $100,000,000  (4,289,544  shares) of
     Equity  Shares,  Series AAA  ("Equity  Shares AAA") to a newly formed joint
     venture.  The Equity  Shares AAA ranks on a parity with  common  shares and
     junior to the Senior  Preferred  Shares with respect to general  preference
     rights,  and  has  a  liquidation  amount  equal  to  120%  of  the  amount
     distributed to each common share. Annual  distributions per share are equal
     to the lesser of (i) five times the  amount  paid per common  share or (ii)
     $2.1564. We have no obligation to pay distributions if no distributions are
     paid to common  shareholders.  During the nine months ended  September  30,
     2009 and 2008, we paid quarterly  distributions to the holder of the Equity
     Shares,  Series AAA of  $0.5391  per share for each of the  quarters  ended
     March 31, June 30 and September 30. For all periods  presented,  the Equity
     Shares, Series AAA and related dividends are eliminated in consolidation.

              Dividends
              ---------

              The unaudited characterization of dividends for Federal income tax
     purposes is made based upon earnings and profits of the Company, as defined
     by the Internal Revenue Code.  Common share dividends totaled $93.0 million
     ($0.55 per share) and $92.9 million ($0.55 per share), for the three months
     ended September 30, 2009 and 2008, respectively,  and $278.8 million ($1.65
     per share) and $278.5 million ($1.65 per share),  for the nine months ended
     September  30,  2009  and  2008,  respectively.  Equity  Shares,  Series  A
     dividends  totaled  $5.1  million  ($0.6125  per  share)  and $5.4  million
     ($0.6125  per share),  for the three months  ended  September  30, 2009 and
     2008, respectively,  and totaled $15.4 million ($1.838 per share) and $16.1
     million  ($1.838 per share),  for the nine months ended  September 30, 2009
     and 2008,  respectively.  Preferred  share  dividends  pay fixed rates from
     6.125% to 7.500%  with a total  liquidation  amount  of  $3,399,777,000  at
     September  30, 2009  ($3,424,327,000  at December 31,  2008) and  dividends
     aggregating  $58.1  million and $60.3  million for the three  months  ended
     September 30, 2009 and 2008,  respectively,  and $174.3  million and $181.0
     million  for  the  nine  months   ended   September   30,  2009  and  2008,
     respectively.

9.   Related Party Transactions
     --------------------------

              Mr. Hughes,  Public  Storage's  Chairman of the Board of Trustees,
     and his family  (collectively the "Hughes Family") have ownership interests
     in, and operate  approximately  51 self-storage  facilities in Canada using
     the "Public  Storage"  brand name ("PS Canada")  pursuant to a royalty-free
     trademark  license  agreement with Public Storage.  We currently do not own
     any interests in these  facilities  nor do we own any facilities in Canada.
     The Hughes Family owns  approximately 18% of our common shares  outstanding
     at  September  30,  2009.  We have a right of first  refusal to acquire the
     stock  or  assets  of the  corporation  that  manages  the 51  self-storage
     facilities  in Canada,  if the Hughes Family or the  corporation  agrees to
     sell  them.  However,  we  have  no  interest  in the  operations  of  this
     corporation,  we have no right to acquire  this stock or assets  unless the
     Hughes  Family  decides to sell and we receive no benefit  from the profits
     and increases in value of the Canadian self-storage facilities.

              We reinsure  risks  relating to loss of goods stored by tenants in
     the  self-storage  facilities  in  Canada.  During  the nine  months  ended
     September 30, 2009 and 2008, we received  $479,000 and $649,000 (based upon
     historical  exchange rates between the U.S.  Dollar and Canadian  Dollar in
     effect as the revenues were earned),  respectively, in reinsurance premiums
     attributable to the Canadian facilities.  Since our right to provide tenant
     reinsurance  to the  Canadian  facilities  may be  qualified,  there  is no
     assurance that these premiums will continue.

              Public Storage and Mr. Hughes are  co-general  partners in certain
     consolidated  partnerships  and affiliated  partnerships  of Public Storage
     that are not consolidated. The Hughes Family owns 47.9% of the voting stock
     and Public Storage holds 46% of the voting and 100% of the nonvoting  stock
     (representing  substantially all the economic  interest) of a private REIT.
     The private REIT owns  limited  partnership  interests  in five  affiliated

                                       27


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     partnerships.  The Hughes Family also owns limited partnership interests in
     certain of these  partnerships and holds securities in PSB. PS Canada holds
     approximately  a 1.2%  interest  in  Stor-RE,  a  consolidated  entity that
     provides liability and casualty insurance for PS Canada, Public Storage and
     certain  affiliates of Public Storage,  for  occurrences  prior to April 1,
     2004 as  described  below.  Public  Storage and the Hughes  Family  receive
     distributions  from  these  entities  in  accordance  with the terms of the
     partnership agreements or other organizational documents.

              From time to time, the Company and the Hughes Family have acquired
     limited   partnership   units  from  limited   partners  of  the  Company's
     consolidated  partnerships.  In connection with the acquisition in 1998 and
     1999 of a total of 638 limited partnership units by Tamara Hughes Gustavson
     and H-G Family Corp., a company owned by Hughes Family members, the Company
     was granted an option to acquire the limited  partnership units acquired at
     cost,  plus  expenses.  During the  fourth  quarter  of 2008,  the  Company
     exercised  its option to acquire  the units for a total  purchase  price of
     approximately  $239,000.  The  transaction  was approved by the independent
     members of the Board of Trustees  after  considering  that the value of the
     units  had  appreciated  significantly  since  1998  and  1999 and that the
     exercise price for the Company was  substantially  below the prices paid to
     acquire  similar  limited  partner units in third party  transactions.  The
     acquisition was effective January 1, 2009.

10.  Share-Based Compensation
     ------------------------

              Stock Options
              -------------

              We have various  stock option plans  (collectively  referred to as
     the "PS Plans").  Under the PS Plans, the Company has granted non-qualified
     options to certain  trustees,  officers  and key  employees to purchase the
     Company's  common  shares at a price equal to the fair market  value of the
     common  shares  at the date of  grant.  Generally,  options  granted  after
     December 31, 2002 vest generally over a five-year period and expire between
     eight years and ten years after the date they  became  exercisable.  The PS
     Plans  also  provide  for the grant of  restricted  shares  (see  below) to
     officers,  key  employees and service  providers on terms  determined by an
     authorized committee of our Board.

              We recognize  compensation  expense for  share-based  awards based
     upon their fair value on the date of grant  amortized  over the  applicable
     vesting  period  (the "Fair Value  Method"),  net of  estimates  for future
     forfeitures.

              For the  three  and nine  months  ended  September  30,  2009,  we
     recorded   $900,000   and   $2,400,000,   respectively,   in  stock  option
     compensation  expense  related to options granted after January 1, 2002, as
     compared to $904,000 and $2,271,000 for the same periods in 2008.

              A total of 1,485,000  stock  options were granted  during the nine
     months ended September 30, 2009, 42,662 shares were exercised,  and 118,000
     shares were forfeited.  A total of 3,721,670 stock options were outstanding
     at September 30, 2009 (2,397,332 at December 31, 2008).

              Outstanding  stock options are included on a one-for-one  basis in
     our diluted  weighted  average  shares,  less a reduction  for the treasury
     stock method applied to a) the average cumulative measured but unrecognized
     compensation  expense  during the period and b) the strike  price  proceeds
     expected from the employee upon exercise.

                                       28


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

              Restricted Share Units
              ----------------------

              Outstanding  restricted share units vest over a five or eight-year
     period from the date of grant  ratably.  The employee  receives  additional
     compensation   equal  to  the  per-share   dividends   received  by  common
     shareholders  with  respect to  restricted  share units  outstanding.  Such
     compensation  is accounted for as dividends  paid.  Any  dividends  paid on
     units which are  subsequently  forfeited  are expensed.  Upon vesting,  the
     employee  receives  common shares equal to the number of vested  restricted
     share units in exchange for the units.

              The total value of each  restricted  share unit grant,  based upon
     the market  price of our common  shares at the date of grant,  is amortized
     over the  service  period,  net of  estimates  for future  forfeitures,  as
     compensation  expense.  The related  employer  portion of payroll  taxes is
     expensed as incurred.

              During  the  nine  months  ended   September  30,  2009,   105,050
     restricted  share units were granted,  62,753  restricted  share units were
     forfeited and 111,803 restricted share units vested.  This vesting resulted
     in the issuance of 70,026 common  shares.  In addition,  cash  compensation
     totaling  $3,082,000  was paid to employees in lieu of 41,777 common shares
     based upon the market value of the shares at the date of vesting,  and used
     to settle the employees' tax liability generated by the vesting.

              At September  30, 2009,  approximately  560,706  restricted  share
     units  were  outstanding  (630,212  at  December  31,  2008).  A  total  of
     $2,460,000 and $7,053,000 in restricted  share expense was recorded for the
     three and nine months ended September 30, 2009,  respectively,  as compared
     to $2,601,000 and $7,492,000 for the same periods in 2008. Restricted share
     expense  includes  amortization  of the grant-date  fair value of the units
     reflected as an increase to paid-in  capital,  as well as payroll  taxes we
     incurred upon each respective vesting.

              See  also  "net  income  per  common   share"  above  for  further
     discussion regarding the impact of restricted share units on our net income
     per common and income allocated to common shareholders.

11.  Segment Information
     -------------------

              Our reportable segments reflect significant  operating  activities
     that are evaluated  separately by management,  and are organized based upon
     their  operating  characteristics.  Each of our  segments is  evaluated  by
     management based upon net segment income. Net segment income represents net
     income in conformity with GAAP and our significant  accounting  policies as
     denoted in Note 2.

              We had  previously  grouped  our  Commercial  Segment  with  other
     ancillary  activities  such as  reinsurance  of policies  against losses to
     goods stored by tenants in our self-storage facilities,  merchandise sales,
     truck rentals,  and  containerized  storage.  Due to the termination of our
     containerized  storage and truck rental  operations,  these other ancillary
     activities as a group have become less  significant  and as a result are no
     longer allocated to a particular  reportable  segment. We have adjusted the
     classification  of the  "Presentation  of Segment  Information"  below with
     respect  to  prior  periods  to be  consistent  with  our  current  segment
     definition.

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

              Domestic Self Storage Segment
              -----------------------------

              The  Domestic   Self-Storage   Segment   comprises   our  domestic
     self-storage rental operations, and is our predominant segment. It includes
     the  operations of the 1,991 self storage  facilities  owned by the Company
     and  the  Consolidated  Entities,  as well as our  equity  share  of the 19

                                       29


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

     self-storage  facilities that we account for on the equity method.  None of
     our  interest  and other  income,  interest  expense or the  related  debt,
     general  and  administrative  expense,  or gains and  losses on the sale of
     self-storage  facilities is allocated to our Domestic  Self-Storage segment
     because  management does not consider these items in evaluating the results
     of operations of the Domestic  Self-Storage segment. At September 30, 2009,
     the assets of the Domestic  Self-Storage segment are comprised  principally
     of our  self-storage  facilities  with a book value of $7.6  billion  ($7.8
     billion at December  31,  2008),  Tenant  Intangibles  with a book value of
     approximately  $20.5 million ($33.2 million at December 31, 2008),  and the
     Other  Investments with a net book value of $14.0 million ($14.8 million at
     December 31, 2008).  Substantially  all of our other assets totaling $104.9
     million,  and our accrued and other  liabilities  totaling  $236.5 million,
     ($109.9 million and $212.4 million, respectively, at December 31, 2008) are
     directly associated with the Domestic Self-Storage segment.

              Europe Self-Storage Segment
              ---------------------------

              The Europe Self-Storage segment comprises our interest in Shurgard
     Europe,  which has a separate  management  team that  makes the  financing,
     capital allocation, and other significant decisions for this operation. The
     Europe  Self-Storage  segment  presentation  includes all of the  revenues,
     expenses,  and operations of Shurgard Europe to the extent  consolidated in
     our financial statements,  and for periods following the deconsolidation of
     Shurgard Europe, includes our equity share of Shurgard Europe's operations,
     the interest and other income  received  from Shurgard  Europe,  as well as
     specific general and administrative expense, disposition gains, and foreign
     currency exchange gains and losses that management  considers in evaluating
     our  investment in Shurgard  Europe.  At September 30, 2009,  our condensed
     consolidated balance sheet includes an investment in Shurgard Europe with a
     book value of $272.7  million  ($264.1  million at December 31, 2008) and a
     loan receivable from Shurgard Europe totaling  (euro)391.9  million ($571.8
     million) ($552.4 million at December 31, 2008).

              Commercial Segment
              ------------------

              The  Commercial   segment  comprises  our  investment  in  PSB,  a
     self-managed Real Estate  Investment Trust with a separate  management team
     that  makes  the  financing,   capital  allocation  and  other  significant
     decisions.  The  Commercial  segment also  includes our direct  interest in
     certain  commercial  facilities,  substantially all of which are managed by
     PSB. The Commercial  segment  presentation  includes our equity income from
     PSB, as well as the revenues and expenses of our commercial facilities.  At
     September  30, 2009,  the assets of the  Commercial  segment are  comprised
     principally  of our  investment  in PSB  which  has a book  value of $327.2
     million ($265.7 million at December 31, 2008).

              Presentation of Segment Information
              -----------------------------------

              The following table reconciles the performance of each segment, in
     terms of  segment  income,  to our  consolidated  net  income  (amounts  in
     thousands):


                                       30


                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

For the three months ended September 30, 2009



                                                                                                       Other Items
                                                        Domestic          Europe                     Not Allocated to     Total
                                                      Self-Storage     Self Storage    Commercial         Segments     Consolidated
                                                      -------------   -------------   -------------  ----------------  -------------
                                                                                   (Amounts in thousands)
Revenues:
                                                                                                        
   Self-storage facilities.......................     $    378,207     $        -      $        -      $        -      $   378,207
   Ancillary operations..........................                -              -           3,753          24,047           27,800
   Interest and other income.....................                -          6,254               -             603            6,857
                                                      -------------   -------------   -------------  ----------------  -------------
                                                           378,207          6,254           3,753          24,650          412,864
                                                      -------------   -------------   -------------  ----------------  -------------
Expenses:
  Cost of operations:
      Self-storage facilities....................          121,261              -               -               -          121,261
      Ancillary operations.......................                -              -           1,440           6,053            7,493
  Depreciation and amortization..................           85,256              -             652               -           85,908
  General and administrative.....................                -              -               -           8,654            8,654
  Interest expense...............................                -              -               -           7,289            7,289
                                                      -------------   -------------   -------------  ----------------  -------------
                                                           206,517              -           2,092          21,996          230,605
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations before equity
   in earnings of real estate entities, gains on
   disposition of other real estate investments,
   net and foreign currency exchange gain........          171,690          6,254           1,661           2,654          182,259

Equity in earnings of real estate entities.......              509          3,631           4,684               -            8,824
Gains on disposition of other real estate
   investments, net..............................                -              -          30,293             280           30,573
Foreign currency exchange gain...................                -         21,429               -               -           21,429
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations................          172,199         31,314          36,638           2,934          243,085
Discontinued operations..........................                -              -               -             866              866
                                                      -------------   -------------   -------------  ----------------  -------------
Net income.......................................     $    172,199     $   31,314      $   36,638      $    3,800      $   243,951
                                                      =============   =============   =============  ================  =============



                                       31



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009




For the three months ended September 30, 2008
                                                                                                       Other Items
                                                        Domestic          Europe                     Not Allocated to     Total
                                                      Self-Storage     Self Storage    Commercial         Segments     Consolidated
                                                      -------------   -------------   -------------  ----------------  -------------
                                                                                   (Amounts in thousands)
Revenues:
                                                                                                        
   Self-storage facilities.......................     $  392,738      $        -      $         -      $        -      $  392,738
   Ancillary operations..........................              -               -            3,745          23,201          26,946
   Interest and other income.....................              -           6,380                -           5,105          11,485
                                                      -------------   -------------   -------------  ----------------  -------------
                                                         392,738           6,380            3,745          28,306         431,169
                                                      -------------   -------------   -------------  ----------------  -------------
Expenses:
  Cost of operations:
      Self-storage facilities....................        121,579               -                -               -         121,579
      Ancillary operations.......................              -               -            1,555           2,201           3,756
  Depreciation and amortization..................         90,432               -              652               -          91,084
  General and administrative.....................              -               -                -           8,879           8,879
  Interest expense...............................              -               -                -           9,099           9,099
                                                      -------------   -------------   -------------  ----------------  -------------
                                                         212,011               -            2,207          20,179         234,397
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations before equity
   in earnings of real estate entities, gains on
   disposition of other real estate investments,
   net, casualty loss and foreign currency
   exchange loss.................................        180,727           6,380            1,538           8,127         196,772

Equity in earnings of real estate entities.......            738           2,260            3,320               -           6,318
Gains on disposition of other real estate
   investments, net..............................              -               -                -           1,024           1,024
Casualty loss....................................              -               -                -            (525)           (525)
Foreign currency exchange loss...................              -         (53,172)               -               -         (53,172)
                                                      -------------   -------------   -------------  ----------------  -------------
Income (loss) from continuing operations.........        181,465         (44,532)           4,858           8,626         150,417
Discontinued operations..........................              -               -                -          (2,475)         (2,475)
                                                      -------------   -------------   -------------  ----------------  -------------
Net income.......................................     $  181,465      $  (44,532)     $     4,858      $    6,151      $  147,942
                                                      =============   =============   =============  ================  =============


                                       32



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009




For the nine months ended September 30, 2009

                                                                                                       Other Items
                                                        Domestic          Europe                     Not Allocated to     Total
                                                      Self-Storage     Self Storage    Commercial         Segments     Consolidated
                                                      -------------   -------------   -------------  ----------------  -------------
                                                                                 (Amounts in thousands)
Revenues:
                                                                                                       
   Self-storage facilities.......................     $  1,121,076     $        -      $        -      $       -      $  1,121,076
   Ancillary operations..........................                -              -          11,124         70,617            81,741
   Interest and other income.....................                -         17,608               -          4,398            22,006
                                                      -------------   -------------   -------------  ----------------  -------------
                                                         1,121,076         17,608          11,124         75,015         1,224,823
                                                      -------------   -------------   -------------  ----------------  -------------
Expenses:
  Cost of operations:
      Self-storage facilities....................          379,213              -               -              -           379,213
      Ancillary operations.......................                -              -           4,309         23,211            27,520
  Depreciation and amortization..................          252,366              -           2,304              -           254,670
  General and administrative.....................                -              -               -         26,532            26,532
  Interest expense...............................                -              -               -         22,705            22,705
                                                      -------------   -------------   -------------  ----------------  -------------
                                                           631,579              -           6,613         72,448           710,640
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations before equity in
   earnings of real estate entities, gains on
   disposition of other real estate investments,
   net, gain on early retirement of debt and
   foreign currency exchange gain................          489,497         17,608           4,511          2,567           514,183

Equity in earnings of real estate entities.......            1,443          7,239          30,351              -            39,033
Gains on disposition of other real estate
   investments, net..............................                -              -          30,293          3,002            33,295

Gain on early retirement debt....................                -              -               -          4,114             4,114
Foreign currency exchange gain...................                -         19,901               -              -            19,901
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations................          490,940         44,748          65,155          9,683           610,526
Discontinued operations..........................                -              -               -         (7,759)           (7,759)
                                                      -------------   -------------   -------------  ----------------  -------------
Net income.......................................     $    490,940     $   44,748      $   65,155      $   1,924      $    602,767
                                                      =============   =============   =============  ================  =============



                                       33



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009




For the nine months ended September 30, 2008

                                                                                                       Other Items
                                                        Domestic          Europe                     Not Allocated to     Total
                                                      Self-Storage     Self Storage    Commercial         Segments     Consolidated
                                                      -------------   -------------   -------------  ----------------  -------------
                                                                                   (Amounts in thousands)
Revenues:
                                                                                                        
   Self-storage facilities.......................     $  1,143,059     $   54,722      $        -      $        -      $ 1,197,781
   Ancillary operations..........................                -          4,913          11,546          67,234           83,693
   Interest and other income.....................                -         12,912               -          12,431           25,343
                                                      -------------   -------------   -------------  ----------------  -------------
                                                         1,143,059         72,547          11,546          79,665        1,306,817
                                                      -------------   -------------   -------------  ----------------  -------------
Expenses:
  Cost of operations:
      Self-storage facilities....................          381,704         24,654               -               -          406,358
      Ancillary operations.......................                -          1,409           4,789          20,926           27,124
  Depreciation and amortization..................          284,036         21,871           2,246               -          308,153
  General and administrative.....................                -         30,044               -          26,924           56,968
  Interest expense...............................                -          6,597               -          28,590           35,187
                                                      -------------   -------------   -------------  ----------------  -------------
                                                           665,740         84,575           7,035          76,440          833,790
                                                      -------------   -------------   -------------  ----------------  -------------
Income (loss) from continuing operations before
   equity in earnings of real estate entities,
   gains on disposition of other real estate
   investments, net, casualty loss and foreign
   currency exchange loss........................          477,319        (12,028)          4,511           3,225          473,027

Equity in earnings of real estate entities.......            1,450          3,717           8,512               -           13,679
Gains on disposition of other real estate
   investments, net..............................                -        341,865               -             932          342,797
Casualty loss....................................                -              -               -            (525)            (525)
Foreign currency exchange loss...................                -        (12,203)              -               -          (12,203)
                                                      -------------   -------------   -------------  ----------------  -------------
Income from continuing operations................          478,769        321,351          13,023           3,632          816,775
Discontinued operations..........................                -              -               -          (4,937)          (4,937)
                                                      -------------   -------------   -------------  ----------------  -------------
Net income (loss)................................     $    478,769     $  321,351      $   13,023      $   (1,305)     $   811,838
                                                      =============   =============   =============  ================  =============


                                       34



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

12.  Commitments and Contingencies
     -----------------------------

         Legal Matters
         -------------

         Brinkley v. Public Storage, Inc. (filed April 2005)
         ---------------------------------------------------
         (Superior Court of California - Los Angeles County)
         ---------------------------------------------------

              The plaintiff  sued the Company on behalf of a purported  class of
     California  non-exempt  employees based on various California wage and hour
     laws and seeking  monetary  damages and injunctive  relief.  In May 2006, a
     motion  for  class   certification   was  filed  seeking  to  certify  five
     subclasses.   Plaintiff  sought   certification  for  alleged  meal  period
     violations, rest period violations, failure to pay for travel time, failure
     to pay for mileage  reimbursement,  and for wage statement  violations.  In
     October  2006,  the  Court  declined  to  certify  three  out of  the  five
     subclasses.  The Court did,  however,  certify  subclasses based on alleged
     meal period and wage statement violations.  Subsequently, the Company filed
     a motion  for  summary  judgment  seeking  to  dismiss  the  matter  in its
     entirety.  On June 22,  2007,  the  Court  granted  the  Company's  summary
     judgment  motion  as to the  causes of action  relating  to the  subclasses
     certified and dismissed those claims.  The only surviving  claims are those
     relating to the named  plaintiff.  The plaintiff has filed an appeal to the
     Court's June 22, 2007 summary  judgment  ruling.  On October 28, 2008,  the
     Court of Appeals sustained the trial court's ruling.  The plaintiff filed a
     petition for review with the California  Supreme  Court,  which was granted
     but further action in this matter was deferred  pending  consideration  and
     disposition  of a related  issue in Brinker  Restaurant  Corp.  v. Superior
     Court which is currently pending before the California Supreme Court.

         Other Items
         -----------

              We are a party to  various  claims,  complaints,  and other  legal
     actions that have arisen in the normal course of business from time to time
     that are not  described  above.  We believe  that it is  unlikely  that the
     outcome of these other pending legal proceedings  including  employment and
     tenant claims,  in the aggregate,  will have a material adverse impact upon
     our operations or financial position.

         Insurance and Loss Exposure
         ---------------------------

              We  have  historically  carried  customary  property,  earthquake,
     general liability and workers compensation coverage through internationally
     recognized insurance carriers,  subject to customary levels of deductibles.
     The aggregate limits on these policies of $75 million for property coverage
     and $102 million for general liability are higher than estimates of maximum
     probable  loss  that  could  occur  from  individual   catastrophic  events
     determined in recent engineering and actuarial studies; however, in case of
     multiple catastrophic events, these limits could be exhausted.

              Our tenant  insurance  program  reinsures a program that  provides
     insurance to certificate  holders against claims for property losses due to
     specific  named  perils  (earthquakes  and floods are not  covered by these
     policies) to goods  stored by tenants at our  self-storage  facilities  for
     individual limits up to a maximum of $5,000. We have third-party  insurance
     coverage  for  claims  paid  exceeding  $1,000,000  resulting  from any one
     individual  event, to a limit of $25,000,000.  At September 30, 2009, there
     were  approximately  596,000  certificate  holders  participating  in  this
     program in the U.S.  representing  aggregate coverage of approximately $1.3
     billion.  We  rely  on a  third-party  insurance  company  to  provide  the
     insurance  and are subject to licensing  requirements  and  regulations  in
     several  states.  No assurance can be given that this activity can continue
     to be conducted in any given jurisdiction.

                                       35



                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2009

         Operating Lease Obligations
         ---------------------------

              We lease land,  equipment and office space under various operating
     leases.  At September  30, 2009,  the  approximate  future  minimum  rental
     payments  required under our operating  leases for each calendar year is as
     follows:  $2 million  for the  remainder  of 2009,  $6 million in 2010,  $5
     million  per  year in 2011 -  2013,  and an  aggregate  of $76  million  in
     payments thereafter.

              Expenses under operating  leases were  approximately  $1.3 million
     and $4.0  million for the three and nine months ended  September  30, 2009,
     respectively,  as  compared to $1.4  million and $4.0  million for the same
     periods in 2008.

13.  Subsequent Events
     -----------------

              Effective October 31, 2009, we extended the maturity date to March
     31, 2013 for our existing  (euro)391.9 million ($571.8 million at September
     30, 2009) loan to Shurgard  Europe.  Under the terms of the extension,  the
     existing  7.5% rate of  interest  increased  to 9.0% per  annum  (effective
     November 1, 2009). All other material terms and covenants remain the same.




                                       36




ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------

     The following  discussion and analysis  should be read in conjunction  with
our condensed consolidated financial statements and notes thereto.

     FORWARD  LOOKING   STATEMENTS:   This  document  contains   forward-looking
statements within the meaning of the federal  securities laws. All statements in
this document,  other than  statements of historical  fact, are  forward-looking
statements  which  may  be  identified  by  the  use  of  the  words  "expects,"
"believes,"  "anticipates,"  "plans," "would,"  "should," "may," "estimates" and
similar expressions.  These forward-looking statements involve known and unknown
risks and  uncertainties,  which may cause Public  Storage's  actual results and
performance to be materially  different  from those  expressed or implied in the
forward-looking   statements.   As  a  result,   you  should  not  rely  on  any
forward-looking  statements in this report,  or which management may make orally
or in writing from time to time, as  predictions of future events nor guarantees
of future  performance.  Risk that could  impact  our  performance  and  results
include,  but are not limited to, those  described in Item 1A, "Risk Factors" in
our most recent  Annual  Report on Form 10-K and in this Form 10-Q, in our other
filings with the Securities and Exchange Commission, and the following:

     o    general  risks  associated  with the  ownership  and operation of real
          estate   including   changes  in  demand,   potential   liability  for
          environmental  contamination,  adverse changes in tax laws,  including
          property  tax rates and  assessments,  real estate and zoning laws and
          regulations, and the impact of natural disasters;

     o    risks associated with downturns in the national and local economies in
          the markets in which we operate,  including  risks  related to current
          economic conditions;

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

     o    difficulties  in  our  ability  to  successfully  evaluate,   finance,
          integrate  into  our  existing  operations  and  manage  acquired  and
          developed properties;

     o    risks  associated with  international  operations  including,  but not
          limited to, unfavorable foreign currency rate fluctuations, that could
          adversely affect our earnings and cash flows;

     o    risks related to our participation in joint ventures;

     o    the impact of the regulatory  environment as well as national,  state,
          and local laws and regulations  including,  without limitation,  those
          governing  environmental,  tax and tenant  insurance  matters and real
          estate investment trusts ("REITs"), and risks related to the impact of
          existing or potential new laws and regulations;

     o    risks  associated  with a possible  failure by us to qualify as a REIT
          under the Internal Revenue Code of 1986, as amended;

     o    disruptions  or shutdowns of our  automated  processes  and systems or
          breaches of our data security;

     o    difficulties in raising capital at a reasonable cost;

     o    fill-up of our newly developed properties; and

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

                                       37



     Our forward-looking  statements speak only as of the date of this report or
as of the dates indicated in the statements.  We assume no obligation to update,
revise or  supplement  publicly  any  forward-looking  statements,  whether as a
result of new  information,  future events or  otherwise,  except as required by
law.

     CRITICAL ACCOUNTING POLICIES

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations  discusses our  consolidated  financial  statements,  which have been
prepared in accordance with United States ("U.S.") generally accepted accounting
principles  ("GAAP").  The  preparation of our financial  statements and related
disclosures  in  conformity  with GAAP and our  discussion  and  analysis of our
financial  condition  and  results of  operations  requires  management  to make
judgments,  assumptions  and estimates  that affect the amounts  reported in our
condensed consolidated financial statements and accompanying notes. The notes to
our September 30, 2009 condensed  consolidated  financial statements,  primarily
Note 2, summarize the  significant  accounting  policies and methods used in the
preparation  of our  condensed  consolidated  financial  statements  and related
disclosures.

     Management  believes the following are critical  accounting  policies,  the
application  of  which  has  a  material  impact  on  the  Company's   financial
presentation. That is, they are both important to the portrayal of our financial
condition  and  results,  and they  require  management  to make  judgments  and
estimates about matters that are inherently uncertain.

     QUALIFICATION AS A REIT - INCOME TAX EXPENSE:  We believe that we have been
organized  and operated,  and we intend to continue to operate,  as a qualifying
REIT under the Internal  Revenue Code and applicable state laws. We also believe
that Shurgard,  prior to merging with us,  qualified as a REIT. A REIT generally
does not pay  corporate  level federal  income taxes on its REIT taxable  income
that is distributed to its shareholders,  and accordingly, we do not pay federal
income tax on the share of our REIT taxable  income that is  distributed  to our
shareholders.

     We therefore  do not estimate or accrue any federal  income tax expense for
income earned and distributed related to REIT operations. This estimate could be
incorrect,  because  due  to  the  complex  nature  of  the  REIT  qualification
requirements,   the  ongoing  importance  of  factual   determinations  and  the
possibility of future changes in our circumstances, we cannot be assured that we
actually have satisfied or will satisfy the  requirements for taxation as a REIT
for any  particular  taxable  year.  For any  taxable  year that we fail or have
failed to qualify as a REIT and for which applicable  relief  provisions did not
apply,  we would be taxed at the regular  corporate  rates on all of our taxable
income,  whether or not we made or make any  distributions to our  shareholders.
Any resulting  requirement to pay corporate income tax, including any applicable
penalties or interest,  could have a material  adverse  impact on our  financial
condition or results of  operations.  Unless  entitled to relief under  specific
statutory provisions,  we also would be disqualified from taxation as a REIT for
the four taxable  years  following  the year for which  qualification  was lost.
There can be no assurance that we would be entitled to any statutory  relief. In
addition,  if  Shurgard  failed to qualify as a REIT,  we  generally  would have
succeeded to or incurred significant tax liabilities.

     IMPAIRMENT OF LONG-LIVED ASSETS: Substantially all of our assets consist of
real  estate  and other  intangible  assets  which are  long-lived  assets.  The
evaluation of our long-lived assets for impairment includes  determining whether
indicators  of  impairment  exist,  which  is a  subjective  process.  When  any
indicators of impairment  are found,  the evaluation of such  long-lived  assets
then entails  projections of future  operating  cash flows,  which also involves
significant  judgment.  Future events, or facts and circumstances that currently
exist, that we have not yet identified, could cause us to conclude in the future
that our long-lived  assets are impaired.  Any resulting  impairment  loss could
have a  material  adverse  impact on our  financial  condition  and  results  of
operations.

     ESTIMATED  USEFUL  LIVES OF  LONG-LIVED  ASSETS:  Substantially  all of our
assets  consist of  depreciable  or  amortizable  long-lived  assets.  We record
depreciation  and  amortization  expense with respect to these assets based upon
their estimated  useful lives. Any change in the estimated useful lives of those
assets,  caused by functional or economic  obsolescence or other factors,  could
have a  material  adverse  impact  on our  financial  condition  or  results  of
operations.

                                       38



     ACCRUALS FOR CONTINGENCIES:  We are exposed to business and legal liability
risks with respect to events that have occurred, but in accordance with GAAP, we
have not accrued  for certain  such  potential  liabilities  because the loss is
either not  probable or not  estimable or because we are not aware of the event.
Future  events  and the  results  of  pending  litigation  could  result in such
potential  losses becoming  probable and estimable,  which could have a material
adverse impact on our financial condition or results of operations.  Significant
unaccrued  losses that we have determined are at least  reasonably  possible are
described in Note 12 to our September 30, 2009 condensed  consolidated financial
statements.

     ACCRUALS  FOR  OPERATING  EXPENSES:  We accrue for property tax expense and
certain other operating  expenses based upon estimates and historical trends and
current and anticipated  local and state government  rules and  regulations.  If
these estimates and assumptions are incorrect, our expenses could be misstated.

     VALUATION OF ASSETS AND LIABILITIES ACQUIRED IN BUSINESS  COMBINATIONS:  We
have estimated the fair value of real estate,  intangible assets,  debt, and the
other  assets and other  liabilities  acquired  in business  combinations,  most
notably the Shurgard  Merger.  We have acquired these assets,  in certain cases,
with non-cash assets, most notably the 38.9 million shares that we issued to the
Shurgard  shareholders.   These  estimates  are  based  upon  many  assumptions,
including  interest  rates,  market values of land and buildings in the U.S. and
Europe, estimated future cash flows from the tenant base in place at the time of
the  merger,  and the  recoverability  of certain  assets.  We believe  that the
assumptions used were reasonable,  however,  these assumptions were subject to a
significant  degree of judgment,  and others could come to materially  different
conclusions as to the estimated values,  if different  assumptions were used. If
the values were  determined  using  different  assumptions  than those used, our
depreciation and amortization expense,  interest expense, gain on disposition of
an interest in Shurgard Europe,  real estate,  debt, and intangible assets could
have been materially different.

     OVERVIEW OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

     Our principal  business  activities  include the acquisition,  development,
ownership and operation of  self-storage  facilities  which offer storage spaces
for lease,  generally on a month-to-month  basis, for personal and business use.
We are the largest  owner and operator of  self-storage  facilities in the U.S.,
and we have an interest in what we believe is the largest  owner and operator of
self-storage facilities in Europe.

     We  currently  operate  within  three  reportable  segments:  (i)  Domestic
Self-Storage,  (ii)  Europe  Self-Storage  and (iii)  Commercial.  The  Domestic
Self-Storage  segment comprises the direct and indirect ownership,  development,
and operation of storage facilities in the U.S. Our Europe Self-Storage  segment
comprises our equity interest in the  self-storage  through our 49% ownership in
Shurgard  Europe and its  associated  activities  in seven  countries in Western
Europe.  Our Commercial  segment  includes our commercial  property  operations,
directly and through our 41.4%  ownership  interest in PS Business  Parks,  Inc.
("PSB"),  a publicly traded REIT whose common stock trades on the New York Stock
Exchange  under  the  symbol  "PSB" (as of  September  30,  2009,  PSB owned and
operated 19.6 million rentable square feet of commercial space). See "Investment
in PSB" under "Equity in Earnings of Real Estate Entities" below for information
regarding  transactions  related to our  investment  in PSB recorded  during the
three months ended  September 30, 2009. Our other  activities  including (i) the
reinsurance  of  policies  against  losses  to goods  stored by  tenants  in our
self-storage  facilities,  (ii) merchandise sales at our self-storage facilities
and (iii) management of self-storage  facilities owned by third-party owners and
domestic  facilities owned by the affiliated  entities that are not consolidated
are not allocated to any segment.

     During the three months ended March 31, 2009,  we decided to terminate  our
containerized  storage and truck  rental  operations.  Accordingly,  the related
results of  operations  have been  included in  discontinued  operations  on our
condensed consolidated  statements of income. Our self-storage facilities in the
U.S.  comprise  approximately 92% of our operating revenue for each of the three
and nine months ended  September 30, 2009,  and represent the primary  driver of
growth in our net income and cash flows from  operations.  In addition,  much of
our  ancillary  revenues  are derived at our  self-storage  facility  locations,
either from our existing self-storage customer base or from the customer traffic
within our self-storage facilities.  Accordingly,  a large portion of management
time and focus is placed  upon  maximizing  revenues  and  effectively  managing
expenses in our self-storage facilities.

                                       39



     The self-storage  industry is not immune to the  recessionary  pressures in
the general economic environment. Demand for self-storage space in both the U.S.
and Europe has softened and, as a result, we are experiencing  downward pressure
on  occupancy  levels,  rental  rates,  and  revenues  in each of our  operating
segments.

     An important  determinant  of our long-term  growth is the expansion of our
asset base and deployment of capital.  Acquisitions of  self-storage  facilities
have  been  minimal  over  the  past  year  as we  continue  to  monitor  seller
expectations  and wait for better  opportunities  that may come about as certain
local developers,  who raised capital through the issuance of debt,  endeavor to
refinance such debt in the near-term,  but face the current tight credit markets
as  well as  pressure  on  operating  cash  flow  due to the  current  difficult
operating  environment  and may be more  likely to  consider  liquidating  their
facilities.  There can be no assurance that such  opportunities may arise either
in the short or long-term.

     While  historically we have developed real estate  facilities,  our current
development  of real estate  facilities  has been  minimized due to the existing
economic environment and our belief that our capital can be more effectively put
to use in other ways.

     We currently  have $670.9  million in cash and cash  equivalents on hand at
September 30, 2009, and continue to evaluate opportunities to effectively deploy
this capital,  primarily either through the acquisition of facilities or through
the opportunistic acquisition of our own debt and equity securities. We acquired
$110.2 million of our  outstanding  senior  unsecured notes during February 2009
and we acquired, for $24.6 million, certain of our preferred securities in March
2009 at a substantial  discount to liquidation value. Also during March 2009, we
acquired for $153.0  million,  certain of our preferred  partnership  units at a
substantial discount to their carrying amount.

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

     OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009:
     ----------------------------------------------------------------

     Net income for the three months ended September 30, 2009 was $244.0 million
compared to $147.9 million for the same period in 2008, representing an increase
of $96.1 million.  This increase is primarily due to a foreign currency exchange
gain  totaling  $21.4  million in the three months ended  September  30, 2009 as
compared to a foreign currency  exchange loss totaling $53.2 million in the same
period in 2008 and a gain on disposition  of $30.3 million  related to an equity
offering by PS Business Parks, Inc. ("PSB"), offset partially by a $16.2 million
reduction in net operating income with respect to our Same Store Facilities.

     Revenues for the Same Store  Facilities  decreased 4.6% or $16.9 million in
the quarter ended September 30, 2009 as compared to the same period in 2008, due
to a 4.2% reduction in realized rent per occupied  square foot,  combined with a
1.0%  reduction in average  occupancies.  Cost of operations  for the Same Store
Facilities declined 0.6% or $0.7 million in the quarter ended September 30, 2009
as compared to the same period in 2008. Net operating  income for our Same Store
Facilities  decreased  6.3% or $16.2 million in the quarter ended  September 30,
2009 as compared to the same period in 2008.

     For the three months ended September 30, 2009, net income  allocable to our
common   shareholders   (after  allocating  net  income  to  our  noncontrolling
interests,  preferred and equity stock  shareholders,  and holders of restricted
share  units) was $173.5  million or $1.03 per common  share on a diluted  basis
compared to $71.5 million or $0.42 per common share for the same period in 2008,
representing  an  increase  of $102.0  million  or $0.61 per  common  share on a
diluted  basis.  These  increases  are  primarily  due to the net  impact of the
factors described above.

     OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009:
     ---------------------------------------------------------------

     Net income for the nine months ended  September 30, 2009 was $602.8 million
compared to $811.8 million for the same period in 2008,  representing a decrease
of  $209.0  million.  This  decrease  is  primarily  due to (i) a gain of $341.8
million in the nine months ended  September 30, 2008 related to our  disposition
of an  interest  in  Shurgard  Europe,  (ii) a $28.6  million  reduction  in net
operating  income  with  respect  to our Same  Store  Facilities,  and  (iii) an
impairment charge included in discontinued operations with respect to intangible
assets  totaling  $8.2  million in the nine months  ended  September  30,  2009,

                                       40



partially  offset by (iv) a gain on disposition  of $30.3 million  related to an
equity offering by PSB, (v) a foreign  exchange gain of $19.9 million during the
nine months  ended  September  30,  2009 as compared to a loss of $12.2  million
during the same period in 2008,  (vi) a $31.6 million  reduction in depreciation
and amortization related to our domestic assets,  primarily representing reduced
intangible  amortization,  and (vii) a reduction  in general and  administrative
expenses  due to $27.9  million in incentive  compensation  incurred in the nine
months ended  September  30, 2008 related to our  disposition  of an interest in
Shurgard Europe.

     Revenues for the Same Store  Facilities  decreased 3.0% or $32.3 million in
the nine months ended September 30, 2009 as compared to the same period in 2008,
due to a 2.5% reduction in realized rent per occupied square foot, combined with
a 1.0% reduction in average  occupancies.  Cost of operations for the Same Store
Facilities  declined 1.0% or $3.6 million in the nine months ended September 30,
2009 as compared to the same period in 2008.  Net operating  income for our Same
Store  Facilities  decreased  4.0% or $28.6  million for the nine  months  ended
September 30, 2009 as compared to the same period in 2008.

     For the nine months ended  September 30, 2009, net income  allocable to our
common   shareholders   (after  allocating  net  income  to  our  noncontrolling
interests,  preferred and equity stock  shareholders,  and holders of restricted
share  units) was $468.5  million or $2.78 per common  share on a diluted  basis
compared  to $584.3  million  or $3.46 per common  share for the same  period in
2008,  representing  a decrease of $115.8 million or $0.68 per common share on a
diluted  basis.  These  decreases  are  primarily  due to the net  impact of the
factors  described  above,  offset  by a $78.2  million  reduction  in  earnings
allocated to our preferred partnership unitholders and preferred shareholders in
the nine months ended  September  30, 2009  associated  with the  repurchase  of
securities.

REAL ESTATE OPERATIONS
--------------------------------------------------------------------------------

     SELF-STORAGE OPERATIONS: Our self-storage operations are by far the largest
component of our operating activities, representing approximately 92% and 91% of
our total revenues  generated for the three months ended  September 30, 2009 and
2008, respectively, and 92% for each of the nine months ended September 30, 2009
and 2008. Net operating income (after  depreciation  and  amortization  expense)
with respect to our self-storage operations decreased by $7.7 million during the
three months ended  September 30, 2009, when compared to the same period in 2008
as the decline in revenues of 3.7% outpaced the 7.2% decline in depreciation and
amortization  due to decreased  amortization of tenant  intangible  assets.  Net
operating income (after  depreciation and amortization  expense) with respect to
our  self-storage  operations  increased by $5.3 million  during the nine months
ended  September  30,  2009,  when  compared  to the same  period in 2008 due to
decreased  amortization of tenant  intangible  assets,  offset  partially by the
deconsolidation of Shurgard Europe effective April 1, 2008.

     To enhance year-over-year comparisons,  the following table summarizes, and
the ensuing  discussion  describes,  the  operating  results of three  groups of
facilities that management analyzes: (i) the Same Store group,  representing the
facilities in the Domestic Self-Storage Segment that we have owned and have been
operating on a stabilized basis since January 1, 2007, (ii) all other facilities
in the Domestic  Self-Storage  Segment,  which are primarily those  consolidated
facilities  that we have not owned and  operated  at a  stabilized  basis  since
January 1, 2007 such as newly acquired,  newly developed,  or recently  expanded
facilities,  and (iii) the  facilities  operated by Shurgard  Europe  which were
deconsolidated effective March 31, 2008.

                                       41





 SELF-STORAGE OPERATIONS
 SUMMARY                                 Three Months Ended September 30,             Nine Months Ended September 30,
                                    -----------------------------------------    ---------------------------------------
                                                                   Percentage                                  Percentage
                                        2009           2008          Change          2009          2008          Change
                                    -----------    -----------     ----------    -----------   -----------     ----------
                                                                 (Dollar amounts in thousands)

 RENTAL INCOME:
                                                                                                
   Same Store Facilities..........  $   352,121    $   368,976        (4.6)%    $  1,046,145  $  1,078,428        (3.0)%
   Other Facilities ..............       26,086         23,762         9.8%           74,931        64,631        15.9%
   Shurgard Europe Facilities (a).            -              -         -                   -        54,722      (100.0)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
     Total rental income..........      378,207        392,738        (3.7)%       1,121,076     1,197,781        (6.4)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
COST OF OPERATIONS:
   Same Store Facilities..........      113,286        113,972        (0.6)%         354,719       358,354        (1.0)%
   Other Facilities...............        7,975          7,607         4.8%           24,494        23,350         4.9%
   Shurgard Europe Facilities (a).            -              -         -                   -        24,654      (100.0)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
      Total cost of operations....      121,261        121,579        (0.3)%         379,213       406,358        (6.7)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
NET OPERATING INCOME (b):
   Same Store Facilities..........      238,835        255,004        (6.3)%         691,426       720,074        (4.0)%
   Other Facilities...............       18,111         16,155        12.1%           50,437        41,281        22.2%
   Shurgard Europe Facilities (a).            -              -         -                   -        30,068      (100.0)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
       Total net operating income.      256,946        271,159        (5.2)%         741,863       791,423        (6.3)%
   Total depreciation and
     amortization expense ........      (85,256)       (90,432)       (5.7)%        (252,366)     (305,907)      (17.5)%
                                    -----------    -----------     ----------    -----------   -----------     ----------
   Total net income...............  $   171,690    $   180,727        (5.0)%     $   489,497   $   485,516         0.8%
                                    ===========    ===========     ==========    ===========   ===========     ==========

DATA FOR SAME STORE AND OTHER FACILITIES:
Weighted average square foot
 occupancy during the period (c):
  Same Store Facilities...........        89.6%          90.5%        (1.0)%           89.2%         90.1%        (1.0)%
  Other Facilities................        86.8%          83.1%         4.5%            83.7%         78.6%         6.5%
Realized rents per occupied square
  foot during the period (d)(e):
  Same Store Facilities...........  $     12.73    $     13.29        (4.2)%     $     12.69   $     13.02        (2.5)%
  Other Facilities................  $     13.61    $     14.00        (2.8)%     $     13.49   $     13.85        (2.6)%
Number of facilities at period end:
  Same Store Facilities...........                                                     1,899         1,899         -
  Other Facilities................                                                        92            90         2.2%
Net rentable square footage at period end (in thousands):
  Same Store Facilities...........                                                   117,462       117,462         -
  Other Facilities................                                                     8,499         8,097         5.0%
Square foot occupancy at period end:
  Same Store Facilities...........                                                     88.7%         89.4%        (0.8)%
  Other Facilities................                                                     86.2%         82.4%         4.6%
In place rents per occupied square foot at period end:
  Same Store Facilities...........                                               $     13.65   $     14.37        (5.0)%
  Other Facilities................                                               $     14.80   $     15.43        (4.1)%



     (a)  Represents  the results with respect to Shurgard  Europe's  properties
          for the periods consolidated in our financial statements.  We acquired
          these  facilities on August 22, 2006 in  connection  with the Shurgard
          Merger.  As described in Note 3 to our  September  30, 2009  condensed
          consolidated  financial  statements,  effective  March  31,  2008,  we
          deconsolidated  Shurgard Europe.  See also "Equity in Earnings of Real
          Estate Entities - Investment in Shurgard  Europe" for further analysis
          of the historical same store property operations of Shurgard Europe.

     (b)  See "Net Operating income or NOI" below.

     (c)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

     (d)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing rental income (which excludes late
          charges and  administrative  fees) by the  weighted  average  occupied

                                       42



          square feet for period.  Realized annual rent per occupied square foot
          takes into  consideration  promotional  discounts and other items that
          reduce rental income from the contractual amounts due.

     (e)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied  square foot.  Exclusion of these
          amounts  provides a better  measure of our ongoing level of revenue by
          excluding  the  volatility  of  late  charges,   which  are  dependent
          principally upon the level of tenant  delinquency,  and administrative
          fees,  which are  dependent  principally  upon the  absolute  level of
          move-ins for a period.

     NET OPERATING INCOME
     --------------------

     We  refer  herein  to net  operating  income  ("NOI")  of our  self-storage
facilities,  which is a  non-GAAP  (generally  accepted  accounting  principles)
financial  measure that  excludes the impact of  depreciation  and  amortization
expense.  Although  depreciation  and  amortization  are a component of GAAP net
income,  we believe that NOI is a meaningful  measure of operating  performance,
because we utilize NOI in making decisions with respect to capital  allocations,
property  performance,   and  comparing  period-to-period  and  market-to-market
property operating  results.  In addition,  we believe the investment  community
utilizes NOI in determining  operating  performance and real estate values,  and
does not consider  depreciation expense as it is based upon historical cost. NOI
is not a substitute for net operating income after depreciation and amortization
in evaluating our operating results.  The following  reconciles NOI generated by
our  self-storage and Shurgard Europe segments to our consolidated net income in
our September 30, 2009 condensed consolidated financial statements.



                                                Three Months Ended            Nine Months Ended
                                                  September 30,                 September 30,
                                           ----------------------------  ---------------------------
                                               2009           2008           2009           2008
                                           -------------  -------------  -------------  ------------
                                                            (Amounts in thousands)

Net operating income:
                                                                            
   Same-store facilities.................  $   238,835    $   255,004    $   691,426    $   720,074
   Other facilities......................       18,111         16,155         50,437         41,281
   Shurgard Europe facilities............            -              -              -         30,068
                                           -------------  -------------  -------------  ------------
      Total net operating income.........      256,946        271,159        741,863        791,423
Ancillary operating revenue..............       27,800         26,946         81,741         83,693
Interest and other income................        6,857         11,485         22,006         25,343
Ancillary cost of operations.............       (7,493)        (3,756)       (27,520)       (27,124)
Depreciation and amortization............      (85,908)       (91,084)      (254,670)      (308,153)
General and administrative expense.......       (8,654)        (8,879)       (26,532)       (56,968)
Interest expense.........................       (7,289)        (9,099)       (22,705)       (35,187)
Equity in earnings of real estate
     entities............................        8,824          6,318         39,033         13,679
Gains on disposition of real estate
     investments, net....................       30,573            499         33,295        342,272
Gain on early debt retirement............            -              -          4,114              -
Foreign currency exchange gain (loss)....       21,429        (53,172)        19,901        (12,203)
Discontinued operations..................          866         (2,475)        (7,759)        (4,937)
Net income of the Company................  -------------  -------------  -------------  ------------
                                           $   243,951    $   147,942    $   602,767    $   811,838
                                           =============  =============  =============  ============




     Same Store Facilities

     The "Same Store Facilities"  represents those 1,899 facilities that we have
owned, and have been operated on a stabilized  basis,  since January 1, 2007 and
therefore  provide  meaningful  comparisons  for 2007,  2008, and 2009. The Same
Store Facilities increased from 1,789 at December 31, 2008 to 1,899 at September
30, 2009, as we added facilities that are now stabilized and owned since January
1, 2007,  and removed  facilities  from the previous  Same Store Pool that,  due
primarily to  construction  activities,  are no longer expected to be stabilized
through  December  31, 2009.  The  following  table  summarizes  the  historical
operating  results of these 1,899 facilities  (117.5 million net rentable square
feet) that represent approximately 93% of the aggregate net rentable square feet
of our U.S. consolidated self-storage portfolio at September 30, 2009.

                                       43






SAME STORE FACILITIES                                   Three Months Ended September 30,          Nine Months Ended September 30,
                                                     --------------------------------------     ------------------------------------
                                                                                 Percentage                               Percentage
                                                         2009          2008         Change         2009          2008       Change
                                                     -----------    -----------   ---------     -----------   -----------  ---------
                                                             (Dollar amounts in thousands, except weighted average amounts)
Revenues:
                                                                                                            
    Rental income..................................  $  334,953     $  353,200       (5.2)%     $  997,346    $ 1,033,456     (3.5)%
    Late charges and admin fees collected..........      17,168         15,776        8.8%          48,799         44,972      8.5%
                                                     -----------    -----------   ---------     -----------   -----------  ---------
   Total revenues (a)..............................     352,121        368,976       (4.6)%      1,046,145      1,078,428     (3.0)%
                                                     -----------    -----------   ---------     -----------   -----------  ---------
Cost of operations:
    Property taxes.................................      37,137         36,161        2.7%         111,558        107,666      3.6%
    Direct property payroll........................      23,321         22,862        2.0%          71,020         70,568      0.6%
    Media advertising..............................       3,430          2,148       59.7%          18,812         18,931     (0.6)%
    Other advertising and promotion................       4,942          4,645        6.4%          15,523         14,098     10.1%
    Utilities......................................       9,235         10,238       (9.8)%         26,732         28,035     (4.6)%
    Repairs and maintenance........................       8,992          9,765       (7.9)%         28,867         31,842     (9.3)%
    Telephone reservation center...................       2,890          3,183       (9.2)%          8,501          9,624    (11.7)%
    Property insurance.............................       2,240          2,642      (15.2)%          7,504          8,766    (14.4)%
    Other cost of management.......................      21,099         22,328       (5.5)%         66,202         68,824     (3.8)%
                                                     -----------    -----------   ---------     -----------   -----------  ---------
   Total cost of operations (a)....................     113,286        113,972       (0.6)%        354,719        358,354     (1.0)%
                                                     -----------    -----------   ---------     -----------   -----------  ---------
Net operating income (b)...........................     238,835        255,004       (6.3)%        691,426        720,074     (4.0)%
Depreciation and amortization expense (c)..........     (75,609)       (82,096)      (7.9)%       (226,095)     (256,632)    (11.9)%
                                                     -----------    -----------   ---------     -----------   -----------  ---------
Net income.........................................  $  163,226     $  172,908       (5.6)%     $  465,331    $   463,442      0.4%
                                                     ===========    ===========   =========     ===========   ===========  =========


Gross margin (before depreciation and amortization
expense)...........................................      67.8%          69.1%        (1.9)%         66.1%         66.8%       (1.0)%

Weighted average for the period:
   Square foot occupancy (d).......................      89.6%          90.5%        (1.0)%         89.2%         90.1%       (1.0)%
   Realized annual rent per occupied square foot
(e)(f)............................................. $    12.73     $    13.29        (4.2)%    $    12.69    $    13.02       (2.5)%
   REVPAF (f)(g)................................... $    11.41     $    12.03        (5.2)%    $    11.32    $    11.73       (3.5)%

 Weighted average at September 30:
   Square foot occupancy...........................                                                 88.7%         89.4%       (0.8)%
   In place annual rent per occupied square foot (h)                                           $    13.65    $    14.37       (5.0)%
Total net rentable square feet (in thousands)......                                               117,462       117,462          -
Number of facilities...............................                                                 1,899         1,899          -



     (a)  Revenues and cost of operations do not include ancillary  revenues and
          expenses   generated  at  the   facilities   with  respect  to  tenant
          reinsurance,   retail  sales  and  truck  rentals.   "Other  costs  of
          management" included in cost of operations  principally represents all
          the  indirect  costs  incurred in the  operations  of the  facilities.
          Indirect costs  principally  include  supervisory  costs and corporate
          overhead  cost  incurred to support the  operating  activities  of the
          facilities.

     (b)  See "Net Operating Income" above.

     (c)  Depreciation  and  amortization  expense for the three and nine months
          ended  September  30, 2009  decreased  primarily due to a reduction in
          amortization  expense related to intangible assets that we obtained in
          the Shurgard Merger.

     (d)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

     (e)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing rental income (which excludes late
          charges and  administrative  fees) by the  weighted  average  occupied
          square feet for the period.  Realized  annual rent per occupied square
          foot takes into  consideration  promotional  discounts and other items
          that reduce rental income from the contractual amounts due.

     (f)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied square foot and REVPAF. Exclusion
          of these  amounts  provides a better  measure of our ongoing  level of
          revenue,  by  excluding  the  volatility  of late  charges,  which are
          dependent  principally  upon the  level  of  tenant  delinquency,  and
          administrative fees, which are dependent principally upon the absolute
          level of move-ins for a period.

     (g)  Realized  annual  rent per  available  foot or "REVPAF" is computed by
          dividing rental income (which excludes late charges and administrative
          fees) by the total available net rentable square feet for the period.

     (h)  In place annual rent per occupied  square foot  represents  annualized
          contractual  rents per  occupied  square foot without  reductions  for
          promotional  discounts  and excludes  late charges and  administrative
          fees.

                                       44



     Revenues  generated by our Same Store  facilities  decreased  approximately
4.6%  and  3.0%  in  the  three  and  nine  months  ended  September  30,  2009,
respectively,  as compared to the same  periods in 2008.  These  decreases  were
caused by lower rental income generated by these facilities as a result of lower
average  realized  annual  rental rates per occupied  square foot  combined with
lower average occupancy  levels.  For the three months ended September 30, 2009,
average  realized  annual rental rates per occupied  square foot were 4.2% lower
and average  occupancy  levels were 1.0% lower as compared to the same period in
2008,  resulting in a 5.2% reduction in rental income. For the nine months ended
September 30, 2009,  average  realized  annual rental rates per occupied  square
foot were 2.5% lower and average occupancy levels were 1.0% lower as compared to
the same period in 2008, resulting in a 3.5% reduction in rental income.

     Demand for self-storage space has been negatively  impacted by recessionary
pressures, including increased unemployment,  reduced housing sales, and reduced
moving activity,  in each of the markets in which we operate.  In the top twenty
markets  in which we have the  highest  concentration  of  facilities,  only two
markets (New York and Houston) had positive  year-over-year  revenue  growth for
the three months ended  September  30,  2009.  This  compares to the first three
months of the year,  where seven  markets  (New York,  Houston,  San  Francisco,
Washington D.C.,  Chicago,  Minneapolis and Dallas) had positive  year-over-year
revenues   growth.   Accordingly,   the  operating   trends,   with  respect  to
year-over-year revenue growth, have progressively declined.

     From  a   geographic   standpoint,   we  are   experiencing   the  greatest
year-over-year  revenue declines in our Southeast markets,  located in North and
South Carolina,  Georgia, and Florida, as well as the West Coast, which includes
Seattle,  Portland,  San  Francisco  and Los  Angeles.  See Analysis of Regional
Trends table that follows.

     The following  summarizes Same Store quarterly  revenue growth trends, on a
year-over-year basis:

                                            Same Store
                                          Year-over-Year
           Three Months Ended:            Revenue Growth
           ---------------------------  --------------------
           March 31, 2008                      3.4%
           June 30, 2008                       3.5%
           September 30, 2008                  2.6%
           December 31, 2008                   1.7%
           March 31, 2009                     (0.8)%
           June 30, 2009                      (3.5)%
           September 30, 2009                 (4.6)%

     As indicated in the table above,  during the first three  quarters of 2008,
we generated  relatively  strong  year-over-year  revenue  growth.  Beginning in
September  2008,  we began to  experience  a notable  decline in  year-over-year
move-ins that continued through October 2008, which we believe reflected general
economic  conditions.  To offset the decline in new  rentals,  we  significantly
reduced rental rates,  increased  promotional discounts to new incoming tenants,
and  increased  marketing  efforts.  We believe  these  actions have  stabilized
move-in volumes on a year-over-year basis; however, we have not yet been able to
restore  rental rates to the levels  experienced  in the prior year.  We believe
overall demand for  self-storage  space in virtually all of our markets in which
we operate has decreased due to current economic conditions, and coupled with an
increase in the number of  self-storage  operators over the past 10 years,  will
continue to foster a very difficult operating environment,  at least in the near
term.  In  addition,  increased  move-out  activity  beginning  in  August  2008
exacerbated the downward pressure on occupancy levels created by reduced demand.
In March 2009, the increase in move-out  activity began to subside to the extent
that move-outs  during the three months ended  September 30, 2009 were less than
the comparable period in 2008.

     Based upon our evaluation of certain  comparative key operating  metrics as
of  September  30, 2009,  we believe  that  revenue for the three months  ending
December  31,  2009 will be lower than the same  period in 2008.  Our  operating
strategy  will be to  continue  to  focus on  maintaining  occupancy  levels  by
adjusting rental rates,  promotional discounts and marketing  activities.  It is
unclear to us how much the above  mentioned  factors  will  impact our  revenues
beyond the fourth quarter of 2009.

                                       45



     Cost of operations  decreased by 0.6% and 1.0% in the three and nine months
ended September 30, 2009, respectively, as compared to the same periods in 2008.
These decreases were driven by reduction in repairs and maintenance,  utilities,
and property insurance expenses, partially offset by increases in property taxes
and other advertising and promotion activities.

     Direct property payroll expense increased by 2.0% and 0.6% in the three and
nine months  ended  September  30, 2009,  respectively,  as compared to the same
periods in 2008.  This reflects  minimal  growth in average wage rates and lower
hours incurred due to adjustments in staffing levels. For the remainder of 2009,
we expect moderate growth trends in payroll.

     Property  tax  expense  increased  by 2.7% and 3.6% in the  three  and nine
months ended September 30, 2009,  respectively,  as compared to the same periods
in 2008.  These  increases are due to a  combination  of increased tax rates and
increases  in  assessments  of property  values.  While we expect  property  tax
expense growth of approximately 4% in 2009, the actual growth could be higher or
lower because there are several jurisdictions where we have not yet received tax
bills or assessment information for 2009, or appeals or assessments are pending.

     Repairs  and  maintenance  expenditures  decreased  by 7.9% and 9.3% in the
three and nine months ended September 30, 2009, respectively, as compared to the
same periods in 2008.  Repairs and maintenance  expenditures  are dependent upon
several  factors,  such as weather,  the timing of periodic needs throughout our
portfolio, inflation, and random events and accordingly are difficult to project
in quarterly or annual periods.  However, we expect that repairs and maintenance
expenditures will continue to moderate for the remainder of 2009.

     Media  advertising  for the Same Store  facilities  increased  by 59.7% and
declined  by 0.6% in the  three  and  nine  months  ended  September  30,  2009,
respectively,  as  compared  to the same  periods in 2008.  We  increased  media
advertising  during  the  three  months  ended  September  30,  2009 in order to
stimulate move-in activity.  During the nine months ended September 30, 2009, we
have realized cost reductions from more competitive media rates and narrowed our
media focus to selected  markets which we believe  respond most  effectively  to
media  efforts.  Other  advertising  and promotion is comprised  principally  of
yellow page and  internet  advertising,  which  increased  6.4% and 10.1% in the
three and nine months ended September 30, 2009, respectively, as compared to the
same periods in 2008.

     We expect our media  costs to be modestly  higher in the fourth  quarter of
2009  as  compared  to the  same  period  in  2008;  our  fourth  quarter  media
advertising is typically lower because it is our seasonally  slower period.  Our
future spending on yellow page,  media,  and internet  advertising  expenditures
will be  driven in part by  demand  for our  self-storage  spaces,  our  current
occupancy levels,  and the relative efficacy of each type of advertising.  Media
advertising in particular can be volatile and increase or decrease significantly
in the short-term.

     Utility expenses decreased 9.8% and 4.6% in the three and nine months ended
September 30, 2009, respectively, as compared to the same periods in 2008. It is
difficult to estimate  future  utility  cost levels  because  utility  costs are
dependent upon changes in demand driven by weather and  temperature,  as well as
fuel prices, both of which are volatile and not predictable.

     Property  insurance expense decreased 15.2% and 14.4% in the three and nine
months ended September 30, 2009,  respectively,  as compared to the same periods
in 2008.  This decline is primarily due to softer  insurance  markets as lack of
hurricane  activity and  additional  competition  from  insurance  providers has
benefited us. We expect  insurance  expense to be down slightly in the remainder
of 2009, as compared to the same period in 2008.

     Telephone  reservation  center costs  decreased 9.2% and 11.7% in the three
and nine months ended September 30, 2009, respectively,  as compared to the same
periods in 2008, as we adjusted staffing levels to expected inquiry volumes.  We
expect future telephone reservation center costs to remain flat.

                                       46






         The following table summarizes selected quarterly financial data with
respect to the Same Store facilities:

                                               For the Quarter Ended
                      ---------------------------------------------------------------------
                         March 31            June 30       September 30         December 31        Entire Year
                      -----------          ---------       ------------         -----------        -----------
                                       (Amounts in thousands, except for per square foot amount)

Total revenues:
                                                                                  
     2009             $   347,185          $ 346,839        $   352,121
     2008             $   349,991          $ 359,461        $   368,976         $   357,202         $1,435,630

Total cost of operations:
     2009             $   125,007          $ 116,426        $   113,286
     2008             $   123,856          $ 120,526        $   113,972         $   104,442         $  462,796

Property tax expense:
     2009             $    37,762          $  36,659        $    37,137
     2008             $    36,349          $  35,156        $    36,161         $    28,159         $  135,825

Media advertising expense:
     2009             $     8,158          $   7,224        $     3,430
     2008             $     6,947          $   9,836        $     2,148         $       922         $   19,853

Other advertising and promotion expense:
     2009             $     4,614          $   5,967        $     4,942
     2008             $     4,426          $   5,027        $     4,645         $     4,137         $   18,235

REVPAF (a):
     2009             $    11.29           $  11.27         $    11.41
     2008             $    11.43           $  11.74         $    12.03          $    11.65          $   11.71

Weighted average realized annual rent
 per occupied square foot (a):
     2009             $    12.84          $   12.52         $    12.73
     2008             $    12.87          $   12.90         $    13.29          $    13.27          $   13.08

Weighted average occupancy levels for
 the period (a):
     2009                 87.9%              90.0%               89.6%
     2008                 88.8%              91.0%               90.5%               87.8%             89.5%



     (a)  See  "Same  Store  Facilities"  table  above for  further  information
          regarding these measures, which are derived from non-GAAP measures.

                                       47





ANALYSIS OF REGIONAL TRENDS

         The following table sets forth regional trends in our Same Store
Facilities:

                                           Three Months Ended September 30,        Nine Months Ended September 30,
                                        --------------------------------------- --------------------------------------
                                           2009         2008         Change        2009         2008        Change
                                        -----------  -----------     ------     -----------  -----------    ------
                                                  (Amounts in thousands, except for weighted average data)
SAME STORE FACILITIES OPERATING
TRENDS BY REGION

Revenues:
                                                                                            
   Southern California  (176
   facilities)......................    $    51,159  $    54,268      (5.7)%    $   153,916  $   159,520      (3.5)%
   Northern California  (167
   facilities)......................         37,592       39,748      (5.4)%        112,328      115,359      (2.6)%
   Texas  (231 facilities)..........         35,537       36,351      (2.2)%        105,008      105,835      (0.8)%
   Florida  (182 facilities)........         33,852       36,080      (6.2)%        101,109      106,610      (5.2)%
   Illinois  (119 facilities).......         22,347       23,311      (4.1)%         66,179       67,615      (2.1)%
   Washington (88 facilities).......         18,021       19,302      (6.6)%         53,631       56,530      (5.1)%
   Georgia  (86 facilities).........         12,268       13,167      (6.8)%         36,488       38,742      (5.8)%
   All other states  (850 facilities)       141,345      146,749      (3.7)%        417,486      428,217      (2.5)%
                                        -----------  -----------     -------      -----------  -----------    -------
Total revenues......................        352,121      368,976      (4.6)%      1,046,145    1,078,428      (3.0)%

Cost of operations:
   Southern California..............         11,548       11,328       1.9%          35,220       34,845       1.1%
   Northern California..............          9,711        9,825      (1.2)%         30,494       30,701      (0.7)%
   Texas............................         14,189       14,235      (0.3)%         42,409       42,656      (0.6)%
   Florida..........................         12,253       12,227       0.2%          37,146       38,126      (2.6)%
   Illinois.........................          8,983        8,677       3.5%          29,687       30,159      (1.6)%
   Washington.......................          4,417        4,241       4.1%          13,699       13,641       0.4%
   Georgia..........................          4,135        3,945       4.8%          12,661       12,488       1.4%
   All other states.................         48,050       49,494      (2.9)%        153,403      155,738      (1.5)%
                                        -----------  -----------     -------      -----------  -----------    -------
Total cost of operations............        113,286      113,972      (0.6)%        354,719      358,354      (1.0)%

Net operating income (a):
   Southern California..............         39,611       42,940      (7.8)%        118,696      124,675      (4.8)%
   Northern California..............         27,881       29,923      (6.8)%         81,834       84,658      (3.3)%
   Texas............................         21,348       22,116      (3.5)%         62,599       63,179      (0.9)%
   Florida..........................         21,599       23,853      (9.4)%         63,963       68,484      (6.6)%
   Illinois.........................         13,364       14,634      (8.7)%         36,492       37,456      (2.6)%
   Washington.......................         13,604       15,061      (9.7)%         39,932       42,889      (6.9)%
   Georgia..........................          8,133        9,222     (11.8)%         23,827       26,254      (9.2)%
   All other states.................         93,295       97,255      (4.1)%        264,083      272,479      (3.1)%
                                        -----------  -----------     -------      -----------  -----------    -------
Total net operating income..........    $   238,835  $   255,004      (6.3)%    $   691,426  $   720,074      (4.0)%

Weighted average occupancy (a):
   Southern California..............         90.0%        90.8%       (0.9)%         90.3%        90.6%       (0.3)%
   Northern California..............         89.4%        90.9%       (1.7)%         89.0%        90.3%       (1.4)%
   Texas............................         89.6%        91.0%       (1.5)%         89.5%        91.0%       (1.6)%
   Florida..........................         89.2%        90.8%       (1.8)%         89.0%        89.0%        0.0%
   Illinois.........................         89.5%        90.6%       (1.2)%         88.3%        89.5%       (1.3)%
   Washington.......................         90.5%        90.3%        0.2%          89.3%        90.5%       (1.3)%
   Georgia..........................         88.8%        89.6%       (0.9)%         87.6%        89.6%       (2.2)%
   All other states.................         89.6%        90.2%       (0.7)%         89.1%        90.0%       (1.0)%
                                        -----------  -----------     -------      -----------  -----------    -------
Total weighted average occupancy....         89.6%        90.5%       (1.0)%         89.2%        90.1%       (1.0)%



                                       48







   SAME STORE FACILITIES OPERATING
   TRENDS BY REGION (CONTINUED)             Three Months Ended September 30,        Nine Months Ended September 30,
                                         ------------------------------------    ----------------------------------
                                            2009         2008         Change        2009         2008        Change
                                         -----------  -----------     -------    -----------  -----------    -------
                                                   (Amounts in thousands, except for weighted average data)

Realized annual rent per occupied square foot (a):
                                                                                             
   Southern California..............     $    18.82   $    19.80       (4.9)%    $    18.83   $    19.46       (3.2)%
   Northern California..............          16.80        17.46       (3.8)%         16.82        17.02       (1.2)%
   Texas............................          10.02        10.20       (1.8)%          9.91         9.91        0.0%
   Florida..........................          12.12        12.85       (5.7)%         12.14        12.93       (6.1)%
   Illinois.........................          12.89        13.38       (3.7)%         12.95        13.12       (1.3)%
   Washington.......................          13.55        14.62       (7.3)%         13.65        14.26       (4.3)%
   Georgia..........................           9.57        10.33       (7.4)%          9.66        10.14       (4.7)%
   All other states.................          11.72        12.18       (3.8)%         11.64        11.89       (2.1)%
                                         ----------   ----------      -------    ----------   ----------      -------
Total realized rent per square foot.     $    12.73   $    13.29       (4.2)%    $    12.69   $    13.02       (2.5)%
                                         ==========   ==========      =======    ==========   ==========      =======

REVPAF (a):
   Southern California..............     $    16.94   $    17.97        (5.7)%   $    17.00   $    17.63       (3.6)%
   Northern California..............          15.02        15.87        (5.4)%        14.97        15.37       (2.6)%
   Texas............................           8.98         9.29        (3.3)%         8.87         9.01       (1.6)%
   Florida..........................          10.82        11.67        (7.3)%        10.80        11.51       (6.2)%
   Illinois.........................          11.54        12.12        (4.8)%        11.43        11.74       (2.6)%
   Washington.......................          12.26        13.19        (7.1)%        12.18        12.90       (5.6)%
   Georgia..........................           8.50         9.26        (8.2)%         8.46         9.08       (6.8)%
   All other states.................          10.51        10.99        (4.4)%        10.37        10.70       (3.1)%
                                         ----------   ----------      -------    ----------   ----------      -------
Total REVPAF........................     $    11.41   $    12.03        (5.2)%   $    11.32   $    11.73       (3.5)%
                                         ==========   ==========      =======    ==========   ==========      =======



     (a)  See  "Same  Store  Facilities"  table  above for  further  information
          regarding these measures, which represent or are derived from non-GAAP
          measures.

     We believe  that our  geographic  diversification  and scale  provide  some
insulation from localized  economic effects and add to the stability of our cash
flows. It is difficult to predict  localized  trends in short-term  self-storage
demand and operating  results.  We believe that each market has been  negatively
impacted  to  some  degree  by  general  economic  trends  and may  continue  to
experience  negative  operating  trends  until such time that  general  economic
trends improve.

                                       49




     OTHER FACILITIES
     ----------------

     In addition to the Same Store facilities,  at September 30, 2009, we had an
additional  92  self-storage  facilities.   These  facilities  include  recently
acquired  facilities,  recently  developed  facilities and facilities  that were
recently  expanded  by  adding  additional  storage  units.  In  general,  these
facilities are not stabilized  with respect to occupancies or rental rates. As a
result of the fill-up  process and timing of when the  facilities  were put into
place, year-over-year changes can be significant.

     Rental income,  cost of  operations,  depreciation,  net operating  income,
weighted  average square foot  occupancies and realized rents per square foot in
the  table  above  represent  the  operating  results  following  the date  each
particular facility began to be included in our consolidated  operating results,
and in the case of acquired  facilities,  do not include any  operating  results
prior to our acquisition of these facilities.

     In the nine months ended  September 30, 2009, we completed  three expansion
projects to existing real estate  facilities  (75,000 net rentable  square feet)
for an aggregate cost of $13.6 million,  and did not acquire any new properties.

     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  and  capitalize  on the  overall  fragmentation  in  the  storage
industry.  Our acquisitions consist of facilities that have been operating for a
number of years as well as newly constructed facilities that were in the process
of filling up to stabilized  occupancy levels. In either case, we have been able
to leverage off of our operating  strategies and improve the occupancy levels of
the facilities or, with respect to the newly developed facilities,  we have been
able to accelerate the fill-up pace.

     We expect  that the Other  Facilities  will  continue  to provide  earnings
growth  during  the  remainder  of 2009 as these  facilities  continue  to reach
stabilization.  However,  the Other Facilities are subject to the same occupancy
and rate pressures that our Same Store  facilities are facing as a result of the
recession,   and   accordingly  the  pace  at  which  these   facilities   reach
stabilization,  and  the  ultimate  level  of  cash  flows  to be  reached  upon
stabilization, may be negatively impacted by the current economic trends.

     Our  development  pipeline of both new facilities and expansion of existing
facilities  is nominal  at  September  30,  2009.  Our level of newly  developed
facilities has declined over the last few years due to increases in construction
cost, increases in competition with retail, condominium, and apartment operators
for quality construction sites in urban locations, and more difficult zoning and
permitting requirements. Most recently in late 2008, we eliminated substantially
all of our remaining development pipeline due to reduced self-storage demand and
our belief that our capital could be put to use in a more  advantageous  manner.
It is unclear  when we might change our  strategy  with  respect to  development
activities.

                                       50




     EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our ownership of
equity  interests  in PSB  and  Shurgard  Europe,  we had  general  and  limited
partnership interests in five limited partnerships at September 30, 2009. Due to
our limited ownership interest and limited control of these entities,  we do not
consolidate the accounts of these entities for financial reporting purposes, and
account for such investments using the equity method.

     Equity in earnings of real  estate  entities  for the three and nine months
ended  September  30, 2009 and 2008,  consists of our pro-rata  share of the net
income of the Unconsolidated  Entities based upon our ownership interest for the
period.  The following table sets forth the significant  components of equity in
earnings of real estate entities.  Amounts with respect to PSB, Shurgard Europe,
and  Other   Investments  are  included  in  our  Commercial   segment,   Europe
Self-Storage  segment, and other items not allocated to segments,  respectively,
as described in Note 11 to our September 30, 2009 condensed consolidated
financial statements.



HISTORICAL SUMMARY:                              Three Months Ended September 30,           Nine Months Ended September 30,
-------------------
                                                 2009         2008        Change            2009         2008        Change
                                              --------      --------    ---------         --------     --------     ---------
                                                                           (Amounts in thousands)

Net operating income (1):
                                                                                                 
  PSB                                         $  19,714     $  22,291   $  (2,577)       $  62,250    $  66,189    $  (3,939)
  Shurgard Europe........................        12,344        13,893      (1,549)          32,783       27,283        5,500
  Other Investments......................           737           988        (251)           2,069        3,238       (1,169)
                                              ----------     ---------   ---------        ---------    ---------    ---------
                                                 32,795        37,172      (4,377)          97,102       96,710          392
                                              ----------     ---------   ---------        ---------    ---------    ---------
Depreciation:
  PSB....................................        (8,448)      (11,226)      2,778          (28,318)     (34,229)       5,911
  Shurgard Europe .......................        (7,805)       (9,757)      1,952          (22,120)     (20,613)      (1,507)
  Other Investments......................          (205)         (215)         10             (591)      (1,349)         758
                                              ----------     ---------   ---------        ---------    ---------    ---------
                                                (16,458)      (21,198)      4,740          (51,029)     (56,191)       5,162
                                              ----------     ---------   ---------        ---------    ---------    ---------
Other:(2):
  PSB (3)................................        (6,582)       (7,745)      1,163           (3,581)     (23,448)      19,867
  Shurgard Europe........................          (908)       (1,876)        968           (3,424)      (2,953)        (471)
  Other Investments .....................           (23)          (35)         12              (35)        (439)         404
                                              ----------     ---------   ---------        ---------    ---------    ---------
                                                 (7,513)       (9,656)      2,143           (7,040)     (26,840)      19,800
                                              ----------     ---------   ---------        ---------    ---------    ---------

Total equity in earnings of real estate entities:
  PSB....................................         4,684         3,320       1,364           30,351        8,512       21,839
  Shurgard Europe .......................         3,631         2,260       1,371            7,239        3,717        3,522
  Other Investments .....................           509           738        (229)           1,443        1,450           (7)
                                              ----------     ---------   ---------        ---------    ---------    ---------
                                              $   8,824     $   6,318   $   2,506        $  39,033    $  13,679    $  25,354
                                              ==========     =========   =========        =========    =========    =========



     (1)  These amounts represent our pro-rata share of the net operating income
          of the Unconsolidated  Entities. See also "net operating income" above
          for a discussion of this non-GAAP measure.

     (2)  "Other"  reflects  our share of general  and  administrative  expense,
          interest  expense,  interest  income,  gains  on sale  of real  estate
          assets,  and other  non-property;  non-depreciation  related operating
          results of these entities.

     (3)  Includes  our pro rata share of benefit  totaling  $16.3  million from
          PSB's  preferred  stock and preferred  unit  repurchases  for the nine
          months ended September 30, 2009.

Investment in PSB
-----------------

     We have a 41.4% common equity interest in PSB as of September 30, 2009 (46%
as of December  31,  2008),  comprised of our  ownership of 5,801,606  shares of
PSB's common stock and  7,305,355  limited  partnership  units in the  operating
partnership  (5,418,273  shares  of PSB's  common  stock and  7,305,355  limited
partnership  units at December  31,  2008).  The limited  partnership  units are
convertible at our option, subject to certain conditions, on a one-for-one basis
into PSB common  stock.  During the quarter ended  September 30, 2009,  PSB sold
3,450,000  shares of its common  stock  pursuant  to a public  offering  for net
proceeds of $153.6 million during the three months ended  September 30, 2009. In
accordance  with  EITF  08-6  "Equity  Method  Investment  Considerations",   we
recognized a gain totaling  $30,293,000  on the share  issuance by PSB, as if we
had sold a proportionate share of our investment in PSB.

                                       51



     Concurrent  with the public  offering,  we purchased an additional  383,333
shares of PSB  common  stock  from PSB at the same price per share as the public
offering for a total cost of $17.8 million.

     At September 30 2009, PSB owned and operated 19.6 million  rentable  square
feet of commercial  space located in eight states.  PSB also manages  commercial
space  owned by the  Company  and  affiliated  entities  at  September  30, 2009
pursuant to property management agreements.

     Our future  equity  income from PSB will be dependent  entirely  upon PSB's
operating results.  Our investment in PSB provides us with some  diversification
into another asset type. We have no plans of disposing of our investment in PSB.
PSB's filings and selected  financial  information  can be accessed  through the
Securities and Exchange Commission, and on its website, www.psbusinessparks.com.

Investment in Shurgard Europe
-----------------------------

     As described in Note 3 to our  September  30, 2009  condensed  consolidated
financial  statements,  due to the  disposition  of a 51%  interest  in Shurgard
Europe,  our pro-rata  share of the operating  results of Shurgard  Europe after
March 31, 2008 is  included  in "equity in  earnings  of real estate  entities."
Subsequent to March 31, 2008, we no longer consolidate the revenues and expenses
of Shurgard Europe on our consolidated  statements of income. Selected financial
data for Shurgard  Europe for each of the three and nine months ended  September
30,  2009 and 2008 is  included in Note 5 to our  September  30, 2009  condensed
consolidated financial statements.

     We  originally  acquired our 100%  interest in Shurgard  Europe  during our
merger with Shurgard,  which occurred in August 2006. Our primary  objective for
merging  with  Shurgard was to acquire  Shurgard's  U.S.  domestic  assets which
accounted  for  approximately  484  facilities  in the U.S.  as  compared to 149
facilities  in  Europe at the time of the  Shurgard  Merger.  Subsequent  to the
Shurgard Merger, management of Public Storage determined that it was in our best
interests to reduce our investment in Shurgard  Europe.  There were many reasons
for that decision,  most relating to the fact that continued  growth of Shurgard
Europe would require a significant capital commitment.  Movement of capital from
Public Storage (in the U.S.) to various  European  countries  would have exposed
Public Storage to currency  fluctuation  risks and to potential tax burdens when
Public  Storage  wished to repatriate its capital  investment.  Accordingly,  in
March 2008,  we sold 51% of our  ownership  interest in Shurgard  Europe,  which
helped to limit our capital requirements to continue to grow Shurgard Europe and
to limit our exposure to other risks of owning operations in foreign  countries.
We do not intend to sell any of our remaining  interest in Shurgard  Europe.  In
the future, we expect Shurgard Europe to function as a stand-alone entity and to
fund its capital  requirements  primarily with its retained operating cash flow,
bank borrowings and, to the extent available, public or private equity.

     This transaction has resulted in the operations of Shurgard Europe having a
less significant impact on our operating results,  as we have a 49% interest and
a loan receivable from Shurgard  Europe upon which we receive  interest  income,
rather  than the 100% equity  interest  in Shurgard  Europe we held prior to the
transaction.  Our future operating results will also be impacted by the ultimate
returns realized on the reinvestment of the cash proceeds received in connection
with this transaction.

     At September 30, 2009, Shurgard Europe's operations comprise 186 facilities
with an  aggregate  of 9.9 million  net  rentable  square  feet.  The  portfolio
consists of 114 wholly owned  facilities  and 72  facilities  owned by two joint
venture partnerships, in which Shurgard Europe has a 20% equity interest.

     Our equity in earnings from Shurgard  Europe is comprised of our 49% equity
share in the net  income  of  Shurgard  Europe,  as well as 49% of the  interest
earned  with  respect  to the note  receivable  from  Shurgard  Europe  which is
reclassified  in  consolidation  from  interest  income to equity in earnings of
Shurgard Europe.

     Equity in earnings  from our  investment  in Shurgard  Europe for the three
months ended  September 30, 2009 was  $3,631,000  compared to $2,260,000 for the
same  period in 2008,  representing  an increase of  $1,371,000.  This  increase
includes i) a reduction in our pro-rata share of Shurgard Europe's  depreciation
expense,  primarily due to declines in tenant intangible  amortization,  ii) our
pro-rata share of a reduction in Shurgard  Europe's third party interest expense
(joint ventures in which Shurgard Europe has a 20% interest recently  refinanced

                                       52



their  outstanding debt at  substantially  lower interest rates) and general and
administrative  expense,  offset by iii) a  $643,000  reduction,  on a  constant
exchange rate basis,  representing  our 49% pro-rata share of Shurgard  Europe's
same-store  properties  described  in the table  below and (iv) the  effect of a
change in the average  exchange rate of the Euro relative to the U.S.  Dollar to
1.428 for the three months ended September 30, 2009 as compared to 1.504 for the
same period in 2008.

     Equity in earnings  from our  investment  in  Shurgard  Europe for the nine
months ended  September 30, 2009 was  $7,239,000  compared to $3,717,000 for the
same period in 2008,  representing  an increase of $3,522,000.  This increase is
due primarily to the timing of our  disposition  of the 51% interest in Shurgard
Europe.  Equity in  earnings  for the nine  month  period in 2008 only  includes
amounts  for the period of April 1, 2008  through  September  30, 2008 while the
2009 period includes amounts for the entire nine month period.

     We  evaluate  the  performance  metrics  of  Shurgard  Europe's  Same Store
Facilities in order to evaluate the  performance  of our  investment in Shurgard
Europe,  because the Shurgard Europe Same Store Facilities represent the primary
driver of our pro-rata share of earnings of Shurgard Europe.

     The Shurgard  Europe Same Store  Facilities  represent  those 94 facilities
that are  stabilized  and owned  since  January  1, 2007 and  therefore  provide
meaningful comparisons for 2007, 2008, and 2009. The number of facilities in the
Shurgard  Europe Same Store Pool  declined from 96 at December 31, 2008 to 94 at
September 30, 2009, as we removed  facilities from the previous  Shurgard Europe
Same Store Pool that, due primarily to  construction  activities,  are no longer
expected to be stabilized  through  December 31, 2009, and added facilities that
are now stabilized and owned since January 1, 2007. The following table reflects
the operating results of these 94 facilities.

                                       53




SELECTED OPERATING DATA FOR THE 94 FACILITIES OPERATED
BY SHURGARD EUROPE ON A STABILIZED BASIS SINCE JANUARY
1, 2007 ("EUROPE SAME STORE FACILITIES"):                Three Months Ended September 30,          Nine Months Ended September 30,
                                                      --------------------------------------  -------------------------------------
                                                                                  Percentage                             Percentage
                                                         2009          2008         Change        2009          2008       Change
                                                      -----------  -----------    --------    -----------   ----------    --------
                                                                (Dollar amounts in thousands, except weighted average data,
                                                                         utilizing constant exchange rates) (a) (b)

Revenues:
                                                                                                          
     Rental income..................................  $    30,315  $    31,298      (3.1)%    $    84,736  $    88,349      (4.1)%
     Late charges and administrative fees collected.          513          539      (4.8)%          1,400        1,535      (8.8)%
                                                      -----------  -----------    --------    -----------   ----------    --------
   Total revenues...................................       30,828       31,837      (3.2)%         86,136       89,884      (4.2)%

Cost of operations (excluding depreciation and
  amortizaton expense):
     Property taxes ................................        1,562        1,478       5.7%           4,395        4,226       4.0%
     Direct property payroll........................        3,459        3,613      (4.3)%         10,129       10,081       0.5%
     Advertising and promotion......................        1,130          911      24.0%           4,071        2,713      50.1%
     Utilities......................................          632          712     (11.2)%          2,135        2,076       2.8%
     Repairs and maintenance........................          839          765       9.7%           2,365        2,327       1.6%
     Property insurance.............................          173          194     (10.8)%            516          557      (7.4)%
     Other costs of management......................        4,262        4,081       4.4%          12,125       12,004       1.0%
                                                      -----------  -----------    --------    -----------   ----------    --------
  Total cost of operations..........................       12,057       11,754       2.6%          35,736       33,984       5.2%
                                                      -----------  -----------    --------    -----------   ----------    --------
   Net operating income (c).........................  $    18,771  $    20,083      (6.5)%    $    50,400   $   55,900      (9.8)%
                                                      ===========  ===========    ========    ===========   ==========    ========

Gross margin........................................        60.9%       63.1%      (3.5)%          58.5%         62.2%      (5.9)%
Weighted average for the period:
     Square foot occupancy (d)......................        87.2%       87.7%      (0.6)%          85.9%         87.4%      (1.7)%
     Realized annual rent per occupied square foot
(e)(f)..............................................       $26.95      $27.66      (2.6)%         $25.49        $26.12      (2.4)%
     REVPAF (f)(g)..................................       $23.50      $24.26      (3.1)%         $21.90        $22.83      (4.1)%

Weighted average at September 30:
     Square foot occupancy..........................                                               87.2%         88.1%      (1.0)%
     In place annual rent per occupied square foot (h)                                            $28.48        $29.09      (2.1)%
Total net rentable square feet (in thousands).......                                               5,160         5,160       -
Average Euro to the U.S. Dollar: (a)
     Constant exchange rates used herein............        1.428       1.428       -              1.365         1.365       -
     Actual historical exchange rates...............        1.428       1.504      (5.1)%          1.365         1.521     (10.3)%


     (a)  In order to isolate changes in the underlg  operations from the impact
          of  exchange  rates,  the  amounts  in this table are  presented  on a
          constant  exchange  rate  basis.  The  amounts  for the three and nine
          months ended  September 30, 2008 have been  restated  using the actual
          exchange rate for the same periods in 2009.  The exchange rate for the
          Euro relative to the U.S.  Dollar  averaged 1.428 and 1.365 during the
          three and nine months  ended  September  30,  2009,  respectively,  as
          compared  to 1.504 and 1.521,  respectively,  for the same  periods in
          2008.

     (b)  Only the amounts for the period  ended March 31, 2008 are  included in
          our consolidated  financial statements.  We include our pro-rata share
          of these operating  results for periods after March 31, 2008 in Equity
          in Earnings of Real Estate Entities.  The amounts  incorporated in our
          financial  statements,  either  consolidated or equity method amounts,
          are based upon the actual  weighted  average  exchange  rates for each
          period.

     (c)  We  present  net  operating   income  "NOI"  of  the  Shurgard  Europe
          same-store  facilities,  which is a non-GAAP  financial  measure  that
          excludes the impact of depreciation and amortization expense. Although
          depreciation  and  amortization is a component of GAAP net income,  we
          believe  that NOI is a meaningful  measure of  operating  performance,
          because we utilize  NOI in making  decisions  with  respect to capital
          allocations,  segment performance,  and comparing period-to-period and
          market-to-market   property  operating  results.   In  addition,   the
          investment  community  utilizes NOI in determining real estate values,
          and  does  not  consider  depreciation  expense  as it is  based  upon
          historical  cost.  NOI is not a substitute  for net  operating  income
          after  depreciation  and  amortization  in  evaluating  our  operating
          results.

     (d)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

                                       54



     (e)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing  rental income before late charges
          and  administrative  fees by the weighted average occupied square feet
          for the period.  Realized  annual rent per occupied  square foot takes
          into consideration  promotional  discounts and other items that reduce
          rental income from the contractual amounts due.

     (f)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied square foot and REVPAF. Exclusion
          of these  amounts  provides a better  measure of our ongoing  level of
          revenue,  by  excluding  the  volatility  of late  charges,  which are
          dependent  principally  upon the  level  of  tenant  delinquency,  and
          administrative fees, which are dependent principally upon the absolute
          level of move-ins for a period.

     (g)  Realized  annual  rent per  available  foot or "REVPAF" is computed by
          dividing rental income before late charges and admin fees by the total
          available net rentable square feet for the period.

     (h)  In place annual rent per occupied  square foot  represents  annualized
          contractual  rents per  occupied  square foot without  reductions  for
          promotional  discounts  and excludes  late charges and  administrative
          fees.

     Shurgard  Europe's  operations  have been  impacted  by the same  trends in
self-storage  demand that our domestic  facilities are facing.  However,  trends
have improved  somewhat in the third quarter of 2009,  with revenue  declines of
3.2% in the quarter ended September 30, 2009, as compared to 5.0% in the quarter
ended June 30, 2009.  Despite the recent improved  trends and reduced  year-over
year  declines  in  revenues  and net  operating  income,  we  expect  continued
year-over-year declines in revenues during at least the fourth quarter of 2009.

     Shurgard  Europe,  similar  to our  Domestic  Self-Storage  segment,  has a
nominal development pipeline. Accordingly, at least in the short-term, we do not
expect any significant impact to our earnings from Shurgard Europe's development
activities.

Shurgard Europe's Condensed Consolidated Operating Results
----------------------------------------------------------

     In  Note 5 to our  September  30,  2009  condensed  consolidated  financial
statements,  we disclose  Shurgard  Europe's  condensed  consolidated  operating
results  for the  three  and nine  months  ended  September  30,  2009 and 2008.
Shurgard Europe's  condensed  consolidated  operating results include additional
facilities  that are not  Europe  Same  Store  Facilities,  and are  based  upon
historical  exchange  rates rather than constant  exchange rates for each of the
respective periods.

Other Investments
-----------------

     The "Other  Investments"  at September 30, 2009 are comprised  primarily of
our  equity in  earnings  from  entities  that own 19  self-storage  facilities.
Amounts  included in the tables above also  include our equity in earnings  with
respect  to three  facilities  owned by the  Unconsolidated  Entities,  until we
acquired the remaining  interest we did not own in these  entities  during 2008,
and commenced  consolidating these facilities.  Our future earnings with respect
to the other 19 facilities  will be dependent upon the operating  results of the
facilities  that  these  entities  own.  See Note 5 to our  September  30,  2009
condensed  consolidated  financial statements for the operating results of these
19 facilities under the "Other Investments."

Ancillary Operations
--------------------

     Ancillary  revenues and expenses  include  amounts  associated with (i) the
reinsurance  of  policies  against  losses  to goods  stored by  tenants  in our
self-storage  facilities,  (ii) merchandise  sales,  (iii)  commercial  property
operations,  and (iv)  management of facilities for third parties and facilities
owned by the Unconsolidated Entities.

     During the three months ended March 31, 2009,  we decided to terminate  our
truck  rental  and  containerized  operations.  Accordingly,  the  revenues  and
expenses of these  operations  are included in  discontinued  operations  on our
condensed consolidated  statements of income for the three and nine months ended
September 30, 2009 and 2008.

     The following table sets forth our ancillary operations as presented on our
condensed  consolidated  statement of operations.  These items are described and
reconciled to consolidated revenues and expenses in Note 11 to our September 30,
2009 condensed consolidated financial statements.

                                       55






                                               Three Months Ended September 30        Nine Months Ended September 30,
                                               ---------------------------------    ---------------------------------
                                                 2009         2008       Change        2009         2008       Change
                                               -----------  ----------  --------    -----------  ----------  --------
                                                                       (Amounts in thousands)

Ancillary Revenues:
                                                                                           
    Tenant reinsurance premiums ........     $    15,971  $   14,869       1,102    $    47,053       4,176  $  42,877
    Commercial (a)......................           3,753       3,745           8         11,124      11,546      (422)
    Merchandise and other ..............           8,076       8,332        (256)        23,564      24,357      (793)
                                             -----------  ----------    --------    -----------  ----------  --------
      Total domestic ancillary revenues.          27,800      26,946         854         81,741      78,780     2,961
    Shurgard Europe merchandise and tenant
      insurance (b).....................               -           -           -              -       4,913    (4,913)
                                             -----------  ----------    --------    -----------  ----------  --------
       Total  revenues..................          27,800      26,946         854         81,741      83,693    (1,952)
                                             -----------  ----------    --------    -----------  ----------  --------
Ancillary Cost of operations:
    Tenant reinsurance premiums.........             700      (3,628)      4,328          7,138       3,309     3,829
    Commercial (a)......................           1,440       1,555        (115)         4,309       4,789      (480)
    Merchandise and other...............           5,353       5,829        (476)        16,073      17,617    (1,544)
                                             -----------  ----------    --------    -----------  ----------  --------
      Total domestic ancillary cost of
      operations........................           7,493       3,756       3,737         27,520      25,715     1,805
    Shurgard Europe merchandise and tenant
      insurance (b).....................               -           -           -              -       1,409    (1,409)
                                             -----------  ----------    --------    -----------  ----------  --------
       Total cost of operations.........           7,493       3,756       3,737         27,520      27,124       396
                                             -----------  ----------    --------    -----------  ----------  --------
Depreciation - commercial operations (a):            652         652           -          2,304       2,246        58

Ancillary net income:
    Tenant reinsurance premiums.........          15,271      18,497      (3,226)        39,915      39,568       347
    Commercial (a)......................           1,661       1,538         123          4,511       4,511         -
    Merchandise and other...............           2,723       2,503         220          7,491       6,740       751
                                             -----------  ----------    --------    -----------  ----------  --------
      Total domestic ancillary net income         19,655      22,538      (2,883)        51,917      50,819     1,098

    Shurgard Europe merchandise and tenant
      insurance (b).....................               -           -           -              -       3,504    (3,504)
                                             -----------  ----------    --------    -----------  ----------  --------
       Total ancillary net income.......     $    19,655  $   22,538    $ (2,883)   $    51,917  $   54,323  $ (2,406)
                                             ===========  ==========    ========    ===========  ==========  ========



     (a)  Commercial  revenues  and  expenses  are  included  in our  Commercial
          segment, which is described and reconciled to net income in Note 11 to
          our September 30, 2009 condensed consolidated financial statements

     (b)  Shurgard  Europe's  ancillary  revenues  and  expenses are included in
          Europe  Self-Storage  Net  Segment  Income,  which  is  described  and
          reconciled  to net  income  in  Note  11 to  our  September  30,  2009
          condensed consolidated financial statements.

     Tenant  reinsurance  operations:  We reinsure  policies  offered  through a
non-affiliated  insurance  company  against  losses to goods  stored by tenants,
primarily in our domestic self-storage  facilities.  The revenues that we record
are based upon premiums that we reinsure.  Cost of operations primarily includes
claims paid that are not covered by our outside third-party insurers, as well as
claims adjustment expenses.

     The  increase  in  tenant  reinsurance  revenues  over  the  past  year was
attributable  to higher rates combined with an increase in the percentage of our
existing  tenants  retaining  such  policies.  Approximately  58% and 53% of our
tenants had such policies at September 30, 2009 and 2008, respectively.

     The future level of tenant  reinsurance  revenues is largely dependent upon
the number of new tenants electing to purchase  policies,  the level of premiums
charged  for  such   insurance,   and  the  number  of  tenants  that   continue
participating  in the  insurance  program.  Future  cost of  operations  will be
dependent  primarily upon the level of losses  incurred,  including the level of
catastrophic events, such as hurricanes, that occur and affect our properties.

                                       56



     Commercial  operations:  We also operate commercial  facilities,  primarily
small storefronts and office space located on or near our existing  self-storage
facilities  that are rented to third parties.  We do not expect any  significant
changes in revenues or profitability from our commercial operations.

     Merchandise sales and other: We sell locks,  boxes, and packing supplies at
the  self-storage  facilities that we operate.  The primary factor impacting the
level of merchandise  sales is the level of customer traffic at our self-storage
facilities,  including  the level of  move-ins.  In  addition,  to a much lesser
extent,  we also manage  self-storage  facilities  with our existing  management
infrastructure, to third party owners as well as to the Unconsolidated Entities.

OTHER INCOME AND EXPENSE ITEMS
--------------------------------------------------------------------------------

     INTEREST AND OTHER  INCOME:  Interest and other income was  $6,857,000  and
$22,006,000 in three and nine months ended September 30, 2009, respectively,  as
compared  to  $11,485,000  and  $25,343,000  in the same  periods  in 2008.  The
increase is principally as a result of (i) interest income with respect to notes
receivable  from Shurgard  Europe  (described  below),  offset by lower interest
income on our cash reserve balances.  While we had higher average cash balances,
interest  rates  were  significantly  lower in the three and nine  months  ended
September  30,  2009,  as compared to the same  periods in 2008.  We have $670.9
million in cash on hand at September 30, 2009 invested primarily in money-market
funds.  Future  interest income will depend upon the level of interest rates and
the timing of when the cash on hand is ultimately invested;  however, based upon
current  interest  rates on our  outstanding  money-market  fund  investments of
approximately 0.20%, earned interest is expected to be minimal.

     We have a loan  receivable  from Shurgard Europe totaling $571.8 million as
of September 30, 2009 that bears interest at a fixed rate of 7.5% per annum.  We
recorded  interest  income with  respect to this loan,  representing  51% of the
amount earned (the  remaining 49% is recorded as additional  equity in earnings)
of  approximately  $6.0  million  and $6.2  million for the three  months  ended
September 30, 2009 and 2008,  respectively,  and $17.0 million and $12.5 million
for the nine months ended September 30, 2009 and 2008, respectively. No interest
income in connection with this loan was recorded in the three months ended March
31, 2008, as such interest income was fully  eliminated in  consolidation  until
March 31, 2008. All other  variances in interest income from our note receivable
are  attributable  principally  to  changes in average  exchange  rates,  as the
principal balance has remained constant for all periods presented.  The level of
interest income recorded in connection with this loan will be dependent upon the
average  outstanding balance as well as the exchange rate of the Euro versus the
U.S.  Dollar.  All such interest has been paid  currently when due and we expect
the interest to continue to be paid when due with  Shurgard  Europe's  operating
cash flow.

     Effective October 31, 2009, we extended the maturity date to March 31, 2013
for our existing (euro)391.9 million ($571.8 million at September 30, 2009) loan
to Shurgard Europe. Under the terms of the extension,  the existing 7.5% rate of
interest  increased to 9.0% per annum  (effective  November 1, 2009).  All other
material terms and covenants remain the same.

     DEPRECIATION AND  AMORTIZATION:  Depreciation and amortization  expense was
$85,908,000 and  $254,670,000  for the three and nine months ended September 30,
2009,  respectively,  as compared to $91,084,000 and  $308,153,000  for the same
periods in 2008.

     The decrease in depreciation and  amortization  expense in the three months
ended  September  30,  2009,  as  compared  to the  same  period  in 2008 is due
principally to declines in amortization of tenant  intangible  amortization.  We
expect  minimal  amortization  expense of our  existing  intangibles  during the
remainder of 2009, and future intangible amortization will be dependent upon our
future level of acquisition of facilities with existing tenants in place.

     Effective  March 31,  2008,  depreciation  and  amortization  ceased on the
facilities owned by Shurgard Europe,  which was  deconsolidated  effective March
31, 2008.  Included in our  depreciation  and  amortization  related to Shurgard
Europe's facilities was $21,871,000 for the three months ended March 31, 2008.

                                       57



     GENERAL AND ADMINISTRATIVE EXPENSE:  General and administrative expense was
$8,654,000,  and  $26,532,000  for the three and nine months ended September 30,
2009,  respectively,  as compared to  $8,879,000  and  $56,968,000  for the same
periods in 2008.  General and  administrative  expense  principally  consists of
state income taxes,  investor  relations  expenses,  and corporate and executive
salaries.  In addition,  general and  administrative  expenses includes expenses
that vary depending on our activity  levels in certain  areas,  such as overhead
associated  with the  acquisition  and  development  of real estate  facilities,
certain   expenses  related  to  capital  raising  and  merger  and  acquisition
activities,    litigation   expenditures,    employee   severance,   stock-based
compensation, and incentive compensation.

     General and administrative  expense for the nine months ended September 30,
2008 includes $27,900,000 in additional incentive  compensation incurred related
to our disposition of an interest in Shurgard  Europe.  Following March 31, 2008
we record no further  general and  administrative  expense  incurred by Shurgard
Europe's operations.

     We expect  ongoing  general and  administrative  expense to  approximate $8
million to $10 million per quarter.

     INTEREST  EXPENSE:  Interest expense was $7,289,000 and $22,705,000 for the
three and nine months ended  September  30, 2009,  respectively,  as compared to
$9,099,000  and  $35,187,000  for the same  periods  in 2008.  The  decrease  in
interest   expense  in  the  nine  month   periods  is  due   primarily  to  the
deconsolidation of Shurgard Europe. Interest expense was also reduced due to our
early retirement in February 2009 of $110.2 million face amount of senior notes.
See Note 6 to the condensed  consolidated financial statements for a schedule of
our notes  payable  balances,  principal  repayment  requirements,  and  average
interest rates.

     Capitalized  interest  expense totaled  $200,000 and $547,000 for the three
and nine months ended September 30, 2009, respectively,  as compared to $448,000
and $1,630,000 for the same periods in 2008, in connection  with our development
activities.

     Interest  expense  for the  three  months  ended  March 31,  2008  included
$6,892,000  incurred by Shurgard Europe,  relative to third-party debt. Interest
expense  incurred by Shurgard Europe after March 31, 2008 is no longer reflected
in our financial statements.

     FOREIGN  EXCHANGE GAIN (LOSS):  Our loan receivable from Shurgard Europe is
denominated  in Euros and has not been hedged to mitigate the impact of currency
exchange  fluctuations  between the U.S. Dollar and the Euro. The amount of U.S.
Dollars  that will be  received  on  repayment  will  depend  upon the  currency
exchange rates at the time.  Based upon the change in estimated U.S.  Dollars to
be received  caused by  fluctuation  in currency  rates  during the three months
ended  September 30, 2009, we recorded  foreign  currency  translation  gains of
$21,429,000,  as compared to foreign currency  translation losses of $53,172,000
for the three months  ended  September  30,  2008.  During the nine months ended
September  30,  2009,  we  recorded  foreign  currency   translation   gains  of
$19,901,000,  as compared to foreign currency  translation losses of $12,203,000
for the nine months ended  September  30, 2008.  The U.S.  Dollar  exchange rate
relative to the Euro was approximately  1.459,  1.405 and 1.409 at September 30,
2009, June 30, 2009 and December 31, 2008, respectively.

     Future foreign  exchange  gains or losses will be dependent  primarily upon
the  movement  of the Euro  relative  to the U.S.  Dollar,  the amount owed from
Shurgard Europe and our continued expectation with respect to repaying the loan.

     DISCONTINUED  OPERATIONS:  During the nine months ended September 30, 2009,
we decided to terminate  our truck  rental and  containerized  storage  business
units,  and actually  disposed of one and expect to dispose of one  self-storage
facilities  in  connection  with  condemnation  proceedings.  As  a  result,  we
reclassified  all of the  historical  revenues and expenses of these  operations
from  revenues  and  expenses,  into  "discontinued   operations."  Included  in
discontinued  operations  in the nine months ended  September  30, 2009 are $3.5
million  in truck  disposal  expenses,  an $8.2  million  impairment  charge  on
intangible  assets incurred in connection with an eminent domain  proceeding and
gains on disposition of storage  facilities of approximately  $6.0 million which
was recorded in the nine months ended September 30, 2009.

                                       58




LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

     We have $670.9  million of cash on hand at September 30, 2009,  and believe
that these funds,  together with our  internally  generated net cash provided by
operating  activities  will  continue to be  sufficient to enable us to meet our
operating  expenses,   capital  improvements,   debt  service  requirements  and
distributions requirements to our shareholders for the foreseeable future.

     Operating as a REIT,  our ability to retain cash flow for  reinvestment  is
restricted.  In order for us to maintain our REIT status, a substantial  portion
of  our  operating  cash  flow  must  be  used  to  make  distributions  to  our
shareholders (see "Requirement to Pay Distributions"  below).  However,  despite
the  significant  distribution  requirements,  we have  been  able to  retain  a
significant  amount of our operating cash flow. The following  table  summarizes
our  ability  to  fund   distributions  to  the  minority   interests,   capital
improvements to maintain our facilities,  and  distributions to our shareholders
through the use of cash provided by operating  activities.  The  remaining  cash
flow  generated  is  available to make both  scheduled  and  optional  principal
payments on debt and for reinvestment.



                                                                            For the Nine Months Ended
                                                                                    September 30,
                                                                         -----------------------------
                                                                              2009             2008
                                                                         -----------       -----------
                                                                              (Amount in thousands)

                                                                                     
Net cash provided by operating activities (a).........................   $   837,529        $  809,261
Capital improvements to maintain our facilities.......................       (52,449)          (72,629)
                                                                         ------------       -----------
Remaining operating cash flow available for distributions to equity
   holders............................................................       785,080           736,632

Distributions to other noncontrolling interests in subsidiaries.......       (12,637)          (12,727)
Distribution requirements paid to preferred partnership interests.....        (7,643)          (16,209)
                                                                         ------------       -----------
Cash from operations allocable to Public Storage shareholders.........       764,800           707,696
Distributions paid to Public Storage shareholders:
   Preferred share dividends..........................................      (174,324)         (180,999)
   Equity Shares, Series A dividends..................................       (15,393)          (16,068)
   Common shareholders and restricted share unitholders ($1.65 per
   share).............................................................      (278,790)         (278,502)
                                                                         ------------       -----------
Cash from operations available for principal payments on debt and
   reinvestment (b)...................................................   $   296,293        $  232,127
                                                                         ============       ===========



     (a)  Represents  net  cash  provided  by  operating   activities  for  each
          respective  nine month period as presented in our  September  30, 2009
          Condensed Consolidated Statements of Cash Flows.

     (b)  We present cash from  operations  for  principal  payments on debt and
          reinvestment because we believe it is an important measure to evaluate
          our ongoing liquidity. This measure is not a substitute for cash flows
          from  operations in  evaluating  our  liquidity,  ability to repay our
          debt, or to meet our distribution requirements.

     Cash  from  operations   available  for  principal  payments  on  debt  and
reinvestment  increased from $232.1  million in the nine months ended  September
30, 2008 to $296.3  million in the nine months ended  September  30,  2009.  The
increase  is  attributable  to lower  capital  expenditures  as well as  reduced
preferred  partnership  and  preferred  share  dividends due to  repurchases  of
preferred  securities  (see  REPURCHASES  OF THE COMPANY'S  EQUITY AND PREFERRED
SECURITIES below).

     In addition to cash on hand, other sources of readily  available  liquidity
and capital resources include a $300 million revolving line of credit.  The line
of credit expires in March 2012 and there were no outstanding  borrowings on the
line of credit at November 6, 2009.

     Significant  requirements on our liquidity and capital  resources  include:
(i)  capital   improvements  to  maintain  our  facilities,   (ii)  distribution
requirements  to our  shareholders  to  maintain  our REIT  status,  (iii)  debt
service,  (iv)  acquisition and  development  commitments and (v) commitments to
provide  funding  to  Shurgard  Europe  for  certain   investing  and  financing
activities.

                                       59



     CAPITAL IMPROVEMENT REQUIREMENTS:  During 2009, we expect approximately $73
million  for  capital  improvements  for our  facilities.  Capital  improvements
include  major  repairs  or  replacements  to the  facilities,  which  keep  the
facilities in good operating condition and maintain their visual appeal. Capital
improvements  do not include costs  relating to the  development or expansion of
facilities. During the nine months ended September 30, 2009, we incurred capital
improvements of approximately $52.4 million.

     REQUIREMENT TO PAY DISTRIBUTIONS:  We have operated, and intend to continue
to  operate,  in such a manner as to qualify  as a REIT  under the Code,  but no
assurance can be given that we will at all times so qualify.  To the extent that
the Company  continues to qualify as a REIT, we will not be taxed,  with certain
limited  exceptions,  on the REIT  taxable  income  that is  distributed  to our
shareholders, provided that at least 90% of our taxable income is so distributed
to our  shareholders.  We  believe  we  have  satisfied  the  REIT  distribution
requirement since 1981.

     Aggregate  dividends  paid during the nine months ended  September 30, 2009
totaled $174.3 million to the holders of our Cumulative Preferred Shares, $278.8
million to the holders of our common shares and restricted share units and $15.4
million  to the  holders  of our Equity  Shares,  Series A. We believe  that the
aggregate  dividends paid in 2008 to our  shareholders  enable us to continue to
meet our REIT distribution requirements.

     During the first nine months of 2009, we paid  distributions  totaling $7.6
million with respect to our Preferred  Partnership  Units.  We expect our annual
distribution  requirement based upon preferred  partnership units outstanding at
September 30, 2009, to be  approximately  $7.3 million on a go forward basis. In
addition,  we estimate the annual distribution  requirements with respect to our
preferred shares  outstanding at September 30, 2009, to be approximately  $232.4
million,  assuming no additional preferred share issuances or redemptions during
the remainder of 2009.

     For the fourth quarter of 2009, a regular  quarterly  distribution of $0.55
per  common  share  has  been   declared  by  our  Board  of  Trustees.   Future
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.

     With  respect to the  depositary  shares  representing  the Equity  Shares,
Series A, we have no obligation to pay  distributions  if no  distributions  are
paid  to  the  common  shareholders.  To  the  extent  that  we  do  pay  common
distributions  in any year, the holders of the depositary  shares receive annual
distributions  equal to the lesser of (i) five times the per share  dividend  on
the common shares or (ii) $2.45. The depositary shares are  non-cumulative,  and
have  no  preference  over  our  Common  Shares  either  as to  dividends  or in
liquidation.

     We are required by the underlying  governing documents to pay distributions
to noncontrolling  interests in subsidiaries based upon the operating cash flows
of the underlying  entities less any required reserves for capital  expenditures
or debt repayment. Such interests received a total of $12,637,000 (excluding the
preferred partnership units) during the nine months ended September 30, 2009 and
$12,727,000 for the same period in 2008, which represents our expectations  with
respect to future distribution levels.

     DEBT SERVICE REQUIREMENTS: At September 30, 2009, we have total outstanding
debt of  approximately  $521.7  million.  See Note 6 to our  September  30, 2009
condensed consolidated financial statements for approximate principal maturities
of such borrowings.  It is our current intention to fully amortize and repay the
debt at maturity and not seek to refinance debt maturities with additional debt.
Alternatively,  we may prepay debt and finance such  prepayments  with  retained
operating  cash flow or proceeds  from the issuance of preferred  securities  or
common shares.

     Our portfolio of real estate facilities remains substantially unencumbered.
At September 30, 2009, we have secured debt outstanding of $229.5 million, which
encumbers  89  self-storage  facilities  with an  aggregate  net  book  value of
approximately $561.9 million.

     ACQUISITION AND DEVELOPMENT OF FACILITIES: During the remainder of 2009, we
will continue to seek to acquire additional  self-storage  facilities from third

                                       60



parties;  however,  it is  difficult  to  estimate  the  amount  of third  party
acquisitions  we will  undertake.  We have a  minimal  development  pipeline  at
September  30,  2009  and  have  no  current  plan  to  expand  our  development
activities.

     EUROPEAN ACTIVITIES:  At the end of February 2009, the maturity date of the
loan owed by Shurgard  Europe to Public  Storage was extended to March 31, 2010.
The loan totaled approximately $571.8 million at September 30, 2009.

     Effective October 31, 2009, we extended the maturity date to March 31, 2013
for our existing (euro)391.9 million ($571.8 million at September 30, 2009) loan
to Shurgard Europe. Under the terms of the extension,  the existing 7.5% rate of
interest  increased to 9.0% per annum  (effective  November 1, 2009).  All other
material terms and covenants remain the same.

     In addition,  if Shurgard Europe acquires its partner's  interests in First
Shurgard and Second Shurgard and is unable to obtain third-party  financing,  we
have agreed to provide additional loans to Shurgard Europe, under the same terms
as the  existing  loans,  for up to  (euro)185  million  ($269.9  million  as of
September 30, 2009) for the  acquisition.  This  commitment was also extended in
February 2009 to March 31, 2010 and was  originally for (euro)305  million,  but
was  reduced  as the  result  of  refinancing  one of the joint  venture  loans.
Shurgard  Europe  has  no  obligation  to  acquire  these  interests,   and  the
acquisition  of these  interests is contingent  on a number of items,  including
whether we assent to the acquisition.

     Shurgard  Europe has a 20%  interest  in two joint  ventures  and one other
partner  owns 80%  interest in each.  The two joint  ventures  collectively  had
approximately  (euro)230  million ($336 million) of outstanding  debt payable to
third parties at September 30, 2009,  which is non-recourse to Shurgard  Europe.
In April 2009,  Shurgard  Europe  obtained loan  extensions on both of its joint
venture loans. One of the joint venture loans,  totaling (euro)110 million ($161
million),  is now due May  2011  and the  other  joint  venture  loan,  totaling
(euro)120  million ($175  million),  is now due in July 2010. Both joint venture
loans are  secured by the joint  ventures'  respective  facilities,  and are not
guaranteed by Public Storage or any third party.

     We  also  committed  to fund  up to  $88.2  million  of  additional  equity
contributions  to Shurgard  Europe to fund  certain  investing  activities.  Our
remaining  obligation  under this commitment  totaled $66.4 million at September
30, 2009.

     ACCESS TO CAPITAL: Over the past nine months, accessing capital through the
equity or credit markets has become very  difficult,  in part due to the lack of
liquidity,  particularly with respect to real estate companies. As a result, our
ability to raise  additional  capital by issuing common or preferred  securities
may not be a viable  option  at least in the near  term.  We are not  dependent,
however, on raising capital to fund our operations or meet our obligations.

     Our   financial    profile   is   characterized   by   a   low   level   of
debt-to-total-capitalization  and a  conservative  dividend  payout  ratio  with
respect to the common shares.  We expect to fund our long-term growth strategies
and  debt  obligations  with  (i)  cash on  hand at  September  30,  2009,  (ii)
internally generated retained cash flows and (iii) depending upon current market
conditions, proceeds from issuing equity securities. In general, our strategy is
to  continue  to finance our growth with  permanent  capital,  either  common or
preferred   equity  to  the  extent  that  market   conditions   are  favorable,
notwithstanding current market conditions are not favorable.

     Historically,  we have funded  substantially  all of our acquisitions  with
permanent capital (both common and preferred securities). We have elected to use
preferred  securities  as a form of leverage  despite the fact that the dividend
rates of our preferred securities exceed the prevailing market interest rates on
conventional  debt.  We have chosen this method of financing  for the  following
reasons:  (i) under the REIT structure,  a significant  amount of operating cash
flow needs to be distributed to our  shareholders,  making it difficult to repay
debt with operating cash flow alone, (ii) our perpetual preferred shares have no
sinking fund requirement or maturity date and do not require redemption,  all of
which eliminate any future  refinancing risks, (iii) after the end of a non-call
period,  we have the option to redeem the  preferred  shares at any time,  which
enable us to refinance  higher coupon preferred shares with new preferred shares
at lower rates if appropriate,  (iv) preferred shares do not contain  covenants,

                                       61



thus  allowing  us  to  maintain  significant  financial  flexibility,  and  (v)
dividends  on  the  preferred   shares  can  be  applied  to  satisfy  our  REIT
distribution requirements.

     Our credit ratings on each of our series of preferred  shares are "Baa1" by
Moody's and "BBB" by Standard & Poor's.

     ISSUANCE  AND  REDEMPTION  OF  SECURITIES:  We  believe  that  our size and
financial  flexibility  enables us to access capital when  appropriate  and when
market conditions are favorable.  However, over the past nine months,  accessing
capital through the credit markets has become very difficult, in part due to the
lack of liquidity.

     As of September  30, 2009,  several of our series of preferred  shares were
redeemable  at our  option;  however,  we  have  not  called  these  series  for
redemption.  Although we may acquire these shares on the open market,  it is not
advantageous  to redeem  these shares at face value  pursuant to our  redemption
option at this time because,  based upon current  market  conditions,  we cannot
issue additional preferred securities at a lower coupon rate than the securities
that  would be  called.  The  timing  of  redemption  of any of these  series of
preferred  shares will depend upon many factors  including  when,  or if, market
conditions  improve such that we can issue new preferred  shares at a lower cost
of capital than the shares that would be redeemed.

     We have the  option to call for  redemption  the  Equity  Shares,  Series A
beginning at any time after March 31, 2010 for $24.50 per depositary  share plus
accrued  and unpaid  distributions,  representing  an implied  yield of 10%.  No
decision has been made on redemption of these securities.

     In the past we have typically raised  additional  capital in advance of the
redemption  dates  to  ensure  that we have  available  funds  to  redeem  these
securities.  Provided  market  conditions  improve in the  future,  we may raise
capital in advance to fund redemptions.

     REPURCHASES OF THE COMPANY'S EQUITY AND PREFERRED SECURITIES:  Dislocations
in  capital  markets  have  provided  opportunities  for the  repurchase  of our
preferred and debt securities.  During the nine months ended September 30, 2009,
we  repurchased  certain  of  our  Cumulative   Preferred  Shares  in  privately
negotiated   transactions   with  a  liquidation  value  of  $24.6  million  for
approximately $17.5 million,  including accrued dividends,  reducing our ongoing
dividend  requirement by  approximately  $1.8 million per year.  Also during the
nine months ended  September 30, 2009, we  repurchased  certain of our Preferred
Partnership Units in privately negotiated transactions with a carrying amount of
$225 million for  approximately  $153  million,  reducing  our ongoing  dividend
requirement by approximately $14.4 million per year.

     On February 12, 2009, we acquired approximately $110 million face amount of
our existing senior unsecured notes pursuant to a tender offer. The amounts paid
in the tender were  substantially less than what would have been paid if we were
to repay this debt early subject to the  prepayment  premiums  under the related
debt agreement.

     Our Board of Trustees has authorized the repurchase from time to time of up
to 35,000,000 of our common shares on the open market or in privately negotiated
transactions.  During the nine  months  ended  September  30,  2009,  we did not
repurchase  any of our  common  shares.  From the  inception  of the  repurchase
program  through  November 6, 2009,  we have  repurchased  a total of 23,721,916
common  shares at an aggregate  cost of  approximately  $679.1  million.  Future
levels of common  repurchases  will be  dependent  upon our  available  capital,
investment alternatives, and the trading price of our common shares.

     These  acquisitions  were  funded by us with cash on hand.  We  continue to
monitor  the  existing  trading  ranges of all our  outstanding  debt and equity
securities for potential opportunities.

CONTRACTUAL OBLIGATIONS

     Our  significant  contractual  obligations  at September 30, 2009 and their
impact on our cash flows and liquidity are summarized below for the years ending
December 31 (amounts in thousands):

                                       62




                                                 2009
                                  Total       (remainder)        2010           2011           2012            2013       Thereafter
                                ----------    -----------     ----------      ---------     --------       ----------    ----------


                                                                                                    
Long-term debt (1) ............ $  627,439     $  21,440      $   41,799      $ 154,348     $ 74,716       $  259,878    $   75,258

Operating leases (2)...........    100,459         1,841           5,954          5,433        5,456            5,348        76,427

Construction commitments (3)...     13,341        12,007           1,334              -            -                -             -
                                ----------    -----------     ----------      ---------     --------       ----------    ----------
Total.......................... $  741,239     $  35,288      $   49,087      $ 159,781     $ 80,172       $  265,226    $  151,685
                                ==========    ===========     ==========      =========     ========       ==========    ==========


     (1)  Amounts include interest  payments on our notes payable based on their
          contractual  terms.  See Note 6 to our  September  30, 2009  condensed
          consolidated  financial  statements for additional  information on our
          notes payable.

     (2)  We lease land,  equipment  and office  space under  various  operating
          leases. Certain leases are cancelable with substantial penalties.

     (3)  Includes  obligations for facilities  under  construction at September
          30, 2009.

         We have not included any additional funding requirements that we may be
required make to Shurgard Europe as a contractual obligation in the table above,
since it is uncertain whether or not we will be required to fund any additional
amounts and because such funding is subject to our assent.

         We have no substantial construction commitments at September 30, 2009.

     OFF-BALANCE  SHEET  ARRANGEMENTS:  At September 30, 2009 we had no material
off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) and the
instructions thereto.

                                       63




ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

     To limit our exposure to market risk, we principally finance our operations
and growth with permanent equity capital  consisting either of common shares and
preferred  shares.  At  September  30, 2009,  our debt as a percentage  of total
equity (based on book values) was 5.8%.

     Our preferred  shares are not  redeemable at the option of the holders.  At
September 30, 2009, our Series V, Series W, Series X, Series Y, Series Z, Series
A, Series B and Series C preferred shares are currently redeemable by us. Except
under certain conditions relating to the Company's  qualification as a REIT, the
preferred  shares are not  redeemable by the Company  pursuant to its redemption
option  prior  to the  dates  set  forth  in Note 8 to our  September  30,  2009
condensed consolidated financial statements.

     Our market risk sensitive instruments include notes payable,  which totaled
$521,662,000 at September 30, 2009.

     We have foreign  currency  exposures  related to our investment in Shurgard
Europe,  which has a book value of $272.7 million at September 30, 2009. We also
have a loan  receivable  from Shurgard  Europe,  which is  denominated in Euros,
totaling  (euro)391.9  million  ($571.8  million) at September 30, 2009. We also
have an  obligation,  in  certain  circumstances,  to  loan up to an  additional
(euro)185 million to Shurgard Europe.

     The table below  summarizes  annual debt  maturities  and  weighted-average
interest rates on our  outstanding  debt at the end of each year and fair values
required to evaluate  our  expected  cash-flows  under debt  agreements  and our
sensitivity  to interest rate changes at September  30, 2009 (dollar  amounts in
thousands).


                            2009
                         (remainder)    2010        2011          2012        2013     Thereafter      Total     Fair Value
                         ----------- ---------- ------------ ------------- ---------- ------------ ------------ ------------


                                                                                        
Fixed rate debt........  $   2,289   $ 13,089   $  131,432   $   55,575    $251,421   $  67,856    $  521,662   $ 527,646
Average interest rate..      5.68%      5.68%        5.68%        5.70%       5.62%       5.50%
----------------------------------------------------------------------------------------------------------------------------
Variable rate debt (1).  $       -   $      -   $        -   $        -    $     -    $       -    $        -   $       -
Average interest rate..
----------------------------------------------------------------------------------------------------------------------------



     (1)  Amounts include borrowings under our line of credit,  which expires in
          2012. As of September  30, 2009, we have no borrowings  under our line
          of credit.

                                       64




ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

     We maintain  disclosure controls and procedures that are designed to ensure
that  information  required to be  disclosed in reports we file and submit under
the Securities  Exchange Act of 1934, as amended  ("Exchange Act"), is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
accordance  with SEC guidelines and that such  information  is  communicated  to
Public  Storage's  management,  including our Chief Executive  Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure based
on the definition of "disclosure controls and procedures" in Rules 13a-15(e) and
15d-15(e)  of the Exchange  Act. In  designing  and  evaluating  our  disclosure
controls and  procedures,  we recognized  that any controls and  procedures,  no
matter how well designed and operated,  can provide only reasonable assurance of
achieving the desired control objectives and that our management necessarily was
required to apply its judgment in evaluating the  cost-benefit  relationship  of
possible controls and procedures in reaching that level of reasonable assurance.
Also,  we have  investments  in certain  unconsolidated  entities.  Since Public
Storage does not control or manage these entities,  our disclosure  controls and
procedures  with respect to such  entities are  substantially  more limited than
those we maintain with respect to our consolidated subsidiaries.

     Under  the  supervision  and  with  the  participation  of our  management,
including our Chief Executive Officer and Chief Financial Officer,  we evaluated
our the effectiveness of our disclosure controls and procedures,  as required by
Exchange Act Rule 13a-15(b), as of the end of the period covered by this report.
Based on that  evaluation,  our Chief  Executive  Officer  and  Chief  Financial
Officer  concluded that our disclosure  controls and procedures  were effective.
There were no changes in our internal  control over financial  reporting  during
the quarter  ended  September  30, 2009 that have  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

                                       65




PART II.      OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS
              -----------------

     The  information  set forth under the heading "Legal Matters" in Note 12 to
the  Condensed   Consolidated   Financial   Statements  in  this  Form  10-Q  is
incorporated by reference in this Item 1.

ITEM 1A.      RISK FACTORS
              ------------

     The risk  factors set forth below update the  corresponding  risk factor in
Part I, "Item 1A. Risk  Factors" in our Annual  Report on Form 10-K for the year
ended  December 31,  2008.  In addition to the risk  factors  below,  you should
carefully consider the other risk factors discussed in our Annual Report on Form
10-K for the year ended  December 31, 2008,  which could  materially  affect our
business, financial position and results of operations.

IF WE FAILED TO QUALIFY AS A REIT FOR INCOME TAX PURPOSES, WE WOULD BE TAXED AS
A CORPORATION, WHICH WOULD SUBSTANTIALLY REDUCE FUNDS AVAILABLE FOR PAYMENT OF
DIVIDENDS.

     Investors  are  subject  to the risk that we may not  qualify as a REIT for
income tax purposes.  REITs are subject to a range of complex organizational and
operational  requirements.  As a REIT, we must  distribute  with respect to each
year at least 90% of our REIT taxable income to our shareholders (which may take
into account certain dividends paid in the subsequent year).  Other restrictions
apply to our income  and  assets.  Our REIT  status is also  dependent  upon the
ongoing  qualification  of our  affiliate,  PSB,  as a REIT,  as a result of our
substantial ownership interest in that company.

     For any  taxable  year that we fail to  qualify as a REIT and are unable to
avail ourselves of relief  provisions set forth in the Code, we would be subject
to  federal  income tax at the  regular  corporate  rates on all of our  taxable
income,  whether or not we make any  distributions  to our  shareholders.  Those
taxes  would  reduce  the  amount  of cash  available  for  distribution  to our
shareholders or for reinvestment  and would adversely affect our earnings.  As a
result,  our failure to qualify as a REIT  during any taxable  year could have a
material  adverse  effect  upon us and  our  shareholders.  Furthermore,  unless
certain relief  provisions  apply, we would not be eligible to elect REIT status
again until the fifth taxable year that begins after the first year for which we
fail to qualify.

     We have also  assumed,  based on Shurgard  Storage  Center,  Inc.'s  public
filings and due  diligence  performed  in  connection  with our  acquisition  of
Shurgard,  that  Shurgard  qualified  as a REIT through the date of the Shurgard
Merger on August 22, 2006.  However, if Shurgard failed to qualify as a REIT, we
generally  would have  succeeded  to or  incurred  significant  tax  liabilities
(including  the  significant  tax  liability  that would have  resulted from the
deemed sale of assets by Shurgard to us as part of the Shurgard Merger).

WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS AND ACTIONS THAT AFFECT OUR OPERATING
RESULTS AND FINANCIAL CONDITION.

     Our business is subject to regulation under a wide variety of U.S. federal,
state and local laws, regulations and policies.  There can be no assurance that,
in response to current economic conditions or the current political  environment
or otherwise,  laws and  regulations  will not be implemented or changed in ways
that adversely  affect our operating  results and financial  condition,  such as
current  federal  legislative  proposals to expand health care coverage costs or
facilitate union activity or otherwise increase operating costs.

ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              -----------------------------------------------------------

     Our Board of Trustees has authorized the repurchase from time to time of up
to 35,000,000 of our common shares on the open market or in privately negotiated
transactions.  During the nine  months  ended  September  30,  2009,  we did not
repurchase  any of our  common  shares.  From the  inception  of the  repurchase
program  through  November 6, 2009,  we have  repurchased  a total of 23,721,916
common shares at an aggregate cost of approximately  $679.1 million.  Our common
share  repurchase  program  does  not have an  expiration  date  and  there  are
11,278,084  common  shares  that may yet be  repurchased  under  our  repurchase

                                       66



program as of September  30, 2009.  During the nine months ended  September  30,
2009,  we did not  repurchase  any of our common  shares  outside  our  publicly
announced  repurchase  program,  except  shares  withheld  for  payment  of  tax
withholding in connection with our various stock option plans.  Future levels of
common  repurchases  will be dependent  upon our available  capital,  investment
alternatives, and the trading price of our common shares.

ITEM 6.       EXHIBITS
              --------

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

                                       67



                                   SIGNATURES

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

                                       DATED: November 6, 2009

                                       PUBLIC STORAGE

                                       By: /s/ John Reyes
                                           --------------
                                           John Reyes
                                           Senior Vice President and
                                           Chief Financial Officer
                                          (Principal financial officer
                                           and duly authorized officer)

                                       68




                                 PUBLIC STORAGE

                              INDEX TO EXHIBITS (1)

                           (Items 15(a)(3) and 15(c))


3.1         Articles of Amendment and  Restatement  of  Declaration  of Trust of
            Public Storage,  a Maryland real estate investment trust. Filed with
            the  Registrant's  Current Report on Form 8-K dated June 6, 2007 and
            incorporated by reference herein.

3.2         Bylaws of Public Storage,  a Maryland real estate  investment trust.
            Filed with the Registrant's Current Report on Form 8-K dated June 6,
            2007 and incorporated by reference herein.

3.3         Articles  Supplementary for Public Storage Equity Shares,  Series A.
            Filed with the Registrant's Current Report on Form 8-K dated June 6,
            2007 and incorporated by reference herein.

3.4         Articles Supplementary for Public Storage Equity Shares, Series AAA.
            Filed with the Registrant's Current Report on Form 8-K dated June 6,
            2007 and incorporated by reference herein.

3.5         Articles   Supplementary   for  Public  Storage  7.500%   Cumulative
            Preferred  Shares,  Series V.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.6         Articles   Supplementary   for  Public  Storage  6.500%   Cumulative
            Preferred  Shares,  Series W.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.7         Articles   Supplementary   for  Public  Storage  6.450%   Cumulative
            Preferred  Shares , Series X.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.8         Articles   Supplementary   for  Public  Storage  6.850%   Cumulative
            Preferred  Shares,  Series Y.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.9         Articles   Supplementary   for  Public  Storage  6.250%   Cumulative
            Preferred  Shares,  Series Z.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.10        Articles   Supplementary   for  Public  Storage  6.125%   Cumulative
            Preferred  Shares,  Series A.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.11        Articles   Supplementary   for  Public  Storage  7.125%   Cumulative
            Preferred  Shares,  Series B.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.12        Articles   Supplementary   for  Public  Storage  6.600%   Cumulative
            Preferred  Shares,  Series C.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.13        Articles   Supplementary   for  Public  Storage  6.180%   Cumulative
            Preferred  Shares,  Series D.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.14        Articles   Supplementary   for  Public  Storage  6.750%   Cumulative
            Preferred  Shares,  Series E.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.15        Articles   Supplementary   for  Public  Storage  6.450%   Cumulative
            Preferred  Shares,  Series F.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

                                       69



3.16        Articles   Supplementary   for  Public  Storage  7.000%   Cumulative
            Preferred  Shares,  Series G.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.17        Articles   Supplementary   for  Public  Storage  6.950%   Cumulative
            Preferred  Shares,  Series H.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.18        Articles   Supplementary   for  Public  Storage  7.250%   Cumulative
            Preferred  Shares,  Series I.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.19        Articles   Supplementary   for  Public  Storage  7.250%   Cumulative
            Preferred  Shares,  Series K.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.20        Articles   Supplementary   for  Public  Storage  6.750%   Cumulative
            Preferred  Shares,  Series L.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.21        Articles   Supplementary   for  Public  Storage  6.625%   Cumulative
            Preferred  Shares,  Series M.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 6, 2007 and  incorporated by reference
            herein.

3.22        Articles   Supplementary   for  Public  Storage  7.000%   Cumulative
            Preferred  Shares,  Series N.  Filed with the  Registrant's  Current
            Report on Form 8-K dated June 28, 2007 and incorporated by reference
            herein.

4.1         Master Deposit  Agreement,  dated as of May 31, 2007. Filed with the
            Registrant's  Current  Report  on Form 8-K  dated  June 6,  2007 and
            incorporated by reference herein.

10.1        Amended  Management  Agreement between Registrant and Public Storage
            Commercial  Properties  Group,  Inc.  dated as of February 21, 1995.
            Filed with Public  Storage Inc.'s ("PSI") Annual Report on Form 10-K
            for the year ended  December  31, 1994 (SEC File No.  001-0839)  and
            incorporated herein by reference.

10.2        Second  Amended  and  Restated  Management  Agreement  by and  among
            Registrant and the entities  listed therein dated as of November 16,
            1995. Filed with PS Partners,  Ltd.'s Annual Report on Form 10-K for
            the year  ended  December  31,  1996  (SEC File No.  001-11186)  and
            incorporated herein by reference.

10.3        Limited  Partnership  Agreement of PSAF Development  Partners,  L.P.
            Filed with  PSI's  Quarterly  Report on Form 10-Q for the  quarterly
            period ended March 31, 1997 (SEC File No. 001-0839) and incorporated
            herein by reference.

10.4        Agreement of Limited  Partnership of PS Business  Parks,  L.P. Filed
            with PS Business Parks, Inc.'s Quarterly Report on Form 10-Q for the
            quarterly  period ended June 30, 1998 (SEC File No.  001-10709)  and
            incorporated herein by reference.

10.5        Amended and  Restated  Agreement of Limited  Partnership  of Storage
            Trust Properties,  L.P. (March 12, 1999). Filed with PSI's Quarterly
            Report on Form 10-Q for the  quarterly  period  ended June 30,  1999
            (SEC File No. 001-0839) and incorporated herein by reference.

10.6        Limited  Partnership  Agreement of PSAC Development  Partners,  L.P.
            Filed with PSI's Current  Report on Form 8-K dated November 15, 1999
            (SEC File No. 001-0839) and incorporated herein by reference.

10.7        Agreement of Limited  Liability  Company of PSAC Storage  Investors,
            L.L.C.  Filed with PSI's Current  Report on Form 8-K dated  November
            15,  1999  (SEC  File  No.  001-0839)  and  incorporated  herein  by
            reference.

10.8        Amended  and  Restated  Agreement  of  Limited  Partnership  of  PSA
            Institutional  Partners, L.P. Filed with PSI's Annual Report on Form
            10-K for the year ended  December  31, 1999 (SEC File No.  001-0839)
            and incorporated herein by reference.

                                       70



10.9        Amendment to Amended and Restated  Agreement of Limited  Partnership
            of PSA  Institutional  Partners,  L.P.  Filed with  PSI's  Quarterly
            Report on Form 10-Q for the  quarterly  period  ended June 30,  2000
            (SEC File No. 001-0839) and incorporated herein by reference.

10.10       Second  Amendment  to  Amended  and  Restated  Agreement  of Limited
            Partnership  of PSA  Institutional  Partners,  L.P. Filed with PSI's
            Quarterly  Report on Form 10-Q for the quarterly  period ended March
            31,  2004  (SEC  File  No.  001-0839)  and  incorporated  herein  by
            reference.

10.11       Third  Amendment  to  Amended  and  Restated  Agreement  of  Limited
            Partnership  of PSA  Institutional  Partners,  L.P. Filed with PSI's
            Quarterly  Report  on Form  10-Q  for  the  quarterly  period  ended
            September 30, 2004 (SEC File No. 001-0839) and  incorporated  herein
            by reference.

10.12       Limited  Partnership  Agreement of PSAF Acquisition  Partners,  L.P.
            Filed  with  PSI's  Annual  Report on Form  10-K for the year  ended
            December 31, 2003 (SEC File No. 001-0839) and incorporated herein by
            reference.

10.13       Credit Agreement by and among Registrant, Wells Fargo Bank, National
            Association  and  Wachovia  Bank,  National  Association  as co-lead
            arrangers, and the other financial institutions party thereto, dated
            March 27, 2007. Filed with PSI's Current Report on Form 8-K on April
            2,  2007  (SEC  File  No.  001-0839)  and  incorporated   herein  by
            reference.

10.14*      Post-Retirement  Agreement  between  Registrant  and B. Wayne Hughes
            dated as of March 11, 2004. Filed with Registrant's Quarterly Report
            on Form 10-Q for the quarter  ended June 30,  2009 and  incorporated
            herein by reference.

10.15*      Shurgard Storage Centers, Inc. 1995 Long Term Incentive Compensation
            Plan.  Incorporated  by reference to Appendix B of Definitive  Proxy
            Statement  dated  June 8,  1995  filed  by  Shurgard  (SEC  File No.
            001-11455).

10.16*      Shurgard  Storage  Centers,  Inc.  2000  Long-Term  Incentive  Plan.
            Incorporated  by  reference to Exhibit  10.27 Annual  Report on Form
            10-K for the year ended  December  31, 2000 filed by  Shurgard  (SEC
            File No. 001-11455).

10.17*      Shurgard Storage Centers, Inc. 2004 Long Term Incentive Compensation
            Plan.  Incorporated  by reference to Appendix A of Definitive  Proxy
            Statement  dated  June 7,  2004  filed  by  Shurgard  (SEC  File No.
            001-11455).

10.18*      Public  Storage,  Inc. 1996 Stock Option and Incentive  Plan.  Filed
            with PSI's  Annual  Report on Form 10-K for the year ended  December
            31,  2000  (SEC  File  No.  001-0839)  and  incorporated  herein  by
            reference.

10.19*      Public Storage,  Inc. 2000  Non-Executive/Non-Director  Stock Option
            and Incentive Plan. Filed with PSI's Registration  Statement on Form
            S-8 (SEC File No. 333-52400) and incorporated herein by reference.

10.20*      Public Storage,  Inc. 2001  Non-Executive/Non-Director  Stock Option
            and Incentive Plan. Filed with PSI's Registration  Statement on Form
            S-8 (SEC File No. 333-59218) and incorporated herein by reference.

10.21*      Public  Storage,  Inc. 2001 Stock Option and  Incentive  Plan ("2001
            Plan").  Filed with PSI's  Registration  Statement  on Form S-8 (SEC
            File No. 333-59218) and incorporated herein by reference.

10.22*      Form of 2001 Plan Non-qualified  Stock Option Agreement.  Filed with
            PSI's Quarterly  Report on Form 10-Q for the quarterly  period ended
            September 30, 2004 (SEC File No. 001-0839) and  incorporated  herein
            by reference.

                                       71



10.23*      Form of 2001 Plan Restricted Share Unit Agreement.  Filed with PSI's
            Quarterly  Report  on Form  10-Q  for  the  quarterly  period  ended
            September 30, 2004 (SEC File No. 001-0839) and  incorporated  herein
            by reference.

10.24*      Form  of 2001  Plan  Non-Qualified  Outside  Director  Stock  Option
            Agreement.  Filed with PSI's  Quarterly  Report on Form 10-Q for the
            quarterly  period ended  September 30, 2004 (SEC File No.  001-0839)
            and incorporated herein by reference.

10.25*      Public Storage, Inc. Performance-Based Compensation Plan for Covered
            Employees. Filed with PSI's Current Report on Form 8-K dated May 11,
            2005 (SEC File No. 001-0839) and incorporated herein by reference.

10.26*      Public   Storage   2007  Equity  and   Performance-Based   Incentive
            Compensation Plan. Filed as Exhibit 4.1 to Registrant's Registration
            Statement  on Form S-8 (SEC File No.  333-144907)  and  incorporated
            herein by reference.

10.27*      Form of 2007  Plan  Restricted  Stock  Unit  Agreement.  Filed  with
            Registrant's  Quarterly  Report on Form 10-Q for the  quarter  ended
            June 30, 2007 and incorporated herein by reference.

10.28*      Form of 2007 Plan Stock Option  Agreement.  Filed with  Registrant's
            Quarterly  Report on Form 10-Q for the  quarter  ended June 30, 2007
            and incorporated herein by reference.

10.29*      Form of Indemnity Agreement. Filed with Registrant's Amendment No. 1
            to Registration  Statement on Form S-4 (SEC File No. 333-141448) and
            incorporated herein by reference.

10.30*      Offer letter/Employment  Agreement dated as of July 28, 2008 between
            Registrant  and Mark  Good.  Filed as Exhibit  10.1 to  Registrant's
            Current Report on Form 8-K dated September 9, 2008 and  incorporated
            herein by reference.

12          Statement Re:  Computation of Ratio of Earnings to Fixed Charges and
            Preferred Stock Dividends. Filed herewith.

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

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

32          Section 1350 Certifications. Filed herewith.

                    101 .INS**      XBRL Instance Document

                    101 .SCH**      XBRL Taxonomy Extension Schema

                    101 .CAL**      XBRL Taxonomy Extension Calculation Linkbase

                    101 .DEF**      XBRL Taxonomy Extension Definition Linkbase

                    101 .LAB**      XBRL Taxonomy Extension Label Linkbase

                    101 .PRE**      XBRL Taxonomy Extension Presentation Link

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

*           Denotes management compensatory plan agreement or arrangement.

**          Furnished herewith.

                                       72