Public Storage
| Company type | Public company |
|---|---|
| Industry | Self storage, Real estate investment trust |
| Founded | August 1972 |
| Founder | B. Wayne Hughes, Kenneth Volk Jr. |
| Headquarters | Glendale, California , United States |
Area served | United States, Canada, Europe |
Key people | Ronald L. Havner, Jr. (former CEO) |
| Products | Self storage units, packing materials, insurance services |
| Owner | Tamara Hughes Gustavson (largest individual shareholder, approx. 10%) |
Public Storage is a global American self storage enterprise based in Glendale, California, functioning as a real estate investment trust (REIT). It stands as the foremost self-storage chain in the United States, boasting upwards of 3,390 facilities throughout the US, Canada, and Europe. Besides self-storage, the firm holds a 42% ownership in an office parks subsidiary and provides packing materials alongside additional services. Operating as a REIT, it allocates over 90% of its earnings to its real estate investors. The largest individual shareholder is Tamara Hughes Gustavson, daughter of co-founder B. Wayne Hughes, who owns approximately 10% of the company's shares.
Established in 1972 by B. Wayne Hughes and Kenneth Volk Jr., Public Storage reached 1,000 locations by 1989, with growth financed through real estate limited partnerships (RELPs). It transitioned to a publicly traded REIT in 1995 following a merger with Storage Equities. In 2006, the company purchased Shurgard Storage Centers for $5.5 billion; Shurgard was subsequently spun off as an independent publicly traded entity, while Public Storage maintained a 36.6% ownership stake.
Founding
Public Storage was launched in August 1972 by Southern California real estate developer B. Wayne Hughes and Kenneth Volk with an initial capital of $50,000. Inspired by mini-storage operations observed in Texas, Hughes introduced the self-storage model to California. The inaugural facility opened that same year in El Cajon, California. Originally called "Private Storage Spaces Inc.," the firm rebranded to "Public Storage" to emphasize its public accessibility and align with the PS abbreviation. Initially, the founders treated storage warehouses as interim income sources until land values justified redevelopment.
Within three months of opening, the first site reached break-even at 35% occupancy. Rental prices were on par with apartments or office spaces but construction and maintenance costs were 35–50% lower. A property management division named Public Storage Management Inc. was created in 1973, and by 1974 the company had developed 20 locations.
Real Estate Limited Partnership funding
Hughes favored minimizing debt by primarily financing property development through real estate limited partnerships (RELPs). At first, Public Storage constructed warehouses and sold them to independent RELPs while earning development fees. In 1975, it established its own RELP entity, Public Storage Partners Ltd., which secured $3 million from investors by 1977. The company purchased land using cash, built storage facilities, then utilized rental income to repay investors and generate profits while collecting fees on each transaction.
Early backers enjoyed returns ranging from three to four times their initial investments due to appreciating property values and rising occupancy rates in Southern California. By the mid-1980s, Public Storage raised between $200 million and $300 million annually through RELPs, allowing expansion even as competitors slowed amid high borrowing costs. After Volk's retirement mid-decade, Hughes acquired his shares; Forbes estimated the company’s value at $800 million.
With capital from investors, Public Storage expanded outside California into the top 39 U.S. metropolitan areas, clustering facilities to share development resources and capitalize on localized television advertising campaigns. Growth decelerated in the mid-1980s due to intensified competition, increasing land prices, and slower rental rate growth. Additional obstacles included unfavorable weather conditions and labor markets beyond California as well as unsuccessful ventures into office park properties.
By the late 1980s, Public Storage had launched its 1,000th facility and was three times larger than its closest U.S. competitor. By 1989, it attracted $2.7 billion from some 200,000 investors. The company played a pivotal role in popularizing self-storage as a real estate investment option and became one of the longest-standing RELP platforms. By 1991, it had created over 150 RELPs and real estate investment trusts (REITs).
Real Estate Investment Trust (REIT)
By the end of the 1980s, the real estate limited partnership (RELP) market that Public Storage had relied upon for capital had largely vanished. The Tax Reform Act of 1986 reduced the tax advantages associated with RELPs, creating obstacles for real estate firms. In December 1990, Public Storage transitioned five of its partnerships into Real Estate Investment Trusts (REITs), consolidating these partnerships and acquiring stakes in affiliated companies.
Storage Equities, established by Public Storage in 1980, was among 17 self-storage REITs connected to the corporation. From 1992 through 1995, Storage Equities paid Public Storage $31 million in fees for management and consulting services. In 1995, Public Storage merged with Storage Equities Inc., reorganizing as a unified REIT under the name Public Storage Inc. This consolidation resolved conflicts of interest and simplified the corporate framework.
That same year, Public Storage separated its box, locks, and packing supplies division into a subsidiary named PS Orangeco to preserve its tax-exempt REIT status by concentrating on real estate-related activities. This separation restricted investments from institutional investors limited to pure real estate entities. By 1998, Public Storage reported quarterly revenues of $141 million, held assets valued at $2 billion, and operated 1,200 facilities across 38 states. Later that year, it expanded its footprint by acquiring competitor Storage Trust Realty for $600 million, strengthening market share and solidifying its position as a leader in the self-storage sector.
Recent history
Throughout the early 2000s, Public Storage experienced consistent growth and was included in the S&P 500 index in 2005. In 2006, it completed a $5.5 billion acquisition of Shurgard Storage Centers, adding 624 sites including 141 located in Europe. Prior attempts to acquire Shurgard in 2000 and 2005 had been unsuccessful. The company has continued to expand through acquisitions like the March 2010 purchase of 30 locations from A-American Self Storage.
Operations
Public Storage stands as the largest self-storage operator in the United States with 2,836 locations as of 2022. It holds a 49% ownership interest in Shurgard Europe, overseeing 193 European facilities, and controls a 42% stake in PS Business Parks, which manages a portfolio of 2,546 office parks. The top self-storage enterprise in Canada operates independently but licenses the Public Storage brand.
Its properties are generally concentrated near major metropolitan areas at freeway junctions and intersections to optimize market penetration. The company achieves low operating expenses by automating customer entry systems and employing minimal on-site personnel, often compensating property managers close to minimum wage without covering rent or utilities.
Failure to pay rental fees
If rental payments are overdue by sixty days, contents within storage units are auctioned off. Although the television series Storage Wars increased public interest in these auctions, most units do not contain items of substantial value. Occasionally, auctions have sparked controversy; notably in 2007, Public Storage auctioned possessions belonging to a customer deployed in Iraq, resulting in negative media attention and an $8,000 settlement payment.
Theft, insurance, and damage issues
In 2005, Public Storage reported an increase in claims associated with moisture and mold damage. Their rental agreements explicitly exclude responsibility for the contents of units, even when damage results from defects within the storage units themselves. According to The Wall Street Journal, options for recourse in cases of theft or damage at self-storage facilities remain limited.
A significant number of customers have lodged complaints about insurance policies sold by Public Storage agents following burglaries and subsequent claim denials. Investigative reports from media outlets in California, Kansas, and Washington uncovered challenges in obtaining reimbursements from affiliated insurers such as Willis and The New Hampshire Insurance Company. Frequently, claims are rejected due to insufficient proof of forced entry, despite evidence that burglars often replace locks to hide break-ins. Several state insurance regulators have publicly criticized the practices of these associated insurers.
A pending class action lawsuit accuses Public Storage of misleading consumers by suggesting that insurance premiums are charged at cost, while the company retains considerable profits. Although insurance sales generate substantial earnings, they constitute less than five percent of the overall revenue for the company.
Financial overview
Public Storage functions as a "self-administered, self-managed" real estate investment trust (REIT), aggregating capital from numerous investors to acquire and oversee real estate holdings. By 2008, it held the position as the largest publicly traded self-storage REIT. In 2013, it achieved a profit margin of 50%, ranking it third highest among S&P 500 companies. Over a 20-year span through the first quarter of 2016, the firm delivered an average annual total return of 17%, outperforming the S&P 500 by a factor of two.
More than 90% of its revenue is derived from self-storage operations, supplemented by income from insurance services, packing materials, and a 44% ownership interest in PS Business Parks. The company established PS Reinsurance in 1984 to insure storage unit contents and launched PS Orangeco in 1995 to provide boxes, packing supplies, truck rentals, and moving equipment.
In 2017, then-CEO Ronald L. Havner, Jr. earned $10.5 million, reflecting both the company's robust financial results and executive compensation aligned with market performance.