Origins
The idea for Public Storage was conceived by Southern California real estate developer B. Wayne Hughes in the early 1970s. During a trip to Texas, he observed that local real estate developers were doing well creating mini-storage facilities outside of Dallas and Houston.[4] He brought the self storage concept back with him to California.[4] Hughes partnered with Kenneth Volk and the two founded Public Storage in August 1972 with a $50,000 initial investment,[4] at first calling it "Private Storage Spaces Inc."[5][6]
The first warehouse was built in 1972 in El Cajon, California with $50,000 in capital.[4][7] According to Hughes, "Private Storage Spaces Inc." confused people into thinking it was private, so the name was changed to "Public Storage" to match the PS acronym.[6][5] The founders initially planned to build storage warehouses as a temporary source of income until the land became more valuable and could be redeveloped for another use.[8]
Within three months, the first location was breaking even with a 35% occupancy.[8] The units were rented for a similar price per square foot as apartments or office space, but cost 35% to 40% less to build and maintain.[8] A property management subsidiary called Public Storage Management Inc. was formed in 1973.[5] By 1974, 20 locations had been built.[4][8]
Real Estate Limited Partnership financing
Hughes disliked debt, so he financed the purchase and development of new properties primarily through real estate limited partnerships (RELPs).[8] At first, Public Storage built warehouses and sold them to independent RELPs for a development fee. The company's own RELP, called Public Storage Partners Ltd, was formed in 1975[5] and closed its first deal for $3 million in investments two years later.[8] Public Storage paid cash to acquire property and build a self storage facility, then used the property's income to pay investors back and earn a portion as profit. Public Storage Inc. also earned revenues from a portion of each deal that was made.[8]
Early investors earned three to four times their money back due to increasing property values in Southern California, high occupancy rates, and increasing storage rental prices.[8] By the mid-1980s, Public Storage was raising $200 to $300 million in investments each year.
Real Estate Investment Trust (REIT)
According to Financial World, by 1989 the real estate limited partnership (RELP) market that Public Storage relied on for funding "all but vanished". A book by Public Storage Inc. said the Tax Reform Act of 1986 reduced the tax benefits of RELPs and was followed by "a tough time for real estate companies."[5] In December 1990, five of its partnerships were converted to REITs.[10] It also began consolidating its partnerships and acquiring many of the companies in which it held an interest.
Storage Equities was founded by Public Storage in 1980[11] to purchase self-storage facilities.[5] It was one of 17 self-storage REITs owned in part by Public Storage.[12]
In 1995, PS Orangeco was created as a subsidiary, selling boxes, packaging, truck rentals, and other moving supplies.
2000-present
In 2006, the company acquired Shurgard Storage Centers in a $5.5 billion transaction, acquiring 624 locations, including 141 in Europe.[18] Public Storage had attempted to acquire the company in 2000 and again in 2005, but its offers were rejected.[4][7]
In 2007, a customer's belongings were auctioned for non-payment while he was serving the US military in Iraq. After receiving negative publicity, Public Storage apologized and gave him $8,000 as compensation for his sold belongings.[19]
In March 2010, the company acquired 30 locations from A-American Self Storage for $189 million.[20]
In December 2013, the company acquired a 44-property portfolio from Stor-All Storage for $430 million.[21]
