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

FORWARD LOOKING STATEMENTS: This Quarterly Report on Form 10-Q 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. We caution you not to place undue reliance on forward-looking statements, which speak only as the date of this report or as of the dates indicated in the statements. All of our forward-looking statements, including those in this report, are qualified in their entirely by this statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of this document, except where expressly required by law. Accordingly, you should use caution in relying on past forward-looking statements to anticipate future results.

Factors and risks that may impact our future results and performance include, but are not limited to, those described in Item 1A, "Risk Factors" in the Public Storage Annual Report on Form 10-K for the year ended December 31, 2008, our subsequent filings on Form 8-K and in our other filings with the Securities and Exchange Commission ("SEC"). These risks include, among other things, 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, 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 the current global fiscal crisis;

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");

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;

o difficulties in raising capital at a reasonable cost;

o delays in the development process; and

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

The risks included here are not exhaustive as it is not possible for management to predict all possible risk factors that may exist or emerge from time to time. Investors should refer to our future reports and other information filed from time to time with the SEC for additional information.

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 March 31, 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 Code and applicable state laws. We also believe that Shurgard 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 long-lived assets, including real estate and other intangible 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.

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 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. Some of these potential losses, of which we are aware, are described in Note 12 to our March 31, 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.

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) self-storage,
(ii) Shurgard Europe and (iii) ancillary. The self-storage segment comprises the direct and indirect ownership, development, and operation of storage facilities in the U.S. Our Shurgard Europe segment comprises our equity interest in the self-storage and associated activities in seven countries in Western Europe. Our ancillary segment represents all of our other activities, which are reported as a group, including (i) commercial property operations, directly and through our 46% 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 March 31, 2009, PSB owned and operated 19.6 million net rentable square feet of commercial space), (ii) the reinsurance of policies against losses to goods stored by tenants in our self-storage facilities, (iii) retail operations conducted at our self-storage facilities including merchandise sales and truck rentals, and (iv) management of self-storage facilities owned by third-party owners and domestic facilities owned by the affiliated entities that are not consolidated.

During the three months ended March 31, 2009, we decided to terminate our containerized storage and truck rental operations, each of which had previously been classified in our ancillary segment. Accordingly, the results of operations for these operations have been included in discontinued operations on our condensed consolidated statements of income. See "Discontinued Operations" in Note 2 to our March 31, 2009 condensed consolidated financial statements for further information regarding our discontinued operations. See also Note 11 to our March 31, 2009 condensed consolidated financial statements for further information regarding our segments.

Our self-storage facilities in the U.S. comprise approximately 93% of our operating revenue, 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.

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.

While historically we have developed real estate facilities, we have substantially reduced our development activities due to the existing recession and our belief that our capital can be more effectively put to use in other ways.

We currently have $493.4 million in cash and cash equivalents on hand at March 31, 2009, and continue to monitor the appropriate and most effective way to 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 MARCH 31, 2009:

Net income for the three months ended March 31, 2009 was $153.4 million compared to $519.9 million for the same period in 2008, representing a decrease of $366.5 million. This decrease is primarily due to a gain of $341.9 million in the three months ended March 31, 2008 related to our disposition of an interest in Shurgard Europe, combined with a $34.7 million foreign exchange loss during the quarter ended March 31, 2009 as compared to an exchange gain of $41.0 million in the same period in 2008.

Net income to Public Storage shareholders for the three months ended March 31, 2009 was $217.0 million compared to $512.3 million for the same period in 2008, representing a decrease of $295.3 million. The decrease is due primarily to the factors noted above with respect to net income, partially offset by a $72.0 million reduction in earnings allocated to our preferred partnership unitholders in the three months ended March 31, 2009.

The foreign currency exchange gains and losses relate primarily to a Euro denominated loan receivable from Shurgard Europe and were due to changes in the value of the U.S. Dollar relative to the Euro during each period.

During the three months ended March 31, 2009, we repurchased preferred partnership units at an aggregate acquisition cost of $153.0 million which was approximately $72.0 million less than the original net proceeds from issuance of the respective units. The $72.0 million benefit to our common shareholders is reflected as a reduction in the amount of net income allocated to these preferred partnership unitholders and a corresponding increase in income allocation to our common shareholders.

Net operating income with respect to our domestic operations increased by $0.2 million in the three months ended March 31, 2009 as compared to the same period in 2008 due to an increase of $4.2 million with respect to our non-stabilized facilities combined with a decrease of $4.0 million with respect to our Same Store operations.

During the three months ended March 31, 2009, pursuant to a tender offer, we acquired $96.7 million principal amount of our 7.75% senior unsecured notes due in 2011 at par plus accrued interest, and $13.5 million face amount of our 5.875% senior unsecured notes due in 2013 at 92.5% of par plus accrued interest. We recorded a gain on early retirement of debt of approximately $4.1 million in the quarter ended March 31, 2009.

During the three months ended March 31, 2009, we repurchased preferred shares at an acquisition cost of $17.5 million was approximately $6.2 million less than the original net proceeds from issuance of the respective preferred securities. The $6.2 million benefit to our common shareholders is reflected as an increase in the amount of net income allocated to our common shareholders and a corresponding decrease in income allocation to our preferred shareholders.

For the three months ended March 31, 2009, net income allocable to our common shareholders (after allocating net income to our preferred and equity shareholders) was $159.5 million or $0.95 per common share on a diluted basis compared to $444.8 million or $2.63 per common share on a diluted basis for the same period in 2008, representing an decrease of $285.3 million or $1.68 per common share on a diluted basis. These decreases are primarily due to the impact of the factors described above.

Weighted average diluted common shares were 168,473,000 and 168,982,000 for the three months ended March 31, 2009 and 2008, respectively.

REAL ESTATE OPERATIONS

SELF-STORAGE OPERATIONS: Our self-storage operations are by far the largest component of our operating activities, representing approximately 92% and 93% of our total revenues generated for the three months ended March 31, 2009 and 2008, respectively. Net operating income (after depreciation and amortization expense) with respect to our self-storage operations increased by $7.5 million during the three months ended March 31, 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 with respect to the Company's performance for our self-storage segment, which includes: (i) the Same Store group, representing our domestic facilities that we have owned and have been operating on a stabilized basis since January 1, 2007, (ii) the facilities operated by Shurgard Europe which were deconsolidated effective March 31, 2008, and (iii) all other facilities included in our financial statements, which are primarily those 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.

SELF - STORAGE OPERATIONS SUMMARY:
---------------------------------                       Three Months Ended March 31,
                                                   ----------------------------------------
                                                                                Percentage
                                                       2009           2008        Change
                                                   -----------    -----------   -----------
                                                           (Dollar amounts in thousands)
Rental income:
   Same Store Facilities.......................    $   347,185    $   349,991     (0.8)%
   Other Facilities ...........................         24,413         19,893     22.7%
                                                   -----------    -----------   ---------
      Total Self-Storage Segment...............        371,598        369,884      0.5%
   Shurgard Europe Segment Facilities (a)......              -         54,722   (100.0)%
                                                   -----------    -----------   ---------
     Total rental income.......................        371,598        424,606    (12.5)%
                                                   -----------    -----------   ---------
Cost of operations before depreciation and
    amortization expense:
   Same Store Facilities.......................        125,007        123,856      0.9%
   Other Facilities............................          8,634          8,305      4.0%
                                                   -----------    -----------   ---------
      Total Self-Storage Segment...............        133,641        132,161      1.1%
   Shurgard Europe Segment Facilities (a)......              -         24,654   (100.0)%
                                                   -----------    -----------   ---------
      Total cost of operations.................        133,641        156,815    (14.8)%
                                                   -----------    -----------   ---------
Net operating income before depreciation and
    amortization expense (b):
   Same Store Facilities.......................        222,178        226,135     (1.7)%
   Other Facilities............................         15,779         11,588     36.2%
                                                   -----------    -----------   ---------
      Total Self-Storage Segment...............        237,957        237,723      0.1%
   Shurgard Europe Segment Facilities..........              -         30,068   (100.0)%
                                                   -----------    -----------   ---------
   Total net operating income before
        depreciation and amortization expense..        237,957        267,791    (11.1)%
   Total depreciation and amortization expense.        (84,187)      (121,499)   (30.7)%
                                                   -----------    -----------   ---------
   Total net operating income..................    $   153,770    $   146,292      5.1%
                                                   ===========    ===========   =========

Data for Same Store and Other Facilities:

Number of facilities at period end:
  Same Store Facilities........................          1,899          1,899      -
  Other Facilities.............................             93             84     10.7%

Net rentable square footage at period end (in thousands):
  Same Store Facilities........................        117,462        117,462      -
  Other Facilities.............................          8,536          7,381     15.6%

Weighted average square foot occupancy during the period:
  Same Store Facilities........................          87.9%          88.8%     (1.0)%
  Other Facilities.............................          79.9%          73.3%      9.0%

Realized rents per occupied square foot during the period:
  Same Store Facilities........................    $     12.84    $     12.87     (0.2)%
  Other Facilities.............................    $     13.80    $     14.11     (2.2)%

Square foot occupancy at period end:
  Same Store Facilities........................          88.2%          89.3%     (1.2)%
  Other Facilities.............................          81.2%          74.6%      8.8%
In place rents per square foot at period end:
  Same Store Facilities........................    $     13.57    $     13.86     (2.1)%
  Other Facilities.............................    $     14.75    $     15.45     (4.5)%

(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 March 31, 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) Total net operating income before depreciation and amortization or "NOI" is a non-GAAP (generally accepted accounting principles) financial measure that excludes the impact of depreciation and amortization expense. See Note 11 to our March 31, 2009 consolidated financial statements, "Segment Information," which includes a

reconciliation of NOI for our self-storage and Shurgard Europe segments to our consolidated net income. Although depreciation and amortization are operating expenses, we believe that NOI is a meaningful measure of operating performance, because we utilize NOI in making decisions with respect to capital allocations, in determining current property values, segment performance, and comparing period-to-period and market-to-market property operating results. NOI is not a substitute for net operating income after depreciation and amortization in evaluating our operating results.

The Same Store Pool represents those 1,899 facilities that are stabilized and owned since January 1, 2007 and therefore provide meaningful comparisons for 2007, 2008, and 2009. The Same Store Pool increased from 1,789 at December 31, 2008 to 1,899 at March 31, 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 March 31, 2009.

SAME STORE FACILITIES                                        Three Months Ended March 31,
. . .