Fitch Optimistic About Self-Storage REIT

Fitch Ratings has upgraded the outlook for Public Storage to positive from stable. The New York ratings agency has also affirmed some ratings on the Glendale, Calif., self-storage real estate investment trust and its affiliate, Seattle-based Shurgard Storage Centers.

The improved outlook for Public Storage is supported by the cash generated by the REIT’s operations. It has a portfolio of over 2,100 self-storage facilities valued at $10.3 billion as of December 2007, with little attached debt. The properties are located in 38 states and seven Western European countries.

Public Storage’s outlook is also based on improvement in the reserves that cover its debt, an increase in income available to the REIT, and an increase in the rental income generated by its portfolio. Also, occupancy is up at the REIT’s properties, from 84.4% in 2006 to 88.5% in 2007.

Further supporting the positive outlook is New York Common Retirement Fund’s acquisition of a 51% interest in Shurgard European Holdings, the holding company for Public Storage’s European operations. Fitch sees some positive implications for Public Storage from this acquisition. For one, this reduces Shurgard’s exposure to the European market, which is dominated by a few players. This means it may require a significant commitment of cash from Shurgard to gain ground in this market.

The ratings agency also has an ‘A-’ rating on Public Storage’s creditworthiness, or its issuer default rating, which reflects “management’s opportunistic approach toward self-storage acquisitions and refinancings through economic cycles.”

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