Shurgard Storage Centers Form 10-K/A

Positions and Offices with the Company

Charles Barbo

Chairman of the Board, President and Chief Executive Officer

Harrell Beck

Director, Senior Vice President, Chief Financial Officer and Treasurer

David Grant

Executive Vice President

10-K/A 1 v90426e10vkza.htm FORM 10-K/A Shurgard Storage Centers Form 10-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A


[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002


[ ]		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 0-11455

SHURGARD STORAGE CENTERS, INC.

(Exact name of registrant as specified in its charter)


Washington (State of organization)		91-1603837 (IRS Employer Identification No.)

1155 Valley Street, Suite 400, Seattle, Washington 98109
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (206) 624-8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

Class A Common Stock, par value $.001 per share		New York Stock Exchange
Preferred Share Purchase Rights		New York Stock Exchange
8.8% Series B Cumulative Redeemable Preferred Stock, par Value $.001 per share		New York Stock Exchange
8.7% Series C Cumulative Redeemable Preferred Stock, par Value $.001 per share		New York Stock Exchange
8.75% Series D Cumulative Redeemable Preferred Stock, par Value $.001 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Aggregate market value of voting stock held by nonaffiliates of the registrant as of June 28, 2002: $1,154,734,952.

Aggregate market value of voting stock held by nonaffiliates of the registrant as of March 6, 2003: $1,017,650,420.

Class A Common Stock outstanding as of March 6, 2003: 35,960,040 shares

Documents incorporated by reference: Part III is incorporated by reference from the Proxy Statement filed in connection with our Annual Shareholders Meeting to be held May 13, 2003.

There are 97 pages.

This amendment on Form 10-K/A of Shurgard Storage Centers, Inc. incorporates certain revisions to historical financial data and related descriptions but is not intended to update other information presented in this report as originally filed, except where specifically noted. This restatement includes changes to Item 6, Item 7 and Item 8. The amendment reflects the restatement of Form 10-K for the year ended December 31, 2002 filed on March 17, 2003, related to the accounting for derivative instruments. See Note X to our consolidated financial statements for further discussion of this matter. We are not required to and we have not updated any forward-looking statements previously included in Form 10-K filed on March 17, 2003.

TABLE OF CONTENTS


PART I
	Item 1 — Business
	Item 2 — Properties
	Item 3 — Legal Proceedings
	Item 4 — Submission of Matters to a Vote of Security Holders
PART II
	Item 5 — Market for the Registrant’s Common Equity and Related Stockholder Matters
	Item 6 — Selected Financial Data
	Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 8 — Financial Statements and Supplementary Data
	Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10 — Directors and Executive Officers of the Registrant
	Item 11 Executive Compensation
	Item 12 Security Ownership of Certain Beneficial Owners and Management
	Item 13 — Certain Relationships and Related Transactions
	Item 14 — Disclosure Controls
PART IV
	Item 16 — Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURE
CERTIFICATIONS
Exhibit 23.1
Exhibit 99.1
Exhibit 99.2

PART I

Item 1 — Business

Overview

Shurgard Storage Centers, Inc. is a real estate investment trust (REIT) that develops, acquires, owns and manages self storage centers and related operations. Our self storage centers offer easily accessible storage space for personal and business uses. We are one of the four largest operators of self storage centers in the United States and the largest operator of self storage centers in Europe. As of December 31, 2002, we operated a network of 560 storage centers and two business parks located throughout the United States and in Europe. Of these properties, we own or lease, directly and through our subsidiaries and joint ventures, 534 properties containing approximately 34.0 million net rentable square feet. The 534 properties include 87 in which we hold joint venture interests ranging from 50% to 99% and 96 stores located in Europe in which we have a 7.57% ownership. Of the 534 properties, 438 are located in 21 states in the U.S., and 96 are located in Europe. We also manage for third parties 28 self storage centers containing approximately 1.6 million net rentable square feet. For the year ended December 31, 2002, our domestic properties had a weighted average annual net rentable square foot occupancy rate of 80.0% and a weighted average rent per net rentable square foot of $11.50. For the year ended December 31, 2002, our European properties had a weighted average annual net rentable square foot occupancy rate of 53% and a weighted average rent per net rentable square foot of $16.25.

We were incorporated in Delaware on July 23, 1993 and began operations through the consolidation on March 1, 1994 of 17 publicly held real estate limited partnerships that were sponsored by Shurgard Incorporated. On March 24, 1995, Shurgard Incorporated merged with and into Shurgard Storage Centers, Inc., and we became self-administered and self-managed. In May 1997, we reincorporated in the state of Washington.

Business Strategy

Our mission is to become the global leader in storage products and services and to ensure satisfaction and value for our customers through security, quality and innovation. Our strategy involves an emphasis on customer service and satisfaction, portfolio management, development and acquisitions and property management systems.

Customer Service and Satisfaction

• Quality Employees. We view the quality of customers’ interaction with employees as critical to our long-term success. Accordingly, we emphasize teamwork in our employee training programs. Through our emphasis on training, personnel development and decentralized decision-making, we believe we attract well-qualified, highly motivated employees who are committed to providing superior levels of customer service.

• Convenient and Secure Stores. Our stores are easily accessible, offer a range of storage products and services for customer convenience and emphasize security and product quality. We believe that our strategy of offering high-quality, convenient stores strengthens the brand image of Shurgard, attracts customers and enables us to maintain premium rents.

—   Store Location and Hours. Our stores are generally located in major metropolitan areas along retail and high-traffic corridors for easy customer access and usually have significant road frontage for high visibility. Although hours vary from store to store, customers can generally access their individual units between 6 a.m. and 9 p.m seven days a week.

—   One-Stop Convenience. Our stores offer a range of storage products and ancillary services, including supplies such as packing and storage materials, locks and boxes, as well as services such as property insurance referrals, moving company referrals and Ryder truck rentals that we believe conveniently and efficiently address customers’ storage needs. In addition, we generally offer premium features such as computer-controlled access and electronic security systems. Finally, a number of our stores offer climate-controlled storage space.

—   Property Security. We use a variety of measures at our stores, as appropriate, to enhance security. Such measures may include, among others, on-site personnel, electronic devices such as intrusion and fire alarms, access controls, video and intercom surveillance devices, individual unit alarms, perimeter beams, fencing and

lighting. We assign each customer a designated personal identification number for use in connection with a computerized gate access system. Each access is automatically logged into a computer database. In addition, we have developed and plan to continue to improve our package of security controls, including software, video and interactive communication.

—   Capital Expenditures and Maintenance. We budget for a level of capital expenditures consistent with our commitment to maintaining attractive, well-maintained and secure self storage centers, which enable us to pursue a premium pricing strategy. In addition, capital expenditures for consistent signage and color scheme among our properties strengthen the brand image of Shurgard.

• Marketing and Sales. We provide managers with sales skills to elicit customer needs and turn prospects into customers. We also have a national sales center to field telephone sales calls from individual properties. Employees at the national sales center are able to sell space at the store most convenient to the customer. We have implemented additional sales and marketing programs to broaden our distribution channels, such as a web site for our enhanced e-commerce business and an expanded commercial accounts and direct sales force in selected markets.

—   Market Research. We maintain an extensive market research database on our primary markets and closely track occupancy levels, rental rates and other operational data regarding self storage properties within these markets. We have conducted focus group research and telephone surveys, and use customer comment cards to identify the primary considerations in customers’ self storage choices and satisfaction so that we can better attract and service customers.

—   Market Share. We employ various means to increase our share of the self storage market. We place prominent advertisements in the yellow pages and seek to promote customer awareness of our stores through highly visible store locations, site signage and architectural features. We locate our stores along retail and high-traffic corridors, usually with significant road frontage to increase visibility. We build on most newly developed stores a distinctive “lighthouse” office to distinguish us from competitors and to increase customer awareness of the Shurgard brand.

Portfolio Management

Our portfolio management strategy is to increase same store cash flow by achieving the highest rental rate structure consistent with strong occupancy rates, cost containment, improved operating leverage, and expansion of our existing stores.

• Revenue Optimization. We seek to optimize our revenue by achieving the highest rental rate structure for our stores, consistent with strong levels of occupancy, through the use of teams of store employees and district managers who are trained and authorized to set rental rates and make rental rate changes based on their analysis of demand and availability at a particular store. Market personnel regularly evaluate their properties’ rental rates on a periodic basis, based on unit demand and unit availability, and can quickly change marginal rental rates to ensure that revenue is optimized.

• Cost Containment and Improved Operating Leverage. We seek to increase cash flow by carefully containing operating expenses. For example, we closely monitor our real estate tax assessments appealing such assessments, as appropriate, and engage consultants to manage certain utility costs. In addition, as we increase the number of properties in our targeted markets, we achieve economies of scale and lessen the impact of corporate overhead expense. We believe that our management and operational procedures, which can be implemented over a large number of properties, enable us to add new properties quickly and with little disruption to our system.

• Strategic Expansions. We seek to increase revenue by building additional rentable storage space at suitable stores either through on site expansion or acquisition of property adjacent to existing stores. We typically receive high incremental returns on such build-out investments, because resulting revenue increases are achieved with little increase in fixed operating costs.

Development and Acquisitions

Our external growth strategy is to develop new, high-quality self storage properties and to acquire additional self storage properties that meet or can be upgraded to meet our standards. In general, we plan to develop or acquire new properties primarily in our existing markets and in new markets that create economies of scale for our current network of stores. In most markets, we seek to own at least 15 stores in order to realize operating and marketing efficiencies and increase brand awareness. We believe that the experience of our management team in developing and acquiring self storage properties strengthens our ability to pursue our external growth strategy.

We favor development or acquisition of self storage properties in major metropolitan markets, located near retail or high-traffic corridors, usually with significant road frontage to increase visibility. We rely on our market personnel to target areas in which to develop and acquire new stores. Our staff of real estate professionals in various markets develops and acquires new stores for us in the markets presenting the best opportunities. We have developed comprehensive market expansion plans for each of our target markets, and use these plans as the basis for selecting new store locations and acquisition targets. The market expansion plans use a demographic analysis of an area along with an evaluation of competitors’ locations, rates and product quality to determine the optimum number and location of new stores.

• Development. We believe that several factors favor our development strategy:

—   Development Expertise. We have substantial real estate development, construction management and architectural expertise that has been developed over the past 30 years. Along with our predecessors, we developed more than a third of the properties we currently own, lease or manage, and, since 1972, we have maintained an internal development staff, which currently employs 18 people.

—   Strategic Site Selection to Maximize Revenues. To obtain the best store locations, we target sites for development in urban areas and up-scale retail areas that often require rezoning and other complex development measures. We believe that the difficulties of developing storage properties in such in-fill areas may discourage competitors from locating nearby and, as a result, enable us to operate in underserved areas. This in turn enables us to charge higher rental rates.

—   Focus on Quality and Brand Image Development. We have greater control of quality and brand image by developing our own self storage properties. This enables us to focus on high construction quality and standards and a consistent and inviting building design. We believe our focus on quality and consistency will enable us to further strengthen awareness of the Shurgard brand, obtain repeat business, maintain premium prices and differentiate us from our competitors.

• Acquisitions. We also selectively acquire high-quality properties that are consistent with our business plan. Additional acquisitions allow us to spread overhead and certain management, marketing and advertising costs over a greater number of revenue-producing assets. As a result, we can achieve increasing economies of scale with each new property acquired. We complete a thorough analysis of each property that we intend to acquire, including, but not limited to, a review of capital expenditures that will be required for the property to meet our standards. In addition to adding high-quality properties, we look for high-quality portfolios of properties that would establish a market presence for us in a new market.

• European Investment. As of December 31, 2002, we had a 7.57% interest in an entity that owns 96 storage centers operating in six countries. We have the right to purchase an additional interest in that entity and intend to do so in 2003. The business strategies that we employ in the United States also apply to our European investment. During the past eight years, that entity has introduced our product to local consumers and built the infrastructure necessary to support an accelerated expansion program. Because of the density of the areas where Shurgard Europe develops and the limited availability of land, substantially all of the European stores have multistory buildings. In general, European customers prefer interior units in large buildings which are perceived as being safer than the drive-up units in single story buildings. The length of stay, customer use and customer profile of the European customer is similar to U.S. customers. Additionally, there are fewer acquisition opportunities in the European markets. Today, Shurgard Europe employs over 360 employees with a senior management team made up of seasoned managers with substantial local development, finance, operations and marketing experience.

Property Management Systems

We have integrated property management systems and procedures for marketing, advertising, leasing, operations, maintenance and security of properties and the management of on-site personnel. Our computerized management

information system links our corporate office with each store. We use proprietary software that expedites internal auditing, financial statement and budget preparations, allows the daily exchange of information with our corporate office and manages detailed information with respect to the tenant mix, demographics, occupancy levels, rental rates, revenue optimization, payroll and other information relating to each store. Additionally, we use a network-based accounting package that has aided in the compilation and dissemination of information from and to our stores and we use an enterprise wide-area network with remote access capability. This software enables our national sales center, commercial accounts department and our corporate employees to have remote access to current store information. We are developing significant updates to this software that will improve management information and increase effectiveness in information compilation and dissemination to our stores.

Other Activities

Shurgard Storage To Go, LLC (formerly Shurgard Storage To Go, Inc.) (STG) is a containerized storage business that brings storage directly to the customer through weather resistant 8’x 5’x 8’ storage containers. STG delivers these containers to customers for packing. STG then picks up the containers and delivers them to a warehouse for storage. Customers may access their storage container in a showroom at the warehouse or have it redelivered to their home. In addition to the monthly rental charge, we may charge service fees for transportation of the container. This business venture is currently operating in the Seattle, Portland, and San Francisco markets.

We also manage, under the Shurgard name, self storage properties owned by others that meet our quality standards. Management of such properties enables us to spread the cost of overhead across a greater number of properties. Additionally, it allows us to expand our presence in the markets in which we operate, to offer customers a broader geographic selection of self-storage properties to suit their needs and to establish relationships with property owners that may lead to future acquisitions. Management fees that we earn are not qualifying income for REIT qualification purposes. Accordingly, we closely monitor the level of these activities to ensure our continued qualification as a REIT. As of December 31, 2002, we managed 28 self storage properties for others.

For financial information about our significant industry segments, see our consolidated financial statements and related notes, including Note T. For financial information about our foreign and domestic operations, see the consolidated financial statements and the related notes, including Note E and Note J.

Capital Strategy

Our stated long-term capital objectives include: maintaining conservative leverage ratios; maintaining our investment grade rating; extending our debt maturity schedule; and increasing the percentage of our unencumbered assets. We anticipate funding our growth primarily through a combination of our lines of credit, unsecured debt, preferred and common equity, and alternative capital sources. In order to continue to grow at historical rates and to execute our internal business plan and meet our capital objectives, it will be necessary to continue to access the equity capital markets. Additionally, we anticipate that our dividend payout ratio will decline over time as we retain a higher proportion of cash flow for growth.

In order to mitigate our interest rate risk, we contract with financial institutions for derivative products that help us manage this exposure. Our investment policy prohibits us from entering into any such contract solely to secure profit by speculating on the direction of currency exchange or interest rates if unrelated to capital borrowed, lent or invested by us. In order to diversify capital sources and mitigate development risk, we have developed a significant number of our storage centers through joint venture partners.

The Self Storage Industry

The self storage industry serves an important function in the commercial and residential real estate markets. Self storage properties were first developed in the early 1960’s in the southwestern United States in response to the growing need for low-cost, accessible storage. A number of factors accelerated the demand for low-cost storage, including, among others, a more mobile society, with individuals moving to new homes and new cities needing short-term storage for their belongings, the increasing cost of housing (resulting in smaller houses), the increased popularity of apartments and condominiums, more individuals with growing discretionary income (resulting in the purchase of items such as boats and recreational vehicles that often cannot be stored at residences), the growing number of small businesses and the escalating cost of other storage alternatives. As the demand for such storage increased, and the acceptance of self storage became more widespread, self storage properties were built throughout the United States. Generally, such properties were constructed along major thoroughfares that provided ready access and public visibility or in outlying areas

where land was inexpensive. In certain areas of the country, where new construction was impractical because of construction costs, lack of suitable sites or other restrictions, older structures have been converted into self storage properties.

We believe, based on our experience, that the self storage industry is characterized by fragmented ownership, high gross margins, low levels of price sensitivity and increasing customer demand. Typical customers of a self storage property include individuals, ranging from homeowners to college students, and commercial users, such as sales representatives and distributors, who require frequent access, and business owners requiring seasonal storage. A single customer rarely occupies more than 1% or 2% of the net rentable area in any particular store.

Capital expenditures are generally less for self storage properties as compared to other types of commercial real estate due to the properties’ structural simplicity and durable materials and the lack of tenant improvement demands. Capital expenditures include periodic expenditures for replacing roofs and pavement, as well as improvements such as expansions and unit reconfigurations. Expense items include repairing asphalt, doors, fences and masonry walls, maintaining landscaping, and repairing damage caused by customer vehicles. Minimal maintenance is required when a storage unit is vacated to prepare it for the next customer.

Competition

Competition exists in every U. S. market in which our stores are located, and to a lesser extent in continental Europe and Sweden. We compete with, among others, national, regional and local self storage operators and developers. Storage operators compete based on several factors including location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed. We believe that the primary competition for potential customers of any of our self storage centers come from other self storage properties within a three-to five-mile radius of that store. We have positioned our stores within their respective markets as high-quality operators that emphasize customer service and security. We do not seek to be the lowest-price storage provider. During periods of recession, we may experience a decline in demand that can increase price competition among storage center operators.

To the extent we experience new supply in our markets, the increased available storage space may reduce occupancy levels per storage property and further intensify competition among storage providers for available tenants in those markets. The extent to which we are affected by competition will depend in significant part on market conditions within a three- to five-mile radius of our stores.

Regulation

Environmental Regulations

We are subject to federal, state and local environmental regulations that apply to the ownership, management and development of real property, including regulations affecting both construction activities and the operation of self storage properties.

In developing properties and constructing improvements, we use environmental consultants and/or governmental data to determine whether there are any flood plains, wetlands or environmentally sensitive areas that are part of the property to be developed. If any such areas are identified, development and construction are planned in conformance with federal, state, and local environmental and land-use requirements. The principal laws that could affect us are the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act; state and local governments have also adopted separate but similar environmental laws and regulations that vary from state to state and locality to locality.

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. Such laws may impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of hazardous substances on a property may adversely affect the owner’s ability to sell the property or to borrow using the property as collateral and may cause the owner or manager of the property to incur substantial remediation costs. In addition to claims for cleanup costs, the presence of hazardous substances on a property could cause the owner or manager to incur substantial liabilities as a result of a claim by a private party for personal injury or a claim by an adjacent property owner for property damage.

We have notified the Missouri Department of Natural Resources (MDNR) of elevated levels of hydrocarbons found in groundwater monitoring wells on a property in St. Louis, Missouri that we have been monitoring in accordance with a work plan approved by the MDNR. During 1998, a quarterly monitoring report revealed continued contamination in the groundwater samples. The source of the contamination is still unknown. The MDNR notified us that it will continue requiring quarterly groundwater monitoring. During 1999, at the MDNR’s request, a work plan was developed to address its question on whether on-site contamination might be spreading to adjacent properties. The work plan encompasses a broader scope of monitoring, including installation of four additional monitoring wells on adjacent properties. We obtained permission from neighboring property owners to install the four new wells on their properties. Ground water samples were taken from the new locations on the adjacent properties as well as the existing locations. Those samples showed contamination on one adjacent property, however, it is not established whether this contamination is the result of migration from the Shurgard property. Our consultant revised the work plan to incorporate the sample results. The MDNR approved a revised work plan that includes continued sampling and monitoring. We receive quarterly reports on the monitoring. In the event this ongoing monitoring indicates that significant contamination has spread to adjacent properties, the MDNR could be more aggressive in the future, and may require identification of the location of the groundwater contamination and construction of a system to remediate the problem.

Except for this property in St. Louis, we have not been notified by any governmental authority of any current, material environmental noncompliance, claim or liability in connection with any of the properties we own or manage. We have not been notified of any current claims for personal injury or property damage by a private party in connection with environmental conditions at any of the properties we own or manage. We have obtained a Phase I environmental assessment report prepared by an independent environmental consultant for each of the properties we own.

We are not aware of any environmental condition with respect to the properties we own or manage that could have a material adverse effect on our financial condition or results of operations. We cannot give assurance however, that any environmental assessments undertaken with respect to the properties have revealed all potential environmental liabilities, that any prior owner or operator of the properties did not create any material environmental condition not known to us or that an environmental condition does not otherwise exist as to any one or more of the properties that could have a material adverse effect on our financial condition or results of operation. In addition, we cannot give assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of our owned or managed properties will not be affected by the condition of properties in the vicinity of such properties (such as the presence of leaking underground storage tanks) or by third parties unrelated to us, or (iii) tenants will not violate their leases by introducing hazardous or toxic substances into our owned or managed properties that could expose us to liability under federal or state environmental laws.

Americans with Disabilities Act; Fire and Safety Regulations

The Americans with Disabilities Act (ADA) requires all public accommodations to meet certain federal standards relating to physical access and use by disabled persons. Compliance might require, among other things, removal of access barriers. A determination that we are not in compliance with the ADA could result in the imposition of fines, injunctive relief, damages or attorneys’ fees. If we were required to make modifications to comply with the ADA, our ability to make expected distributions to our shareholders could be adversely affected; however, management believes that such effect would not be material. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. Compliance with these codes and regulations may require substantial capital expenditures, which would reduce money otherwise available for distribution to shareholders.

Risk Factors

The following factors are risks associated with our business.

Real Estate Investment Risks

Legislation or changes in accounting regulations or interpretations relating to such matters as variable interest entities, guarantees, stock options and capitalization of certain development overhead costs could substantially affect our financial reporting. We may be affected by legislation or change in regulations or interpretations regarding certain accounting standards applied to our operations and certain of our existing financial and joint venture structures. Changes in accounting for unconsolidated investments, guarantees, stock options and capitalization of certain development overhead costs may affect the accounting treatment or net income of certain of our investments. The Financial Accounting

Standards Board (FASB) has issued new rules on variable interest entities and guarantees, that will likely materially impact the accounting treatment of certain of our financial and joint venture structures. The new rules on variable interest entities will likely result in the consolidation of the assets, liabilities and operations of trusts used in connection with the tax retention operating leases and our European entities for which we currently record a more limited minority interest. The new rules regarding guarantees results in a change in accounting treatment for guarantees that we utilize with the tax retention operating leases and certain unconsolidated joint venture developments. These changes could have a corresponding material adverse effect on various of our financial ratios and other financial and operational indicators unless we were to restructure those arrangements, a process that could potentially result in less favorable terms. We are not able to predict the exact impact of the new interpretations. Additionally, there may be other future changes in accounting standards that we are not aware of at this time that could materially impact our financial statements.

We have significant real estate holdings that can be difficult to sell in unfavorable economic conditions and that can have unpredictable decreases in value. Our primary business involves owning real estate-related assets and operating self storage centers. Real estate investments can be difficult to sell, especially when economic conditions are unfavorable. This makes it difficult for us to diversify our investment portfolio and to limit our risk when economic conditions change. Decreases in market rents, negative tax, real estate, and zoning law changes, and changes in environmental protection laws can also lower the value of our investments and decrease our income.

Our real estate development and acquisition activities can result in unforeseen liabilities and increases in costs. We may develop our current properties or acquire more properties. Real estate development involves risks in addition to those involved in owning and operating existing properties. For example, we must hire contractors or subcontractors to develop the properties. Problems can develop with these relationships, including contract and labor disputes, unforeseen property conditions that require additional work, and construction delays. These problems can increase construction and other costs and delay the date when tenants can occupy the property and pay us rent. Properties that we acquire may not meet our performance expectations, including projected occupancy and rental rates, and we may have overpaid for acquisitions. Failure of our properties to perform as expected or unforeseen significant capital improvements could decrease our cash flow. We may also have underestimated the cost of improvements needed for us to market a property effectively, requiring us to pay more to complete a project. If a number of these events were to occur, we could have difficulty meeting our repayment obligations and making our expected distributions to shareholders.

We focus almost exclusively on self storage businesses, which makes us vulnerable to changes in the profitability of self storage properties. Our investments focus on self storage and similar businesses and related real estate interests. We do not expect to have substantial interests in other real estate investments or businesses to hedge against the risk that national trends might decrease the profitability of our self storage-related investments.

We would have great difficulty acquiring or developing properties without access to financing. Fluctuations in market conditions or in our operating results may cause us to violate the covenants of our existing credit facilities. If we cannot access our existing financing sources, we may have to obtain equity and/or debt financing in order to develop and acquire properties. If we obtain financing by issuing additional capital stock, we could dilute the ownership of the existing shareholders. Banks or other lenders might refuse to lend us money to finance acquisitions or development, or might charge interest rates that are too high to allow us to develop and acquire new properties. If the cash flows generated from the properties are less than the distributions payable to the new shareholders or the repayment obligations to the lender, we may have difficulty meeting our overall repayment obligations and making expected distributions to our shareholders.

We do not have experience or expertise in all types of investments that we might make. Although we invest primarily in self storage properties, we may also invest in other commercial ventures if our board of directors specifically approves such investments. We have no present plans to make any such investments. If we invest in other forms of real estate, we might lack the experience and expertise necessary to manage and operate those properties effectively. We might also be unfamiliar with local laws, procedures and practices, or in the operation of such other investments, reducing income or creating losses from such investments.

Our indirect investments may result in liability against which we cannot protect. We have and may continue to make participating mortgages or acquire equity interests in partnerships, joint ventures or other legal entities that have invested in real estate. Our bylaws require that we satisfy several conditions before we make these indirect investments, including that the joint investment not jeopardize our eligibility to be taxed as a REIT or result in our becoming an investment company under the Investment Company Act of 1940, as amended. These investments carry risks that are not present when we invest directly in real estate, including the risk that we may not control the legal entity that has title to the real estate, the possibility that the enterprise in which we invest has liabilities that are not disclosed at the time of the investment, and the possibility that our investments are not easily sold or readily accepted as collateral by our lenders.

We have strong competitors in the self storage market that may have better resources and other advantages over us. We must compete in every U.S. market in which our stores are located, and to a lesser extent in Europe. Our competitors include national, regional and many local self storage operators and developers. Entry into the self storage business by acquiring existing properties is relatively easy for persons or entities with the required initial capital. Competition may increase if available funds for investment in real estate increase. Some of our competitors may have more resources than we do, including better access to financing, greater cash reserves, and less demanding rules governing distributions to shareholders. Some competitors may have lower prices or better locations than ours or other advantages. Local market conditions will play a significant part in how competition affects us; additional competition has lowered occupancy levels and rental revenue of our self storage properties in specific markets from time to time. For example, from the fourth quarter of 2001 to the fourth quarter of 2002, occupancy of our properties in the Northern California market, where additional self storage facilities had been opened, dropped 12% resulting in decreased revenue of approximately $378,000.

We face possible liability for environmental cleanup costs and damages for contamination related to our properties. Because we own and operate real property, various federal, state and local laws might impose liability on us for the costs of removing or remediating various hazardous substances released on or in our property. The principal federal laws that could affect us are the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act; state and local governments have also adopted separate but similar environmental laws and regulations that vary from state to state and locality to locality. These laws may impose liability whether or not we knew of or caused the release. We obtain environmental assessment reports on the properties we own or operate as we deem appropriate. These reports have not revealed any environmental liability or compliance concerns that we believe would materially adversely affect our financial condition or results of operations. However, the environmental assessments that we have undertaken might not have revealed all potential environmental liabilities or claims for such liabilities. The presence of hazardous substances on a property or the failure to meet environmental regulatory requirements may materially adversely affect our ability to use or sell the property, or to use the property as collateral for borrowing, and may cause us to incur substantial remediation or compliance costs. In addition, if hazardous substances are located on or released from one of our properties, we could incur substantial liabilities through a private party personal injury claim, a claim by an adjacent property owner for property damage or a claim by a governmental entity for other damages. This liability may be imposed on us under environmental laws or common-law principles. It is also possible that future laws, ordinances or regulations will impose material environmental liability on us, that the current environmental conditions of properties we own or operate will be affected by other properties in the vicinity or by the actions of third parties unrelated to us or that our tenants will violate their leases by introducing hazardous or toxic substances into the properties we own or manage and expose us to liability under federal or state environmental laws. The costs of defending these claims, conducting this environmental remediation or responding to such changed conditions could materially adversely affect our financial condition and results of operations.

We must comply with the Americans with Disabilities Act and fire and safety regulations, which can require significant expenditures. All our properties must comply with the Americans with Disabilities Act and with the related regulations, rules and orders commonly referred to as the ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to persons with disabilities. A failure to comply with the ADA could result in the U.S. government imposing fines on us and awarding damages to individuals affected by the failure. In addition, we must operate our properties in compliance with numerous local fire and safety regulations, building codes and other land use regulations. Compliance with these requirements can require us to spend substantial amounts of money, which would reduce cash otherwise available for distribution to shareholders. Failure to comply with these requirements can also affect the marketability of the properties.

Property taxes can increase and cause a decline in yields on investments. Each of our properties is subject to real property taxes. These real property taxes may increase in the future as property tax rates change and as our properties are assessed or reassessed by tax authorities. Depending on local market conditions, we may not be able to offset the tax increases through increases in rents or other income, reducing the amount of funds available for distribution to our shareholders.

We face potential underinsured losses on our investments. We maintain title and other property-related insurance on all our properties. We exercise discretion in determining amounts, coverage limits and deductibility provisions of title, casualty and other insurance relating to our properties, taking into account the appraised or estimated value of the property in each case to obtain appropriate insurance coverage at a reasonable cost and on suitable terms. We currently carry the following insurance coverage: (1) commercial general liability insurance, covering up to a general aggregate of $60,000,000, with a deductible of $50,000 (2) property insurance, covering up to an aggregate of $50,000,000, with

deductibles of $5,000 or $20,000 under certain circumstances, and a $50,000 deductible in the case of flood damage; and (3) boiler & machinery insurance, covering up to $10,000,000 of direct damages with a $20,000 deductible. Depending on the type of insurance, and subject to deductibles and coverage limits, Shurgard either receives direct payment of the replacement value of losses or tenders the defense of a claim to the insurance carrier. This might mean that, in the event of a loss, our insurance coverage would not pay the full current market value or current replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also increase the replacement cost of a facility after it has been damaged or destroyed. In that case the insurance proceeds that we receive might not be enough to restore us to our economic position with respect to the property.

Terrorist attacks and the possibility of wider armed conflict may have an adverse effect on our business and operating results and could decrease the value of our assets. Terrorist attacks and other acts of violence or war, such as those that took place on September 11, 2001, could have a material adverse effect on our business and operating results. There can be no assurance that there will not be further terrorist attacks against the United States or its businesses or interests. Attacks or armed conflicts that directly impact one or more of our properties could significantly affect our ability to operate those properties and thereby impair our ability to achieve our expected results. Further, we may not have insurance coverage for losses caused by a terrorist attack. Such insurance may not be available, or if it is available and we decide, or are required by our lenders to obtain such terrorism coverage, the cost for the insurance may be significant in relationship to the risk covered. In addition, the adverse effects that such violent acts and threats of future attacks could have on the U.S. economy could similarly have a material adverse effect on our business and results of operations. Finally, further terrorist acts could cause the United States to enter into a wider armed conflict which could further impact our business and operating results.

Risks Relating to Qualification and Operation as a REIT

We might lose REIT status and incur significant tax liabilities. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the Code), commencing with our taxable year ended December 31, 1994. So long as we meet the requirements under the Code for qualification as a REIT each year, we can deduct dividends paid to our shareholders when calculating our taxable income. For us to qualify as a REIT, we must meet detailed technical requirements, including income, asset, distribution and stock ownership tests, under several Code provisions that have not been extensively interpreted by judges or administrative officers. In addition, we do not control the determination of all factual matters and circumstances that affect our ability to qualify as a REIT. New legislation, regulations, administrative interpretations or court decisions might significantly change the tax laws with respect to REIT qualification or the federal income tax consequences of such qualification. We believe that we are organized so that we qualify as a REIT under the Code and that we have operated and will continue to operate so that we continue to qualify. However, we cannot guarantee that we will qualify as a REIT in any given year because:

• the rules governing REITs are highly complex;

• we do not control all factual determinations that affect REIT status; and

• our circumstances may change in the future.

For any taxable year that we fail to qualify as a REIT, we would not be entitled to deduct dividends paid to our shareholders from our taxable income. Consequently, our net assets and distributions to shareholders would be substantially reduced because of our increased tax liability. If we made distributions in anticipation of our qualification as a REIT, we might be required to borrow additional funds or to liquidate some of our investments in order to pay the applicable tax. If our qualification as a REIT terminates, we may not be able to elect to be treated as a REIT for the four taxable years following the year during which we lost the qualification.

We may pay taxes even if we continue to qualify as a REIT. Even if we qualify as a REIT, we are required to pay some federal, state, local and foreign taxes on our income and our property. For example, Shurgard TRS and certain of our other corporate subsidiaries have elected to be treated as taxable REIT subsidiaries. We will be subject to a 100% penalty tax on payments we receive from these subsidiaries if the economic arrangements between us and the subsidiaries are not comparable to similar arrangements between unrelated third parties. We also could be subject to tax in the event we, among other things, (i) sell property that is considered to be inventory for federal income tax purposes, (ii) sell, prior to March 25, 2005, certain assets we acquired from Shurgard Incorporated or (iii) fail to satisfy certain distribution rules, as described below.

Our REIT distribution requirements are complex and may create tax difficulties. To maintain our status as a REIT for federal income tax purposes, we generally must distribute to our shareholders at least 90% of our taxable income each

year. In addition, we are subject to a 4% nondeductible excise tax on the amount by which our distributions for a calendar year are less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year, and (iii) any amount of our income that we did not distribute in prior years. For tax purposes we may be required to treat interest, rent and other items as earned even though we have not yet received these amounts. In addition, we may not be able to deduct currently as expenses for tax purposes some items that we have actually paid. We could also realize income, such as income from cancellation of indebtedness, that is not accompanied by cash proceeds. If one or more of these events happened, we could have taxable income in excess of cash available for distribution. In such circumstances, we might have to borrow money or sell investments on unfavorable terms in order to meet the distribution requirement applicable to a REIT.

President Bush’s proposed tax cut could adversely affect the price of our stock. President Bush has proposed a tax reduction package that would, among other things, substantially reduce or eliminate the taxation of dividends paid by corporations other than REITs. If the double taxation of corporate dividends were to be eliminated or reduced, certain of the relative tax advantage of being a REIT would be eliminated or reduced, which may have an adverse effect on the price of our stock. This adverse effect may take place prior to the adoption of any tax cut based on the market’s perception of the likelihood of implementation of such a provision.

Other Risks

Our current and potential investments in self storage businesses that are not real estate-related may result in losses when economic conditions change. We have invested in self storage businesses that are not real estate-related and we might make more of these investments. For example, we have invested in and currently own through our ownership in Shurgard TRS, all of the outstanding interests of STG, a business that provides customers with local delivery, pick up and storage of individual storage containers. STG faces the same risks that we do regarding losses resulting from competition and decreases in rent in the self storage market. In addition, because STG does not have significant real estate holdings or other marketable assets to borrow against, it might have difficulty borrowing necessary operating funds or attracting additional investments if economic conditions change, putting our investment at greater risk of loss.

We may not be able to repay our debt financing obligations. We might not have sufficient net cash flow from our operations to meet required payments of principal and interest under our loans. As a result, we might not be able to refinance the existing indebtedness on our properties or might have to enter into credit terms that are less favorable than the terms of our existing indebtedness.

We have an investment in international operations that carry risks in addition to our U.S. operations. We invest in operations outside the United States. We face risks inherent in international business operations, including but not limited to currency risks, unexpected changes in regulatory requirements, longer accounts receivable payment cycles, difficulties in staffing and managing international operations, potentially adverse tax burdens, obstacles to the repatriation of earnings and cash, local political uncertainty and burdens of complying with different permitting standards and a wide variety of foreign laws. Each of these risks might impact our cash flow or impair our ability to borrow funds, which ultimately could adversely affect our ability to repay loans and make expected distributions to shareholders. We may be subject to these risks to a greater degree than could be expected given the size of our current investment due to our contingent liability as a general partner of Recom & Co. SNC, a Belgian partnership in which we, our European operating partners and some Shurgard Europe employees have ownership interest, to cover the partnership’s debt.

Employees

As of December 31, 2002, we employed approximately 1,250 persons. None of our employees are covered by a collective bargaining agreement. We believe that our relations with our employees are good.

Executive Officers of the Registrant

The following table sets forth certain information regarding the executive officers of Shurgard as of December 31, 2002.


		For Mr. Barbo’s and Mr. Beck’s biographies, see our proxy statement for the annual meeting of shareholders to be held on May 13, 2003.

David Grant has served as our Executive Vice President and Director of Real Estate Investment since July 1993. He became President of Shurgard Europe (previously SSC Benelux & Co., SCA) effective January 1, 1996. Mr. Grant joined Shurgard Incorporated in November 1985 as Director of Real Estate Investment and continued to serve in that capacity until the Merger. He also served as an Executive Vice President of Shurgard Incorporated. He is expected to return to the U.S. in August of 2003 to take on the role of President and Chief Operating Officer. Mr. Grant was previously a manager with Touche Ross & Co., where he was employed for approximately 10 years providing financial consulting, accounting and auditing services primarily to clients in the real estate, construction and engineering industries. Mr. Grant has a Bachelor of Arts degree in Business Administration and a Bachelor of Science degree in Accounting, both from Washington State University.

Christine McKay has served as Senior Vice President, Secretary and General Counsel since October 1999. She joined Shurgard Incorporated in June 1993, as an Assistant General Counsel. She has served as our Assistant Secretary since October 1998, and as Assistant Secretary and Division Counsel for STG, since July 1997. Ms. McKay was previously an attorney with Williams, Kastner & Gibbs, in Seattle. She has a Bachelor of Arts degree in Business Administration from Chadron State College, and a Juris Doctorate, with honors, from Creighton University. She is a member of the Washington State Bar Association and the Corporate Counsel Section of the Washington State Bar Association.

Steve Tyler joined Shurgard in May 1996 as Vice President of Operations covering the Midwest and East Coast markets. Since October, 1999 he has served as Senior Vice President of Operations. Prior to joining Shurgard, he was a Regional Operations Manager with Victoria’s Secret (a division of the Limited), Casual Corner (a division of US Shoe), and a District Operating manager with The Gap and Sears. He has a Bachelor of Arts degree in Business Administration from the University of Minnesota-Duluth.

Other Available Information

We file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports with the Securities & Exchange Commission. You may obtain copies of these documents by visiting the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the SEC’s website at http://www.sec.gov. In addition, as soon as reasonably practicable, after such materials are filed with or furnished to the SEC, we make copies of these documents (other than exhibits) available to the public free of charge through our web site at www.shurgard.com or by contacting our Secretary at our principal offices, which are located at 1155 Valley Street, Suite 400, Seattle, Washington 98109, telephone number (206) 624-8100.

Item 2 — Properties

We own or lease, as of December 31, 2002, directly and through our subsidiaries and joint ventures, 534 properties (including 532 self storage properties), 438 of which are located in 21 states and 96 of which are located in Europe. The 534 properties include 87 in which we hold joint venture interests ranging from 50% to 99% and 96 located in Europe in which we have a 7.57% ownership. Our self storage properties are designed to offer accessible storage space for personal and business use. Individuals typically rent individual units in self storage properties for storage of personal belongings such as furniture, appliances, boats and other household and recreational goods. Businesses typically rent space for storage of business property such as equipment, seasonal goods, records and fixtures. We believe that it is desirable to have commercial customers because they tend to rent larger units, stay for longer terms, are more reliable payers and are less sensitive to price increases. Based on a survey of our customers conducted during December 2002, we estimate that commercial users account for approximately 25% to 30% of our total customer base.

Our self storage properties are divided into a number of self-enclosed rental units that generally range in size from approximately 25 to 360 square feet. Many properties have uncovered storage outside the buildings for parking motor

vehicles, boats, campers and other similar items suitable for outside storage. Additionally, a number of our properties include climate-controlled storage units for which we typically charge a premium.

Customers of self storage properties are generally responsible for delivering and retrieving their goods. Many leased spaces can be accessed directly by automobile or truck, but some properties, in particular the multistory buildings, have separate loading docks and elevators available for delivery and retrieval of stored goods. Customers generally have access to their unit without additional charge during normal business hours and control access to such space through the use of their personal padlocks. We offer Budget truck rentals at a majority of our properties for added convenience to our customers and to differentiate our stores from most of our competitors. In addition to truck rentals, we sell locks, boxes and packing and storage materials at our stores.

The leasing, maintenance and operation of our stores are the responsibility of store managers. The property’s security is provided through a variety of systems that may include, among others, on-site personnel, electronic devices such as intrusion and fire alarms, access controls, video and intercom surveillance devices, property fencing and lighting.

Although our stores range considerably in size, most properties consist of one or more single-story buildings. The smallest store has approximately 21,000 net rentable square feet, while the largest store has approximately 280,000 net rentable square feet. The properties generally are constructed with concrete block or tilt-up concrete panels, with steel columns or precast concrete columns that rest on concrete footings and slabs, and have built-up tar roofs or pitched truss roofs with shingles or standing seam metal roofs. The interior walls are generally constructed with metal studs and partitions or other construction materials that are secure but readily movable. The parking areas and driveways are generally asphalt or concrete. All stores have fencing, floodlights, and electronic gates.

In some cases, multistory buildings have been converted into self storage properties. In addition, similar multistory buildings for self storage have been constructed in dense urban areas where land costs, zoning and other development considerations make it impractical or undesirable to construct single-story buildings.

The following table sets forth information regarding weighted average occupancy and weighted average rent per square foot for the self storage properties and business parks owned or leased by us for the years ended December 31, 2002, 2001 and 2000. The occupancy and rental information in this and the following table is affected by new stores, which, once opened, go through a “rent-up” period during which occupancy is generally lower than at later stages, which will impact the comparability from year to year.


	No. of														Average Rent
	Properties		Percentage			Average Occupancy									per Square Foot
	as of Dec. 31		of 2002
	2002 (1)		Revenue (2)			2002			2001			2000			2002		2001		2000

Arizona		22		3.8	%		84	%		86	%		82	%	$	9.73	$	9.88	$	9.69
California		48		14.2			81			89			88			14.66		13.89		12.71
Florida		28		5.8			70			73			73			11.08		10.63		10.52
Georgia		18		3.5			78			81			79			10.73		10.44		10.04
Illinois		20		3.6			76			85			84			11.56		11.21		10.51
Michigan		26		4.5			81			83			90			9.76		9.66		9.33
New York		11		4.3			77			73			80			20.94		20.57		19.59
North Carolina		33		2.7			75			84			74			6.67		9.00		12.00
Oregon		14		2.6			88			91			89			11.12		10.29		9.54
South Carolina		13		0.8			71			—			—			6.14		—		—
Texas		66		11.9			84			84			80			10.46		9.85		9.40
Virginia		35		7.0			86			85			84			13.58		13.16		11.93
Washington		52		11.8			84			86			87			11.89		11.60		10.95
Other domestic		52		7.8			76			76			78			10.54		10.52		10.17
Europe		96		15.7			53			55			46			16.25		16.91		15.69

Weighted Average		534		100.0	%		76	%		79	%		79	%	$	12.05	$	11.51	$	10.84

(1) Includes 409 facilities owned or leased by us and entities controlled by us. The remaining 125 facilities are owned or leased by entities in which we have a non-controlling interest. See Schedule III in our Form 10-K/A for a complete list of properties for which financial information is consolidated by us.

(2) Revenue includes all Same Store and New Store revenue regardless of ownership interest in the property.

The following table sets forth information for all properties for which we have an ownership or leasehold interest regardless of percentage ownership. The table provides weighted average occupancy and weighted average rent per square foot for the years ended December 31, 1998 through December 31, 2002.


	2002			2001			2000			1999			1998

Domestic
Weighted average occupancy		80	%		83	%		83	%		82	%		84	%
Weighted average per square foot	$	11.50		$	11.47		$	10.82		$	10.30		$	9.90
Europe
Weighted average occupancy		53	%		55	%		46	%		40	%		57	%
Weighted average per square foot	$	16.25		$	16.91		$	15.69		$	14.35		$	12.10

Leasing of Properties. Rental units are usually rented on a month-to-month basis. Based on our most recent evaluation of customer move-outs for the year ended 2002, the average rental period for a tenant is approximately 12 months. This average is comprised of the rental periods of business tenants, whose average stay is 19 months, and those of residential customers, whose average stay is 11 months. Rental income from leased space constitutes the primary revenue from such properties, but additional revenue is received from incidental services rendered at the properties, such as lock and box sales and truck rentals. Rental rates vary substantially depending on the size of the storage space, the property location, the quality of the property and the proximity of competition.

Other Properties. Shurgard owns two business parks located near Tacoma, Washington and Burke, Virginia. The business parks were built in 1979 and 1984, respectively, and they contain an aggregate of approximately 158,000 net rentable square feet.

Item 3 — Legal Proceedings

We are a defendant in litigation filed on June 17, 2002, in the Superior Court of California for Orange County styled as Gary Drake v. Shurgard Storage Centers, Inc. et al (Case No. 02CC00152). The complaint alleges that we misrepresent the size of our storage units, seeks class action status and seeks damages, injunctive relief and declaratory relief against us under California statutory and common law relating to consumer protection, unfair competition, fraud and deceit and negligent misrepresentation. We do not currently believe that the outcome of this litigation will have a material adverse effect on our financial position or results of operations. However, we cannot presently determine the potential total damages, if any, or the ultimate outcome of the litigation. We intend to vigorously defend this action.

We are a defendant in litigation filed on October 30, 2002, in the United States District Court for the Northern District of California styled as Patricia Scura et al. v. Shurgard Storage Centers, Inc. (Case No. C 02-5246-WDB). The complaint alleges that we required our hourly store employees to perform work before and after their scheduled work times and failed to pay overtime compensation for work performed before and after hours and during meal periods. The lawsuit seeks class action status and seeks damages, injunctive relief and a declaratory judgment against us under the federal Fair Labor Standards Act and California statutory wage and hour laws and laws relating to unlawful and unfair business practices. We do not currently believe that the outcome of this litigation will have a material adverse effect on our financial position or results of operations. However, we cannot presently determine the potential total damages, if any, or the ultimate outcome of the litigation. We intend to vigorously defend this action.

Item 4 — Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders during the fourth quarter of 2002.

PART II

Item 5 — Market for the Registrant’s Common Equity and Related Stockholder Matters

Our common stock is traded on the NYSE under the symbol “SHU.” As of March 6, 2003 there were 17,755 holders of record of our common stock and the reported NYSE closing price per share of common stock was $29.46.

The table below sets forth for the fiscal periods indicated the high and low closing prices per share of Common Stock as reported in published financial sources, and distributions declared.


					Distributions
	High		Low		Declared (1)

2002
Fourth Quarter	$	31.50	$	28.36	$	0.53
Third Quarter		34.05		29.46		0.53
Second Quarter		35.40		32.31		0.53
First Quarter		33.31		29.69		0.52
2001
Fourth Quarter	$	32.25	$	29.16	$	0.52
Third Quarter		31.37		28.14		0.52
Second Quarter		30.21		24.76		0.52
First Quarter		25.13		22.84		0.51

(1) Distributions declared by the Board of Directors based on financial results for the quarter specified, but declared and paid in the following quarter.

Holders of shares of common stock are entitled to receive distributions when declared by our Board of Directors out of any assets legally available for payment. There are covenants in our various debt agreements that may restrict our dividends. (See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - FUNDS FROM OPERATIONS). We are required to distribute annually to our shareholders at least 90% of our “REIT taxable income,” which, as defined by the relevant tax statutes and regulations, is generally equivalent to net taxable ordinary income.

Item 6 — Selected Financial Data


		2002		2001

		(as restated)(3)		(as restated)(3)		2000		1999		1998 (1)

OPERATING DATA:
(in thousands except per share data)
Total revenue		$	264,113	$	232,590	$	201,958	$	176,456	$	161,960
Income before extraordinary items		$	54,909	$	34,757	$	32,307	$	37,677	$	37,394
Income before extraordinary items per common share:
	Basic	$	1.15	$	0.63	$	0.80	$	0.99	$	1.14
	Diluted	$	1.13	$	0.63	$	0.79	$	0.99	$	1.14
Distributions per common share:
	Ordinary income	$	1.92	$	1.74	$	1.73	$	1.91	$	1.80
	Capital gain		0.08		0.07		—		0.05		0.01
	Return of capital		0.11		0.26		0.30		0.03		0.14

Total		$	2.11	$	2.07	$	2.03	$	1.99	$	1.95

BALANCE SHEET DATA:
(in thousands)
Total assets		$	1,420,176	$	1,238,805	$	1,230,242	$	1,149,860	$	1,151,996
Total borrowings (2)		$	607,834	$	470,747	$	595,524	$	488,075	$	450,786

(1) For the year 1998, the European operations were consolidated. Beginning in 1999, European operations are not consolidated but are reported under the equity method.

(2) Total borrowing includes participation rights liability net of discount (See Note H to our Consolidated Financial Statements).

(3) See Note X to the consolidated financial statements included in Item 8 on this Form 10-K/A.

Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

As discussed in Note X to the consolidated financial statements included in Item 8 of this Form 10-K/A, the Company has restated its financial statements for the year ended December 31, 2002 and 2001. The accompanying management discussion and analysis takes into account the effects of the restatement.

Shurgard Storage Centers, Inc. is a REIT headquartered in Seattle, Washington, specializing in all aspects of the self storage industry. As of December 31, 2002, we operated a network of 560 storage centers and two business parks located throughout the United States and in Europe. Of these properties, we own or lease, directly and through our subsidiaries, joint ventures and European investment, 534 operating properties containing approximately 34.0 million net rentable square feet. Of the 534 operating properties, 438 are located in 21 states in the U.S. and 96 are located in Europe. We also manage for third parties, 28 self storage centers containing approximately 1.6 million net rentable square feet. Self storage properties offer low-cost, easily accessible storage space for personal and business uses.

Our investment objective is to maximize shareholder value through internal growth and through the acquisition and development of additional self storage properties. We believe that the experience of our management team in acquiring, developing and operating self storage properties, our geographic diversification and our emphasis on quality will enhance our ability to achieve this objective.

Our mission is to be the global leader in storage products and services. We believe we can obtain this goal by focusing on providing exceptional customer service and the highest quality products to our customers.

During 2002, we opened or acquired 61 domestic storage centers directly or through joint ventures. Additionally, our European investment opened 24 developments during 2002.

As part of our focus on providing the highest quality products to our customers, we look for locations that are in populated retail areas. When entering a market, to create customer awareness, we seek dominant locations within specific three to five mile trade areas that are highly visible and accessible in retail corridors. Through multiple locations of this kind within a metropolitan area, we establish brand recognition as well as economies of scale in operating our stores. In most markets, we seek to own at least 15 stores in order to realize these efficiencies. To further enhance brand recognition, we strive to achieve a uniform look to our properties through the use of signage, color schemes, quality of the building and our trademark “lighthouse” office design in new developments.

The following discussion of operations provides comparative financial information and discussion of each of the areas of growth, including Segment Performance, Ownership and Leasing Arrangements, European Operations and Other Real Estate Investments. Also included is a discussion of Capital Expenditures, Financing Transactions, Off Balance Sheet Transactions, Short- and Long-Term Liquidity and Funds From Operations.

When used in this discussion and elsewhere in this Annual Report on Form 10-K/A, the words “believes,” “anticipates,” “projects” and similar expressions are intended to identify forward-looking statements regarding financial performance. Actual results may differ materially due to uncertainties including the risk that changes in economic conditions in the markets in which we operate, and/or competition from new self storage facilities or other storage alternatives may cause rent to decline and may cause occupancy rates to drop, or may cause delays in rent up of newly developed properties, the risk that new developments could be delayed or reduced by zoning and permitting requirements outside of our control, increased competition for desirable sites, construction delays due to weather, unforeseen site conditions, labor shortages, personnel turnover, scheduling problems with contractors, subcontractors or suppliers, and the risk that we may experience increases in the cost of labor, taxes, marketing and other operating and construction expenses, and the risk that tax law changes may change the taxability of operating and construction expenses, and the risk that tax law changes may change the taxability of future income and increases in interest rates may increase the cost of refinancing long term debt, and our alternatives for funding our business plan may be impaired by the economic uncertainty due to the impact of war or terrorism, and our interest in Shurgard Europe may be adversely impacted if that entity is unable to complete formation and funding of its contemplated development joint ventures. We may also be affected by legislation or changes in regulations or interpretations regarding certain accounting standards applied to our operations and certain existing financial and joint venture structures of the company. Other factors that could affect our financial results are described below and in Item 1 (Business) of this Annual Report on Form 10-K/A. Forward-looking statements are based on estimates as of the date of this report. We disclaim any obligation to publicly release the results

of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Basis of presentation: The consolidated financial statements include the accounts of Shurgard and our subsidiaries. All inter-company balances and transactions have been eliminated on consolidation. We consolidate the accounts of those subsidiaries or joint ventures in which we have effective control as evidenced by, among other factors, a majority interest in the investment and the ability to cause a sale of assets. All investments in joint ventures that do not qualify for consolidation, but in which we exercise significant influence and do not have effective control, are accounted for under the equity method and are included in other real estate investments.

Derivatives: We account for derivative instruments and hedging activities in accordance with SFAS No. 133, as amended. SFAS No. 133, as amended, requires that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income, and recognized in the statement of earnings when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment. Changes in the fair value of derivative instruments not designated as hedging instruments are recognized in earnings. Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements or other identified risks. To accomplish this objective, we primarily use interest rate swaps as part of our cash flow hedging strategy. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. Ineffectiveness that meets certain criteria under SFAS No. 133 is recognized in earnings.

Financing arrangements: We accounted for sales of certain storage centers in which we have continuing involvement, as defined in Statement of Financial Accounting Standards (SFAS) No. 66, “Accounting for Sales of Real Estate,” as financing arrangements (See Note H to our Consolidated Financial Statements). We use the effective interest rate method using estimated future cash flows in determining the amortization of participation rights. This estimate is evaluated each period and is sensitive to both amount and timing of cash flows and projected purchase price. Estimated amount and timing of distributions is based on projected property operating cash flows. Estimated amount and timing of purchase price is based on projected stabilized net operating income and our estimate of when each property will reach stabilization. During 2002, we reduced the participation rights for CCP/Shurgard by $6.4 million based on our re-evaluation of the projected cash flows of these properties and the projected timing of our joint venture partner’s exercise of their put option. This reduction in participation rights was accounted for as a change in estimate and will reduce amortization of participation rights in future periods.

Deferred tax asset: Shurgard TRS Inc. (Shurgard TRS), a wholly owned subsidiary, is a taxable REIT subsidiary and is subject to corporate level tax. STG, Shurgard Preferred Partners, SS Income Plan and Storage Line Management are wholly owned subsidiaries of Shurgard TRS. These entities have accumulated tax losses primarily attributable to net operating loss carryforwards from STG that will expire beginning in 2017, temporary differences in fixed assets and operating losses (See Note L to our Consolidated Financial Statements). When determining the necessary amount, if any, of valuation allowance on the deferred tax asset, we estimate projected future taxable income from all sources to determine whether it is more likely than not that we will realize the tax asset in its entirety. No valuation allowance has been recorded for 2002.

SEGMENT PERFORMANCE

When managing our real estate assets, we evaluate performance in two segments. The first segment, Same Stores, represents those storage centers and business parks that are not in the rent up stage and for which historical information is available. The second segment, New Stores, represents those storage centers recently acquired or developed for which performance is measured primarily based on original investment expectations. We evaluate all stores on the same basis regardless of ownership interest in the property. The following sections discuss the performance of these segments for domestic properties.

Same Stores

In 2002, we continued our focus on increasing net operating income (NOI) from our existing real estate assets. The primary way we analyze our performance is to measure year over year improvements in Same Store operating results. Our definition of Same Stores includes existing stores acquired prior to January 1 of the previous year as well as

developed properties that have been operating for a full two years as of January 1 of the current year. Please note that our definition of Same Stores results in the addition of stores each year as new acquisitions and developments meet the criteria for inclusion, and that we then include these stores in the previous year’s comparable data. Other storage companies may define Same Stores differently, which will affect the comparability of the data. The following table summarizes Same Store operating performance as defined at December 31, 2002 and 2001.

Same Store Results (1)


	Year Ended December 31,									Year Ended December 31,
(dollars in thousands except
average rent)	2002			2001			% Change			2001			2000			% Change

Real estate operations revenue	$	231,350		$	227,776			1.6	%	$	210,277		$	197,786			6.3	%
Direct operating and real estate tax expense (2)		67,658			65,627			3.1	%		59,521			57,727			3.1	%

NOI		163,692			162,149			1.0	%		150,756			140,059			7.6	%
Indirect operating and leasehold expense (3)		13,080			14,220			-8.0	%		13,062			13,266			-1.5	%

NOI after indirect operating and leasehold expense	$	150,612		$	147,929			1.8	%	$	137,694		$	126,793			8.6	%

Avg. annual rent per sq.ft. (4)	$	11.80		$	11.44			3.1	%	$	11.39		$	10.82			5.3	%
Avg. sq.ft. occupancy		85	%		87	%					87	%		87	%
Total net rentable sq.ft		21,346,000			21,346,000						19,700,000			19,700,000
No. of properties		330			330						304			304

(1)		Table includes the total operating results of each store regardless of our percentage ownership interest in that store.

(2)		Includes all direct property and real estate tax expense. Does not include any allocation of indirect expense.

(3)		Indirect operating expense includes certain shared property costs such as bank fees, district and corporate management, purchasing, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, legal services, human resources and accounting. Does not include internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to stores based on number of months in operation during the period. Indirect operating and leasehold expense includes leasehold expense of $1.2 million, $1.1 million and $1.0 million for the years ended December 31, 2002, 2001 and 2000, respectively.

(4)		Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period.

NOI has risen over the last three years due to increases in revenue, which is a function of changes in rental rates and occupancy. While the storage business is seasonal, spring and summer being peak occupancy periods, the year over year trends from 2000 to 2002 reflect general market changes. Revenue gains from 2001 to 2002 resulted from rate increases and were offset by occupancy decreases while the gain from 2000 to 2001 resulted primarily from rate increases.

During 2002, we experienced a decrease in demand evidenced by a decrease in recorded inquiries at the stores. Occupancies dropped two and half percentage points from January through April and, in order to stop this erosion, we began to make rate concessions. Although the average rate for the year is up 3%, quarterly trends show that this increase is the result of a 5.4% increase in the first quarter followed by a slow erosion of rates from May through December. Despite these rate adjustments, our seasonal occupancy increase that normally occurs over late spring and summer was not as significant as most years and we continued to lag 2001 occupancy levels. Although we believe that the quality of our storage centers as well as our geographic diversity helps mitigate the impact to us of competition in individual markets, like most other businesses, we are subject to the effects of general economic conditions. We believe that the downward pressure in both occupancies and rates in many of our markets is due to economic conditions and rate reductions being offered by various competitors as they attempt to compensate for these market factors. Despite the declining trends during 2002, we have begun to see some encouraging signs in early 2003. Average rental rates rose in January and February for the first time in nine months. Additionally, for the first time in more than a year, occupancy for the month of February was higher than the previous year. While it is still too early to conclude that these results indicate a turnaround, they are noteworthy and may signal that we are hitting the bottom of the cycle.

In response to decreasing demand and increasing competition, we have been examining our marketing and sales programs to identify areas for potential improvement. During the spring and summer of 2001, we reorganized our national sales center, and during 2002, we realigned our direct sales team to achieve lower overhead and retain the highest performing representatives. As a result of this, as well as additional training of store management personnel, abandonment ratios by our sales and customer service representatives dropped significantly during 2002 and closing ratios increased. During the fourth quarter we began to see some recovery in our occupancy declines evidenced by a decreasing deficit over the prior year, from 200 basis points in the first quarter to 100 basis points in the fourth quarter of 2002. This allowed us to increase rates in some of our markets which reduced the rate deterioration we had been experiencing during 2002.

Direct operating expenses increased 3.1% from 2001 to 2002, consistent with the change from 2000 to 2001. This increase in direct operating expenses in 2002 compared to 2001 was primarily due to increases in personnel, real estate taxes and cost of goods sold offset by decreases in utilities. Direct operating expenses increased 3.1% from 2000 to 2001 as the expenditures for marketing and sales campaigns implemented during 2000 annualized.

Additionally, decreased indirect operating expenses resulted in an increase in NOI after indirect costs of 1.8% for 2002 compared to 8.6% for 2001. This decrease in indirect expenses for 2002 is the result of economies of scale achieved by spreading certain fixed costs over a greater number of stores, as well as holding total indirect expenses flat during 2002. The decrease from 2000 to 2001 is the result of economies of scale realized by operating a larger number of stores in 2001, as well as increased marketing, sales and technology expenses incurred during 2000 that leveled off during 2001. Our definition of indirect operating expense includes certain shared property costs such as bank fees, district and corporate management, purchasing, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, legal services, human resources and accounting.

We believe that, given the current economic environment, revenue growth will be in the 1% to 3% range with expense growth at approximately 5%, resulting in NOI growth in the 0% to 2% range. These expectations regarding growth constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act and are based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the forward-looking statements. The risks and uncertainties that may cause these assumptions and this forward-looking statement to prove to be incorrect include the risks that implementation of the business plan, including marketing and sales initiatives, will not be successful and that our earnings, expenses or revenues may be affected by other factors, such as the risk that changes in economic conditions in the markets in which we operate, competition from new self storage facilities or other storage alternatives may cause rents to decline, and may cause occupancy rates to drop, or may cause delays in rent- up of newly developed properties. The risk that new developments could be delayed or reduced, the risk that we may experience increases in the cost of labor, taxes, marketing and other operating and construction expenses and the risk that tax law changes may change the taxability of future income and increases in interest rates may increase the cost of refinancing long term debt, and our alternatives for funding our business plan may be impaired by the economic uncertainty due to the impact of war or terrorism, and our interest in Shurgard Europe may be adversely impacted if that entity is unable to complete formation and funding of its contemplated development joint ventures. We may also be affected by pending legislation or changes in regulations or interpretations regarding certain accounting standards applied to our operations and certain of our existing financial and joint venture structures.

New Stores

Our definition of New Stores, as shown in the table below, includes existing domestic facilities that had not been acquired or leased as of January 1 of the previous year as well as domestic developed properties that have not been operating a full two years as of January 1 of the current year. The following table summarizes New Store operating performance as defined at December 31, 2002 and 2001.

New Store Results 2002 and 2001 (1)


	Acquisitions				Developments				Total New Stores
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,

(dollars in thousands)	2002		2001		2002		2001		2002		2001

Real estate operations revenue	$	15,944	$	1,847	$	20,035	$	11,416	$	35,979	$	13,263
Direct operating and real estate tax expense (2)		6,143		601		11,282		6,845		17,425		7,446

NOI		9,801		1,246		8,753		4,571		18,554		5,817
Indirect operating and leasehold expense (3)		2,657		736		2,986		1,967		5,643		2,703

NOI after indirect operating and leasehold expense	$	7,144	$	510	$	5,767	$	2,604	$	12,911	$	3,114

No. of properties		56		8		52		35		108		43
No. of property months (4)		405		35		515		340		920		375

(1) Table includes the total operating results of each store regardless of our percentage ownership interest in that store.

(2) Includes all direct property and real estate tax expense. Does not include any allocation of indirect expense.

(3) Indirect operating expense includes certain shared property costs such as bank fees, district and corporate management, purchasing, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, legal services, human resources and accounting. Does not include internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to stores based on number of months in operation during the period. Indirect operating and leasehold expense includes leasehold expense for each of the categories as follows:


	Acquisitions				Developments				Total New Stores
(dollars in thousands)
For the year ended December 31,	2002		2001		2002		2001		2002		2001

Indirect operating expense	$	1,420	$	114	$	1,802	$	1,127	$	3,222	$	1,241
Leasehold expense		1,237		622		1,184		840		2,421		1,462

	$	2,657	$	736	$	2,986	$	1,967	$	5,643	$	2,703

(4) Represents the sum of the number of months we operated each property during the year

New Store Results 2001 and 2000 (1)


	Acquisitions				Developments				Total New Stores
	Year Ended December 31,				Year Ended December 31,				Year Ended December 31,

(dollars in thousands)	2001		2000		2001		2000		2001		2000

Real estate operations revenue	$	5,949	$	2,197	$	25,299	$	13,226	$	31,248	$	15,423
Direct operating and real estate tax expense (2)		2,111		805		11,654		7,103		13,765		7,908

NOI		3,838		1,392		13,645		6,123		17,483		7,515
Indirect operating and leasehold expense (3)		1,059		175		2,802		1,769		3,861		1,944

NOI after indirect operating and leasehold expense	$	2,779	$	1,217	$	10,843	$	4,354	$	13,622	$	5,571

No. of properties		16		8		58		40		74		48
No. of property months (4)		133		52		582		366		715		418

months in operation during the period. Indirect operating and leasehold expense includes leasehold expense for each of the categories as follows:


	Acquisitions				Developments				Total New Stores
(in thousands)
For the year ended December 31,	2001		2000		2001		2000		2001		2000

Indirect operating expense	$	622	$	—	$	889	$	544	$	1,511	$	544
Leasehold expense		437		175		1,913		1,225		2,350		1,400

	$	1,059	$	175	$	2,802	$	1,769	$	3,861	$	1,944

(4) Represents the sum of the number of months we operated each property during the year.

Increases from year to year in NOI for the new store portfolio reflect the greater number of properties and, correspondingly, property months for the periods presented. Although this increase gives some indication of how much of our overall NOI growth results from new stores, we do not regard it as a good method of evaluating the performance of assets within this segment. Rather, we use other methods, including primarily comparisons of actual results to targeted NOI for the appropriate period from opening or at maturity. The performance of our domestic acquisitions and developments are discussed in the sections that follow.

Domestic Acquisitions

We continue to seek acquisition opportunities for high quality storage centers that meet our investment standards. We typically target our acquisitions to generate a yield of 9% to 11% once they have reached stabilization. We have limited our efforts to pursue only those storage centers that enhance our existing network of stores or allow us to establish significant market presence in new markets (i.e. establish greater market presence or expand an established market to create greater economies of scale). The operating results of our acquisitions are discussed below.

The following table summarizes our acquisition activity from 2000 to 2002.


Acquisitions	2002			2001			2000

No. of properties		48			8			7
Square feet available		3,554,000			537,000			368,000
December 2002 Occupancy		70	%		79	%		96	%

During 2002, we purchased four individual storage centers totaling 197,500 net rentable square feet for $9.0 million. These properties are in the following locations: two in Indiana, one in Maryland and one in Florida. The average occupancy of these stores is 80%. The December 2002 yield on these four storage centers is 12% (calculated as December 2002 NOI annualized divided by the purchase price).

Additionally, we began leasing an additional four storage centers through the tax retention operating lease facility totaling 283,500 net rentable square feet (see OFF BALANCE SHEET TRANSACTIONS). These properties are in the following locations: one in Indiana, one in California, one in Illinois and one in Florida. The average occupancy of these stores is 35%, which is below our projected stabilized occupancy as all of these stores were newly built and are still in rent-up. Although renting up slower than expected, we believe that general economic conditions are contributing to this and we still expect them to reach projected returns.

On June 26, 2002, we purchased for $62 million a 74% interest in Morningstar Storage Centers, LLC (Morningstar), which owns and operates 40 storage centers in North Carolina and South Carolina that consist of 3,073,000 net rentable square feet. The 40 existing storage centers include seven sites with pre-identified expansion opportunities and nine sites with continued development potential. We have also entered into an agreement with certain members of Morningstar to form one or more joint ventures for the purpose of developing and operating high quality self storage properties in North and South Carolina. The properties owned by the entity and the properties to be developed in the joint ventures will be managed by the members of Morningstar through an affiliated entity. Of the 40 stores, 16 stores are still in rent-up. Occupancy for these 40 stores is 72%. (See Note D to our Consolidated Financial Statements). We have a preferential return on this portfolio that is currently yielding us 8.4% (calculated as our preferred return divided by the purchase price).

During 2001, we purchased four storage centers totaling 234,000 net rentable square feet for $19.3 million. Two of these properties are located in California and two are in Michigan. The December 2002 yield on the four properties we purchased is 10% (calculated as December 2002 NOI divided by the purchase price).

Additionally, in 2001 we began leasing an additional four storage centers totaling 303,000 net rentable square feet located in Florida, California, Illinois and Michigan. Three of the four properties leased were leased through the tax retention operating lease and one of these properties was acquired through a long-term lease of the land and building. The three properties leased through the tax retention operating lease averaged 60% occupied at December 31, 2002. One of these stores is facing stronger than expected competition and, as a result, is renting up significantly slower than expected.

During 2000, we purchased 7 stores for $24.9 million one of which is located in California and six of which are located in Texas. We sold one of these stores in 2002. As of December 31, 2002, occupancy in the remaining six stores averaged 96% and rates averaged $11.07. These properties have a December 2002 yield of 12% (calculated as December 2002 NOI annualized divided by the purchase price), which is greater than projected at the time of purchase. The operating results of the 2000 acquisitions are included in Same Store Results for 2002 and in New Store Results for 2001.

We can give no assurance that the projections noted above regarding the acquisitions will occur. Actual occupancy levels and rates could be lower if we experience competition from other self storage properties and other storage alternatives in close proximity to our storage centers. Actual yields may also be lower if major expenses such as property taxes, labor and marketing, among others, increase more than projected. See Risk Factors in (Item 1) Business of this Annual Report on Form 10-K/A.

Domestic Development

Our long-term growth plan includes development of new storage centers in markets in which we currently operate. This is primarily due to our focus on maintaining high quality standards and consistent building design to develop brand awareness. Implementation of this development strategy through early 2001 focused on internally financed projects developed primarily through development financing joint ventures. During 2001, we changed to a new method of implementing this growth strategy through build-to-suit, tax retention operating leases under which we have an option to purchase the related properties (see Tax Retention Operating Leases under OFF BALANCE SHEET TRANSACTIONS).

The following table summarizes our domestic development activity from 2000 to 2002.


Developments	2002		2001		2000

No. of properties		13		13		21
Property cost		$73.6 million	$	57.9 million	$	98.3 million
Square feet available		810,000		802,000		1.3 million
December 2002 Occupancy		32%		60%		70%
December 2002 NOI as a percentage of projected NOI at maturity				27%		52%

We typically target yields for developments at 11% to 12%. Yield is calculated as projected annualized NOI divided by the total invested cost. We can give no assurance that the projections noted above regarding the development projects will occur. Actual occupancy levels and rates could be lower if we experience competition from other self storage properties and other storage alternatives in close proximity to our developments. Actual yields may also be lower if major expenses such as property taxes, labor and marketing, among others, increase more than projected. See Risk Factors in (Item 1) Business of this Annual Report on Form 10-K/A. As a result of the addition of new joint venture development partners, and the business trends and economic conditions that we are experiencing in some of our markets, during 2002 we reduced our internal development staff by fourteen.

We opened thirteen domestic storage centers during 2002, and, when all phases are complete, these projects will total approximately 810,000 net rentable square feet with an estimated total cost of $73.6 million. All but one of these stores was developed through the tax retention operating leases (see OFF BALANCE SHEET TRANSACTIONS).

Of the thirteen stores opened in 2001, four of these were developed through the tax retention operating leases (See Tax Retention Operating Leases under OFF BALANCE SHEET TRANSACTIONS), one was developed through our Florida joint venture, one was developed through our Oklahoma joint venture and the remaining seven were developed by Shurgard directly. The 2001 developments together generated $1.9 million in NOI for the 12 months of 2002. For the month of December 2002, these developments had NOI of $154,000, which represents 27% of projected monthly NOI at maturity, and averaged 60% occupancy after an average of 15 months of operations.

Three of the storage centers opened in 2000 were developed through our Tennessee and Florida joint ventures. Additionally, 18 were developed by Shurgard and contributed to CCP/Shurgard Venture, LLC (CCP/Shurgard). The 2000 developments together generated $6.3 million in NOI for the 12 months of 2002. Of these 21 stores, nine opened in the fourth quarter of 2000. For the month of December 2002, these developments had NOI of $522,000, which represents 52% of projected monthly NOI at maturity, and averaged 70% occupancy after an average of 28 months of operations. These stores are facing strong competition in their markets and are leasing up slower than expected, resulting in revenues for 2002 that were approximately $1.2 million below budget. Additionally, many of these stores have experienced higher than anticipated expenses primarily in the category of real estate taxes. We are aggressively contesting these through appeals. Although we expect to be able to reach our revenue goals for these properties in the long run, our stabilized yield will be below the targeted yield if we are unsuccessful in our real estate tax appeals.

OWNERSHIP AND LEASING ARRANGEMENTS

We have various ownership and leasing arrangements with respect to properties included in our Same Store and New Store portfolios. The table below includes information as of and for the year ended December 31, 2002 that identifies the proportion of Same Store and New Store results attributable to each of these various arrangements. The following tables include 100% of the cost, operating results and other information presented regardless of our percentage ownership interest in that property. Each of the categories presented is discussed in greater detail in sections following the table.

Same Store


			Net
			Rentable
(in thousands except for	No. of		Square		Gross Book						Lease
number of properties)	Properties		Feet		Value		Revenue		NOI		Expense

Wholly owned or leased (1)		290		18,887	$	1,036,653	$	204,987	$	145,259	$	1,170
Development financing joint venture (2)		3		204		16,497		2,177		1,459		51
Consolidated joint ventures (3)		16		957		61,264		12,973		9,703		—
Unconsolidated joint ventures (4)		21		1,298		73,399		11,213		7,271		3

Total Same Store		330		21,346	$	1,187,813	$	231,350	$	163,692	$	1,224

New Store


			Net
			Rentable
(in thousands except for	No. of		Square		Gross Book							Lease
number of properties)	Properties		Feet		Value		Revenue		NOI			Expense

Wholly owned or leased (1)		20		1,309	$	87,709	$	9,443	$	4,946		$	1,311
Development financing joint venture (2)		18		1,136		89,642		10,131		5,282			600
Consolidated joint ventures (3)		42		3,214		111,025		10,761		7,052			—
Unconsolidated joint ventures (4)		8		445		31,051		3,133		1,709			126
Tax retention operating leases (5)		20		1,268		—		2,511		(435	)		384

Total New Store		108		7,372	$	319,427	$	35,979	$	18,554		$	2,421

(1) Includes owned and leased properties in which we have a 100% interest other than those included under Tax Retention Operating Leases.

(2) Includes properties developed by CCP/Shurgard.

(3) Includes properties in which we own an interest less than 100% but that are consolidated in our financial statements.

(4) Includes properties that are not consolidated in our financial statements because we own less than 100% and do not exercise control.

(5) Includes properties operated, acquired or developed through the tax retention operating lease arrangements.

The tables below include our pro rata portion of cost, operating results and other information for our consolidated and unconsolidated joint venture properties.


				Net
				Rentable
(in thousands except	Range of			Square		Gross Book						Lease
percentages)	Ownership			Feet		Value		Revenue		NOI		Expense

Same Store
Consolidated joint ventures		79-99	%		884	$	55,359	$	11,854	$	8,844	$	—
Unconsolidated joint ventures		50-90	%		1,073	$	61,135	$	9,190	$	5,935	$	3
New Store
Consolidated joint ventures		38-99	%		2,235	$	78,328	$	7,849	$	5,216	$	—
Unconsolidated joint ventures		50-90	%		350	$	24,667	$	2,506	$	1,388	$	101

Wholly Owned or Leased

Substantially all of our storage centers are owned directly or through wholly owned subsidiaries. Additionally, as of December 31, 2002, we operate 15 properties that are subject to land or building leases requiring non-contingent rent payments.

Development Financing Joint Ventures

In order to expand our development capacity, broaden our access to capital and minimize the effect of the rent-up deficit on funds from operations (FFO, see FUNDS FROM OPERATIONS), we have pursued alternative financing options. In connection with this initiative, we formed four joint ventures, SFPI in May 1998 with Fremont Storage Partners I, SFPII in March 1999 with Fremont Storage Partners II, Shurgard/K&S I, LLC in October 1999 with K&S Storage, LLC and CCP/Shurgard, as referenced above, in May 2000 with an affiliate of JP Morgan Partners. Under these joint venture agreements, we constructed storage centers financed through the use of cash flows provided by operations and our line of credit and, on completion, contributed those storage centers to the joint ventures. At the time of contribution, we were reimbursed to the extent our historical cost plus negative cash flow prior to the transfer exceeded our pro rata portion of required equity (calculated as total required funding less amounts provided from financial institutions multiplied by our ownership percentage). We either retain an option to purchase the storage centers from the joint venture or the joint venture has a right to put those storage centers to us at a future date. The purchase price is calculated as the greater of (a) that amount necessary to provide a specified return on the partners’ contributed capital (12% in the case of CCP/Shurgard) or (b) annualized NOI divided by 9.25%. As a result of this option or put, we have continuing involvement with these joint ventures and do not recognize the contribution of the storage centers as a transfer in ownership for financial reporting purposes. We account for these joint ventures as financing arrangements and, as such, recognize all activities related to those properties in our financial statements. Additionally we recognize a participation rights liability and a related discount on the underlying liability for the estimated fair value of our partners’ share of the estimated option purchase price. The discount is amortized over the term of the related agreement. During 2001, we exercised our option to acquire our joint venture partner’s interest in three of the four joint ventures for a total of $69.4 million. These were accounted for as a reduction in participation rights liability.

As of December 31, 2002, we include the operations of 21 storage centers owned through CCP/Shurgard, a joint venture in which we own a 20% legal interest. Due to the details of the property contribution and purchase option related to this joint venture described above, we account for this joint venture as a financing arrangement and include all of the operating results of the properties in our financial statements. These properties are subject to $66.3 million in mortgage debt. During 2002, we re-evaluated our estimate of the option price, the projected timing of our joint venture partner’s exercise of their put option and the related expected cash flows. These changes were accounted for as a change in

estimate, reduced gross participation rights, and subsequent amortization of participation rights. The effect of this change in estimate decreased gross participation rights by $6.4 million and increased income before extraordinary items and net income by $3.4 million in 2002 by reducing amortization from the comparable 2001 amount.

The following is a summary of the participation rights balances for the years ended December 31, 2002 and 2001:


(in thousands)	December 31, 2002			December 31, 2001

Gross participation rights	$	49,842		$	65,431
Participation rights discount		(2,370	)		(17,777	)

Participation rights, net of discount	$	47,472		$	47,654

Consolidated Joint Ventures

We operate four storage centers owned through a joint venture with a California developer. Under our agreement with this developer, it purchases sites in southern California and constructs storage centers on them according to our specifications. On completion of the rent-up period, the storage centers are purchased by a joint venture. Prior to such purchase, we have no ownership in the properties and accordingly, they are not included in any discussions in our operating results. The developer’s interest in the joint venture is based on a predetermined formula and the fair value of the property at contribution. During 1999, the joint venture purchased one of the completed storage centers for $3.1 million; during 2000 the joint venture purchased an additional completed storage center for $11.0 million; and during 2001, the joint venture purchased two of the completed storage centers for $13.4 million. At December 31, 2002, we had guaranteed $20.4 million in outstanding debt for three properties related to this agreement.

Additionally, we have two partnerships with institutional investors that own 12 storage centers and two joint ventures that own two storage centers. Our ownership in these joint ventures ranges from 79% to 99%.

Included in our consolidated financial statements is our purchase of a 74% interest in Morningstar, which owns 40 storage centers in North and South Carolina. This acquisition was made on June 26, 2002, and the results of operations of these storage centers are included in our consolidated financial statements commencing on that date. We have entered into an agreement with Morningstar members to form one or more joint ventures for the purpose of developing and operating high quality self storage properties in North and South Carolina. The properties owned by the entity and the properties to be developed in the joint ventures will be managed by the members of Morningstar through an affiliated entity using Shurgard management systems and standards.

At the time of the purchase of Morningstar, we entered into a management services agreement with Morningstar Property Management, LLC. They will manage the properties in North Carolina and South Carolina for a property management fee equal to the greater of $1,000 per property or 4.25% of the gross revenues of each property.

Unconsolidated Joint Ventures

The 29 properties in unconsolidated joint ventures have been developed primarily through our Florida and Tennessee joint ventures. Our ownership interests range from 50% to 90%, and we do not exercise effective control because all major decisions require the agreement of both parties. These joint ventures have assets with a gross book value of $104.5 million and debt of $66.1 million secured by the storage centers. Our pro rata ownership in the assets is $85.8 million and our pro rata interest in the debt of these joint ventures is $53.8 million, $15.1 million of which debt we have guaranteed.

Tax Retention Operating Leases

The following table summarizes the properties and obligations under these Tax Retention Operating Leases as of December 31, 2002.

Number

Estimated

Total Cost to Date as

Completed Cost of

of December 31,

Residual

Projects

Projects (1)

2002 (2)

Option Price

Guarantee

TROL Developments:

Operating Properties (3)

$129.9

million

$117.7

million

$117.7

million

$102.4

million

Construction in progress (4)

61.9

million

27.3

million

24.9

million

21.6

million

Land purchased pending construction (5)

47.0

million

13.1

million

11.9

million

10.3

million

Total

$238.8

million

$158.1

million

$154.5

million

$134.3

million

(1) The actual completed cost of these projects could vary due to delays during construction caused by weather, unforeseen site conditions, labor shortages, personnel turnover, scheduling problems with contractors, subcontractors or suppliers, or resource constraints.

(2) Includes amounts for which we have not yet been reimbursed as construction agent.

(3) We have subleased the operations of one property to a third party in which we have no ownership. Therefore, the operating results of this property are not included in our discussion of operating properties.

(4) We have subcontracted out the construction agent responsibilities for 2 of these properties to an affiliate.

(5) We have subcontracted out the construction agent responsibilities for 1 of these properties to an affiliate.

As of December 31, 2002 we leased 36 properties under a leasing arrangement (see Tax Retention Operating Leases under OFF BALANCE SHEET TRANSACTIONS) that terminates in February 2005. Each lease includes a purchase option and a residual lease guarantee. As of December 31, 2002, we are operating 20 of these storage centers and have subleased the operations of one additional storage center to a third party. We are engaged as construction agent on 12 properties that are under construction with an additional three properties under construction for which we have subcontracted the construction management to an affiliate.

As of December 31, 2002, the 21 operating properties under the tax retention operating leases had total net rentable square feet of 1.3 million. Excluding the one property subleased to a third party, these properties generated $2.5 million in revenue in 2002 and NOI of ($435,000), which is approximately 24% and 36% ahead of pro forma for these stores for 2002, respectively. These properties had an average of 28% occupancy, with a rate of $9.37 per square foot after an average of seven months of operations.

In December 2002, we exercised our purchase option on three of the leased properties. During December 2002, these three properties generated $35,000 in NOI which represents 28% of projected monthly NOI at maturity. The yield on these three properties is projected to average 6.3% during 2003, as two of these properties are still in rent-up.

During 2001 we entered into three interest rate swaps to mitigate the risk of interest rate fluctuations related to our various options at the end of the Tax Retention Operating Lease transaction. Although these derivative instruments meet our economic objectives, they do not qualify for hedge accounting under SFAS No. 133. These financial instruments are recorded on the Balance Sheet at estimated fair value and adjusted each period through earnings. As of December 31, 2002, our liability under the swaps is $12.6 million. We recorded $11.0 million and $1.6 million in unrealized loss for these financial instruments for the years ended December 31, 2002 and 2001, respectively. (See Note X to our Consolidated Financial Statements).

European Operations

European Business Summary

European operations are conducted through Shurgard Self Storage, SCA (Shurgard Europe), a joint venture in which we have a combined 7.57% direct and indirect equity interest. At December 31, 2002, Shurgard Europe was operating in Belgium, Sweden, France, the Netherlands, the United Kingdom and Denmark.

Since 1992, Shurgard Europe has tested the self storage product on local consumers and has tailored its product to meet the needs of European consumers. European consumers tend to live in more crowded population densities and smaller living spaces that make self storage an attractive option.

The self storage industry is not well established in much of Europe, and we believe this presents Shurgard Europe with the opportunity to become a dominant player throughout Western Europe. Although we are seeing other industry

players entering the European markets, we believe that the supply being added to the market still leaves significant opportunity when compared to the overall size of the market. Shurgard Europe and its subsidiaries have established expansion plans that focus now in five markets: the Benelux region (which includes Belgium, Luxembourg and the Netherlands), France, Scandinavia (including Sweden and Denmark), the UK, and more recently Germany.

In order to take advantage of the market opportunity, Shurgard Europe continues to expand in Europe. Although the operations of existing stores are improving, this expansion will produce losses for the next two to three years as financing costs, start up losses from the additional stores and overhead costs necessary to carry out current expansion plans will continue to exceed operating income. The results of European operations are not consolidated in our financial statements, but rather our interest is accounted for under the equity method of accounting as we exercise significant influence over its operations through our control of 50% of the board of managers. The data included in the following discussion and tables reflect total European operations, not our pro rata percentage.

Our net loss from European operations, including our interest in Recom & Co. (see OFF BALANCE SHEET TRANSACTIONS), was $2.1 million, $2.0 million and $1.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. These results are reported under Expenses as “Loss from Other Real Estate Investments” in our Consolidated Statements of Income. Our portion of FFO losses (See FUNDS FROM OPERATIONS), including our interest in Recom & Co., was $1.1 million, $1.3 million and $1.0 million for the years ended December 31, 2002, 2001 and 2000, respectively. During 2003, we expect to increase our ownership interest to just over 50% (See OFF BALANCE SHEET TRANSACTIONS). The following tables include certain financial and operating information that illustrate the performance of Shurgard Europe. The data included in the following discussion and tables reflect total European operations, not our pro rata percentage.

Summary of European Properties:


			Total Net
	Operating		Rentable		Estimated Total
	Properties		Sq. Ft. (1)		Cost (1)

Country:
Belgium		17		1,007,000	$ 63.6 million
France		23		1,241,000	108.8 million
Netherlands		22		1,197,000	106.5 million
Sweden		20		1,127,000	93.8 million
Denmark		4		215,000	22.8 million
United Kingdom		10		539,000	87.8 million

		96		5,326,000	$483.3million

(1) Total net rentable square feet and estimated total cost when all phases are complete.

Condensed Financial Information of Shurgard Europe


(in thousands)				December 31, 2002		December 31, 2001

Assets
Storage centers
	Land			$	80,124	$	53,623
	Buildings and equipment, net				279,195		170,279
	Construction in progress				90,772		68,050

			Total storage centers		450,091		291,952
Cash and cash equivalents					24,978		15,324
Other assets					68,425		48,261

		Total assets		$	543,494	$	355,537

Liabilities and Equity
Accounts payable and other liabilities				$	46,434	$	42,524
Notes payable to SSCI					49,317		—
Lines of credit					270,936		174,506
Subordinated notes payable to related parties					127,620		91,870

			Total liabilities		494,307		308,900
Shareholders equity					49,187		46,637

		Total liabilities and shareholders equity		$	543,494	$	355,537


				Year Ended			Year Ended
(in thousands)				December 31 2002			December 31 2001

Revenue
	Real estate operations			$	43,512		$	26,526
	Other				257			20

		Total revenue			43,769			26,546

Expenses
	Operating				39,144			29,498
	Depreciation and amortization				12,959			9,045

			Total expenses		52,103			38,543

Loss from operations					(8,334	)		(11,997	)

Other Income (Expense)
	Interest:
		Interest on notes to related parties			(10,190	)		(7,745	)
		Interest on loans			(13,903	)		(8,749	)

	Loss before income tax benefit				(32,427	)		(28,491	)
	Income tax benefit				8,155			8,305

	Loss before cumulative effect of accounting change				(24,272	)		(20,186	)
	Cumulative effect of accounting change				—			(1,106	)

		Net Loss		$	(24,272	)	$	(21,292	)

European Same Store Operations

The definition for European Same Stores includes existing stores acquired prior to January 1 of the previous year as well as developed properties that have been operating for a full two years as of January 1 of the current year. The following table summarizes Same Store operating performance as defined for the year ended December 31, 2002 and 2001.


	Year Ended December 31,									Year Ended December 31,

							% Change
(dollars in thousands except average rent)	2002			2001			(1)			2001			2000			% Change (1)

Real estate operations revenue	$	23,153		$	19,918			16.2	%	$	10,694		$	9,140			17.0	%
Direct operating and real estate tax expense (2)		6,880			7,063			-2.6	%		3,116			3,240			-3.8	%

NOI		16,273			12,855			26.6	%		7,578			5,900			28.4	%
Indirect operating and leasehold expense (3)		3,846			4,791			-19.7	%		2,750			3,327			-17.3	%

NOI after indirect operating and leasehold expense	$	12,427		$	8,064			54.1	%	$	4,828		$	2,573			87.6	%

Avg. annual rent per sq.ft. (4)	$	16.60		$	15.40			7.8	%	$	13.10		$	12.70			3.1	%
Avg. sq.ft. occupancy		81	%		76	%					84	%		75	%
Total net rentable sq.ft.		1,612,000			1,612,000						934,000			934,000
No. of properties		28			28						16			16

(1) Amounts have been translated from local currencies using the average exchange rate for 2002 for the 2002 to 2001 comparison and using the average exchange rate for 2001 for the 2001 to 2000 comparison.

(2) Includes all direct property and real estate tax expense. Does not include any allocation of indirect operating expense.

(3) Indirect operating expense includes certain shared property costs such as district and regional management, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, human resources and accounting. Does not include internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to stores based on number of months in operation during the period.

(4) Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period.

Revenue increased 16.2% from 2001 to 2002 when translated at constant exchange rates. The increase in rental revenue for these stores is a result of a 7.8% increase in rates and a 6.6% increase in occupancy. Revenue growth in US dollars, when translated at the applicable average period rates, increased by 23% due to a change in currency exchange rates from the fourth quarter of 2001 to the same period in 2002. Decreases in indirect operating expense are the result of spreading certain fixed costs over more stores as our European network expands. The December 2002 yield for these stores was 12.7% (calculated as December 2002 NOI annualized divided by the cost).

In 2001, Shurgard Europe increased rental rates of Same Stores by an average of 3.1% while occupancy rose nine percentage points. These rate increases, as well as increases in occupancy, resulted in the 17% revenue increase from 2000 to 2001. Direct property expenses decreased 3.8% due to decreases in marketing expenses and certain real estate taxes. The decrease in indirect operating expenses is the result of spreading certain fixed costs over more stores as our European network expands.

European Development

The following table summarizes European developments by country during the past three years:


							Total net Rentable
							Sq. Ft. when all
		Number of		Estimated Total Cost			phases are
		Properties		(1)				complete

Opened in 2002
	Belgium		2	$	5.9	million		101,000
	France		7		36.3	million		376,000
	United Kingdom		3		30.0	million		163,000
	Netherlands		7		34.6	million		368,000
	Sweden		3		15.6	million		151,000
	Denmark		2		11.9	million		106,000

	Opened in 2002		24	$	134.3	million		1,265,000

Opened in 2001
	Belgium		1	$	3.1	million		51,000
	France		5		27.5	million		280,000
	United Kingdom		2		18.5	million		102,000
	Netherlands		9		40.9	million		485,000
	Sweden		6		26.8	million		315,000
	Denmark		2		10.9	million		110,000

	Opened in 2001		25	$	127.7	million		1,343,000

Opened in 2000
	France		7	$	33.7	million		407,000
	United Kingdom		2		17.2	million		95,000
	Netherlands		5		24.5	million		284,000
	Belgium		3		12.0	million		186,000
	Sweden		2		9.8	million		123,000

	Opened in 2000		19	$	97.2	million		1,095,000

(1) The actual completed cost of these projects are reported in U.S. dollars and could vary due to delays during construction caused by weather, unforeseen site conditions, labor shortages, personnel turnover, scheduling problems with contractors, subcontractors or suppliers, or resource constraints. (See Item 1 Business –Risk Factors.)

During 2002, Shurgard Europe opened 24 storage centers with an estimated total cost of $134.3 million and net rentable square feet of 1.3 million when all phases are complete. The average occupancy at the end of December 2002 was 13.8% after an average of 3.1 months of operations. These storage centers generated $1.6 million of negative NOI for the year ended December 31, 2002.

The 25 storage centers that Shurgard Europe opened in 2001 have an estimated total cost of $127.7 million and will have net rentable square feet of 1.3 million when all phases are complete. The average occupancy at the end of December 2002 was 47.5% after an average of 16 months of operations. These storage centers generated $1.4 million of NOI for the year ended December 31, 2002.

The 19 storage centers that Shurgard Europe opened in 2000 have an estimated total cost of $97.2 million and will have net rentable square feet of 1.1 million when all phases are complete. The average occupancy at the end of December 2002 was 67.9% after an average of 27 months of operations. These storage centers generated $7.2 million of NOI for the year ended December 31, 2002. For the month of December 2002 theses stores generated $783,000 in NOI which represents 71.4% of their stabilized NOI.

In addition to the above completed developments, Shurgard Europe currently has another three storage centers under construction. The following table summarizes European development projects in progress at December 31, 2002.

Number of

Estimated Completed

Total Cost to Date as of

Projects

Cost of Projects (1)

December 31, 2002

New Developments

France

5.5

million

$5.5 million

Sweden

4.4

million

$1.3 million

United Kingdom

8.9

million

$6.2 million

(1) The actual completed cost of projects could vary due to delays during construction caused by weather, unforeseen site conditions, labor shortages, personnel turnover, scheduling problems with contractors, subcontractors or suppliers, or resource constraints. (See Item 1 Business – Risk Factors)

RELATED PARTY TRANSACTIONS

On May 27, 2002, we entered into a subscription agreement to purchase up to $50 million of three year 9.75% payment-in-kind cumulative preferred bonds to be issued at the option of Shurgard Europe redeemable on December 31, 2004. Pursuant to the subscription agreement, Shurgard Europe may issue up to $50 million of these preferred bonds to us during the first two years of the three-year commitment term. If Shurgard Europe issues more than $40 million in bonds during the first 12 months, it has the option of increasing our total notional subscription to $75 million. Interest is payable on the bonds at the end of each quarter in cash or through an issuance of additional bonds. The bonds issued to pay interest can be issued above the commitment amount. Shurgard Europe has two one-year options to extend the three year redemption date of the bonds. Shurgard Europe must redeem the bonds on the redemption date, or may redeem at anytime prior to the redemption date, on paying us 115% of the face value of the outstanding bonds plus accrued and unpaid interest. The subscription agreement entitles us to a commitment fee of 0.5% and a structuring fee of 1.5% of the initial commitment of $50 million, as well as an unused fee equal to 100 basis points of the undrawn amount payable in arrears on an annual basis. These fees are being recognized as revenue using the effective interest method over the extended term of the bonds. Our intent is to hold these bonds to maturity. As of December 31, 2002, $49.3 million of bonds had been issued to us and we have recorded $1.4 million in interest income. The terms of the bonds provide that the parties will treat the bonds as an equity investment in Shurgard Europe for federal income tax purposes.

We provide property management services to affiliates including marketing, maintenance, management information systems, access to our call center and management of on-site personnel. Management fees from related parties were $454,000, $393,000 and $250,000 for the years ended December 31, 2002, 2001, and 2000, respectively.

CONSOLIDATED STATEMENT OF INCOME

Income before extraordinary items increased from 2001 to 2002 due to increased income from operations, as well as a decrease in the amortization of participation rights discount and interest on loans related to our development activity. The increase from 2000 to 2001 is primarily due to the gain from sale of property and increased performance from store portfolio offset by increased participation rights amortization.

Real estate operations revenue rose from 2001 to 2002 as a result of factors discussed under SEGMENT PERFORMANCE. In addition to the expenses identified under SEGMENT PERFORMANCE, operating expenses include internal acquisition costs and development expenses related to discontinued efforts of $1.5 million, $765,000 and $376,000 for 2002, 2001 and 2000, respectively. Direct and indirect operating expenses of $3.4 million and $2.6 million for our containerized storage operations beginning June 30, 2001 are included in operating expenses for 2002 and 2001, respectively. We incurred $4.5 million and $2.2 million in expenses related to our role as construction agent for Storage Centers Trust (SCT) during 2002 and 2001, respectively. All other amounts are included in NOI after indirect operating and leasehold expenses and are discussed in SEGMENT PERFORMANCE.

Other revenue increased from 2001 to 2002 due to the receipt during 2002 of $5.7 million in developer fees related to expense reimbursements in our role as construction agent for the tax retention operating leases (see Tax Retention Operating Leases under OFF BALANCE SHEET TRANSACTIONS) during 2002 versus $2.2 million in 2001, as well as $3.2 million of revenue from our containerized storage operations which we began consolidating June 30, 2001, and $766,000 of income from our tenant insurance program. Other revenue increased from 2000 to 2001 due to $2.2 million in expense reimbursements related to our role as construction agent for SCT (see Tax Retention Operating Leases under OFF BALANCE SHEET TRANSACTIONS), as well as $2.0 million of revenue from our containerized storage operations (see Containerized Storage Operations under TAXABLE REIT SUBSIDIARY OPERATIONS).

Depreciation and amortization increased from 2001 to 2002 and from 2000 to 2001 due to an increased number of stores included in our consolidated financial statements over the same period of time. Beginning January 1, 2002, we ceased amortization of goodwill (see Note N to our Consolidated Financial Statements).

General and administrative expenses in 2002 include $1.9 million of expenses associated with the impairment of certain land held for sale. Excluding the effect of the impairment in 2002 and the effect of expenses associated with the closure of two containerized warehouses in 2001, general and administrative expenses increased from 2001 to 2002 by $709,000 or 8.3%. The increase from 2000 to 2001 includes expenses associated with the disposal of two containerized storage warehouses. Excluding the effect of the disposal of these warehouses, general and administrative expense increased $2.8 million primarily due to costs related to the restatement of our financial statements during 2001, the negotiations of certain joint venture agreements and increases in personnel and information technology expenses related to our growth. As a percentage of real estate operations revenue, these expenses decreased from 5.2% to 4.4% from 2001 to 2002 and increased from 2.5% to 5.2% from 2000 to 2001. Excluding the impact of the impairment and closure of these warehouses, general and administrative expenses as a percentage of revenue was 3.7%, 3.8% and 2.5% for 2002, 2001 and 2000, respectively.

Interest income and other in 2002 includes gain on sale of property of $942,000 and a one-time lease termination settlement of $1.8 million. During 2001 we recognized a gain on sale of property of $2.0 million. The increase from 2000 to 2001 is primarily due to the gain from sale of property.

Interest expense consists of two components: interest on loans and amortization of participation rights discount. Interest expense on line of credit and notes payable increased from 2000 to 2001 and again from 2001 to 2002 due to increases in the outstanding balances. This increase from 2001 to 2002 represents borrowings related to the purchase of a 74% interest in Morningstar and the development of new storage centers and acquisitions. Additionally, we capitalized interest related to the construction of domestic storage centers of $102,000, $1.3 million and $3.8 million in 2002, 2001 and 2000, respectively. In 2002, we reduced the participation rights liability associated with CCP/Shurgard by $6.4 million which resulted in decreased amortization for the second half of 2002. The amortization of participation rights discount increased from 2000 to 2001 due to the increase in the number of stores subject to participation rights and changes in the estimated cash flows related to those rights. (See Note H to our Consolidated Financial Statements). Amortization of loan costs of $1.4 million, $2.1 million and $2.1 million is included in amortization expense for 2002, 2001 and 2000, respectively. During 2001 we entered into three interest rate swaps to mitigate the risk of interest rate fluctuations related to the company’s various options at the end of its Tax Retention Operating Lease transaction. Since these transactions do not qualify for hedge accounting treatment under SFAS No. 133, we recorded $11.0 million and $1.6 million in unrealized loss for these financial instruments for the years ended December 31, 2002 and 2001, respectively. (See Note X to our Consolidated Financial Statements).

Minority interest increased from 2001 to 2002 which relates to the growing operations of our consolidated partially owned subsidiaries and the inclusion of the 26% non-controlled interest in Morningstar, as discussed previously. The increase from 2000 to 2001 is due to additional capital contributions from our California developer resulting in an increase in its ownership position.

Income tax benefit consists of the current year income tax benefit for Shurgard TRS, our taxable REIT subsidiary, including its subsidiaries: STG since its consolidation beginning June 2001, SS Income Plan, our tenant insurance program, and other taxable subsidiaries (See TAXABLE REIT SUBSIDIARY OPERATIONS). The net operating losses carried forward for STG and the operating losses from other taxable subsidiaries, are offset by income from the other entities. The reduction in our tax benefit from 2001 to 2002 is due to the recognition of $766,000 in taxable income from SS Income Plan.

During 2002, we received approximately $738,000 as an adjustment to the purchase price of SFP II and we recorded a $1.2 million gain from the extinguishment of participation rights, both of which are recorded as early extinguishment of debt. Finally, with the early extinguishment of a mortgage note payable, a loss on early extinguishment of debt of $164,000 was incurred. During 2001 we incurred $1.0 million in costs related to the early extinguishment of a $122.6 million note to a financial services company and $400,000 related to the early extinguishment of the mortgage financing for SFP II.

OTHER REAL ESTATE INVESTMENTS

The following table shows income (loss) from unconsolidated real estate investments for the years ended December 31, 2002, 2001 and 2000. All income and loss amounts reflect our pro rata ownership percentage and are reported under Expenses as “Loss from Other Real Estate Investments” in our Consolidated Statement of Net Income.

Loss from Other Real Estate Investments


(in thousands)	2002			2001			2000

Containerized storage	$	—		$	(1,679	)	$	(1,842	)
Unconsolidated joint ventures		632			(1,083	)		(1,668	)
Participating mortgages		31			1,500			1,659
European Operations		(2,059	)		(2,009	)		(1,569	)

	$	(1,396	)	$	(3,271	)	$	(3,420	)

Containerized Storage

STG, a containerized storage business, is wholly owned by Shurgard TRS, a taxable REIT subsidiary and is subject to corporate level tax. Prior to October 2002, STG operated as Shurgard Storage To Go, Inc, a separate taxable REIT subsidiary. In June 2001, we purchased all of the issued and outstanding shares of STG and converted our outstanding note receivable to equity. As a result of this transaction, we began consolidating STG in our financial statements as of the date of the purchase of the shares. Operating results prior to June 2001 are accounted for under the equity method. The amount in other real estate investments for 2001 includes the first six months of operations prior to consolidation (See Containerized Storage Operations under TAXABLE REIT SUBSIDIARY OPERATIONS).

Unconsolidated Joint Ventures

We have 29 properties in joint ventures in which our ownership interests range from 50% to 90%, and over which we do not exercise effective control because all major decisions require the agreement of both parties. These joint ventures generated $9.0 million in NOI for 2002 compared to $7.6 million in 2001. As of December 31, 2002, we had invested a total of $29.4 million in these joint ventures net of income. Additionally, we have guaranteed certain joint venture loans totaling $15.1 million. Performance related to stores developed through these joint ventures is included in the appropriate tables and section discussions (Same Stores, Domestic Acquisitions or Domestic Development) under SEGMENT PERFORMANCE.

Participating Mortgages

As of December 31, 2001, we had $2.6 million invested in a participating mortgage loan. We received contingent interest payments from the mortgaged property equal to 50% of both operating cash flow and distributions from the gain on sale of real property, in accordance with the terms of the applicable agreement. We received $639,000 and $422,000 in the years 2001 and 2000 in contingent interest in connection with agreements related to the five properties. In December 2001, we purchased four of the five properties at a cost of $13.8 million, including $10.3 million outstanding under the participating mortgage. We purchased the fifth property in February 2002. Operating results for the five properties are included in same store results for 2000 through 2002.

European Operations

Our net loss from European operations, including our interest in Recom & Co. (see OFF BALANCE SHEET TRANSACTIONS), was $2.1 million, $2.0 million and $1.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. Our European investment owns 96 stores in six countries. These properties generated $18.5 million in NOI in 2002 compared to $9.6 million in 2001 and $3.6 million in 2000.

TAXABLE REIT SUBSIDIARY OPERATIONS

Containerized Storage Operations

Since 1996 we have invested in STG, a Washington corporation whose business is to provide services ancillary to self storage, including but not limited to containerized storage services. We originally owned five percent (5%) of the Series A Common Stock in STG and 75% of non-voting, Series B Common Stock for a combined economic interest of

71.25%. In June 2001, we purchased for $57,000 the remaining 95% of the Series A Common stock of STG that was formerly owned by certain of our current and former key employees. At that time, we converted our $16 million note receivable to equity and began consolidating STG in our financial statements.

In March 2001, the Board of Directors decided to close the Chicago containerized storage operations. We incurred approximately $285,000 in expenses related to this closing. In April 2001, we opened a new warehouse in Orange County, California to take advantage of business opportunities in the Southern California market. Despite a new, more aggressive advertising approach, the Orange County warehouse failed to rent up as expected. In the fourth quarter of 2001, based on poor performance outlooks, we decided to close both the Orange County and Atlanta warehouses. We accrued $2.4 million in costs for closing down operations in these two locations. The $2.4 million exit costs included estimates of the costs associated with subleasing the warehouses, lease termination fees for warehouses and equipment, severance costs, charges to prepaid expenses, estimated loss on sale of containers and estimated loss from operations during closing. During 2002, we charged $2.2 million to the liability. These costs consisted primarily of lease termination fees and costs necessary to relocate current customers incurred during 2002. We expect to have the exit plan completed during the first half of 2003.

Our losses, net of tax, related to STG for the years ended December 31, 2002, 2001 and 2000 were $558,000, $5.8 million and $1.8 million, respectively. The losses for 2001 include expenses accrued in the fourth quarter 2001 in connection with the closure of the Orange County and Atlanta warehouses discussed above, as well as $1.7 million in impairment of existing assets and goodwill. In connection with the warehouse closures discussed above, we performed an impairment analysis on the remaining assets and goodwill related to STG. Impairment expense was calculated as the difference between fair value, using the discounted cash flow method, and the book value. The goodwill impairment, asset impairment and exit cost accrual are recorded in “General, administrative and other” on the 2001 Consolidated Statement of Income.

Other

During 2002, we began a new tenant insurance program. Under this program, policies are issued and administered by a third party for a fee, the storage centers receive a cost reimbursement for handling certain administrative duties and SS Income Plan receives the profits, if any, of the policy. SS Income Plan reinsures for losses in excess of premiums collected. During 2002 we recognized $766,000 in revenue based on the excess of premiums over claims and administrative costs.

In December 2002, we contributed all inventory owned by us and our wholly-owned subsidiaries into SS Income Plan, a wholly owned subsidiary of Shurgard TRS, our taxable REIT subsidiary. Beginning in 2003, all inventory sales will be conducted through this entity. We do not conduct any other material taxable operations.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No.133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS No.133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. We adopted SFAS No.133 effective January 1, 2001. We use derivatives to mitigate the risk of interest rate fluctuations. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in Other Comprehensive Income and recognized in the statement of earnings when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.

In June 2001, the FASB issued SFAS No.141, “Business Combinations.” SFAS No.141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. During 2002, we purchased a 74% interest in Morningstar which was accounted for as a purchase in compliance with SFAS No.141.

In June 2001, the FASB issued SFAS No.142, “Goodwill and Other Intangible Assets.” SFAS No.142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, ceased on adoption of this statement. We implemented SFAS No.142 on January 1, 2002. In connection with the adoption of this statement and our annual evaluation, we evaluated our goodwill and determined that goodwill remaining on the books as of December 31, 2002 was not impaired. The remaining goodwill of $25 million has been determined to have an indefinite life and amortization of this goodwill ceased on adoption of this statement.

In July 2001, the FASB issued SFAS No.143, “Accounting for Asset Retirement Obligations.” This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. This statement is effective for us beginning in 2003. Adoption of FASB No. 143 is not expected to have a significant impact on our financial position, results of operations or cash flows.

In August 2001, the FASB issued SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” The statement supercedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for the disposal of a segment of business (as previously defined in that Opinion). SFAS No.144 establishes a single accounting model, based on the framework established in SFAS No.121, for long-lived assets to be disposed of by sale. It retains the fundamental provisions of SFAS No.121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of the impairment of long-lived assets to be disposed of by sale. SFAS No.144 is effective for us in 2002. The adoption of SFAS No.144 has not had a significant impact on our financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” The rescission of SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements,” which amended SFAS No. 4, will affect income statement classification of gains and losses from extinguishment of debt. SFAS No. 4 required that gains and losses from extinguishment of debt be classified as an extraordinary item, if material. Under SFAS No. 145, extinguishment of debt is now considered a risk management strategy by the reporting enterprise and the FASB does not believe it should be considered extraordinary under the criteria in APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, unless the debt extinguishment meets the unusual in nature and infrequency of occurrence criteria in APB Opinion No. 30. SFAS No. 145 will be effective for us beginning in 2003. On adoption, extinguishments of debt will be classified under the criteria in APB Opinion No. 30. Amounts from 2002 and 2001 will be reclassified into Income from Operations on adoption of SFAS No.145.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No.146 requires recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No.146 is effective for exit or disposal activities initiated after December 31, 2002. On adoption, costs associated with exit or disposal activities will be recognized as incurred.

In November 2002, insert the the FASB issued FASB Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements in this Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. (See Note D, J and V to our Consolidated Financial Statements).

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” which amended SFAS No.123, “Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and amends the disclosure requirements of SFAS No.123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS.No. 148 is effective for periods ending after December 15, 2002. We have adopted the disclosure provisions of SFAS No.148 and we continue to account for stock- based compensation under APB No. 25; therefore, SFAS .No. 148 will have no effect on our financial position, results of operations or cash flows. (See Note Q to our Consolidated Financial Statements).

No. 46 becomes effective for us beginning July 2003. It is reasonably possible that we will be considered the primary beneficiary of variable interest entities created prior to February 1, 2003, on adoption of FASB Interpretation No. 46, and therefore will be required to consolidate the assets and liabilities of these entities on adoption of FASB Interpretation No. 46, which will have a material effect on our balance sheet and results of operations. (See Note J to our Consolidated Financial Statements and OFF BALANCE SHEET TRANSACTIONS).

We accounted for sales of certain storage centers in which we have continuing involvement, as defined in SFAS No. 66, “Accounting for Sales of Real Estate”, as financing arrangements. (See Note H to our Consolidated Financial Statements).

FUNDS FROM OPERATIONS

Funds from operations (FFO), pursuant to the National Association of Real Estate Investment Trusts’ (NAREIT) October 1999, as amended in April 2002, White Paper on Funds from Operations, is defined as net income, calculated in accordance with generally accepted accounting principles (GAAP) including non-recurring events, except for those defined as “extraordinary items” under GAAP and gains and losses from sales of depreciable operating property, plus depreciation of real estate assets and amortization of intangible assets exclusive of deferred financing costs less dividends paid to preferred shareholders. We believe that because amortization of participation rights discount reflect our partners’ increasing interests in unrecognized gains on depreciable operating properties (represented by the difference between the expected option price and our partners’ contributions), it is consistent to add it back to net income. Contributions to FFO from unconsolidated entities in which the reporting entity holds an active interest are to be reflected in FFO on the same basis. We believe FFO is a meaningful disclosure as a supplement to net income because net income implicitly assumes that the value of assets diminish predictably over time while we believe that real estate values have historically risen or fallen with market conditions. FFO is not a substitute for net cash provided by operating activities or net income computed in accordance with GAAP, nor should it be considered an alternative indication of our operating performance or liquidity. In addition, FFO is not comparable to “funds from operations” reported by other REITs that do not define funds from operations in accordance with the NAREIT definition. The following table sets forth the calculation of FFO in accordance with the NAREIT definition.


	2002			2001			2000

Net income	$	56,633		$	33,312		$	32,307
Gain on sale of operating real estate		(942	)		(2,044	)
Early extinguishment of debt		(1,724	)		1,445
Preferred distribution		(14,695	)		(15,098	)		(8,750	)
Depreciation/amortization		47,963			45,234			40,693
Adjustment to depreciation/amortization from unconsolidated joint ventures and subsidiaries		3,294			3,339			3,310
Deferred financing costs		(1,439	)		(2,081	)		(2,061	)
Amortization of participation rights discount		4,824			16,876			11,262

FFO	$	93,914		$	80,983		$	76,761

FFO for 2002 increased $12.9 million over 2001 FFO, which had increased $4.2 million over 2000. As previously discussed, this growth rate reflects the improved performance of the original portfolio of properties as well as the addition of properties over the past three years through acquisitions and developments. In 2003, assuming we grow Same Store NOI after indirect operating and leasehold expense at 0% to 3%, we directly finance new developments and we increase our interest in Shurgard Europe to just over 50%, we expect FFO to increase $8.3 million to $13.6 million. This expectation regarding FFO growth constitutes a forward-looking statement within the meaning of the Private Securities Litigation Reform Act and is based on several assumptions. If any of these assumptions are not satisfied or prove to be incorrect, actual results could differ materially from those indicated in the statement. The risks and uncertainties that may cause these assumptions and this forward-looking statement to prove to be incorrect include the risks that implementation of the business plan, including marketing and sales initiatives, will not be successful and that our earnings, expenses or revenues may be affected by other factors, such as the risk that competition from new self storage facilities or other storage alternatives may cause rents to decline, occupancy rates to drop, or delays in rent up of newly developed properties. We may experience increases in labor, taxes, marketing and other operating and construction expenses. For a discussion of the factors that might cause these assumptions not to occur see SEGMENT PERFORMANCE, OTHER REAL ESTATE INVESTMENTS, OWNERSHIP AND LEASING ARRANGEMENTS and Risk Factors in (Item 1) Business of this Annual Report on Form 10-K/A.

INVESTING TRANSACTIONS

In 2002, we invested $37.1 million in domestic development and expansion projects and $7.7 million in capital improvements to our existing portfolio. The $4.4 million increase in other real estate investments reflects the amount invested in joint ventures.

In addition, on June 26, 2002, we purchased for $62 million a 74% interest in Morningstar which owns and operates 40 storage centers in North Carolina and South Carolina that consist of 3.1 million net rentable square feet. The 40 existing storage centers include seven sites with pre-identified expansion opportunities and nine sites with continued development potential. We have also entered into an agreement with certain members of Morningstar to form one or more joint ventures for the purpose of developing and operating high quality self storage properties in North and South Carolina. The properties owned by the entity and the properties to be developed in the joint ventures will be managed by the members of Morningstar through an affiliated entity.

In May 2002, we entered into a subscription agreement to purchase up to $50 million of three year 9.75% payment-in-kind cumulative preferred bonds to be issued at the option of Shurgard Europe (See RELATED PARTY TRANSACTIONS). As of December 31, 2002, we had subscribed to $49.3 million of these bonds.

In 2001, we invested $19.3 million in the acquisition of four storage centers, $38.9 million in domestic development and expansion projects, and $7.1 million in capital improvements to our existing portfolio. The $2.0 million increase in other real estate investments reflects the amount invested in joint ventures.

During 2001, we exercised our option to purchase five properties in which we had participating mortgages and in December 2001, we purchased four of the five properties at a cost of $13.8 million, including $10.3 million outstanding under the participating mortgage. We purchased the fifth property in February 2002. Operating results for the five properties are included in same store results for 2000 through 2002.

In November 2001 we purchased an additional partnership unit in Shurgard Institutional Fund LP for $1.3 million. We currently own 23 of 25 units and are entitled to 92% of this partnership’s limited partner distributions.

In 2000, we invested $24.9 million in the acquisition of seven storage centers, $74.8 million in domestic development and expansion projects, and $7.0 million in capital improvements to our existing portfolio. The $4.9 million increase in other real estate investments reflects primarily the $4.7 million invested in joint ventures and the $200,000 invested in our containerized storage operation. Additionally, during 2000, loans to affiliates included in other real estate investments increased $2.2 million due to additional loans to our containerized storage operation.

Under the Merger Agreement with Shurgard Incorporated, we were contingently obligated to issue additional shares as consideration for certain partnership interests held by Shurgard Incorporated, which were not valued at the time of the merger. In 1998, we recorded the issuance of 145,286 shares and in 2000 issued the final 387,933 shares related to this obligation.

CAPITAL EXPENDITURES

In addition to continued investments in acquisitions and developments, we invest in improving our current portfolio of real estate. Investments in existing storage properties include primarily expansions, conversions (i.e., size of units or climate control) and certain recurring improvements to roofs, pavement, sealant and other items such as security upgrades that we believe are necessary to maintain our quality standards and our ability to generate premium returns.

Of the $6.6 million in capital improvements expended during 2002, $1.6 million was for roofs, pavement and sealant, representing approximately $0.06 per net rentable square foot. During 2001, $6.7 million in capital improvements were expended of which $2.4 million was for roofs, pavement and sealant, representing approximately $0.09 per net rentable square foot, while $1.7 million out of a total of $7.0 million was spent for these items during 2000 representing approximately $0.07 per net rentable square foot. Specifically identified capital improvements expected for 2003 total $5.7 to $6.8 million, of which $2.5 to $3.7 million represents roofs, pavement and sealant.

FINANCING TRANSACTIONS

Line of Credit

The balance on the domestic line of credit increased from $47.8 million at December 31, 2001 to $113.5 million at December 31, 2002. Draws on the line were used to fund acquisition and development activity and general corporate purposes, and payments were made primarily from the proceeds of stock offerings and reimbursements from SCT for costs incurred in connection with our role as construction agent. At December 31, 2002, we had an unsecured domestic line of credit to borrow up to $360 million at a spread over LIBOR, maturing February 2005. Availability under this line of credit is limited based on various financial covenants and guarantees under certain tax retention operating leases. At December 31, 2002, the current available amount was $131.3 million, of which approximately $113.5 million was outstanding. At December 31, 2002, the weighted average interest rate was 2.75%.

The balance on the domestic line of credit decreased $42.1 million from December 31, 2000 to December 31, 2001. Draws on the line were used to fund acquisitions, the purchase of partnership units, development activity and general corporate purposes, and payments were primarily made from the proceeds of bond and stock offerings.

Long-term Financing

On June 28, 2002, we raised $86.25 million (approximately $82.3 million net proceeds) through the sale of 2.5 million shares of Class A Common Stock. On August 19, 2002, we used approximately $50 million of the proceeds to redeem in full our 8.80% Series B Cumulative Redeemable Preferred Stock issued on April 16, 1997. Prior to the closing of the offering, we borrowed under our revolving credit facility to fund the balance of the $62 million purchase of the 74% interest in Morningstar. We repaid this borrowing with proceeds from the offering. In connection with the purchase of our interest in Morningstar, we acquired notes payable of $58.4 million with an aggregate fair value of $61.3 million and recorded a premium on these notes of $2.1 million (representing 74% of the difference between face value and fair value). These notes have various interest rates ranging from 3.74% to 9.05% per annum and mature between 2005 and 2012.

On July 24, 2002, we paid $1.2 million to pay off a mortgage note payable. In connection with the early extinguishment of this debt, we recorded prepayment penalties of $164,000.

On June 27, 2002, we paid $12.5 million to pay off a participating mortgage including $7.3 million in mortgage debt, $5.0 million in participation rights and $200,000 in prepayment penalties. In connection with the early extinguishment of this debt, we recorded a gain, net of prepayment penalties, of $1.2 million.

Shurgard-Resco L.L.C., a consolidated entity, borrowed $14.7 million in May 2002. The note matures June 1, 2012, is secured by 3 properties owned by Shurgard-Resco L.L.C., and has a fixed interest rate of 7.10% per annum.

In 2002 we entered into, and terminated, a fixed to variable rate swap for $50 million of the senior notes payable due in 2004. This hedge was designated as a fair value hedge. The gain or loss on the swap and the bonds are recognized in earnings and the carrying value of the bonds is adjusted accordingly. On August 20, 2002, we terminated these swaps at a gain of $2 million. This gain is being amortized to interest expense over the remaining life of the bonds using the effective interest rate method. As of December 31, 2002, the carrying value of the bonds was increased by $1.6 million.

In February 2001, we issued $200 million in senior unsecured notes (approximately $198.4 million in net proceeds) that bear interest at 7.75% and are due 2011. The notes require semi-annual interest payments due February 22 and August 22. Additionally, in February 2001, we raised $86.25 million (approximately $83.1 million in net proceeds) through the sale of 3.45 million shares of Series D Cumulative Redeemable Preferred Stock. These preferred shares require quarterly distributions of 8.75% per year and are callable at our option after five years, at a redemption price of $25 per share. In 2001, we raised net proceeds after offering costs of $76.0 million through the sale of 2.7 million shares of Class A Common Stock. Proceeds from these issuances were used to repay balances outstanding under our line of credit, to purchase the partnership interests noted above and to pay off our $122.6 million note payable prior to its maturity in June 2001. In connection with the payoff of the $122.6 million note payable, we incurred approximately $1 million in expense related to the early extinguishment of this debt.

During 2000, Shurgard/Fremont Partners II (SFPII) borrowed an additional $12.9 million under its non-recourse credit facility. On October 1, 2001, we exercised our option to acquire our joint venture partner’s interest in SFP II for $37.7 million. This payment was accounted for as a reduction in participation rights (See Note H in our Consolidated Financial Statements). On September 28, 2001, we repaid the partnership’s outstanding mortgage financing of approximately $62.3 million with proceeds from our common stock offering and incurred $409,000 in expenses in connection with the early extinguishment of this debt.

Additionally, during 2000, CCP/Shurgard obtained a non-recourse credit facility to borrow up to $67.7 million of which $66.3 million was outstanding as of December 31, 2002. The note matures December 2003, is secured by the 21 properties owned by CCP/ Shurgard, and requires monthly payments of interest only at 275 basis points above LIBOR. We have an interest rate swap in effect that fixes the interest rate at 6.93%. CCP Shurgard has the option to extend the maturity date for up to two consecutive additional one year periods.

SHORT-TERM AND LONG-TERM LIQUIDITY

Cash balances increased from $7.0 million at December 31, 2001 to $11.7 million at December 31, 2002 primarily due to payment of notes payable and the purchase of participation rights offset by the common and preferred stock offerings. The following table summarizes certain information regarding our liquidity and capital resources:


	At December 31,

	2002			2001			2000

Debt to total assets (2)		43	%		38	%		36	%
Total market capitalization (1)	$1,874 million			$1,708 million			$1,264 million
Debt to total market capitalization (1) (2)		32	%		28	%		35	%
Weighted avg. interest rate (3)		7.23	%		7.87	%		8.25	%

(1) Total market capitalization is based on the closing market price as of December 31, 2002, of the Class A Common Stock, Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock multiplied by their respective total number of outstanding shares plus total debt.

(2) Debt includes notes payable and line of credit and participation rights.

(3) Represents weighted average interest rate on our outstanding domestic line of credit and notes payable.

Our total domestic notes payable at December 31, 2002 was $443.3 million, most of which is fixed rate debt or variable rate debt fixed by swap agreements. In addition, we have $113.5 million variable rate debt on our line of credit. We limit our use of variable rate debt; however, at times balances could be significant enough that fluctuations in interest rates would impact our earnings. We believe that we will be able to minimize the impact of such rate fluctuations through the use of interest rate swaps and caps, refinancing or other strategies.

Cash provided by operating activities for the years ended December 31, 2002, 2001 and 2000 was $128.5 million, $116.5 million and $85.6 million, respectively. We believe that our cash flow in 2003 will be sufficient to make required principal payments and distributions in accordance with REIT requirements. Operating cash flow is subject to certain risks and uncertainties that may affect our ability to meet these obligations, including the risk that implementation of the business plan, including marketing and sales initiatives, will not be successful and that our earnings, expenses or revenues may be affected by other factors, such as the risk that competition from new self storage facilities or other storage alternatives may cause rents to decline, occupancy rates to drop, or delays in rent-up of newly developed properties. Additionally, we may experience increases in labor, taxes, marketing and other operating and construction expenses.

During 2003, we intend to exercise our option to acquire an additional 43% interest in Shurgard Europe. We expect this investment of approximately $150 million to be funded through a combination of debt or equity. The actual amount of our contribution and our ultimate ownership interest depends on the extent, if any, to which our European operating partners and certain employees choose to contribute. As of December 31, 2002, the option price to acquire all 36 properties in the tax retention operating lease was $154.5 million and is expected to be $244 million when they are completely built out. We are not obligated to exercise our option on all properties in this facility. If we choose to exercise our option to purchase these properties, funds would be available through our existing line of credit. We believe we have existing liquidity to finance both transactions.

We anticipate meeting our long-term liquidity needs primarily through a combination of our lines of credit, unsecured debt, common and preferred equity, and alternative capital sources. In order to continue to grow at historical rates and to meet our capital objectives, it will be necessary to obtain equity capital during the next two to three years. We will evaluate various alternatives, including joint ventures with private institutions and public pension funds and the issuance of

additional common stock. Additionally, we anticipate reducing our distribution payout ratio in order to retain cash flow for growth.

COMMITMENTS AND CONTINGENCIES

The following tables summarize our contractual obligations and our off-balance sheet commitments.


	Payments due by Period

									2008 and
(in thousands)	Total		2003		2004-2005		2006-2007		beyond

Contractual Obligations
Long-term debt	$	443,289	$	66,266	$	73,123	$	52,595	$	251,305
Operating lease obligations		77,363		5,644		11,274		11,066		49,379
Partcipation rights liability (1)		47,472		27,406		20,066		—		—

Total	$	568,124	$	99,316	$	104,463	$	63,661	$	300,684


	Amount of Commitment Expiration per Period

	Total
	amounts								2008 and
(in thousands)	Committed		2003		2004-2005		2006-2007		beyond

Other Commercial Commitments & Contingent Liabilities
Joint Venture loan guarantees (2)	$	15,097	$	4,426	$	8,971	$	1,700	$	—
Residual lease guarantees on tax retention operating leases (3)		134,342				134,342
Development contract commitments		316		316
Other related party guarantees		20,363				20,363
Contingent obligations under European joint venture (4)		147,600		147,600		—		—		—

Totals	$	317,718	$	152,342	$	163,676	$	1,700	$	—

(1) Estimate of amount and timing of cash flows. See Development Financing Joint Ventures under OWNERSHIP AND LEASING

ARRANGEMENTS.

(2) See Unconsolidated Joint Ventures under OWNERSHIP AND LEASING ARRANGEMENTS.

(3) See Tax Retention Operating Leases under OWNERSHIP AND LEASING ARRANGEMENTS.

(4) See EUROPEAN OPERATIONS. Bank debt for which we are contingently liable as a general partner of Recom. The debt matures in 2003, or sooner, if we, our partners in Recom or Shurgard Europe default in our separate indebtedness.

OFF BALANCE SHEET TRANSACTIONS

Tax Retention Operating Leases

In 2001, we executed an agreement with a third party, SCT to enter into up to $250 million worth of tax retention operating leases. SCT is a trust that takes title to the development properties identified by us, constructs them to our specifications and then leases them to us for a period of four years with available extensions. Under the lease and related agreements, we will function as construction agent and tenant. We have the option to acquire a property at or before the end of its lease term. At the end of the lease term, we may acquire a property or it may be sold to a third party, or the lease may be extended by mutual agreement. If we elect to purchase the property, the purchase price will be equal to the total property cost plus interest carry and a fixed equity return to SCT at a combined rate of approximately 150 basis points over London Interbank Offering Rate (LIBOR). Prior to such purchase, we will have no ownership interest in these properties. The lease term for these properties begins on SCT’s acquisition of the land and/or an existing storage center. Financing for acquisitions is provided under a credit facility provided by commercial banks to SCT. Rent commences under the lease on completion of construction and equals the lesser of 85% of the storage center’s positive monthly net operating income or SCT’s interest carry costs.

SCT has total assets of $155.6 million consisting of storage centers, both operating and under construction, and liabilities of $154.1 million that consists primarily of SCT’s line of credit. As construction agent we are entitled to a developer fee to the extent of costs incurred. During 2002, we exercised our option to purchase three properties from SCT at a cost of $14.2 million.

In connection with these leases, we have residual lease guarantees totaling 87% of SCT’s property costs. Under the terms of the lease, if we do not elect to exercise our purchase option and the properties are sold to a third party for less than SCT’s property cost, then we are liable for the difference up to the guarantee amount. At December 31, 2002, our maximum exposure to loss is $134.3 million, the total of our residual lease guarantees on 36 properties.

Recom

Recom & Co SNC (Recom) is a Belgian partnership in which we, our European operating partners and some Shurgard Europe employees have ownership interests as described below. Our interests and those of Recom and some of our European partners reflect fully diluted equity interests, after taking into account the exercise of warrants as described below. Recom holds a 53.83% interest in Shurgard Europe as described below. We own a 9.11% interest in Recom and our European operating partners and an entity comprised of some Shurgard Europe employees own collectively a 1.24% interest. The remaining 89.65% interest is held by a trust funded by a commercial banking group through which Recom has established a $168.5 million credit facility. As a general partner of Recom, we are contingently liable for repayment of any amounts outstanding under the credit facility in the event of default. Balances under the credit facility are unsecured, bear interest at LIBOR plus 1.5% (plus certain additional costs) and mature on June 21, 2003. The loan contains customary affirmative and negative lending covenants and default provisions that apply to us, our other Recom partners and Shurgard Europe and could be due prior to maturity in the event of default by us or them in our or their separate indebtedness. Recom is managed by one of our European operating partners who are responsible for day to day operations. Any significant capital commitment or any sale of assets requires unanimous approval of all partners. We, our European operating partners and some of the Shurgard Europe employees have the right to increase our respective equity interests in Recom, pro rata in proportion to our existing ownership, by purchasing additional shares at a Euro fixed price. For example, if we and these partners were to purchase additional interests to provide capital for repayment of the credit facility balance at December 31, 2002, our interest would increase to 87.65%. If we were the only party to purchase additional interests for this purpose, our interest would increase to 99.58%. One of our European operating partners has an option, exercisable in June 2003, to purchase the trust’s interest in Recom identified above for a fixed price and is subject to a put option by the trust, exercisable also in June 2003, with respect to the same interest at the same price.

As of December 31, 2002, Recom’s investment in Shurgard Europe consisted of current equity of 16.1 million Euro (US$18.4 million) and warrants to purchase additional equity for 118.2 million Euro (US$123.9 million). In addition, Recom has funded Shurgard Europe subordinated debt of 121.8 million Euro (US$127.6 million) that bears interest at 8.25% per annum and matures in 2009. Recom’s 53.83% interest in Shurgard Europe referred to above reflects the exercise of these warrants in full.

Under this structure, of the 7.57% aggregate interest we currently own in Shurgard Europe, we hold 2.66% directly and 4.89% indirectly through Recom. If we were to increase our interest in Recom to the largest percentage identified above, our indirect interest in Shurgard Europe through Recom would increase to 53.60% and our aggregate interest in Shurgard Europe would be 56.26%. It is our intention to exercise our right to increase our interest during 2003. The actual amount of our contribution and our ultimate ownership interest depends on the extent, if any, to which our European operating partners and certain employees choose to contribute.

Recom has total assets of $146.7 million and total liabilities of $151.1 million of which we guarantee $147.6 million. Recom’s assets include investment in Shurgard Europe of $18.4 million, loan to Shurgard Europe of $127.6 million and other assets of $0.7 million. It is reasonably likely that we will be considered the primary beneficiary of Recom under FASB Interpretation No. 46 on July 1, 2003, and that we will have to consolidate the assets and liabilities of Recom into Shurgard’s financial statements. Our maximum exposure to loss would be our contingent liability as general partner which totaled $147.6 million at December 31, 2002.

Other joint ventures

Unconsolidated joint ventures: We operate 29 properties in unconsolidated joint ventures that have been developed primarily through our Florida and Tennessee joint ventures. Our ownership interests range from 50% to 90%, and we do not exercise effective control because all major decisions require the agreement of both parties. These joint ventures

have total assets of $98.1 million and total liabilities of $67.2 million. We have guaranteed debt of $15.1 million related to these joint ventures. Our maximum exposure to loss would be $44.5 million, the total of these guarantees and the net book value of our investment which was $29.4 million at December 31, 2002.

Shurgard Europe: Shurgard Europe is a Belgian joint venture in which we own 2.66%, four unaffiliated institutional investors own 43.26%, our European operating partners own .25% and Recom owns 53.83%. Our European operating partners are European entrepreneurs who worked with us in 1995 to establish the European operations and who joined us as original investors at that time. The four institutional investors, consisting of European and U.S. banking, insurance and real estate institutions, acquired their interests in October 1999 through a commitment to invest 122 million Euro in the joint venture. On February 27, 2001, the joint venture obtained commitments from all of its owners on a pro rata basis to invest an additional 28 million Euro. The commitments were made pro rata and, therefore, did not alter the percentage ownership of the parties. At December 31, 2002, Shurgard Europe had drawn on 122 million Euro of the initial commitment from the institutional investors and had not yet drawn on any of the additional February 2001 commitment.

Shurgard Europe is managed by a board of managers in which we hold 50% of the votes, our European operating partners hold 7% and the institutional investors collectively hold 43%. Substantially all major decisions require approval of managers holding at least 80% of the votes. The joint venture agreement provides that if, by December 31, 2004, the institutional investors have not had an opportunity to liquidate their interests through an initial public offering or a sale of all their interests, then they may initiate steps that could lead to an initial public offering or to the sale of Shurgard Europe or its assets in accordance with prescribed procedures. All partners’ interests in Shurgard Europe are subject to a right of first refusal. We, Recom and our European operating partners are subject to other restrictions on transfer and sale. The operation of these provisions could substantially affect our ownership interest in and the structure of our European investment.

Shurgard Europe has total assets of $543.5 million and total liabilities of $494.3 million including $49.3 million bonds payable to us and $127.6 million note payable to Recom. Our maximum exposure to loss would be the balance of the bonds payable to us of $49.3 million at December 31, 2002.

We are currently evaluating the joint ventures and Shurgard Europe on an entity by entity basis to determine if they meet the criteria to be classified as a variable interest entity under the requirements of FASB Interpretation No. 46. Some of all of these entities may be required to be consolidated in our financial statements beginning July 1, 2003.

REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS

As a REIT, we must distribute at least 90% of our taxable income to our shareholders each year, and we generally are not required to pay federal income tax on our taxable income. To satisfy this requirement, our distributions must be made in the taxable year to which they relate or in the following taxable year if they are (i) declared before the REIT timely files its tax return for such year and (ii) paid on or before the first regular distribution payment date after the date of declaration.

Additionally, as a REIT, we must derive at least 95% of our total gross income from specified classes of income related to real property, distributions, interest or certain gains from the sale or other disposition of stock or other securities. Our revenue from truck rentals, sales of locks and boxes and management services performed for other owners of properties do not qualify under this 95% gross income test. Such non-qualifying income was approximately 3.6% of gross revenue in 2002 and we expect to meet the 95% test in 2003. Our acquisition of additional properties will tend to reduce the percentage of non-qualifying income, while additional management contracts, including those with off balance sheet joint ventures and partnerships, and the sales of properties from the existing portfolio will tend to increase the percentage of non-qualifying income. While we intend to manage our activities so that we continue to satisfy the 95% test in the future, we can provide no assurance that non-qualifying income will not exceed 5% in future years, which will result in a loss of REIT status.

Finally, in order to maintain our status as a REIT, we must satisfy on a quarterly basis various tests restricting the nature of our assets. In general, at least 75% of our assets must consist of real estate assets, cash, cash items (including receivables) and government securities. Furthermore, we may not hold securities of any issuer that represent (i) more than 5% of the value of our total assets or (ii) more than 10% of the vote or value of the issuer’s outstanding securities, and no more than 20% of the value of our total assets may be represented by securities in one or more taxable REIT subsidiaries. While we intend to manage our activities so that we continue to satisfy these asset tests in the future, we can provide no assurance that we will be able to do so.

ITEM 7A - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate and Foreign Currency Exchange Rate Risk

We have foreign currency exposures related to our investment in the construction, acquisition, and operation of storage centers in countries outside the US to the extent such activities are financed with financial instruments or equity denominated in non-functional currencies. Since all foreign debt is denominated in the corresponding functional currency, our currency exposure is limited to our equity investment in those countries. Countries in which we have exposure to foreign currency fluctuations include Belgium, France, the Netherlands, Sweden, Denmark and the United Kingdom. Our gross investment in these foreign operations at December 31, 2002 was $3.7 million and is not considered material. At December 31, 2002, cumulative losses, including depreciation expense, have exceeded our gross investment by $6 million. During 2002, all foreign investments are accounted for under the equity method.

The table below provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including loans to shareholders, debt obligations and interest rate swaps. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract.


Expected maturity
date	2003			2004			2005			2006			2007			Thereafter			Total		Fair Value

Liabilities
Lines of credit	$	113,525																	$	113,525	$	113,525
Variable rate		2.68	%
Interest rate
Notes payable
Fixed rate				$	50,000		$	13,919		$	2,595		$	50,000		$	251,306		$	367,820	$	439,440
Interest rate		7.64	%		7.66	%		7.66	%		7.60	%		7.60	%		7.60	%
Variable rate							$	9,204											$	9,204	$	9,204
Interest rate		3.68	%		4.52	%		5.66	%
Interest rate derivatives																					$	(12,601	)
Interest rate swaps
Variable to fixed	$	66,266																	$	66,266	$	(2,066	)
Avg. pay rate		6.93	%
Avg. received rate		4.18	%

Item 8 - Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)


				December 31,		December 31,
				2002		2001
				(as restated)		(as restated)

ASSETS:
Storage centers:
	Land			$	293,306	$	263,324
	Buildings, equipment and other, net				961,901		872,269
	Construction in progress				7,948		900

		Total storage centers			1,263,155		1,136,493
Other real estate investments					29,403		29,146
Cash and cash equivalents					11,662		6,982
Restricted cash					1,098		815
Notes receivable from related parties					49,317		—
Goodwill					24,506		25,919
Other assets, net					41,035		39,450

		Total assets		$	1,420,176	$	1,238,805

LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts payable and other liabilities				$	62,257	$	45,260
Lines of credit					113,525		47,795
Notes payable					446,837		375,298
Participation rights liability, net of discount of $2,370 and $17,777, respectively					47,472		47,654

			Total liabilities		670,091		516,007

Minority interest					15,374		6,375
Commitments and contingencies ( Notes H, J, R and V)
Shareholders’ equity:
	Series B Cumulative Redeemable Preferred Stock; $0.001 par value: 2,000,000 shares authorized; none and 2,000,000 shares issued and outstanding; liquidation preference of $50,000,000				—		50,000
	Series C Cumulative Redeemable Preferred Stock; $0.001 par value: 2,000,000 shares authorized; 2,000,000 shares issued and outstanding; liquidation preference of $50,000,000				48,115		48,115

See Notes to Consolidated Financial Statements


			December 31,			December 31,
			2002			2001
			(as restated)			(as restated)

	Series D Cumulative Redeemable Preferred Stock; $0.001 par value: 3,450,000 shares authorized; 3,450,000 shares issued and outstanding; liquidation preference of $86,250,000			83,068			83,068
	Class A Common Stock, $0.001 par value; 120,000,000 authorized; 35,934,249 and 32,655,408 shares issued and outstanding			36			33
	Class B Common Stock, $0.001 par value; 500,000 shares authorized; none and 154,604 issued and outstanding			—			—
	Loans to shareholders			—			(2,772	)
Additional paid-in capital				804,582			707,317
Accumulated net income less distributions				(199,217	)		(168,377	)
Accumulated other comprehensive loss				(1,873	)		(961	)

		Total shareholders’ equity		734,711			716,423

	Total liabilities and shareholders’ equity		$	1,420,176		$	1,238,805

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)


				Year ended			Year ended
				December 31, 2002			December 31, 2001			Year ended
				(as restated)			(as restated)			December 31, 2000

Revenue
	Real estate operations			$	252,938		$	226,362		$	200,343
	Other				11,175			6,228			1,615

		Total revenue			264,113			232,590			201,958

Expenses
	Operating				82,111			68,890			58,124
	Depreciation and amortization				47,963			45,234			40,693
	Real estate taxes				24,268			20,148			17,940
	Loss from other real estate investments				1,396			3,271			3,420
	General, administrative and other				11,195			11,770			4,911

			Total expenses		166,933			149,313			125,088

Income from operations					97,180			83,277			76,870

Other Income (Expense)
	Interest:
		Interest on loans			(32,025	)		(36,562	)		(36,175	)
		Amortization of participation rights discount			(4,824	)		(16,876	)		(11,262	)
		Unrealized loss on financial instruments			(10,999	)		(1,602	)		—
	Interest income and other				5,900			5,783			3,617

		Other income (expense), net			(41,948	)		(49,257	)		(43,820	)

	Minority interest				(637	)		(808	)		(743	)

	Income before income tax benefit and extraordinary item				54,595			33,212			32,307
	Income tax benefit				314			1,545			—

	Income before extraordinary items				54,909			34,757			32,307
	Early extinguishment of debt				1,724			(1,445	)		—

		Net Income		$	56,633		$	33,312		$	32,307

Net income allocation
	Allocable to preferred shareholders			$	14,695		$	15,098		$	8,750
	Allocable to common shareholders				41,938			18,214			23,557

				$	56,633		$	33,312		$	32,307

Net Income per Common Share:
Basic earnings per share:
	Income before extraordinary item			$	1.15		$	0.63		$	0.80
	Early extinguishment of debt				0.05			(0.04	)		—

	Net Income			$	1.20		$	0.59		$	0.80

Diluted earnings per share:
	Income before extraordinary item			$	1.13		$	0.63		$	0.79
	Early extinguishment of debt				0.05			(0.04	)		—

	Net Income			$	1.18		$	0.59		$	0.79

Distributions per common share				$	2.11		$	2.07		$	2.03

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


			Preferred						Class A				Class B
			Stock						Common Stock				Common Stock

(in thousands)			Shares			Amount			Shares		Amount		Shares			Amount

Balance, Jan 1, 2000				4,000		$	96,171			29,093	$	29		155		$	—
Comprehensive income:
	Net income									—		—		—			—
Issuance of common stock				—			—			527		1		—			—
Payments on loan to shareholder				—			—			—		—		—			—
Distributions:
		Preferred		—			—			—		—		—			—
		Common		—			—			—		—		—			—

Balance, Dec. 31, 2000				4,000			96,171			29,620		30		155			—
Comprehensive income:
	Net income (as restated)			—			—			—		—		—			—
	Other comprehensive income (as restated)			—			—			—		—		—			—
Total comprehensive income (as restated)				—			—			—		—		—			—
Issuance of common and preferred stock				3,450			85,012			3,035		3		—			—
Payments on loan to shareholder				—			—			—		—		—			—
Distributions:
		Preferred		—			—			—		—		—			—
		Common		—			—			—		—		—			—

Balance, Dec. 31, 2001 (as restated)				7,450			181,183			32,655		33		155			—
Comprehensive income:
	Net income (as restated)			—			—			—		—		—			—
	Other comprehensive income (as restated)			—			—			—		—		—			—
Total comprehensive income (as restated)				—			—			—		—		—			—
Issuance of common and preferred stock				—			—			3,279		3		(155	)		—
Redemption of common				(2,000	)		(50,000	)		—		—		—			—
and preferred stock Payments on loan to shareholder				—			—			—		—		—			—
Distributions:
		Preferred		—			—			—		—		—			—
		Common		—			—			—		—		—			—

Balance, Dec. 31, 2002 (as restated)				5,450		$	131,183			35,934	$	36		—		$	—

[Additional columns below]

[Continued from above table, first column(s) repeated]

Accumu- Accumu-

lated Net lated Other

Loans to Income Compre-

Class B Additional Less Dis- hensive

Share- Paid in tributions Income Total

(in thousands) holders Capital (as restated) (as restated) (as restated)

Balance, Jan 1, 2000
$ (4,002 ) $ 614,860 $ (86,858 ) $ — $ 620,200

Comprehensive income:

Net income
— — 32,307 — 32,307

Issuance of common stock
— 12,490 — — 12,491

Payments on loan to shareholder
326 — — — 326

Distributions:

Preferred
— — (8,750 ) — (8,750 )

Common
— — (59,936 ) — (59,936 )

Balance, Dec. 31, 2000
(3,676 ) 627,350 (123,237 ) — 596,638

Comprehensive income:

Net income (as restated)
— — 33,312 — 33,312

Other comprehensive income (as restated)
— — — (961 ) (961 )

Total comprehensive income (as restated)
— — — — 32,351

Issuance of common and preferred stock
— 79,967 — — 164,982

Payments on loan to shareholder
904 — — — 904

Distributions:

Preferred
— — (15,098 ) — (15,098 )

Common
— — (63,354 ) — (63,354 )

Balance, Dec. 31, 2001 (as restated)
(2,772 ) 707,317 (168,377 ) (961 ) 716,423

Comprehensive income:

Net income (as restated)
— — 56,633 — 56,633

Other comprehensive income (as restated)
— — — (912 ) (912 )

Total comprehensive income (as restated)
— — — — 55,721

Issuance of common and preferred stock
— 97,265 — — 97,268

Redemption of common
— — — — (50,000 )

and preferred stock Payments on loan to shareholder
2,772 — — — 2,772

Distributions:

Preferred
— — (14,695 ) — (14,695 )

Common
— — (72,778 ) — (72,778 )

Balance, Dec. 31, 2002 (as restated)
$ — $ 804,582 $ (199,217 ) $ (1,873 ) $ 734,711

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


			Year ended			Year ended
			December 31,			December 31,			Year ended
			2002			2001			December 31,
			(as restated)			(as restated)			2000

Operating activities
Net income			$	56,633		$	33,312		$	32,307
Adjustment to reconcile net income to net cash provided by operating activities:
	Early extinguishment of debt			(1,724	)		1,445
	Gain on sale of assets			(942	)		(2,001	)
	Unrealized loss on financial instruments			10,999			1,602
	Asset impairment			1,899
	Depreciation and amortization			47,963			45,234			40,693
	Amortization of participation rights discount			4,824			16,876			11,262
	Losses from other real estate investments			3,032			4,062			5,932
	Minority interest			637			808			743
	Changes in operating accounts, net of effect of purchase of Morningstar Storage Centers, LLC:
		Restricted cash		164			7,695			(1,344	)
		Other assets		3,584			(3,746	)		(5,099	)
		Accounts payable and other liabilities		1,417			11,189			1,113

		Net cash provided by operating activities		128,486			116,476			85,607

Investing activities:
	Construction, acquisition and improvements to storage centers			(44,838	)		(65,295	)		(106,693	)
		Proceeds from sale of assets		2,409			3,720
		Purchase of other real estate investments		(4,413	)		(1,946	)		(4,908	)
		Purchase of non-competition agreements		(960	)		(3,448	)		(583	)
		Bond receivable from European affiliate		(49,317	)
		Increase in loans to affiliates								(2,204	)
		Increase in cash due to consolidation of containerized storage operations					90
		Purchase of additional interest in affiliated partnership					(1,296	)		(3,807	)
		Purchase of interest in Morningstar Storage Centers, LLC, net of cash acquired		(60,257	)
		Distribution in excess of earnings from other real estate investments		451			709			483

		Net cash used in investing activities		(156,925	)		(67,466	)		(117,712	)

See Notes to Consolidated Financial Statements


Financing activities:
	Proceeds from notes payable		19,538			207,623			73,103
	Payments on notes payable		(10,142	)		(237,754	)		(21	)
	Proceeds from (payments on) lines of credit, net		65,730			(42,130	)		(12,077	)
	Payments on participation rights		(4,369	)		(69,704	)
	Payment of loan costs		(245	)		(4,964	)		(2,237	)
	Proceeds from financing arrangements		1,376			731			35,390
	Proceeds from issuance of common stock, net		82,254			76,018
	Proceeds from preferred stock offering, net					83,068
	Proceeds from payments on loans to shareholder		2,863			904			326
	Proceeds from participating mortgages		2,530			10,416
	Distributions paid		(87,473	)		(78,453	)		(68,686	)
	Payment for redemption of preferrred stock		(50,000	)
	Proceeds from exercise of stock options and dividend reinvestment plan		15,009			5,896			3,284
	Contribution received from minority partners								228
	Distributions paid to minority partners		(3,952	)		(1,343	)		(1,186	)

	Net cash provided by (used in) financing activities		33,119			(49,692	)		28,124

	Increase (decrease) in cash and cash equivalents		4,680			(682	)		(3,981	)
	Cash and cash equivalents at beginning of period		6,982			7,664			11,645

	Cash and cash equivalents at end of period	$	11,662		$	6,982		$	7,664

Supplemental schedule of cash flow information:
Cash paid for interest on loans		$	11,195		$	31,538		$	31,188

Cash paid on participation rights		$	—		$	1,303		$	2,225

Supplemental schedule of noncash investing transactions:
Fair value adjustments of derivatives		$	(11,912	)	$	(2,563	)

Conversion of note receivable to equity investment in STG					$	16,238

Non-cash contribution from minority interest partners					$	3,324

Common stock issued as consideration for partnership interest								$	9,213

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A - Organization

Shurgard Storage Centers, Inc. (Shurgard), a Washington corporation, was organized on July 23, 1993 to serve as a vehicle for investments in, and ownership of, a professionally managed, internationally diverse real estate portfolio consisting primarily of self-service storage properties that provides month-to-month leases for business and personal use. We intend to qualify as a real estate investment trust (REIT) as defined in Section 856 of the Internal Revenue Code.

Note B - Summary of Significant Accounting Policies

Basis of presentation: The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America and include the accounts of Shurgard and our subsidiaries. All inter-company balances and transactions have been eliminated in consolidation. We consolidate the accounts of those subsidiaries or joint ventures in which we have effective control as evidenced by, among other factors, a majority interest in the investment and the ability to cause a sale of assets. All investments in joint ventures that do not qualify for consolidation, but in which we exercise significant influence, are accounted for under the equity method and are included in other real estate investments.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent accounting pronouncements: In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.141, “Business Combinations.” SFAS No.141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. During 2002 we purchased a 74% interest in Morningstar Storage Centers, LLC (Morningstar) which was accounted for as a purchase in accordance with SFAS No. 141. (See Note D).

In June 2001,the FASB issued SFAS No.142, “Goodwill and Other Intangible Assets.” SFAS No.142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, ceased on adoption of this statement. We adopted SFAS No.142 on January 1, 2002. In connection with the adoption of this statement and our annual evaluation, we evaluated our goodwill and determined that goodwill of $25 million was not impaired. See Note N.

In July 2001, the FASB issued SFAS No.143, “Accounting for Asset Retirement Obligations.” This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. This statement is effective for us beginning in 2003. Adoption of SFAS No.143 is not expected to have a significant impact on our financial position, results of operations, or cash flows.

In August 2001, the FASB issued SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supercedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for the disposal of a segment of business (as previously defined in that Opinion). SFAS No.144 establishes a single accounting model, based on the framework established in SFAS No.121, for long-lived assets to be disposed of by sale. It retains the fundamental provisions of SFAS No.121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of the impairment of long-lived assets to be disposed of by sale. We adopted SFAS No.144 on January 1, 2002. The adoption of SFAS No.144 did not have a significant impact on our financial position or results of operations.

and the FASB does not believe it should be considered extraordinary, unless the debt extinguishment is both unusual in nature and infrequently occurring under the criteria in APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions“SFAS No. 145 will be effective for us beginning in 2003. On adoption, extinguishments of debt will be classified under the criteria in APB Opinion No. 30. Amounts from 2002 and 2001 will be reclassified into Income from Operations on adoption of SFAS No.145.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS 146 requires recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and associated liabilities to be recognized at fair value . SFAS No.146 is effective for exit or disposal activities initiated after December 31, 2002. On adoption, costs associated with exit or disposal activities will be recognized as incurred.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amended SFAS No.123, “Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and amends the disclosure requirements of SFAS No.123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for periods ending after December 15, 2002. We have adopted the disclosure provisions of SFAS No.148 and continue to account for stock-based compensation under APB Opinion No. 25, therefore, SFAS No. 148 will have no effect on our financial position, results of operations or cash flows (See Note Q). If we had recorded compensation expense in accordance with SFAS No.123, we would have recognized $1.1 million, $1.9 million and $1.5 million in expense for the years ended December 31, 2002, 2001 and 2000. Our net income for those years would have been $55.6 million, $31.5 million and $30.8 million, respectively.

In November 2002, the FASB issued FASB Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end (See Note V).

In January 2003,the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” which clarifies the application of Accounting Research Bulletin No. 51 “Consolidated Financial Statements” for entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FASB Interpretation No. 46 becomes effective for us beginning July 2003. It is reasonably possible that we will be considered the primary beneficiary of variable interest entities created prior to February 1, 2003, and therefore will be required to consolidate the assets and liabilities of these entities, upon adoption of FASB Interpretation No. 46, which will have a material effect on our balance sheet and results of operations (See Note D, J and V).

Storage centers: Storage centers are recorded at cost. Depreciation on buildings and equipment is recorded on a straight-line basis over their estimated useful lives, which range from three to 40 years.

Other real estate investments: As of December 31, 2002, investments accounted for under the equity method included 28 joint ventures. Although we own a majority interest in most of these entities, all significant business decisions require the approval of both parties and, therefore, we do not have voting control. (See Note E and Note J).

Financing arrangements: We accounted for sales of certain storage centers in which we have continuing involvement, as defined in SFAS No.66, “Accounting for Sales of Real Estate,” as financing arrangements. (See Note H).

Cash equivalents: Cash equivalents consist of money market instruments and securities with original maturities of 90 days or less.

Restricted cash: Restricted cash consists of cash deposits and represents expense reserves required by lenders.

Other assets: Other assets include financing costs and non-competition agreements, which are presented net of accumulated amortization of $10.7 million and $8.7 million as of December 31, 2002 and 2001, respectively. Financing

costs are amortized using the effective interest method over the life of the related debt and the related expense is included in amortization. Non-competition agreements are amortized over their estimated useful lives, which range from three to 30 years.

Federal income taxes: To qualify as a REIT, we must distribute annually at least 90% of our taxable income and meet certain other requirements. Additionally, as a REIT, we will not be subject to federal income taxes to the extent of distributions. We were not required to pay any federal income tax in 2000 or 2001 and we intend to make elections regarding distributions such that we will not pay federal taxes for 2002. As a result, no provision for federal income taxes for the REIT has been made in our financial statements. We are subject to certain international and state income taxes as well as certain franchise taxes; however, these taxes are currently immaterial.

Shurgard TRS, Inc. (Shurgard TRS), a wholly owned subsidiary, is a taxable REIT subsidiary and is subject to corporate level tax. Shurgard Storage To Go, Inc. (STG), Shurgard Preferred Partners, SS Income Plan and Storage Line Management are wholly owned subsidiaries of Shurgard TRS. At December 31, 2002, Shurgard TRS had a deferred tax asset primarily attributable to net operating loss carryforwards from STG that will expire beginning in 2017, and other temporary differences in fixed assets and operating losses (See Note M). When determining the necessary amount, if any, of valuation allowance on the deferred tax asset, we estimate projected future taxable income from all sources and analyze whether it is more likely than not that we will be able to realize all tax benefits.

Revenue recognition: The majority of our customers rent under month-to-month lease agreements and revenue is recognized at the contracted rate for each month occupied. Revenue related to customers who sign longer period leases is recognized ratably over the term of the lease. Management fee revenue is recognized each month for which services are rendered; these contracts are generally cancelable by either party on specified advanced notice.

As a construction agent for Storage Centers Trust (SCT) we are paid a development fee. Fees are recognized as earned to the extent of costs incurred. Due to our contingent liability under the related lease, no profit is recognized as services are performed.

We recognize revenue related to our tenant insurance program based on the excess of premiums over claims and administrative costs.

Valuation of long-lived assets: Using our best estimates based on reasonable and supportable assumptions and projections, we review storage centers and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of our assets might not be recoverable. During 2002 we determined that certain parcels of land held for sale were impaired. Using the expected cash flow method, we determined that the net book value of this land exceeded its fair value less costs to sell. The total impairment loss for these parcels of land was $1.9 million and is included in General, administrative and other expense in the Consolidated Statement of Net Income for 2002. The land held for sale with a carrying value of $4.4 million is included in Other assets on the Balance Sheet.

At December 31, 2001, we determined that certain assets of STG were impaired. The closure of two warehouses in Southern California and Atlanta caused us to evaluate the assets of the three remaining warehouses in Washington, Northern California and Oregon (See Note L). Using the discounted cash flow method for determining the fair value of assets associated with these warehouses, we determined that the remaining net book value of assets in the Oregon warehouse in the amount of $268,000, and $1.5 million of goodwill associated with the Northern California and Washington warehouses were impaired. The total impairment loss of $1.7 million is included in General, administrative and other in the Consolidated Statement of Income for 2001.

Financial instruments: The carrying values reflected on the balance sheet at December 31, 2002, reasonably approximate the fair value of cash and cash equivalents, other assets, accounts payable, lines of credit, variable rate debt and other liabilities. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, we estimate the fair value of fixed rate long-term debt including swap arrangements is $503.9 million compared to a book value of $434.1 million.

Environmental costs: Our policy is to accrue environmental assessments and/or remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. The majority of our real estate facilities have undergone independent environmental investigations and our policy is to have such investigations conducted on all new real estate acquired. Although there can be no assurance that there is not environmental

contamination at our facilities, we are not aware of any such contamination at any of our facilities that individually or in aggregate would be material to our business, financial condition, or results of operations.

Note C — Storage Centers


	December 31			December 31
	2002			2001
(in thousands)
Land	$	293,306		$	263,324
Buildings		1,181,774			1,036,193
Equipment and other		54,969			49,481

		1,530,049			1,348,998
Less: Accumulated Depreciation		(274,842	)		(213,405	)

		1,255,207			1,135,593
Construction in progress		7,948			900

	$	1,263,155		$	1,136,493

Note D — Acquisitions

On June 26, 2002 we acquired a 74% membership interest in Morningstar Storage Centers, LLC (Morningstar) for $62.0 million. The results of Morningstar’s operations have been included in our consolidated financial statements since that date. Morningstar operates and owns, directly or indirectly, 40 existing self-storage properties in North and South Carolina, including seven sites with pre-identified expansion opportunities and nine sites with continued development potential. In addition, we have entered into an agreement with certain of the members of Morningstar to form one or more joint ventures for the purpose of developing and operating high quality self storage properties in North and South Carolina. The properties owned by Morningstar and the properties to be developed in the joint ventures will be managed by the other members of Morningstar through an affiliated entity.

This acquisition was accounted for as a purchase transaction. Assets and liabilities are recorded at book value plus 74% of the difference between book value and fair market value. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.


(in thousands)
Current assets	$	2,780
Storage centers		144,888
Other assets		21

Total assets acquired		147,689
Current liabilities		2,254
Long-term debt		61,316
Minority interest		1,775

Total liabilities assumed		65,345

Net assets acquired		82,344
Fair value of minority interest		20,344

Purchase price	$	62,000

The following table summarizes unaudited pro forma results of operations for the years ended December 31, 2002 and 2001 as if the acquisition had taken place at the beginning of those periods.


		For year ended
		December 31, 2002		December 31, 2001

Pro Forma results of Operations
(in thousands)
Revenue		$	272,294	$	249,066
Income before extraordinary items		$	55,286	$	35,042
Net Income		$	57,010	$	33,597
Basic earnings per share:
	Income before extraordinary items	$	1.16	$	0.64
	Early extinguishment of debt		0.05		(0.04	)

	Net Income	$	1.21	$	0.60

Diluted earnings per share:
	Income before extraordinary items	$	1.14	$	0.64
	Early extinguishment of debt		0.05		(0.04	)

	Net Income	$	1.19	$	0.60

In November 2001, we purchased one limited partner unit in Shurgard Institutional Fund LP from an unaffiliated third party for $1.3 million. We currently own 23 of 25 units and are entitled to 92.6% of this partnership’s limited partner distributions. As this represents a majority interest, Shurgard Institutional Fund LP is consolidated for financial statement purposes. We continue to own a general partnership interest in this partnership.

In September 2000, we purchased 3 limited partner units of Shurgard Institutional Fund LP II for $3.8 million in cash. We currently own all of the 9.5 limited partner units and are entitled to 100% of LP distributions. We continue to own a general partnership interest in this partnership. Due to our majority interest, Shurgard Institutional Fund LP II is consolidated for financial statement purposes.

We have an agreement with a California developer under which it purchases sites in southern California and constructs storage centers on them according to our specifications. On completion of the rent-up period, the storage centers are purchased by a joint venture. Prior to such purchase, we have no ownership in the properties and accordingly, they are not included in any discussions in our operating results. The developer’s interest in the joint venture is based on a predetermined formula based on the fair value of the property at contribution. During 1999, the joint venture purchased one of the completed storage centers for $3.1 million; during 2000, the joint venture purchased an additional completed storage center for $11.0 million; and during 2001, we purchased two of the completed storage centers for $13.4 million. At December 31, 2002, we had guaranteed $20.4 million in outstanding debt for three properties related to this agreement. We recognized approximately $1.5 million, $1.2 million and $691,000 in earnings for years ended December 31, 2002, 2001 and 2000 respectively, which represents 90.7%, 78.7% and 77.3%, respectively, of joint ventures earnings.

Note E — Other Real Estate Investments


	December 31,		December 31,
	2002		2001

Investment in participating mortgages	$	—	$	2,555
Investment in joint ventures		29,403		26,591

	$	29,403	$	29,146

Pursuant to affiliation agreements with three storage operators, we have developed 29 properties in joint ventures in which our ownership interests range from 50% to 90%. As of December 31, 2002, we had invested a total of $29.4 million in these joint ventures, net of joint venture earnings. We have guaranteed $15.1 million of loans. The financial results of these joint ventures are not consolidated in our financial statements because each affiliation agreement allows

the local operator to control the daily operations of the property, and all significant investment decisions require the approval of both parties regardless of ownership percentage.

As of December 31, 2001, we had $2.6 million invested in a participating mortgage loan. In addition to fixed interest payments, we received contingent interest payments from the mortgaged property equal to 50% of both operating cash flow and distributions from the gain on sale of real property, in accordance with the terms of the applicable agreement. During 2002, we exercised our option to acquire this property.

Our interest in Shurgard Self Storage, SCA (Shurgard Europe) is 7.57%, and we do not have effective control of Shurgard Europe. The joint venture agreement requires a vote of two thirds of the Board of Managers for all major decisions; however, we continue to exercise significant influence over Shurgard Europe through our control of half of the seats on the Board of Managers. The negative investment balances of $5.9 million and $4.1 million are included in other liabilities as of December 31, 2002 and 2001, respectively.

Note F — Lines of Credit

We have an unsecured domestic line of credit to borrow up to $360 million. This facility matures in February 2005 and requires monthly interest payments at 125 basis points over LIBOR. Availability under this line of credit is limited based on various financial covenants and guarantees under certain tax retention operating leases. At December 31, 2002, the available amount was $131.3 million. At December 31, 2002, there was $113.5 million outstanding and the weighted average rate was 2.75%.

Note G — Notes Payable


(in thousands)	December 31, 2002		December 31, 2001

Senior notes payable	$	300,000	$	300,000
Mortgage notes payable		143,289		75,298

		443,289		375,298
Premium on senior notes payable		1,601		—
Premium on mortgage notes payable		1,947		—

	$	446,837	$	375,298

On July 24, 2002, we paid $1.2 million to retire a mortgage note payable incurring prepayment penalties of $164,000 which are included in early extinguishment of debt in the Consolidated Statements of Income.

On June 27, 2002, we paid $12.5 million to pay off a participating mortgage including $7.3 million in mortgage debt, $5.0 million in participation rights and $0.2 million in prepayment penalties. In connection with the early extinguishment of this debt, we recorded a gain, net of prepayment penalties, of $1.2 million.

On June 26, 2002, in connection with the purchase of our 74% interest in Morningstar (See Note D), we acquired notes payable of $58.4 million with fair values of $61.3 million and recorded a premium on these notes of $2.1 million (74% of the difference between face value and fair value). These notes have various interest rates ranging from 3.74% to 9.05% per annum and mature between 2005 and 2012.

At December 31, 2002, $66.3 million of the mortgage notes payable is secured by 21 properties accounted for as participation rights (See Note H) and is a non-recourse credit facility that requires payments of interest only. This note matures December 2003 with two consecutive one year extension options.

In April 1997, we issued $100 million in senior unsecured notes, $50 million of which are seven year notes due April 2004 bearing interest at 7.5% and $50 million of which are ten year notes due April 2007 bearing interest at 7.625%. The notes require semi-annual interest due April 25th and October 25th. During 2002 we entered into, and later terminated, a fixed to variable rate swap for $50 million of the senior notes payable due in 2004. This hedge was designated as a fair

value hedge. As a result of this hedge, the carrying value of the bonds was increased by $1.6 million as of December 31, 2002 (See Note P).

On February 22, 2001, we issued $200 million in senior unsecured notes that are ten-year notes bearing interest at 7.75% and are due 2011. The notes require semi-annual interest payments due February 22 and August 22.

Additionally, we have a mortgage note payable totaling approximately $1.9 million dollars secured by one wholly owned property which mortgage note matures in 2011.

The maturities of debt principal over the next five fiscal years and thereafter are approximately $66.3 million in 2003, $50.0 million in 2004, $23.1 million in 2005, $2.6 million in 2006, $50.0 million in 2007, and $251.3 million in 2008 and thereafter. Each of these notes contains covenants that require us to submit financial information and maintain certain financial ratios. Secured debt of $143.3 million is secured by storage centers with a net book value of $179.1 million. As of December 31, 2002, we were in compliance with all debt covenants.

Note H — Participation Rights

During the past several years we formed four joint ventures; SFPI in May 1998 with Fremont Storage Partners I, SFPII in March 1999 with Fremont Storage Partners II, Shurgard/K&S I, LLC in October 1999 with K&S Storage, LLC and CCP/Shurgard Venture, LLC (CCP/Shurgard) in May 2000 with an affiliate of JP Morgan Partners. Under these joint venture agreements, we constructed storage centers financed through the use of cash flows provided by operations and our line of credit and, on completion, contributed those storage centers to the joint ventures. At the time of contribution, we were reimbursed to the extent our historical cost plus negative cash flow prior to the transfer exceeded our pro rata portion of required equity (calculated as total required funding less amounts provided from financial institutions multiplied by our ownership percentage). We either retain an option to purchase the storage centers from the joint venture or the joint venture has a right to put those storage centers to us at a future date. The purchase price is calculated as the greater of (a) that amount necessary to provide a specified return on the partners’ contributed capital (12% in the case of CCP/Shurgard) or (b) annualized NOI (See Note T) divided by 9.25%. Due to our continuing involvement with the storage centers, in accordance with SFAS No.66, “Accounting for Sales of Real Estate”, we do not recognize the sale of these properties and, due to the likelihood of our exercising the options, we account for these transactions as financing arrangements. Under this method we recognize a participation rights liability and a related discount on the underlying liability for the estimated fair value of our joint venture partners’ share of the estimated option purchase price based on the best evidence available to us. The discount is amortized as a component of interest expense over the term of the related agreements. Changes in the estimated fair value of the participation rights and related discount are recognized prospectively over the remaining term of the agreements. The storage centers, mortgage notes payable, and other related assets and liabilities of the joint ventures are included in our consolidated balance sheets, and the related revenue and expenses of these properties are included in our Consolidated Statements of Income.

During 2001, we exercised our option to acquire our joint venture partner’s interest in SFP I, SFP II and Shurgard/K&S I for a total of $69.4 million. These acquisitions were accounted for as a reduction in participation rights liability.

During 2002, we re-evaluated our estimate of the option price, the projected timing of our joint venture partner’s exercise of their put option and the related expected cash flows. These changes were accounted for as a change in estimate, reduced gross participation rights and subsequent amortization of participation rights. The effect of this change in estimate on the 2002 financial statements decreased gross participation rights by $6.4 million and increased income before extraordinary items and net income by $3.4 million and diluted earnings per share by $0.10.

On June 27, 2002, we paid off the participating mortgage for one storage center. The lenders were to receive 90% of the property’s appreciation. As a result this mortgage was accounted for in the same manner as described above. We paid off this participating mortgage for $12.5 million including $7.3 million in mortgage debt and $0.2 million in prepayment penalties. The remaining $5.0 million payment was accounted for as reduction in participation rights. In connection with the early extinguishment of this debt, we recognized an extraordinary gain of $1.2 million, net of prepayment penalties.

The following table summarizes the estimated liability for participation rights and the related discount:


(in thousands)
	December 31, 2002			December 31, 2001

Gross participation rights	$	49,842		$	65,431
Participation rights discount		(2,370	)		(17,777	)

Participation rights, net of discount	$	47,472		$	47,654

Note I — Lease Obligations

We lease certain parcels of land and buildings under operating leases with terms up to 50 years. The future minimum rental payments required under these leases are as follows (in thousands):


2003	$	5,644
2004		5,596
2005		5,678
2006		5,603
2007		5,463
Thereafter		49,379

	$	77,363

Expense under these leases was approximately $3.5 million, $2.6 million and $1.1 million for the years ended December 31, 2002, 2001 and 2000, respectively.

Note J — Variable interest entities

Tax Retention Operating Leases

In February 2001, we executed an agreement with a third party to enter into up to $250 million in tax retention operating leases in connection with the line of credit discussed in Note F. Most of our development projects since that time have been developed by this third party and leased through this facility. Under the related agreements, we function as construction agent and tenant. At the end of the lease term, we may acquire a property or it may be sold to a third party, or the lease may be extended by mutual agreement; we have the option to acquire a property at or before the end of its lease term. If we exercise our options, the purchase price for the property will be equal to the total property cost plus interest carry and a fixed equity return to the third party at a combined rate of approximately 150 basis points over LIBOR. Prior to such purchase, we have no legal ownership in these properties. As of December 31, 2002, the third party has eight storage centers under construction, has purchased land for construction of seven additional storage centers and has sixteen completed developments and four acquisitions with one additional completed storage center subleased to a third party. The lease term for these properties begins on the third party’s acquisition of the land and/or property. Rent commences under the lease on completion of construction and equals 85% of the storage center’s positive monthly net operating income. For the year ended December 31, 2002 and 2001, we paid $678,000 and $122,000, respectively, in lease payments on these properties. During 2002, we exercised our option on three properties for a total cost of $14.2 million. Additionally, during December 2002, we gave notice that we intend to exercise our option on one additional property for $2.6 million. This property has not been completed and we have determined that no further construction will be done on this property and the land will be sold. We have expensed $1.2 million in abandoned development expense in connection with this property. As of December 31, 2002, the assets in this variable interest entity have a carrying value of $155.6 million. In connection with these leases, our maximum exposure to loss is our liability for contingent residual lease guarantees totaling $134.3 million as of December 31, 2002.

European Partnership

Recom & Co SNC (Recom) is a Belgian partnership in which we, our European operating partners and certain Shurgard Europe employees have ownership interests as described below. Our interests and those of Recom and some of our European partners reflect fully diluted equity interests, after taking into account the exercise of warrants as described below. Recom holds a 53.83% interest in Shurgard Europe as described below. We own a 9.11% interest in Recom, and our European operating partners and an entity comprised of some Shurgard Europe employees own collectively a 1.24% interest. The remaining 89.65% interest is held by a trust funded by a commercial banking group through which Recom has established a $168.5 million credit facility. As a general partner of Recom, we are contingently

liable for repayment of any amounts outstanding under the credit facility in the event of default. Balances under the credit facility are unsecured, bear interest at LIBOR plus 1.5% (plus certain additional costs) and mature on June 21, 2003. The loan contains customary affirmative and negative lending covenants and default provisions that apply to us, our other Recom partners and Shurgard Europe and could be due prior to maturity in the event of default by us or them in our or their separate indebtedness. Recom is managed by one of our European operating partners who is responsible for day to day operations. Any significant capital commitment or any sale of assets requires unanimous approval of all partners. We, our European operating partners and some of the Shurgard Europe employees have the right to increase our respective equity interests in Recom, pro rata in proportion to our existing ownership interest, by purchasing additional shares at a Euro fixed price. For example, if we and these partners were to purchase additional interests to provide capital for repayment of the credit facility balance at December 31, 2002, our interest would increase to 87.65%. If we were the only party to purchase additional interests for this purpose, our interest would increase to 99.58%. One of our European operating partners has an option, exercisable in June 2003, to purchase the trust’s interest in Recom identified above for a fixed price and is subject to a put option held by the trust, exercisable also in June 2003, with respect to the same interest at the same price.

Recom has total assets of $146.7 million and total liabilities of $151.1 million of which we guarantee $147.6 million. Recom’s assets include an investment in Shurgard Europe of $18.4 million, a loan to Shurgard Europe of $127.6 million and other assets of $0.7 million. Upon adoption of FASB Interpretation No. 46, it is reasonably likely that we will be considered the primary beneficiary of Recom and that we will have to consolidate the assets and liabilities of Recom in Shurgard’s financial statements. Our maximum exposure to loss would be our contingent liability as general partner which totaled $147.6 million at December 31, 2002.

Other joint ventures

We operate 29 properties in unconsolidated joint ventures that have been developed primarily through our Florida and Tennessee joint ventures. Our ownership interests range from 50% to 90%, and we do not exercise effective control because all major decisions require the agreement of both parties. As of December 31, 2002, these joint ventures have total assets of $98.1 million and total liabilities of $67.2 million. We have guaranteed debt of $15.1 million related to these joint ventures. Our maximum exposure to loss is $44.5 million, the total of these guarantees and the net book value of our investment which was $29.4 million at December 31, 2002.

Shurgard Europe is a Belgian joint venture in which we own 2.66%, four unaffiliated institutional investors own 43.26%, our European operating partners own .25% and Recom owns 53.83%. Our European operating partners are European entrepreneurs who worked with us in 1995 to establish the European operations and who joined us as original investors at that time. The four institutional investors, consisting of European and U.S. banking, insurance and real estate institutions, acquired their interests in October 1999 through a commitment to invest 122 million Euro in the joint venture. On February 27, 2001, the joint venture obtained commitments from all of its owners to invest an additional 28 million Euro. The commitments were made pro rata and, therefore, did not alter the percentage ownership of the parties. At December 31, 2002, Shurgard Europe had drawn on 122 million Euro of the initial commitment from the institutional investors and had not yet drawn on any of the additional February 2001 commitment.

Shurgard Europe is managed by a board of managers in which we hold 50% of the votes, our European operating partners hold 7% and the institutional investors collectively hold 43%. Substantially all major decisions require approval of managers holding at least 80% of the votes. The joint venture agreement provides that if, by December 31, 2004, the institutional investors have not had an opportunity to liquidate their interests through an initial public offering or a sale of their interests, they may initiate steps that could lead to an initial public offering or to the sale of Shurgard Europe or its assets in accordance with prescribed procedures. All partners’ interests in Shurgard Europe are subject to a right of first refusal. We, Recom and our European operating partners are subject to other restrictions on transfer and sale. The operation of these provisions could substantially affect our ownership interest in and the structure of our European investment.

Shurgard Europe has total assets of $543.5 million and total liabilities of $494.3 million including $49.3 million bonds payable to us and $127.6 million note payable to Recom. Our maximum exposure to loss is the balance of the bonds payable to us of $49.3 million at December 31, 2002.

preliminary steps of this evaluation, some or all of these entities may be consolidated in our financial statements beginning July 1, 2003.

Note K - Related Party Transactions

On May 27, 2002, we entered into a subscription agreement to purchase up to $50 million of three year 9.75% payment-in-kind cumulative preferred bonds to be issued at the option of Shurgard Europe redeemable December 31, 2004. Pursuant to the subscription agreement, Shurgard Europe may issue up to $50 million of these preferred bonds to us during the first two years of the three-year commitment term. If Shurgard Europe issues more than $40 million in bonds during the first 12 months, it has the option of increasing our total notional subscription to $75 million. Interest is payable on the bonds at the end of each quarter in cash or through an issuance of additional bonds. The bonds issued to pay interest can be issued above the commitment amount. Shurgard Europe has two one-year options to extend the three year redemption date of the bonds. Shurgard Europe must redeem the bonds on the redemption date, or may redeem at anytime prior to the redemption date, on paying us 115% of the face value of the outstanding bonds plus accrued and unpaid interest. The subscription agreement entitles us to a commitment fee of 0.5% and a structuring fee of 1.5% of the initial commitment of $50 million, as well as an unused fee equal to 100 basis points of the undrawn amount payable in arrears on a quarterly basis. These fees are being recognized as revenue using the interest method over the term of the bonds. Our intent is to hold these bonds to maturity. As of December 31, 2002, $49.3 million of bonds had been issued to us and we have recorded $1.4 million in interest income.

We provide property management services to affiliates including marketing, maintenance, management information systems, access to our call center and management of on-site personnel. Management fees from related parties were $454,000 $393,000 and $250,000 for the years ended December 31, 2002, 2001, and 2000, respectively.

Note L - Exit Costs

In December 2001, the Board of Directors approved an exit plan to discontinue the operations of STG in the Atlanta and Southern California markets. In connection with this decision, we accrued incremental costs that we expected to incur during the closing of the warehouses of $4.1 million which are included in General, administrative and other in the Consolidated Statement of Income for 2001. These costs consisted of lease termination fees for warehouses and equipment, severance packages, estimated loss on sale of containers and estimated loss from operations during closing of $2.4 million, as well as impairment losses on certain assets and goodwill of an additional $1.7 million. The costs charged to this accrual during 2002 consisted primarily of lease termination fees and costs necessary to relocate current customers incurred during 2002. We expect to have the exit plan completed in the first half of 2003.


Total exit costs accrued during 2001	$	2.4		million

Total accrued exit costs as of December 31, 2001	$	2.4		million
Costs applied to accrual		(2.2	)	million

Total accrued exit costs as of December 31, 2002	$	0.2		million

Note M - Income Taxes

In June 2001, we purchased the remaining shares of STG, a taxable REIT subsidiary, and began consolidating the assets and liabilities of STG as of that date. In addition, we began operations for Shurgard TRS, a taxable REIT subsidiary, in 2002, which includes Shurgard Preferred Partners, Storage Line Management and SS Income Plan. STG has also been merged into Storage To Go, LLC, a wholly-owned subsidiary of Shurgard TRS. The income tax benefit, calculated at the statutory rate of 34%, consists entirely of a deferred tax benefit due to net operating losses. The components of deferred tax assets (liabilities) for Shurgard TRS at December 31, 2001 are included in the table below. As of December 31, 2002, no valuation allowance had been established.


	2002		2001

Net operating loss carryforwards	$	8,227	$	7,173
Accrual for warehouse closure		56		891
Fixed assets		25		(70	)

	$	8,308	$	7,994

The following table reconciles Shurgard’s net income to REIT taxable income for the years ended December 31, 2002, 2001 and 2000:


	Year ended			Year ended			Year ended
(in thousands)	December 31, 2002			December 31, 2001			December 31, 2000

Net Income	$	56,633		$	33,312		$	32,307
Book adjustment for restatement								20,666
Unrealized loss on financial instruments		10,999			1,602
Prepaid Rent		21			244			(20	)
Original Issue Discount		40			131			182
Investment in Unconsolidated Entities		9,626			26,181			1,935
Travel and Entertainment		185			194			225
Gain from Distributions in Excess of Tax Basis					60
Depreciation and Amortization		1,580			5,586			2,845
Gain on Disposition of Assets		(43	)		(141	)		(85	)
Other items		167			(260	)		(105	)
TROL Lease Expense		2,480			—			—
Dividends Paid		(87,469	)		(70,400	)		(59,908	)

REIT Tax Loss	$	(5,781	)	$	(3,491	)	$	(1,958	)

For income tax purposes, distributions paid to common shareholders consist of ordinary income, capital gains, return of capital or a combination thereof. For the years ended December 31, 2002, 2001 and 2000 distributions paid per share were taxable as follows:


	2002					2001					2000

(in thousands)	Amount		Percentage			Amount		Percentage			Amount		Percentage

Ordinary income	$	1.92		91.0	%	$	1.74		84.1	%	$	1.73		85.2	%
Return of capital		0.11		5.2	%		0.26		12.6	%		0.30		14.8	%
Capital gains		0.08		3.8	%		0.07		3.4	%		—		0.0	%

	$	2.11		100	%	$	2.07		100	%	$	2.03		100.0	%

Note N – Goodwill and Other Intangible Assets

On January 1, 2002 we adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No.142 changes the accounting for goodwill from an amortization method to an impairment-only approach. The following table summarizes our net income for the years ended December 31, 2002, 2001 and 2000, excluding goodwill amortization prior to adoption of SFAS No. 142.


		For the year ended December 31,

(in thousands except per share data)		2002		2001			2000

Reported income before extraordinary items		$	54,909	$	34,757		$	32,307
Add back: Goodwill amortization			—		1,073			1,041

Adjusted income before extraordinary items			54,909		35,830			33,348
Early extinguishment of debt			1,724		(1,445	)		—

Adjusted net income		$	56,633	$	34,385		$	33,348

Basic earnings per share:
	Reported income before extraordinary items	$	1.15	$	0.63		$	0.80
	Add back: Goodwill amortization		—		0.04			0.04

	Adjusted income before extraordinary items		1.15		0.67			0.84
	Early extinguishment of debt		0.05		(0.05	)		—

	Adjusted net income	$	1.20	$	0.62		$	0.84

Diluted earning per share:
	Reported income before extraordinary items	$	1.13	$	0.63		$	0.79
	Add back: Goodwill amortization		—		0.04			0.03

	Adjusted income before extraordinary items		1.13		0.67			0.82
	Early extinguishment of debt		0.05		(0.05	)		—

	Adjusted net income	$	1.18	$	0.62		$	0.82

The following table summarizes our expected amortization of intangible assets, as included in Other assets, net in our Consolidated Balance Sheet, over the next five years and thereafter (in thousands):


2003	$	1,952
2004		1,040
2005		709
2006		404
2007		347
thereafter		926

	$	5,378

Note O — Shareholders’ Equity

In addition to the rights, privileges and powers of Class A Common Stock, Class B common shareholders received loans from Shurgard to fund certain obligations to the 17 partnerships that comprised our predecessor. For the years ended December 31, 2002 and 2001, we received $80,000 and $49,000 in interest income on these notes. The loans were paid in full as of December 31, 2002 and the Class B Common Stock was converted to Class A Common Stock. As of December 31, 2002, there are no shareholder loans outstanding.

Shurgard has 40 million shares of preferred stock authorized, of which 2.8 million shares have been designated as Series A Junior Participating Preferred Stock, (none are issued or outstanding at December 31, 2002); 2 million shares have been designated as Series B Cumulative Redeemable Preferred Stock (none of which are issued or outstanding at December 31, 2002, as discussed below), 2 million shares have been designated as Series C Cumulative Redeemable preferred stock (2 million shares of which are issued and outstanding at December 31, 2002, as discussed below), and 3.45 million shares have been designated as Series D Cumulative Redeemable Preferred Stock (3.45 million shares of which are issued and outstanding at December 31, 2002, as discussed below). The Board of Directors is authorized to determine the rights, preferences and privileges of the preferred stock including the number of shares constituting any such series and the designation thereof.

Series C Cumulative Redeemable Preferred Stock requires quarterly distribution payments totaling 8.7% per year and is callable at our option after five years, at a redemption price of $25 per share.

In February 2001, we raised $86.25 million (approximately $83.1 million in net proceeds) through the sale of 3.45 million shares of Series D Cumulative Redeemable Preferred Stock. These preferred shares require quarterly distributions of 8.75% per year and are callable at our option after five years, at a redemption price of $25 per share.

On March 24, 1995, Shurgard acquired Shurgard Incorporated (the Management Company) through a merger. Under the Management Company Merger Agreement, we were contingently obligated to issue additional shares as consideration for certain partnership interests held by the Management Company, which were not valued at the time of the merger. On June 5, 2000, we issued the final 387,933 Class A common shares due under this obligation with an aggregate value of $9.2 million.

In 2001, we raised net proceeds after offering costs of $76.0 million through the sale of 2.7 million shares of Class A Common Stock.

On June 28, 2002, we raised $86.25 million (approximately $82.3 million net proceeds) through the sale of 2.5 million shares of Class A Common Stock. We used approximately $50 million of the proceeds to redeem in full our 8.80% Series B Cumulative Redeemable Preferred Stock, issued on April 16, 1997, on August 19, 2002. Additional proceeds were used to repay a portion of the indebtedness under our revolving credit facility.

Note P — Derivative Financial Instruments and Other Comprehensive Income

SFAS No.133 requires that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income, and recognized in the statement of earnings when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment. Changes in the fair value of derivative instruments that do not qualify for hedge accounting under SFAS No. 133 are recognized in earnings.

The adoption of SFAS No.133 on January 1, 2001 resulted in a cumulative reduction in Other Comprehensive Income (OCI) of $348,000. The reduction in OCI was attributable to losses on cash flow hedges. There was no net gain or loss recognized in earnings for the years ended December 2002 and 2001 due to hedge ineffectiveness. Changes in the time value of an interest rate cap have been excluded from the assessment of hedge effectiveness, are reported in “Interest income and other” on the Consolidated Statements of Income and were $17,000 and $126,000 for the years ended December 31, 2002 and 2001, respectively. Approximately $25,000 of OCI will be reclassified into earnings during the next twelve months through amortization.

For the year ended December 31, 2002, other assets increased $106,000, other liabilities increased $11.9 million, $11.0 million in unrealized loss on financial instruments was recognized in earnings and other comprehensive loss increased $912,000 due to changes in the value of derivative instruments. Total accumulated other comprehensive loss was $1.9 million as of December 31, 2002.

In March 2002, we entered into a fixed to variable rate swap for $50 million of the senior notes payable due in 2004. This hedge was designated as a fair value hedge. The gain or loss on the swap and the bonds are recognized in earnings and the carrying value of the bonds is adjusted accordingly. On August 20, 2002, we terminated these swaps at a gain of $2 million. This gain is being amortized to interest expense over the remaining life of the bonds using the effective interest rate method. For the year ended December 31, 2002, the carrying value of the bonds was increased by $1.6 million. For the year ended December 31, 2002, interest expense was reduced by $452,000 for amortization of the gain.

Subsequent to our adoption of SFAS No.133 for the year ended December 31, 2001, other assets increased $106,000, other liabilities increased $2.1 million, $1.6 million in unrealized losses on financial instruments was recognized in earnings, and other comprehensive loss increased $0.9 million. Additionally, for the year ended December 31, 2001, we recognized $1.2 million in interest expense related to the termination of swap agreements for SFPI and SFPII in connection with paying off the debt.

Duringsee suggestions 2001 we entered into three interest rate swaps to mitigate the risk of interest rate fluctuations related to our various options at the end of its Tax Retention Operating Lease transaction. These derivative instruments do not qualify for hedge accounting treatment under SFAS No. 133. They are recorded on the Balance Sheet at estimated fair value and adjusted each period through earnings. As of December 31, 2002, our liability under the derivative instruments is $12.6 million. We recorded $11.0 million and $1.6 million in unrealized loss for these financial instruments for the years ended December 31, 2002 and 2001, respectively.

Note Q - Stock Compensation and Benefit Plans

The 1993 Stock Option Plan (the 1993 Plan) provides for the granting of options for up to 3% of our outstanding shares of Class A Common Stock at the end of each year, limited in the aggregate to 5,000,000 shares. In general, the options vest ratably over five years and must be exercised within ten years from date of grant. The exercise price for qualified incentive options under the 1993 Plan must be at least equal to fair market value at date of grant and at least 85% of fair market value at date of grant for non qualified options. The 1993 Plan expires in 2003. The remaining outstanding options under the 1993 Plan expire in 2005.

The 1995 Long-Term Incentive Compensation Plan (the 1995 Plan) provided for the granting of options for up to 2% of the adjusted average shares of our Class A Common Stock outstanding during the preceding calendar year, as well as stock appreciation rights, stock awards (including restricted stock), performance awards, other stock-based awards and distribution equivalent rights. The 1995 Plan required mandatory acceleration of vesting in the event of certain mergers and consolidations or a sale of substantially all the assets or a liquidation of Shurgard, except where such awards were assumed or replaced in the transaction. The 1995 Plan permitted the plan administrator to authorize loans, loan guarantees or installment payments to assist award recipients in acquiring shares pursuant to awards and contains certain limitations imposed by tax legislation. The 1995 Plan allowed for grants to consultants and agents, as well as our officers and key employees. The 1995 plan expired in July 2000.

The 2000 Long-Term Incentive Compensation Plan (the 2000 Plan) provides for the granting of options for up to 2.8 million shares of our Class A Common Stock, as well as stock appreciation rights, stock awards (including restricted stock), performance awards, other stock-based awards and distribution equivalent rights. The 2000 Plan requires mandatory acceleration of vesting in the event of certain mergers and consolidations or a sale of substantially all the assets or a liquidation of Shurgard, except where such awards are assumed or replaced in the transaction. The 2000 Plan permits the plan administrator to authorize loans, loan guarantees or installment payments to assist award recipients in acquiring shares pursuant to awards and contains certain limitations imposed by tax legislation. The 2000 Plan allows for grants to consultants and agents, as well as our officers, directors and key employees. We granted 39,325, 34,289 and 39,525 shares of restricted Class A Common Stock to officers and key employees for years ended December 31, 2002, 2001 and 2000, respectively, and recorded approximately $416,000, $175,000 and $11,000 in compensation expense, respectively. The shares granted entitle the grantee to all shareholder rights: however, the shares will vest ratably over 5 years. If a grantee’s employment is terminated prior to the end of the five-year period, the unvested shares will be forfeited. During 2002, 5,587 shares were forfeited due to employee terminations. In December 2001, we granted 142,358 shares of discounted options to officers and key employees. During 2002 we recognized $204,000 in expense related to these options.

In 1993, we also established the Stock Option Plan for Nonemployee Directors (the Directors Plan) for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors. This plan was amended during 1995 and provided current outside directors with 6,000 shares each in 1995 and 3,000 shares each annually thereafter. Such options vest on the date of our next annual meeting so long as such director continues to serve as a director until such date. In 1998 the Director’s Plan was amended and restated to provide for discretionary grants. The total number of shares reserved under the Plan did not change and remains at 200,000. The exercise price for options granted under the Directors Plan are equal to fair market value the day before the date of grant. As of December 31, 2002, 151,680 of these options were outstanding.

We have an employee incentive savings and stock ownership plan, in which substantially all employees are eligible to participate. Each year, employees may contribute an amount up to 15% of their annual compensation not to exceed the maximum allowable by law. Employee contributions may be invested in one or more of ten mutual fund investment options administered by a third party. We match a portion of employee contributions and may make annual discretionary contributions in the form of company stock. Our expense for contributions to this plan was approximately $597,000, $737,000 and $809,000 for 2002, 2001 and 2000, respectively. We do not offer post-employment or post-retirement benefits.

In 1996, we established an Employee Stock Purchase Plan under which employees can elect to purchase Shurgard stock through regular periodic payroll deductions without paying broker commissions. This plan provides for potential price discounts of up to 15%. Effective January 2000, a 10% discount was offered to employees under this plan.

The weighted average remaining contractual life of options outstanding at December 31, 2002 was 7.6 years and option prices ranged from $20.75 to $34.70 per share.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2002:


					Weighted
		Number of			Average
		Shares			Exercise Price

Outstanding, January 1, 2000			2,247,576		$	24.46
	Granted		1,164,500		$	23.15
	Forfeited		(385,583	)	$	24.40
	Exercised		(36,854	)	$	23.01

Outstanding, December 31, 2000			2,989,639		$	23.98
	Granted		545,418		$	28.77
	Forfeited		(197,643	)	$	24.75
	Exercised		(240,064	)	$	22.82

Outstanding, December 31, 2001			3,097,350		$	24.86
	Granted		485,939		$	31.32
	Forfeited		(157,335	)	$	24.95
	Exercised		(539,493	)	$	23.78

Outstanding, December 31, 2002			2,886,461		$	26.15

Exercisable, December 31, 2000			999,709		$	25.34

Exercisable, December 31, 2001			1,451,793		$	24.69

Exercisable, December 31, 2002			1,807,732		$	24.78


	Number of Options		Weighted Average	Number of
Range of	Outstanding		Remaining	Options Exercisable
Exercise Prices	December 31, 2002		Contractual Life	December 31, 2002

$20.75 to $23.00		27,100	2.1 years		27,100
$25.50 to $27.00		17,696	3.2 years		17,696
$28.25 to $28.25		122,923	4.1 years		122,923
$27.88 to $29.00		241,266	5.1 years		241,266
$21.31 to $27.56		640,454	6.6 years		633,787
$22.63 to $23.31		863,840	7.7 years		564,692
$24.56 to $32.25		487,243	8.8 years		200,268
$28.99 to $34.70		485,939	9.9 years		—

		2,886,461			1,807,732

We have adopted the disclosure only provisions of SFAS No.123, “Accounting for Stock-Based Compensation.” No compensation cost has been recognized for options granted at market price. Had compensation cost for options granted under our stock option plans been determined based on the fair value at the grant date for awards in 2000, 2001 and 2002 consistent with the provisions of SFAS No.123, our net income and net income per share would have been reduced to the pro forma amounts indicated below (in thousands):


		Year Ended December 31,

		2002			2001			2000

Net income:
	As reported	$	56,633		$	33,312		$	32,307
	Compensation expense		(1,061	)		(1,854	)		(1,478	)

	Pro forma	$	55,572		$	31,458		$	30,829

Basic net income per share:
	As reported	$	1.20		$	0.59		$	0.80
	Pro forma	$	1.17		$	0.53		$	0.75
Dilutive net income per share:
	As reported	$	1.18		$	0.59		$	0.79
	Pro forma	$	1.15		$	0.53		$	0.74
Weighted average fair value of options granted		$	1.75		$	2.16		$	2.54

The fair value of options granted under our stock option plans during 2002, 2001 and 2000 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 8.20%, 8.41% and 8.81%; expected volatility of 20%, 19% and 28%; risk free interest rate of 2.76%, 5.07% and 5.12%; and expected life of 5.2, 6.5 and 6.5 years, respectively.

Note R — Shareholder Rights Plan

In March 1994, we adopted a Shareholder Rights Plan and declared a distribution of one Right for each outstanding share of common stock. Under certain conditions, each Right may be exercised to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock at a purchase price of $65, subject to adjustment. The Rights will be exercisable only if a person or group has acquired 10% or more of the outstanding shares of common stock, or following the commencement of a tender or exchange offer for 10% or more of such outstanding shares of common stock. If a person or group acquires more than 10% of the then outstanding shares of common stock, each Right will entitle its holder to receive, on exercise, common stock (or, in certain circumstances, cash, property or other securities of Shurgard) having a value equal to two times the exercise price of the Right. In addition, if Shurgard is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase that number of the acquiring company’s common shares having a market value of twice the Right’s exercise price. We will be entitled to redeem the Rights at $0.0001 per Right at any time prior to the earlier of the expiration of the Rights in March 2004 or the time that a person has acquired a 10% position. The Rights do not have voting or distribution rights, and until they become exercisable, have no dilutive effect on our earnings.

Note S — Net Income Per Share

The following summarizes the computation of basic and diluted net income per share:


				Weighted		Net Income
				Average		Per
(in thousands except per share date)	Net income			Shares		Share

For the year ended December 31, 2000
Net income	$	32,307
Less: preferred distributions		(8,750	)

Basic net income		23,557			29,561	$	0.80
Effect of dilutive stock options		—			200		(0.01	)

Diluted net income	$	23,557			29,761	$	0.79

For the year ended December 31, 2001
Net income	$	33,312
Less: preferred distributions		(15,098	)

Basic net income		18,214			30,689	$	0.59
Effect of dilutive stock options		—			397		—

Diluted net income	$	18,214			31,086	$	0.59

For the year ended December 31, 2002
Net income	$	56,633
Less: preferred distributions		(14,695	)

Basic net income		41,938			34,836	$	1.20
Effect of dilutive stock options		—			565		(0.02	)

Diluted net income	$	41,938			35,401	$	1.18

Note T — Segment Reporting

Shurgard currently has two reportable segments: Same and New Stores. Our definition of Same Stores includes existing stores acquired prior to January 1 of the previous year as well as developed properties that have been operating for a full two years as of January 1 of the current year. We project that newly developed properties will reach stabilization in an average of approximately 24 months. New Stores include existing domestic facilities that had not been acquired as of January 1 of the previous year as well as domestic developed properties that have not been operating a full two years as of January 1 of the current year.

These reportable segments allow us to focus on improving results from our existing domestic real estate assets and renting up our new domestic facilities. We evaluate each segment’s performance based on net operating income (NOI) and NOI after indirect and leasehold expenses. NOI is defined as rental revenue less direct operating expenses and real estate taxes, but does not include any allocation of indirect operating expense. Indirect and leasehold expense includes land or building lease expense and certain shared property costs such as bank fees, district and corporate management, purchasing, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, legal services, human resources and accounting. Indirect operating expense is allocated to stores based on number of months in operation during the period and does not include internal real estate acquisition costs or abandoned development expense.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no inter-segment sales and transfers. We do not allocate development and acquisition expense, depreciation and amortization, general, administrative and other, interest expense, interest income and other (net) and minority interest to the segments.

Using the definition of Same Store and New Store described above, the portfolio of assets reported in these segments changes from year to year. Assets transition from New Store to Same Store over time. The following table illustrates the results using the 2002 Same Store and New Store base for reportable segments as of and for the years ended December 31, 2002 and 2001. Same stores include all stores acquired prior to January 1, 2001, and domestic developments opened prior to January 1, 2000. New stores represent all stores acquired after January 1, 2001, and domestic developments opened after January 1, 2000. Disposed stores represent properties sold during 2002:


(in thousands)	Same Stores			New Stores			Disposed		Total

Year Ended December 31, 2002
Real estate operations revenue	$	231,350		$	35,979		$	203	$	267,532
Less unconsolidated joint ventures		(11,330	)		(3,264	)		—		(14,594	)

Consolidated revenue		220,020			32,715			203		252,938
Direct operating and real estate tax expense		67,658			17,425			124		85,207
Less unconsolidated joint ventures		(3,972	)		(1,572	)		—		(5,544	)

Consolidated direct operating and real estate tax expense		63,686			15,853			124		79,663

Consolidated NOI		156,334			16,862			79		173,275
Indirect and leasehold expense		13,080			5,643			—		18,723
Less unconsolidated joint ventures		(765	)		(383	)		—		(1,148	)

Consolidated indirect and leasehold expense		12,315			5,260			—		17,575

Consolidated NOI after indirect and leasehold expense	$	144,019		$	11,602		$	79	$	155,700

Total Assets	$	963,715		$	297,212		$	—	$	1,260,927

Year Ended December 31, 2001
Real estate operations revenue	$	227,776		$	13,263		$	763	$	241,802
Less unconsolidated joint ventures		(13,945	)		(1,495	)		—		(15,440	)

Consolidated revenue		213,831			11,768			763		226,362
Direct operating and real estate tax expense		65,627			7,446			375		73,448
Less unconsolidated joint ventures		(4,730	)		(1,123	)		—		(5,853	)

Consolidated direct operating and real estate tax expense		60,897			6,323			375		67,595

Consolidated NOI		152,934			5,445			388		158,767
Indirect and leasehold expense		14,220			2,703			—		16,923
Less unconsolidated joint ventures		(807	)		(234	)		—		(1,041	)

Consolidated indirect and leasehold expense		13,413			2,469			—		15,882

Consolidated NOI after indirect and leasehold expense	$	139,521		$	2,976		$	388	$	142,885

Total Assets	$	992,897		$	187,077		$	—	$	1,179,974

The following table illustrates the results using the 2001 Same Store and New Store base for reportable segments as of and for the years ended December 31, 2001 and 2000. Same stores include all stores acquired prior to January 1, 2000, and all domestic developments opened prior to January 1, 1999. New stores represent all stores acquired after January 1, 2000 and domestic developments opened after January 1, 1999:


Year Ended December 31, 2001
(in thousands)	Same Stores			New Stores			Disposed		Total

Real estate operations revenue	$	210,277		$	31,248		$	277	$	241,802
Less unconsolidated joint ventures		(11,700	)		(3,740	)		—		(15,440	)

Consolidated revenue		198,577			27,508			277		226,362
Direct operating and real estate tax expense		59,521			13,765			162		73,448
Less unconsolidated joint ventures		(3,754	)		(2,099	)		—		(5,853	)

Consolidated direct operating and real estate tax expense		55,767			11,666			162		67,595

Consolidated NOI		142,810			15,842			115		158,767
Indirect and leasehold expense		13,062			3,861			—		16,923
Less unconsolidated joint ventures		(615	)		(426	)		—		(1,041	)

Consolidated indirect and leasehold expense		12,447			3,435			—		15,882

Consolidated NOI after indirect and leasehold expense	$	130,363		$	12,407		$	115	$	142,885

Total Assets	$	992,897		$	187,077		$	—	$	1,179,974

Year Ended December 31, 2000
Real estate operations revenue	$	197,786		$	15,423		$	537	$	213,746
Less unconsolidated joint ventures		(11,226	)		(2,177	)		—		(13,403	)

Consolidated revenue		186,560			13,246			537		200,343
Direct operating and real estate tax expense		57,727			7,908			293		65,928
Less unconsolidated joint ventures		(3,579	)		(1,450	)		—		(5,029	)

Consolidated direct operating and real estate tax expense		54,148			6,458			293		60,899

Consolidated NOI		132,412			6,788			244		139,444
Indirect and leasehold expense		13,266			1,944			—		15,210
Less unconsolidated joint ventures		(504	)		(232	)		—		(736	)

Consolidated indirect and leasehold expense		12,762			1,712			—		14,474

Consolidated NOI after indirect and leasehold expense	$	119,650		$	5,076		$	244	$	124,970

Total Assets	$	1,008,374		$	116,325		$	—	$	1,124,699

The following table reconciles the reportable segments’ revenue per the table above to consolidated total revenue for the years ended December 31, 2002, 2001 and 2000:


(in thousands)	2002		2001		2000

Consolidated real estate operations	$	252,938	$	226,362	$	200,343
Other		11,175		6,228		1,615

Total revenue	$	264,113	$	232,590	$	201,958

The following table reconciles the reportable segments direct and indirect operating expense to consolidated operating expense and real estate taxes for the years ended December 31, 2002, 2001 and 2000:


(in thousands)	2002		2001		2000

Consolidated direct operating and real estate tax expense	$	79,663	$	67,595	$	60,899
Consolidated indirect operating and leasehold expense		17,575		15,882		14,474
Other operating expense		9,141		5,561		691

Consolidated operating and real estate tax expense	$	106,379	$	89,038	$	76,064

The following table reconciles the reportable segments’ NOI per the table above to consolidated net income for the years ended December 31, 2002, 2001 and 2000:


(in thousands)	2002			2001			2000

Consolidated NOI after indirect and leasehold expense	$	155,700		$	142,885		$	124,970
Loss from other real estate investments		(1,396	)		(3,271	)		(3,420	)
Other revenue		11,175			6,228			1,615
Other operating expense		(9,141	)		(5,561	)		(691	)
Depreciation and amortization		(47,963	)		(45,234	)		(40,693	)
Interest on loans		(32,025	)		(36,562	)		(36,175	)
Unrealized loss on financial instruments		(10,999	)		(1,602	)
General and administrative		(11,195	)		(11,770	)		(4,911	)
Interest income and other		5,900			5,783			3,617
Amortization of participation rights discount		(4,824	)		(16,876	)		(11,262	)
Minority interest		(637	)		(808	)		(743	)
Income tax benefit		314			1,545			—
Early extinguishment of debt		1,724			(1,445	)		—

Net income	$	56,633		$	33,312		$	32,307

The following table reconciles the reportable segments’ assets to consolidated assets as of December 31, 2002, 2001, and 2000:


(in thousands)	2002			2001			2000

Segment assets	$	1,260,927		$	1,179,974		$	1,124,699
Unconsolidated joint ventures		(95,537	)		(88,205	)		(88,167	)
Corporate assets		254,786			147,036			193,710

Consolidated assets	$	1,420,176		$	1,238,805		$	1,230,242

Note U — Supplemental Quarterly Financial Data (Unaudited)


	Three months Ended

	As previously		As		As previously				As previously				As previously
	reported		restated		reported		As restated		reported		As restated		reported		As restated

	March 31		March 31		June 30		June 30		September 30		September 30		December 31		December 31
(in thousands, except per share data)	2002		2002		2002		2002		2002		2002		2002		2002

Revenue	$	60,616	$	60,616	$	64,013	$	64,013	$	69,400	$	69,400	$	70,084	$	70,084
Income from operations	$	22,373	$	22,373	$	24,276	$	24,276	$	27,041	$	27,041	$	23,490	$	23,490
Net income	$	13,214	$	13,389	$	18,676	$	14,083	$	18,722	$	13,390	$	17,020	$	15,771
Net income per common share:
Basic	$	0.28	$	0.28	$	0.44	$	0.30	$	0.42	$	0.27	$	0.38	$	0.36
Diluted	$	0.27	$	0.28	$	0.43	$	0.29	$	0.42	$	0.27	$	0.38	$	0.35


	Three months Ended

					As previously				As previously
					reported		As restated		reported		As restated

	March 31		June 30		September 30		September 30		December 31		December 31
(in thousands, except per share data)	2001		2001		2001		2001		2001		2001

Revenue	$	53,133	$	58,397	$	60,935	$	60,935	$	60,125	$	60,125
Income from operations	$	18,362	$	22,431	$	24,443	$	24,443	$	18,041	$	18,041
Net income	$	4,137	$	9,962	$	11,715	$	8,944	$	9,100	$	10,269
Net income per common share:
Basic	$	0.04	$	0.20	$	0.26	$	0.17	$	0.15	$	0.18
Diluted	$	0.04	$	0.19	$	0.25	$	0.16	$	0.15	$	0.17

Note V — Contingent Liabilities and Commitments

The following tables summarize our contractual obligations and our off-balance sheet commitments.


		Payments due by Period

										2008 and
		Total		2003		2004-2005		2006-2007		beyond

Contractual Obligations
Long-term debt		$	443,289	$	66,266	$	73,123	$	52,595	$	251,305
Operating lease obligations			77,363		5,644		11,274		11,066		49,379
Participation rights liability			47,472		27,406		20,066		—		—

	Total	$	568,124	$	99,316	$	104,463	$	63,661	$	300,684


		Amount of Commitment Expiration per Period

		Total
		amounts								2008 and
		Committed		2003		2004-2005		2006-2007		beyond

Other Commercial Commitments & Contingent Liabilities
Joint Venture loan guarantees		$	15,097	$	4,426	$	8,971	$	1,700	$	—
Residual lease guarantees on tax retention operating leases			134,342				134,342
Development contract commitments			316		316
Other related party guarantees			20,363				20,363
Contingent obligations under European joint venture			147,600		147,600		—		—		—

	Totals	$	317,718	$	152,342	$	163,676	$	1,700	$	—

In addition, from time to time we are subject to various legal proceedings that arise in the ordinary course of business. Although we cannot predict the outcomes of these proceedings with certainty, we do not believe that the disposition of these matters and the matters discussed above will have a material adverse effect on our financial position, results of operations or cash flows.

Note W – Subsequent Events

On March 11, 2003, we entered into an Agreement and Plan of Merger for the acquisition of five entities owning 18 self storage centers located in Minnesota and operated under the name of Minnesota Mini-Storage. As consideration in the transaction, we will issue 3,050,000 shares of common stock at closing and have agreed to issue an additional 50,000 shares if the properties meet certain revenue targets prior to the end of 2005. The shares will be issued pursuant to a Form S-4 registration statement to be filed with the Securities and Exchange Commission. The transaction is subject to

the approval of the entities’ existing equity owners. In connection with the execution of the merger agreement, equity owners holding more than a majority of the voting securities of the entities have agreed to vote in favor of the transaction. We anticipate closing during the second quarter of 2003. The acquisition will be accounted for as a purchase in accordance with SFAS No. 141.

On March 10, 2003, through our wholly owned subsidiary SSC Benelux, Inc, we entered into a Securities Purchase Agreement with SSC General Partners (Guernsey) Limited and SSC Partner (Gurnsey) Limited and Credit Suisse First Boston Europe (Limited) (collectively “CSFB”) to acquire their equity interest in Shurgard Self Storage SCA (‘Shurgard Europe”). The agreement provides that we will purchase CSFB’s 10.6% ownership interest in Shurgard Europe for approximately 45 million Euro ($49.6 million at March 10, 2003). CSFB is one of four institutional joint venture partners who, together with us, our European operating partners and certain Shurgard Europe employees, own Shurgard Europe. Under the existing joint venture agreement, the other partners have the opportunity to purchase their pro rata interest in the portion of CSFB’s equity interest being sold to Shurgard on the same terms being offered to Shurgard.

Note X – Restatement

Subsequent to the issuance of its consolidated financial statements for the year ended December 31, 2002, the company determined that a transaction entered into in August 2001 to mitigate the risk of interest rate fluctuations related to various options at the end of its Tax Retention Operating Lease transaction did not qualify for hedge accounting treatment (See Note M). This transaction was originally accounted for as a hedge of the forecasted transaction and changes in the estimated fair value of the derivative instrument were recorded in Other Comprehensive Income rather than in earnings. As a result, the accompanying consolidated financial statements for the years ended December 31, 2002 and 2001 have been restated. A summary of the significant effects of the restatement is as follows (in thousands):


	2002						2001

	As previously						As previously

	reported			As restated			reported			As restated

At December 31, Liabilities and Shareholders equity
Accounts payable and other liabilities	$	58,847		$	62,257		$	45,358		$	45,260
Accumulated net income less distributions	$	(186,616	)	$	(199,217	)	$	(166,775	)	$	(168,377	)
Accumulated other comprehensive loss	$	(11,064	)	$	(1,873	)	$	(2,661	)	$	(961	)
For the year ended December 31, Other Income (Expense)
Unrealized loss from financial instruments				$	(10,999	)				$	(1,602	)
Income before income tax benefit and extraordinary item	$	65,594		$	54,595		$	34,814		$	33,212
Income before extraordinary item	$	65,908		$	54,909		$	36,359		$	34,757
Net income	$	67,632		$	56,633		$	34,914		$	33,312
Net Income per Common Share Basic earnings per share
Income before extraordinary item	$	1.47		$	1.15		$	0.69		$	0.63
Net income	$	1.52		$	1.20		$	0.65		$	0.59
Diluted earnings per share
Income before extraordinary item	$	1.45		$	1.13		$	0.68		$	0.63
Net income	$	1.50		$	1.18		$	0.64		$	0.59

Schedule III – Real Estate and Accumulated

See Notes to Consolidated Financial Statements


						INITIAL COST						Costs
												Subse-
								Building,		Gross		quent to
			Encum-					Equip. &		Storage		Acquis-
Property Name	Location	State	brances			Land		Other		Centers		ition

Ahwatukee	Phoenix	AZ					721		2,469		3,191		(2	)
Airpark	Scottsdale	AZ					880		3,694		4,574		13
Arrowhead	Phoenix	AZ					569		2,600		3,168		10
Chandler	Chandler	AZ					652		2,608		3,260		577
Colonnade	Phoenix	AZ					—		1,146		1,146		1
Cooper Road	Gilbert	AZ					376		2,471		2,847		9
Dobson Ranch	Mesa	AZ					499		1,996		2,495		160
Houghton Road	Tucson	AZ		(1	)		607		2,536		3,143		252
Mesa	Mesa	AZ					352		1,829		2,182		539
Mill Avenue	Tempe	AZ					147		1,799		1,946		52
Phoenix	Phoenix	AZ					670		2,697		3,368		141
Phoenix East	Phoenix	AZ					543		2,189		2,731		194
Scottsdale	Scottsdale	AZ					410		1,743		2,153		208
Scottsdale North	Scottsdale	AZ					1,093		4,811		5,904		144
Shea	Scottsdale	AZ					786		3,165		3,951		163
Speedway	Tucson	AZ					744		2,304		3,048		694
Tempe	Tempe	AZ					273		1,110		1,383		237
Union Hills	Phoenix	AZ					615		2,475		3,090		150
Val Vista	Gilbert	AZ					682		2,805		3,487		1,147
Warner	Mesa	AZ					313		1,352		1,665		175
Alicia Parkway	Laguna Hills	CA					1,729		7,027		8,757		281
Aliso Viejo	Aliso Viejo	CA					2,218		3,628		5,846		757
Antioch	Antioch	CA		(1	)		638		4,366		5,003		754
Bloomington	Bloomington	CA					237		1,027		1,264		85
Blossom Valley	San Jose	CA					1,204		4,128		5,332		514
Cabot Road	Laguna Niguel	CA		(3	)		1,300		6,129		7,429		13
Capital Expressway	San Jose	CA					973		6,181		7,155		120
Castro Business Pk.	Castro Valley	CA					97		390		487		26
Castro Valley	Castro Valley	CA					810		4,010		4,820		13
Colton	Colton	CA					283		1,142		1,424		94
Costa Mesa	Costa Mesa	CA		(3	)		1,057		2,956		4,013		208
Culver City	Los Angeles	CA					1,039		4,146		5,185		165
Daly City	Daly City	CA					1,846		5,438		7,284		717
El Cajon	El Cajon	CA					1,013		4,113		5,126		500
El Cerrito	Richmond	CA					765		3,055		3,820		163
Fontana Sierra	Fontana	CA					391		1,572		1,962		718
Hayward	Hayward	CA					322		1,322		1,645		261
Huntington Beach	Huntington Beach	CA					949		3,794		4,743		362
Kearney-Balboa	San Diego	CA					830		3,333		4,163		314
La Habra	La Habra	CA					715		2,886		3,600		311
Martinez	Martinez	CA					1,012		2,215		3,227		2,385
Mountain View	Mountain View	CA					439		1,757		2,196		170
Newark	Newark	CA					855		3,421		4,276		104
Ontario	Ontario	CA					512		2,058		2,570		50
Orange	Orange	CA					1,144		4,580		5,724		85
Palo Alto	Palo Alto	CA					701		2,805		3,506		241
Pinole	Pinole	CA					614		1,023		1,637		1,652
Rohnert Park	Rohnert Park	CA					1,218		4,296		5,514		146
S. San Francisco	San Francisco	CA					721		2,897		3,618		231
Sacramento	Sacramento	CA					680		2,723		3,403		32
San Juan Creek	San Juan	CA					1,450		5,526		6,976		—
San Leandro	San Leandro	CA					776		3,105		3,881		129
San Lorenzo	San Lorenzo	CA					611		2,447		3,058		120
Santa Ana	Santa Ana	CA					1,467		5,920		7,387		308
Solana Beach	Solana Beach	CA					—		6,837		6,837		336
Sunnyvale	Sunnyvale	CA					1,697		6,541		8,238		4,970
Tracy	Tracy	CA					732		2,928		3,660		89
Tracy II	Tracy	CA					840		3,746		4,586		—
Union City	Hayward	CA					287		1,208		1,494		198
Van Ness	San Francisco	CA					5,289		9,001		14,289		407
Vista Park-Land Ls.	San Jose	CA		(2	)		—		—		—		56
Walnut	Walnut	CA					751		3,006		3,757		98
Walnut Creek	Walnut Creek	CA		(1	)		630		4,512		5,143		836
Westpark	Irvine	CA		(3	)		690		7,478		8,169		4,903
Westwood	Santa Monica	CA					951		3,797		4,748		4,189
Lakewood	Golden	CO					528		2,108		2,636		67
Northglenn	Northglenn	CO					531		2,152		2,683		154
preciation Tamarac	Denver	CO					194		776		970		198


						INITIAL COST						Costs
												Subse-
								Building,		Gross		quent to
			Encum-					Equip. &		Storage		Acquis-
Property Name	Location	State	brances			Land		Other		Centers		ition

Thornton	Denver	CO					237		956		1,193		137
Windermere	Littleton	CO					653		2,690		3,343		279
Blue Heron	West Palm Beach	FL					1,327		5,490		6,818		850
Davie	Davie	FL					1,890		3,021		4,910		4,849
Delray Beach	Delray Beach	FL					748		2,993		3,741		279
Lauderhill	Lauderhill	FL					761		3,164		3,925		315
Margate	Margate	FL					906		3,623		4,529		252
Military Trail	West Palm Beach	FL					1,140		4,564		5,704		524
Oakland Park	Ft. Lauderdale	FL					2,443		9,878		12,322		696
Seminole	Seminole	FL					336		1,344		1,680		153
Ansley Park	Atlanta	GA					804		3,255		4,059		4,032
Brookhaven	Atlanta	GA					1,082		2,223		3,305		2,768
Clairemont	Atlanta	GA					470		1,907		2,377		244
Decatur	Atlanta	GA					644		2,719		3,363		2,730
Forest Park	Forest Park	GA					573		2,293		2,866		127
Gwinnett	Lawrenceville	GA					820		2,324		3,144		485
Holcomb Bridge	Roswell	GA		(1	)		917		2,991		3,908		(8	)
Jones Bridge	Atlanta	GA					676		3,930		4,606		(64	)
Lawrenceville	Lawrenceville	GA					858		3,064		3,922		134
Morgan Falls	Dunwoody	GA					1,429		5,718		7,147		178
Norcross	Norcross	GA					562		2,248		2,810		127
Peachtree	Duluth	GA					1,144		4,784		5,929		121
Perimeter	Atlanta	GA					1,458		2,715		4,173		218
Roswell	Roswell	GA					435		1,743		2,178		160
Sandy Plains	Marietta	GA					1,012		4,066		5,078		29
Satellite Blvd.	Duluth	GA					670		2,831		3,501		36
Stone Mountain	Stone Mountain	GA					656		2,637		3,293		129
Tucker	Tucker	GA					241		656		897		417
Alsip	Alsip	IL					250		1,001		1,251		1,285
Bolingbrook	Bolingbrook	IL					641		2,631		3,272		238
Bridgeview	Bridgeview	IL					479		1,917		2,396		170
Country Club Hills	Country Club Hills	IL					777		3,109		3,886		466
Dolton	Calumet City	IL					344		1,489		1,834		1,134
Fox Valley	Chicago	IL					927		2,986		3,912		6
Hillside	Hillside	IL					261		1,043		1,304		108
Lisle	Lisle	IL					575		2,335		2,910		253
Lombard	Lombard	IL					392		1,566		1,958		295
Oak Forest	Orland Park	IL					704		1,869		2,573		1,355
Palatine	Palatine	IL		(1	)		413		2,213		2,626		848
Rolling Meadows	Rolling Meadows	IL					384		1,587		1,970		422
Schaumburg	Schaumburg	IL					443		1,808		2,251		357
Schaumburg South	Schaumburg	IL					490		3,231		3,722		535
Willowbrook	Willowbrook	IL					412		1,650		2,062		248
Wheaton	Wheaton	IL		(2	)						—		5,226
Allisonville	Indianapolis	IN					827		3,394		4,221		331
Carmel	Carmel	IN					404		2,560		2,964		12
Castleton	Indianapolis	IN					494		1,969		2,464		102
College Park	Indianapolis	IN					694		2,777		3,471		249
County Line	SouthPort	IN					—		2,600		2,600		41
Downtown Indy	Indianapolis	IN		(1	)		947		3,393		4,340		(61	)
Eaglecreek	Indianapolis	IN					802		2,646		3,448		27
East 62nd Street	Indianapolis	IN					376		1,629		2,005		—
East Washington	Indianapolis	IN		(1	)		399		2,583		2,982		(3	)
Geist	Fishers	IN					547		2,356		2,903		—
Georgetown	Indianapolis	IN					461		2,143		2,604		219
Glendale	Indianapolis	IN					520		2,077		2,597		87
Annapolis	Annapolis	M D					—		3,432		3,432		84
Briggs Chaney	Silver Spring	M D					430		1,727		2,157		99
Clinton	Clinton	M D					303		1,213		1,516		2,016
Crofton	Gambrills	M D					376		1,516		1,893		117
Frederick	Frederick	M D					206		826		1,032		126
Gaithersburg	Gaithersburg	M D					614		2,465		3,079		1,538
Germantown	Germantown	M D					552		2,218		2,770		102
Laurel	Laurel	M D					391		1,570		1,962		166
Oxon Hill	Ft. Washington	M D					349		1,401		1,750		76
Reisterstown	Owing Mills	M D					586		1,177		1,763		—
Suitland	Suitland	M D					660		2,638		3,298		128
Ann Arbor	Ann Arbor	M I					424		1,695		2,119		149
Canton	Canton	M I					433		1,797		2,230		382
Canton Township	Canton Township	M I		(1	)		842		2,308		3,150		745
Clinton Township	Clinton Township	M I					754		3,195		3,948		237
Flint East	Flint	M I					297		1,192		1,489		40
Flint South	Flint	M I					615		1,738		2,353		64
Fraser	Fraser	M I					627		2,599		3,226		14
Grand Rapids	Grand Rapids	M I					192		810		1,002		85
Jackson	Jackson	M I					317		1,282		1,599		13
Lansing	Lansing	M I					124		500		623		64
Livonia	Livonia	M I					636		2,634		3,270		32
Madison Heights	Detroit	M I					487		2,099		2,586		437
Mt. Clemens	Mt. Clemens	M I		1,950			935		2,614		3,550		18
Plymouth	Canton Township	M I					348		1,436		1,784		1,772
Rochester	Utica	M I					610		2,445		3,055		45


						INITIAL COST						Costs
												Subse-
								Building,		Gross		quent to
			Encum-					Equip. &		Storage		Acquis-
Property Name	Location	State	brances			Land		Other		Centers		ition

Rochester Hills	Rochester Hills	MI					970		3,929		4,900		122
Southfield	Southfield	MI					702		2,824		3,526		597
Sterling Heights	Sterling Heights	MI					919		3,692		4,611		138
Taylor	Taylor	MI					632		2,094		2,726		1,407
Troy - Maple	Troy	MI					556		2,243		2,799		2,841
Troy - Oakland Mall	Troy	MI					642		2,604		3,246		398
Walled Lake	Walled Lake	MI					359		1,437		1,797		271
Warren	Warren	MI					683		2,831		3,514		1,205
Auburn Hills	Auburn Hilss	MI		(2	)						—		3,669
Olive	St. Louis	MO					818		3,705		4,523		89
Albemarle	Charlotte	NC		3,500			788		4,567		5,355		—
Amity Court	Charlotte	NC		1,927			433		2,314		2,747		—
Arrowood	Charlotte	NC		2,718			1,155		3,151		4,306		—
Capital Blvd.	Raleigh	NC					342		1,376		1,718		1,311
Cary	Cary	NC					714		2,860		3,574		219
Clayton	Clayton	NC					764		2,495		3,259		—
Concord Kannapolis	Concord	NC					665		2,403		3,068		—
Cone Boulevard	Greensboro	NC		1,186			599		3,106		3,705		—
COTT	Matthews	NC		805			237		1,471		1,708		—
Country Club	Winston Salem	NC					757		3,462		4,219		—
Creedmoor	Raleigh	NC					807		3,178		3,985		1
Eastland	Charlotte	NC		1,790			590		3,743		4,333		—
English Road	High Point	NC					602		2,100		2,702		—
Garner	Garner	NC					204		818		1,022		85
Glenwood	Raleigh	NC					266		1,066		1,332		129
Hickory	Hickory	NC					892		3,826		4,718		—
Lexington	Lexington	NC					430		1,625		2,055		—
Matthews	Matthews	NC		1,847			775		5,617		6,392		—
Monroe	Matthews	NC		2,224			556		3,239		3,795		—
Morrisville	Morrisville	NC					409		1,640		2,048		126
North Tryon	Charlotte	NC		2,066			927		2,723		3,650		—
Park Road	Charlotte	NC					1,488		6,754		8,242		—
Pavilion	Charlotte	NC		1,557			1,320		2,251		3,571		—
Pineville	Pineville	NC		9,700			2,688		5,916		8,604		—
Randleman Road	Greensboro	NC		2,041			1,113		2,600		3,713		—
Rockingham	Rockingham	NC		810			178		1,870		2,048		—
Salisbury	Salisbury	NC		3,336			237		5,296		5,533		—
Silas Creek	Winston, Salem	NC					1,640		2,457		4,097		—
Stallings	Matthews	NC					747		2,075		2,822		—
Wake Forest	Wake Forest	NC		484			851		1,547		2,398		—
Weddington	Waxhaw	NC					642		2,520		3,162		—
Wilkinson	Charlotte	NC					575		3,270		3,845		—
Winston-Salem	Winston, Salem	NC					354		1,930		2,284		—
Bricktown	Bricktown	NJ		(1	)		1,398		2,640		4,038		1,747
Marlboro	Morganville	NJ					1,320		4,963		6,284		13
Old Bridge	Matawan	NJ					767		2,301		3,068		2,080
Voorhees	Voorhees	NJ					1,121		4,268		5,388		28
Beth Page	Long Island	NY		(1	)		2,370		6,209		8,579		1,362
Commack	Huntington	NY		(1	)		3,461		6,203		9,664		116
Gold Street	Brooklyn	NY					1,194		4,821		6,015		777
Great Neck	Long Island	NY		(1	)		436		2,632		3,067		269
Hempstead	Hempstead	NY		(1	)		1,902		4,572		6,475		686
Melville	Long Island	NY					1,099		3,897		4,996		3,690
Nesconset	Long Island	NY		(1	)		1,072		2,919		3,991		598
Northern Boulevard	Long Island City	NY					1,244		5,039		6,283		600
Utica	Brooklyn	NY					830		3,556		4,386		226
Van Dam	Long Island City	NY					760		3,189		3,949		345
Yonkers	Yonkers	NY					913		3,936		4,849		352
16th and Sandy	Portland	OR					231		938		1,169		1,327
Allen Blvd.	Beaverton	OR					525		2,101		2,626		90
Barbur Boulevard	Portland	OR					337		3,411		3,748		2,316
Beaverton	Beaverton	OR					216		863		1,078		118
Denny Road	Beaverton	OR					593		2,380		2,973		100
Division	Portland	OR					352		1,395		1,746		1,924
Gresham	Portland	OR					744		2,442		3,186		88
Hillsboro	Portland	OR					720		2,992		3,712		135
King City	Tigard	OR					511		2,051		2,562		119
Liberty Road	Salem	OR					524		1,280		1,805		1,452
Milwaukie	Milwaukie	OR					583		2,005		2,587		2,397
Oregon City	Portland	OR					321		1,613		1,934		1,374
Portland	Portland	OR					382		1,530		1,912		63
Salem	Salem	OR					574		2,294		2,868		307
Airport	Philadelphia	PA					799		3,194		3,993		319
Edgemont	Philadelphia	PA					497		3,070		3,567		2,731
Painter’s Crossing	Philadelphia	PA					513		2,868		3,382		5
Valley Forge	Berwyn	PA					331		2,816		3,147		—
West Chester	West Chester	PA					—		4,197		4,197		386
Ashley River	Charleston	SC					851		4,239		5,090		—
Ballantyne	Fort Mill	SC					640		2,153		2,793		—
Charleston	Ladson	SC		2,188			403		3,453		3,856		—
Dave Lyle	Rock Hill	SC					487		2,595		3,082		—


						INITIAL COST						Costs
												Subse-
								Building,		Gross		quent to
			Encum-					Equip. &		Storage		Acquis-
Property Name	Location	State	brances			Land		Other		Centers		ition

Garner’s Ferry	Columbia	SC		2,446			1,071		2,809		3,880		—
Greenville (SC)	Greenville	SC		1,888			989		2,162		3,151		—
Rock Hill	Rock Hill	SC		1,645			415		2,063		2,478		—
Rosewood	Columbia	SC					317		—		317		—
Shriners	Greenville	SC					431		2,564		2,995		—
Spartanburg	Spartanburg	SC		494			268		1,466		1,734		—
Sumter	Sumter	SC					268		2,020		2,288		—
Sunset	Lexington	SC					535		2,423		2,958		—
Woodruff Road (SC)	Greenville	SC					1,082		1,693		2,775		—
Bandera Road	San Antonio	TX					468		1,873		2,342		124
Bedford	Bedford	TX					408		1,678		2,086		87
Bee Caves Road	Austin	TX					608		3,609		4,217		913
Beltline	Irving	TX					414		1,671		2,086		327
Blanco Road	San Antonio	TX					801		3,235		4,035		122
Champions	Houston	TX					515		2,775		3,290		(2	)
Cinco Ranch	Houston	TX					1,751		1,336		3,088		28
Cityplace	Dallas	TX					1,045		3,314		4,359		262
East Lamar	Arlington	TX					742		1,863		2,605		280
Federal Road	Houston	TX					552		2,223		2,775		141
First Colony	Missouri City	TX					447		2,175		2,622		(12	)
Forum 303	Arlington	TX					273		1,100		1,373		147
Fredericksburg Road	San Antonio	TX					645		2,596		3,241		275
Georgetown	Austin	TX					403		1,711		2,114		6
Greenville	Dallas	TX					768		3,200		3,968		12
Helotes	San Antonio	TX		(1	)		481		2,277		2,758		(14	)
Henderson Pass	San Antonio	TX					562		2,348		2,910		792
Henderson Street	Fort Worth	TX					318		3,137		3,455		660
Highway 26	Hurst	TX					517		2,761		3,278		50
Highway 78	San Antonio	TX					392		1,550		1,942		32
Hill Country Village	San Antonio	TX					679		2,731		3,410		135
Hillcroft	Houston	TX					—		3,712		3,712		(23	)
Hurst	Hurst	TX					363		1,492		1,855		90
Imperial Valley	Houston	TX					461		1,856		2,318		157
Irving	Irving	TX					180		734		913		736
Kingwood	Kingwood	TX					525		2,097		2,622		754
Lakeline	Austin	TX					737		3,412		4,149		39
Las Colinas	Irving	TX		(1	)		478		2,717		3,195		435
Lewisville	Dallas	TX					434		2,521		2,955		35
MacArthur	Irving	TX					180		734		913		1,145
McArthur Crossing	Irving	TX					746		2,577		3,323		401
Medical Center (TX)	Houston	TX					737		2,950		3,687		305
Medical Center SA	San Antonio	TX		(1	)		660		2,683		3,343		61
Mission Bend	Houston	TX					653		2,218		2,871		533
Nacodoches	San Antonio	TX					363		1,565		1,928		1,352
North Austin	Austin	TX					609		2,436		3,045		128
North Carrollton	Carrollton	TX					627		2,739		3,366		7
North Park	Kingwood	TX					570		2,163		2,733		8
Oak Farm Dairy	Houston	TX					2,603		2,730		5,332		664
Oak Hills	Austin	TX		(1	)		149		3,568		3,717		(42	)
Oltorf	Austin	TX					—				—		3
Olympia	Missouri City	TX		(1	)		489		2,912		3,401		(9	)
Park Cities East	Dallas	TX					1,017		2,686		3,703		255
Parker Road	Dallas	TX					809		2,211		3,020		5
Preston Road	Dallas	TX					703		2,903		3,605		(24	)
Quarry	San Antonio	TX					1,316		2,817		4,133		55
River Oaks	Houston	TX					987		2,565		3,552		6,464
Round Rock	Austin	TX					386		1,641		2,027		8
San Antonio NE	San Antonio	TX					406		1,630		2,036		128
Slaughter Lane	Austin	TX					592		2,428		3,019		8
South Cooper	Arlington	TX					632		2,305		2,937		324
South Main	Houston	TX					404		1,039		1,442		76
Southlake	Dallas	TX					670		2,738		3,408		230
Sugarland	Sugarland	TX					761		2,991		3,752		113
T.C. Jester	Houston	TX					903		3,613		4,516		476
Thousand Oaks	San Antonio	TX					421		1,683		2,104		84
Universal City	San Antonio	TX					169		593		762		1,040
Valley Ranch	Coppell	TX					791		3,210		4,001		4
West University	Houston	TX					1,121		4,484		5,605		145
Westchase	Houston	TX					250		2,756		3,006		(18	)
Westheimer	Houston	TX					611		2,470		3,081		71
Windcrest	San Antonio	TX					626		2,535		3,161		423
Woodforest	Houston	TX					538		1,870		2,408		399
Woodlands	Houston	TX					737		2,948		3,685		333
Bayside	Virginia Beach	VA					236		943		1,179		317
Burke	Fairfax	VA					634		2,539		3,173		76
Burke Centre	Burke	VA					716		3,304		4,020		319
Burke Ctr. Bus. Park	Fairfax	VA					319		1,474		1,793		(317	)
Cascades	Sterling	VA					2,292		3,639		5,931		65
Cedar Road	Chesapeake	VA					295		1,184		1,479		137
Charlottesville	Charlottesville	VA					305		1,225		1,530		114
Chesapeake	Chesapeake	VA					454		1,821		2,275		72


						INITIAL COST						Costs
												Subse-
								Building,		Gross		quent to
			Encum-					Equip. &		Storage		Acquis-
Property Name	Location	State	brances			Land		Other		Centers		ition

Dale City	Dale City	VA					346		1,388		1,734		384
Fairfax	Fairfax	VA					1,136		4,555		5,691		2,325
Falls Church	Falls Church	VA					1,413		5,661		7,075		524
Fordson	Alexandria	VA					324		3,114		3,438		—
Fullerton	Springfield	VA					1,139		4,346		5,486		16
Gainesville	Gainesville	VA					245		983		1,228		99
Herndon	Herndon	VA					582		2,334		2,916		218
Holland Road	Virginia Beach	VA					204		818		1,022		147
Jeff Davis Hwy	Richmond	VA					306		1,226		1,531		93
Kempsville	Virginia Beach	VA					279		1,116		1,395		121
Laskin Road	Virginia Beach	VA					305		1,225		1,530		115
Leesburg	Leesburg	VA					541		2,174		2,715		48
Manassas E. & W.	Manassas	VA					654		2,627		3,281		388
McLean	McLean	VA					—		1,839		1,839		1,801
Merrifield	Fairfax	VA					3,184		3,966		7,151		1,364
Midlothian Turnpike	Richmond	VA					646		2,591		3,237		86
Newport News. North	Newport News	VA					574		2,301		2,875		245
Newport News. S	Newport News	VA					496		2,014		2,510		340
North Richmond	Richmond	VA					344		1,375		1,719		117
Old Towne	Alexandria	VA		(1	)		2,036		7,210		9,246		161
Potomac Mills	Potomac Mills	VA					1,114		3,440		4,554		7
Princess Anne Rd.	Virginia Beach	VA					305		1,225		1,530		87
S. Military Highway	Virginia Beach	VA					289		1,161		1,450		292
Telegraph	Lorton	VA					441		2,036		2,477		0
Temple Avenue	Petersburg	VA					297		1,193		1,490		117
Virginia Beach	Virginia Beach	VA					502		1,832		2,334		451
Auburn	Auburn	WA					760		2,773		3,533		138
Bellefield	Bellevue	WA					957		3,830		4,787		209
Bellingham	Bellingham	WA					601		2,400		3,001		132
Bremerton	Bremerton	WA					563		2,297		2,860		27
Burien	Seattle	WA					646		2,622		3,268		236
Burien II	Seattle	WA					388		1,553		1,941		207
Canyon Park JV	Bothell	WA					1,023		2,949		3,972		236
Canyon Rd.	Puyallup	WA					234		937		1,171		115
Capitol Hill	Seattle	WA					764		4,516		5,280		925
Corporate Office	Seattle	WA					3,947		7,096		11,043		16,847
E. Bremerton	Bremerton	WA					576		2,312		2,888		134
East Lynnwood	Lynnwood	WA					482		1,933		2,415		514
Edmonds	Edmonds	WA					1,190		4,806		5,996		210
Everett	Everett	WA					512		2,045		2,557		709
Factoria	Bellevue	WA					590		2,362		2,952		40
Factoria Square	Bellevue	WA					1,226		4,909		6,135		122
Federal Way	Federal Way	WA					862		3,414		4,275		269
Gig Harbor	Gig Harbor	WA					1,119		769		1,887		48
Hazel Dell	Vancouver	WA					728		1,506		2,234		1,825
Highland Hill	Tacoma	WA					592		2,362		2,954		148
Interbay	Seattle	WA					952		3,777		4,729		210
Issaquah	Issaquah	WA					615		2,460		3,075		161
Juanita	Kirkland	WA		(1	)		877		4,523		5,400		(54	)
Kennydale	Renton	WA					816		3,267		4,083		156
Kent	Kent	WA					557		2,297		2,854		5
Lacey	Olympia	WA					251		1,014		1,265		42
Lake City	Seattle	WA					572		2,421		2,993		236
Lake Union	Seattle	WA					1,580		7,440		9,021		15
Lakewood 512	Tacoma	WA					920		3,676		4,596		251
Lynnwood	Lynnwood	WA					775		3,186		3,961		99
Mill Creek	Everett	WA					627		3,760		4,387		554
North Spokane	Spokane	WA					581		2,328		2,909		1,322
Parkland	Tacoma	WA					400		1,634		2,034		61
Pier 57	Seattle	WA					872		4,558		5,430		198
Pt. Orchard	Pt. Orchard	WA					483		2,013		2,496		66
Redmond	Redmond	WA					537		5,503		6,040		(18	)
Renton	Renton	WA					625		2,557		3,182		243
Salmon Creek	Vancouver	WA					759		3,327		4,086		29
Sammamish	Redmond	WA					963		3,854		4,817		48
Shoreline/Aurora N.	Seattle	WA					1,495		6,006		7,501		726
Smokey Point	Arlington	WA					232		929		1,161		129
South Center	Renton	WA					425		1,783		2,208		215
South Hill	Seattle	WA					300		1,247		1,547		155
South Tacoma	Tacoma	WA					315		1,263		1,578		115
Spokane	Spokane	WA					232		952		1,184		96
Sprague	Tacoma	WA					717		1,431		2,148		2,304
Totem Lake	Kirkland	WA					660		2,668		3,328		219
Vancouver Mall	Vancouver	WA					364		1,457		1,821		219
West Olympia	Olympia	WA					359		1,446		1,806		13
West Seattle	Seattle	WA					698		4,202		4,900		35
Whitecenter	Seattle	WA					559		2,284		2,843		143
Woodinville	Woodinville	WA					674		2,693		3,367		130
Bellevue	Bellevue	Wa					1,860		7,483		9,343		5,112
Containerized storage				—			—		4,889		4,889		(854	)

			$	46,601		$	276,481	$	1,069,111	$	1,345,592	$	184,457


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

Ahwatukee	Phoenix	AZ		721		2,468		3,189		(416	)		1998		1998		360
Airpark	Scottsdale	AZ		880		3,707		4,587		(737	)		1997		1997		360
Arrowhead	Phoenix	AZ		569		2,609		3,178		(458	)		1997		1997		360
Chandler	Chandler	AZ		652		3,185		3,837		(948	)		1986		1986		360
Colonnade	Phoenix	AZ		—		1,147		1,147		(219	)		1998		1997		360
Cooper Road	Gilbert	AZ		376		2,480		2,856		(140	)		2001		2001		360
Dobson Ranch	Mesa	AZ		499		2,156		2,655		(486	)		1996		1978		360
Houghton Road	Tucson	AZ		607		2,788		3,395		(254	)		1999		2000		360
Mesa	Mesa	AZ		355		2,366		2,721		(754	)		1987		1985		360
Mill Avenue	Tempe	AZ		431		1,567		1,998		(211	)		1999		1998		360
Phoenix	Phoenix	AZ		656		2,853		3,509		(911	)		1985		1984		360
Phoenix East	Phoenix	AZ		543		2,382		2,925		(766	)		1987		1984		360
Scottsdale	Scottsdale	AZ		410		1,951		2,361		(629	)		1985		1976/85		360
Scottsdale North	Scottsdale	AZ		1,093		4,955		6,048		(1,502	)		1985/87		1985		360
Shea	Scottsdale	AZ		807		3,307		4,114		(622	)		1997		1996		360
Speedway	Tucson	AZ		773		2,969		3,742		(433	)		1998		1998		360
Tempe	Tempe	AZ		273		1,347		1,620		(413	)		1984		1976		360
Union Hills	Phoenix	AZ		617		2,623		3,240		(418	)		1998		1998		360
Val Vista	Gilbert	AZ		778		3,856		4,634		(920	)		1999		1999		360
Warner	Mesa	AZ		313		1,527		1,840		(610	)		1995		1985		360
Alicia Parkway	Laguna Hills	CA		1,729		7,309		9,038		(856	)		1998		1991		360
Aliso Viejo	Aliso Viejo	CA		2,218		4,385		6,603		(997	)		1996		1996		360
Antioch	Antioch	CA		678		5,079		5,757		(489	)		1999		1999		360
Bloomington	Bloomington	CA		237		1,112		1,349		(264	)		1997		1983		360
Blossom Valley	San Jose	CA		1,212		4,634		5,846		(680	)		1998		1998		360
Cabot Road	Laguna Niguel	CA		1,300		6,142		7,442		(269	)		2001		2001		360
Capital Expressway	San Jose	CA		995		6,280		7,275		(470	)		2000		2000		360
Castro Business Pk	Castro Valley	CA		97		416		513		(95	)		1996		1975		360
Castro Valley	Castro Valley	CA		907		3,926		4,833		(1,007	)		1996		1975		360
Colton	Colton	CA		283		1,235		1,518		(403	)		1985		1984		360
Costa Mesa	Costa Mesa	CA		882		3,339		4,221		(378	)		1999		1998		360
Culver City	Los Angeles	CA		1,039		4,311		5,350		(1,330	)		1988		1989		360
Daly City	Daly City	CA		1,846		6,155		8,001		(1,872	)		1995		1989		360
El Cajon	El Cajon	CA		1,013		4,613		5,626		(1,489	)		1986		1977		360
El Cerrito	Richmond	CA		765		3,218		3,983		(975	)		1986		1987		360
Fontana Sierra	Fontana	CA		589		2,091		2,680		(591	)		1987		1980/85		360
Hayward	Hayward	CA		322		1,584		1,906		(512	)		1985		1983		360
Huntington Beach	Huntington Beach	CA		949		4,156		5,105		(1,244	)		1988		1986		360
Kearney-Balboa	San Diego	CA		830		3,647		4,477		(1,189	)		1986		1984		360
La Habra	La Habra	CA		715		3,196		3,911		(1,008	)		1986		1979/91		360
Martinez	Martinez	CA		1,524		4,088		5,612		(949	)		1995		1987		360
Mountain View	Mountain View	CA		439		1,927		2,366		(590	)		1987		1986		360
Newark	Newark	CA		855		3,525		4,380		(761	)		1996		1991		360
Ontario	Ontario	CA		512		2,108		2,620		(462	)		1996		1984		360
Orange	Orange	CA		1,144		4,665		5,809		(987	)		1996		1985		360
Palo Alto	Palo Alto	CA		705		3,042		3,747		(919	)		1986		1987		360


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

Pinole	Pinole	CA		980		2,309		3,289		(463	)		1995		1988		360
Rohnert Park	Rohnert Park	CA		1,220		4,440		5,660		(182	)		2001		2001		360
S. San Francisco	San Francisco	CA		721		3,128		3,849		(999	)		1987		1985		360
Sacramento	Sacramento	CA		680		2,755		3,435		(597	)		1996		1991		360
San Juan Creek	San Juan	CA		1,450		5,526		6,976		(245	)		2001		2001		360
San Leandro	San Leandro	CA		776		3,234		4,010		(701	)		1996		1991		360
San Lorenzo	San Lorenzo	CA		611		2,567		3,178		(578	)		1996		1990		360
Santa Ana	Santa Ana	CA		1,467		6,228		7,695		(1,958	)		1986		1975/86		360
Solana Beach	Solana Beach	CA		—		7,173		7,173		(2,267	)		1987		1984		360
Sunnyvale	Sunnyvale	CA		1,697		11,511		13,208		(2,626	)		1986		1974/75		360
Tracy	Tracy	CA		732		3,017		3,749		(666	)		1996		1986		360
Tracy II	Tracy	CA		840		3,746		4,586		(23	)		2002		2000		360
Union City	Hayward	CA		287		1,405		1,692		(448	)		1985		1985		360
Van Ness	San Francisco	CA		5,289		9,407		14,696		(857	)		1999		1999/1934		360
Vista Park-Land Ls	San Jose	CA		—		56		56		(22	)		2001		2000		360
Walnut	Walnut	CA		751		3,104		3,855		(667	)		1996		1986		360
Walnut Creek	Walnut Creek	CA		626		5,353		5,979		(468	)		1999		1987		360
Westpark	Irvine	CA		4,190		8,882		13,072		(854	)		2000		1999		360
Westwood	Santa Monica	CA		951		7,986		8,937		(1,925	)		1986		1988		360
Lakewood	Golden	CO		528		2,175		2,703		(666	)		1986		1985		360
Northglenn	Northglenn	CO		531		2,306		2,837		(759	)		1987		1979		360
Tamarac	Denver	CO		194		974		1,168		(348	)		1984		1977		360
Thornton	Denver	CO		237		1,093		1,330		(348	)		1984		1984		360
Windermere	Littleton	CO		653		2,969		3,622		(989	)		1984		1977/79		360
Blue Heron	West Palm Beach	FL		1,327		6,341		7,668		(1,878	)		1987		1975		360
Davie	Davie	FL		2,863		6,896		9,759		(1,804	)		1996		1990		360
Delray Beach	Delray Beach	FL		748		3,272		4,020		(752	)		1996		1986		360
Lauderhill	Lauderhill	FL		761		3,479		4,240		(687	)		1997		1986		360
Margate	Margate	FL		906		3,875		4,781		(827	)		1996		1984		360
Military Trail	West Palm Beach	FL		1,140		5,088		6,228		(1,514	)		1987		1981		360
Oakland Park	Ft. Lauderdale	FL		2,443		10,575		13,018		(3,233	)		1985		1974/78		360
Seminole	Seminole	FL		336		1,497		1,833		(456	)		1986		1984/85		360
Ansley Park	Atlanta	GA		1,527		6,564		8,091		(1,974	)		1995		1991		360
Brookhaven	Atlanta	GA		1,616		4,457		6,073		(1,327	)		1995		1992		360
Clairemont	Atlanta	GA		470		2,151		2,621		(490	)		1996		1990		360
Decatur	Atlanta	GA		1,144		4,949		6,093		(1,523	)		1995		1992		360
Forest Park	Forest Park	GA		573		2,420		2,993		(564	)		1996		1980		360
Gwinnett	Lawrenceville	GA		820		2,809		3,629		(657	)		1996		1996		360
Holcomb Bridge	Roswell	GA		920		2,980		3,900		(248	)		1999		2000		360
Jones Bridge	Atlanta	GA		676		3,866		4,542		(631	)		1997		1997		360
Lawrenceville	Lawrenceville	GA		858		3,198		4,056		(542	)		1997		1997		360
Morgan Falls	Dunwoody	GA		1,429		5,896		7,325		(1,308	)		1996		1990		360
Norcross	Norcross	GA		562		2,375		2,937		(547	)		1996		1984		360
Peachtree	Duluth	GA		1,144		4,906		6,050		(1,037	)		1997		1996		360
Perimeter	Atlanta	GA		1,458		2,933		4,391		(734	)		1996		1996		360
Roswell	Roswell	GA		435		1,903		2,338		(573	)		1986		1986		360
Sandy Plains	Marietta	GA		1,012		4,095		5,107		(593	)		1998		1998		360
Satellite Blvd	Duluth	GA		670		2,867		3,537		(602	)		1997		1994		360
Stone Mountain	Stone Mountain	GA		656		2,766		3,422		(625	)		1996		1985		360
Tucker	Tucker	GA		241		1,073		1,314		(240	)		1996		1987		360
Alsip	Alsip	IL		250		2,286		2,536		(583	)		1982		1980		360
Bolingbrook	Bolingbrook	IL		641		2,869		3,510		(501	)		1997		1997		360
Bridgeview	Bridgeview	IL		479		2,087		2,566		(645	)		1985		1983		360
Country Club Hills	Country Club Hills	IL		781		3,571		4,352		(391	)		1999		1999		360
Dolton	Calumet City	IL		344		2,624		2,968		(724	)		1982		1979		360
Fox Valley	Chicago	IL		932		2,986		3,918		(504	)		1998		1998		360
Hillside	Hillside	IL		261		1,151		1,412		(370	)		1988		1988		360
Lisle	Lisle	IL		576		2,587		3,163		(793	)		1986		1976/86		360
Lombard	Lombard	IL		392		1,861		2,253		(639	)		1982		1980		360
Oak Forest	Orland Park	IL		704		3,224		3,928		(866	)		1995		1991		360
Palatine	Palatine	IL		453		3,021		3,474		(249	)		2000		2000		360
Rolling Meadows	Rolling Meadows	IL		384		2,008		2,392		(576	)		1982		1980		360
Schaumburg	Schaumburg	IL		446		2,162		2,608		(642	)		1982		1980		360
Schaumburg South	Schaumburg	IL		504		3,753		4,257		(398	)		1999		1999		360
Willowbrook	Willowbrook	IL		412		1,898		2,310		(604	)		1986		1979/82		360
Wheaton	Wheaton	IL		283		4,943		5,226		(15	)		2002		2001		360
Allisonville	Indianapolis	IN		827		3,725		4,552		(692	)		1997		1987		360
Carmel	Carmel	IN		404		2,572		2,976		(638	)		1996		1996		360
Castleton	Indianapolis	IN		522		2,044		2,566		(364	)		1998		1988		360
College Park	Indianapolis	IN		694		3,026		3,720		(979	)		1986		1984		360
County Line	SouthPort	IN		—		2,641		2,641		(404	)		1998		1998		360
Downtown Indy	Indianapolis	IN		986		3,293		4,279		(321	)		1999		1999		360
Eaglecreek	Indianapolis	IN		802		2,673		3,475		(443	)		1998		1998		360
East 62nd Street	Indianapolis	IN		376		1,629		2,005		(48	)		2002		1999		360
East Washington	Indianapolis	IN		412		2,567		2,979		(215	)		1999		1999		360
Geist	Fishers	IN		547		2,356		2,903		(76	)		2002		1999		360
Georgetown	Indianapolis	IN		461		2,362		2,823		(535	)		1996		1996		360
Glendale	Indianapolis	IN		520		2,164		2,684		(669	)		1986		1985		360
Annapolis	Annapolis	M D		—		3,516		3,516		(555	)		1998		1998		360
Briggs Chaney	Silver Spring	M D		430		1,826		2,256		(567	)		1994		1987		360
Clinton	Clinton	M D		650		2,882		3,532		(614	)		1986		1985		360
Crofton	Gambrills	M D		376		1,634		2,010		(491	)		1988		1985		360


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

Frederick	Frederick	M D		206		952		1,158		(302	)		1994		1987		360
Gaithersburg	Gaithersburg	M D		614		4,003		4,617		(1,048	)		1994		1986		360
Germantown	Germantown	M D		552		2,320		2,872		(690	)		1994		1988		360
Laurel	Laurel	M D		391		1,737		2,128		(524	)		1988		1984		360
Oxon Hill	Ft. Washington	M D		349		1,477		1,826		(443	)		1994		1987		360
Reisterstown	Owing Mills	M D		586		1,177		1,763		(31	)		2002		1992		360
Suitland	Suitland	M D		660		2,766		3,426		(856	)		1987		1985		360
Ann Arbor	Ann Arbor	M I		424		1,844		2,268		(642	)		1988		1977		360
Canton	Canton	M I		433		2,179		2,612		(536	)		1988		1986		360
Canton Township	Canton Township	M I		852		3,043		3,895		(206	)		2000		2000		360
Clinton Township	Clinton Township	M I		772		3,413		4,185		(443	)		1999		1999		360
Flint East	Flint	M I		291		1,238		1,529		(222	)		1997		1977		360
Flint South	Flint	M I		615		1,802		2,417		(62	)		2001		1983		360
Fraser	Fraser	M I		627		2,613		3,240		(569	)		1988		1985		360
Grand Rapids	Grand Rapids	M I		192		895		1,087		(303	)		1983		1978		360
Jackson	Jackson	M I		309		1,303		1,612		(244	)		1997		1978		360
Lansing	Lansing	M I		124		563		687		(199	)		1983		1978/79		360
Livonia	Livonia	M I		636		2,666		3,302		(607	)		1988		1985		360
Madison Heights	Detroit	M I		487		2,536		3,023		(667	)		1995		1977		360
Mt. Clemens	Mt. Clemens	M I		935		2,633		3,568		(120	)		2001		2001		360
Plymouth	Canton Township	M I		348		3,208		3,556		(657	)		1985		1979		360
Rochester	Utica	M I		610		2,490		3,100		(553	)		1996		1989		360
Rochester Hills	Rochester Hills	M I		970		4,052		5,022		(166	)		2001		2001		360
Southfield	Southfield	M I		702		3,421		4,123		(955	)		1983		1976		360
Sterling Heights	Sterling Heights	M I		919		3,830		4,749		(835	)		1996		1986		360
Taylor	Taylor	M I		632		3,501		4,133		(938	)		1995		1980		360
Troy - Maple	Troy	M I		1,987		3,653		5,640		(1,020	)		1981		1975/77		360
Troy - Oakland Mall	Troy	M I		642		3,002		3,644		(932	)		1983		1979		360
Walled Lake	Walled Lake	M I		359		1,709		2,068		(578	)		1985/89		1984		360
Warren	Warren	M I		815		3,904		4,719		(683	)		1988		1985		360
Auburn Hills	Auburn Hilss	M I		565		3,104		3,669		(9	)		2002		2001		360
Olive	St. Louis	M O		818		3,794		4,612		(1,151	)		1994		1994		360
Albemarle	Charlotte	NC		788		4,567		5,355		(699	)		2002		1984		360
Amity Court	Charlotte	NC		433		2,314		2,747		(334	)		2002		1993		360
Arrowood	Charlotte	NC		1,155		3,151		4,306		(700	)		2002		1992		360
Capital Blvd.	Raleigh	NC		342		2,687		3,029		(527	)		1994		1984		360
Cary	Cary	NC		714		3,079		3,793		(895	)		1994		1984		360
Clayton	Clayton	NC		764		2,495		3,259		(194	)		2002		1999		360
Concord Kannapolis	Concord	NC		665		2,403		3,068		(499	)		2002		1995		360
Cone Boulevard	Greensboro	NC		599		3,106		3,705		(129	)		2002		2000		360
COTT	Matthews	NC		237		1,471		1,708		(295	)		2002		1989		360
Country Club	Winston Salem	NC		757		3,462		4,219		(337	)		2002		2000		360
Creedmoor	Raleigh	NC		807		3,179		3,986		(534	)		1997		1997		360
Eastland	Charlotte	NC		590		3,743		4,333		(594	)		2002		1983		360
English Road	High Point	NC		602		2,100		2,702		(117	)		2002		2000		360
Garner	Garner	NC		204		903		1,107		(291	)		1994		1987		360
Glenwood	Raleigh	NC		266		1,195		1,461		(365	)		1994		1983		360
Hickory	Hickory	NC		892		3,826		4,718		(764	)		2002		1986		360
Lexington	Lexington	NC		430		1,625		2,055		(343	)		2002		1987		360
Matthews	Matthews	NC		775		5,617		6,392		(1,011	)		2002		1981		360
Monroe	Matthews	NC		556		3,239		3,795		(709	)		2002		1985		360
Morrisville	Morrisville	NC		409		1,765		2,174		(520	)		1994		1988		360
North Tryon	Charlotte	NC		927		2,723		3,650		(625	)		2002		1987		360
Park Road	Charlotte	NC		1,488		6,754		8,242		(708	)		2002		1998		360
Pavilion	Charlotte	NC		1,320		2,251		3,571		(329	)		2002		1997		360
Pineville	Pineville	NC		2,688		5,916		8,604		(1,299	)		2002		1983		360
Randleman Road	Greensboro	NC		1,113		2,600		3,713		(340	)		2002		1998		360
Rockingham	Rockingham	NC		178		1,870		2,048		(347	)		2002		1996		360
Salisbury	Salisbury	NC		237		5,296		5,533		(780	)		2002		1986		360
Silas Creek	Winston, Salem	NC		1,640		2,457		4,097		(193	)		2002		2000		360
Stallings	Matthews	NC		747		2,075		2,822		(459	)		2002		1995		360
Wake Forest	Wake Forest	NC		851		1,547		2,398		(91	)		2002		1998		360
Weddington	Waxhaw	NC		642		2,520		3,162		(208	)		2002		1999		360
Wilkinson	Charlotte	NC		575		3,270		3,845		(562	)		2002		1986		360
Winston-Salem	Winston, Salem	NC		354		1,930		2,284		(529	)		2002		1985		360
Bricktown	Bricktown	NJ		1,397		4,388		5,785		(317	)		1999		2000		360
Marlboro	Morganville	NJ		1,320		4,977		6,297		(266	)		2000		2000		360
Old Bridge	Matawan	NJ		767		4,381		5,148		(993	)		1987		1987		360
Voorhees	Voorhees	NJ		1,121		4,295		5,416		(220	)		2001		2001		360
Beth Page	Long Island	NY		2,434		7,507		9,941		(499	)		2000		2000		360
Commack	Huntington	NY		3,461		6,319		9,780		(759	)		1999		1999		360
Gold Street	Brooklyn	NY		1,194		5,598		6,792		(1,892	)		1986		1940		360
Great Neck	Long Island	NY		438		2,898		3,336		(256	)		1999		1929		360
Hempstead	Hempstead	NY		1,914		5,247		7,161		(463	)		1999		1999		360
Melville	Long Island	NY		1,099		7,587		8,686		(810	)		1998		1998		360
Nesconset	Long Island	NY		1,074		3,515		4,589		(285	)		2000		2000		360
Northern Boulevard	Long Island City	NY		1,244		5,639		6,883		(1,851	)		1987		1940		360
Utica	Brooklyn	NY		830		3,782		4,612		(1,334	)		1986		1964		360
Van Dam	Long Island City	NY		760		3,534		4,294		(1,243	)		1986		1925		360
Yonkers	Yonkers	NY		913		4,288		5,201		(1,510	)		1986		1928		360
16th and Sandy	Portland	OR		479		2,017		2,496		(495	)		1995		1973		360
Allen Blvd.	Beaverton	OR		525		2,191		2,716		(494	)		1996		1973		360


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

Barbur Boulevard	Portland	OR		741		5,323		6,064		(1,559	)		1995		1993		360
Beaverton	Beaverton	OR		216		980		1,196		(352	)		1985		1974		360
Denny Road	Beaverton	OR		593		2,480		3,073		(765	)		1989		1988		360
Division	Portland	OR		700		2,970		3,670		(913	)		1996		1992		360
Gresham	Portland	OR		744		2,530		3,274		(606	)		1996		1996		360
Hillsboro	Portland	OR		720		3,127		3,847		(715	)		1996		1996		360
King City	Tigard	OR		511		2,170		2,681		(622	)		1987		1986		360
Liberty Road	Salem	OR		749		2,508		3,257		(754	)		1995		1993		360
Milwaukie	Milwaukie	OR		1,052		3,932		4,984		(1,147	)		1996		1990		360
Oregon City	Portland	OR		571		2,737		3,308		(870	)		1995		1992		360
Portland	Portland	OR		382		1,593		1,975		(493	)		1988		1988		360
Salem	Salem	OR		574		2,601		3,175		(836	)		1983		1979/81		360
Airport	Philadelphia	PA		799		3,513		4,312		(1,106	)		1986		1985		360
Edgemont	Philadelphia	PA		975		5,323		6,298		(1,550	)		1995		1992		360
Painter’s Crossing	Philadelphia	PA		516		2,871		3,387		(474	)		1998		1998		360
Valley Forge	Berwyn	PA		331		2,816		3,147		—			2002		2002		360
West Chester	West Chester	PA		—		4,583		4,583		(1,378	)		1986		1980		360
Ashley River	Charleston	SC		851		4,239		5,090		(459	)		2002		1999		360
Ballantyne	Fort Mill	SC		640		2,153		2,793		(216	)		2002		1998		360
Charleston	Ladson	SC		403		3,453		3,856		(468	)		2002		1999		360
Dave Lyle	Rock Hill	SC		487		2,595		3,082		(155	)		2002		2000		360
Florence	Florence	SC		636		4,441		5,077		(678	)		2002		1985		360
Garner’s Ferry	Columbia	SC		1,071		2,809		3,880		(495	)		2002		1988		360
Greenville (SC)	Greenville	SC		989		2,162		3,151		(640	)		2002		1987		360
Rock Hill	Rock Hill	SC		415		2,063		2,478		(230	)		2002		1998		360
Rosewood	Columbia	SC		317		—		317		—			2002				360
Shriners	Greenville	SC		431		2,564		2,995		(289	)		2002		1998		360
Spartanburg	Spartanburg	SC		268		1,466		1,734		(427	)		2002		1986		360
Sumter	Sumter	SC		268		2,020		2,288		(405	)		2002		1986		360
Sunset	Lexington	SC		535		2,423		2,958		(166	)		2002		1999		360
Woodruff Road (SC)	Greenville	SC		1,082		1,693		2,775		(333	)		2002		1996		360
Bandera Road	San Antonio	TX		468		1,998		2,466		(639	)		1988		1981		360
Bedford	Bedford	TX		408		1,765		2,173		(564	)		1985		1984		360
Bee Caves Road	Austin	TX		626		4,504		5,130		(474	)		1999		1999		360
Beltline	Irving	TX		414		1,999		2,413		(677	)		1989		1985/86		360
Blanco Road	San Antonio	TX		801		3,356		4,157		(1,071	)		1988		1989/91		360
Champions	Houston	TX		484		2,804		3,288		(440	)		1998		1998		360
Cinco Ranch	Houston	TX		523		2,593		3,116		(344	)		1999		1998		360
Cityplace	Dallas	TX		1,118		3,503		4,621		(429	)		1999		1999		360
East Lamar	Arlington	TX		742		2,143		2,885		(520	)		1996		1996		360
Federal Road	Houston	TX		552		2,364		2,916		(753	)		1988		1988		360
First Colony	Missouri City	TX		427		2,183		2,610		(185	)		2000		1994		360
Forum 303	Arlington	TX		273		1,247		1,520		(417	)		1986		1984		360
Fredericksburg Road	San Antonio	TX		645		2,871		3,516		(906	)		1987		1978/82		360
Georgetown	Austin	TX		403		1,717		2,120		(393	)		1997		1996		360
Greenville	Dallas	TX		768		3,212		3,980		(572	)		1998		1998		360
Helotes	San Antonio	TX		493		2,251		2,744		(194	)		2000		2000		360
Henderson Pass	San Antonio	TX		1,386		2,316		3,702		(403	)		1998		1995		360
Henderson Street	Fort Worth	TX		338		3,777		4,115		(408	)		1999		1999		360
Highway 26	Hurst	TX		527		2,800		3,327		(152	)		2001		2001		360
Highway 78	San Antonio	TX		392		1,582		1,974		(272	)		1998		1997		360
Hill Country Village	San Antonio	TX		679		2,866		3,545		(917	)		1985		1982		360
Hillcroft	Houston	TX		—		3,689		3,689		(1,165	)		1991		1988		360
Hurst	Hurst	TX		363		1,582		1,945		(493	)		1987		1974		360
Imperial Valley	Houston	TX		461		2,014		2,475		(643	)		1988		1987		360
Irving	Irving	TX		314		1,335		1,649		(410	)		1985		1975/84		360
Kingwood	Kingwood	TX		525		2,851		3,376		(835	)		1988		1988		360
Lakeline	Austin	TX		748		3,440		4,188		(205	)		2001		2001		360
Las Colinas	Irving	TX		491		3,139		3,630		(237	)		2000		2000		360
Lewisville	Dallas	TX		434		2,556		2,990		(573	)		1997		1997		360
MacArthur	Irving	TX		359		1,699		2,058		(522	)		1985		1975/84		360
McArthur Crossing	Irving	TX		746		2,978		3,724		(753	)		1996		1996		360
Medical Center (TX)	Houston	TX		737		3,255		3,992		(1,160	)		1989		1989		360
Medical Center SA	San Antonio	TX		667		2,737		3,404		(216	)		1998		1999		360
Mission Bend	Houston	TX		653		2,751		3,404		(637	)		1995		1995		360
Nacodoches	San Antonio	TX		381		2,899		3,280		(445	)		1998		1996		360
North Austin	Austin	TX		609		2,564		3,173		(789	)		1986		1982		360
North Carrollton	Carrollton	TX		627		2,746		3,373		(276	)		2000		1999		360
North Park	Kingwood	TX		549		2,192		2,741		(187	)		2000		1996		360
Oak Farm Dairy	Houston	TX		2,652		3,344		5,996		(380	)		1999		1999		360
Oak Hills	Austin	TX		149		3,526		3,675		(412	)		1999		1999		360
Oltorf	Austin	TX		—		3		3		—			2002		2002		360
Olympia	Missouri City	TX		498		2,894		3,392		(219	)		1998		1999		360
Park Cities East	Dallas	TX		1,017		2,941		3,958		(732	)		1995		1995		360
Parker Road	Dallas	TX		809		2,216		3,025		(548	)		1995		1995		360
Preston Road	Dallas	TX		703		2,878		3,581		(618	)		1997		1997		360
Quarry	San Antonio	TX		488		3,700		4,188		(525	)		1999		1999		360
River Oaks	Houston	TX		2,177		7,839		10,016		(2,231	)		1996		1989		360
Round Rock	Austin	TX		386		1,649		2,035		(390	)		1997		1995		360
San Antonio NE	San Antonio	TX		406		1,758		2,164		(565	)		1985		1982		360
Slaughter Lane	Austin	TX		592		2,435		3,027		(557	)		1997		1994		360
South Cooper	Arlington	TX		632		2,629		3,261		(609	)		1996		1996		360


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

South Main	Houston	TX		392		1,126		1,518		(100	)		2000		1999		360
Southlake	Dallas	TX		670		2,968		3,638		(437	)		1998		1998		360
Sugarland	Sugarland	TX		761		3,104		3,865		(959	)		1988		1987		360
T.C. Jester	Houston	TX		903		4,089		4,992		(875	)		1996		1990		360
Thousand Oaks	San Antonio	TX		421		1,767		2,188		(575	)		1986		1987		360
Universal City	San Antonio	TX		169		1,633		1,802		(504	)		1995		1985		360
Valley Ranch	Coppell	TX		791		3,214		4,005		(709	)		1997		1995		360
West University	Houston	TX		1,121		4,629		5,750		(1,434	)		1989		1988		360
Westchase	Houston	TX		351		2,637		2,988		(224	)		2000		1998		360
Westheimer	Houston	TX		611		2,541		3,152		(780	)		1986		1977		360
Windcrest	San Antonio	TX		626		2,958		3,584		(614	)		1996		1975		360
Woodforest	Houston	TX		538		2,269		2,807		(507	)		1996		1996		360
Woodlands	Houston	TX		737		3,281		4,018		(1,031	)		1988		1988		360
Bayside	Virginia Beach	VA		236		1,260		1,496		(364	)		1988		1984		360
Burke	Fairfax	VA		634		2,615		3,249		(595	)		1996		1984		360
Burke Centre	Burke	VA		1,035		3,304		4,339		(169	)		2001		1983		360
Burke Ctr. Bus. Park	Fairfax	VA		—		1,476		1,476		—			2001		1983		360
Cascades	Sterling	VA		2,292		3,704		5,996		(565	)		1998		1998		360
Cedar Road	Chesapeake	VA		295		1,321		1,616		(385	)		1994		1989		360
Charlottesville	Charlottesville	VA		305		1,339		1,644		(430	)		1994		1984		360
Chesapeake	Chesapeake	VA		454		1,893		2,347		(426	)		1996		1986		360
Crater Road	Petersburg	VA		224		978		1,202		(305	)		1994		1987		360
Dale City	Dale City	VA		346		1,772		2,118		(507	)		1994		1986		360
Fairfax	Fairfax	VA		1,414		6,602		8,016		(1,951	)		1986		1980		360
Falls Church	Falls Church	VA		1,413		6,186		7,599		(1,801	)		1987		1988		360
Fordson	Alexandria	VA		324		3,114		3,438		(100	)		2002		1984		360
Fullerton	Springfield	VA		1,139		4,363		5,502		(154	)		2001		1983		360
Gainesville	Gainesville	VA		245		1,082		1,327		(350	)		1994		1988		360
Herndon	Herndon	VA		582		2,552		3,134		(848	)		1988		1985		360
Holland Road	Virginia Beach	VA		204		965		1,169		(326	)		1994		1985		360
Jeff Davis Hwy	Richmond	VA		306		1,318		1,624		(401	)		1994		1990		360
Kempsville	Virginia Beach	VA		279		1,237		1,516		(368	)		1989		1985		360
Laskin Road	Virginia Beach	VA		305		1,340		1,645		(424	)		1994		1984		360
Leesburg	Leesburg	VA		541		2,222		2,763		(499	)		1996		1986		360
Manassas E. & W.	Manassas	VA		654		3,015		3,669		(993	)		1988		1984		360
McLean	McLean	VA		—		3,640		3,640		(712	)		1997		1997		360
Merrifield	Fairfax	VA		3,192		5,323		8,515		(531	)		1999		1999		360
Midlothian Turnpike	Richmond	VA		646		2,677		3,323		(600	)		1996		1984		360
Newport News North	Newport News	VA		574		2,546		3,120		(567	)		1996		1986		360
Newport News. S	Newport News	VA		496		2,354		2,850		(711	)		1985/92		1985		360
North Richmond	Richmond	VA		344		1,492		1,836		(483	)		1988		1984		360
Old Towne	Alexandria	VA		2,036		7,371		9,407		(779	)		1999		1999		360
Potomac Mills	Potomac Mills	VA		1,122		3,439		4,561		(579	)		1997		1997		360
Princess Anne Rd.	Virginia Beach	VA		305		1,312		1,617		(388	)		1994		1985		360
S. Military Highway	Virginia Beach	VA		289		1,453		1,742		(338	)		1996		1984		360
Telegraph	Lorton	VA		441		2,036		2,477		(72	)		2001		2001		360
Temple Avenue	Petersburg	VA		297		1,310		1,607		(410	)		1994		1989		360
Virginia Beach	Virginia Beach	VA		502		2,283		2,785		(701	)		1989		1985		360
Auburn	Auburn	WA		760		2,911		3,671		(738	)		1996		1996		360
Bellefield	Bellevue	WA		957		4,039		4,996		(878	)		1996		1978		360
Bellingham	Bellingham	WA		601		2,532		3,133		(781	)		1981		1981		360
Bremerton	Bremerton	WA		563		2,324		2,887		(431	)		1997		1976		360
Burien	Seattle	WA		646		2,858		3,504		(912	)		1985		1974		360
Burien II	Seattle	WA		388		1,760		2,148		(558	)		1985		1979		360
Canyon Park JV	Bothell	WA		1,023		3,185		4,208		(1,231	)		1996		1990		360
Canyon Rd.	Puyallup	WA		234		1,052		1,286		(227	)		1996		1986		360
Capitol Hill	Seattle	WA		839		5,366		6,205		(2,557	)		1987		1988		360
Corporate Office	Seattle	WA		4,213		23,677		27,890		(12,540	)		1998		1998		360
E. Bremerton	Bremerton	WA		576		2,446		3,022		(549	)		1996		1985		360
East Lynnwood	Lynnwood	WA		482		2,447		2,929		(707	)		1986		1978		360
Edmonds	Edmonds	WA		1,190		5,016		6,206		(1,528	)		1984		1974/75		360
Everett	Everett	WA		512		2,754		3,266		(780	)		1981		1978		360
Factoria	Bellevue	WA		580		2,412		2,992		(745	)		1984		1984		360
Factoria Square	Bellevue	WA		1,226		5,031		6,257		(1,105	)		1996		1989		360
Federal Way	Federal Way	WA		862		3,682		4,544		(1,134	)		1984		1975		360
Gig Harbor	Gig Harbor	WA		1,059		876		1,935		(123	)		1999		1980		360
Hazel Dell	Vancouver	WA		1,087		2,972		4,059		(905	)		1996		1989		360
Highland Hill	Tacoma	WA		592		2,510		3,102		(745	)		1981		1982		360
Interbay	Seattle	WA		952		3,987		4,939		(1,230	)		1987		1988		360
Issaquah	Issaquah	WA		615		2,621		3,236		(848	)		1985		1986		360
Juanita	Kirkland	WA		877		4,469		5,346		(397	)		1998		1999		360
Kennydale	Renton	WA		816		3,423		4,239		(739	)		1996		1991		360
Kent	Kent	WA		543		2,316		2,859		(448	)		1997		1977		360
Lacey	Olympia	WA		185		1,122		1,307		(205	)		1997		1977		360
Lake City	Seattle	WA		572		2,657		3,229		(971	)		1995		1987		360
Lake Union	Seattle	WA		2,956		6,080		9,036		(2,050	)		1998		1998		360
Lakewood 512	Tacoma	WA		920		3,927		4,847		(1,168	)		87/88/91		1979/81		360
Lynnwood	Lynnwood	WA		757		3,303		4,060		(620	)		1997		1979		360
Mill Creek	Everett	WA		627		4,314		4,941		(584	)		1998		1998		360
North Spokane	Spokane	WA		581		3,650		4,231		(866	)		1984		1976		360
Parkland	Tacoma	WA		391		1,704		2,095		(332	)		1997		1980		360
Pier 57	Seattle	WA		872		4,756		5,628		(669	)		1986		1912		360


			Gross Amount as of

					Building		Gross									Depr.
					Equip. &		Storage		Accum.			Owned		Year		Life in
Property Name	Location	State	Land		Other		Centers		Depr.			Since		Built		mos.

Pt. Orchard	Pt. Orchard	WA		483		2,079		2,562		(468	)		1997		1991		360
Redmond	Redmond	WA		529		5,493		6,022		(834	)		1998		1998		360
Renton	Renton	WA		625		2,800		3,425		(899	)		1984		1979/89		360
Salmon Creek	Vancouver	WA		759		3,356		4,115		(711	)		1997		1997		360
Sammamish	Redmond	WA		963		3,902		4,865		(584	)		1998		1998		360
Shoreline/Aurora N	Seattle	WA		1,495		6,732		8,227		(1,944	)		1986		1978		360
Smokey Point	Arlington	WA		232		1,058		1,290		(338	)		1987		1984/87		360
South Center	Renton	WA		425		1,998		2,423		(659	)		1985		1979		360
South Hill	Seattle	WA		300		1,402		1,702		(398	)		1995		1980		360
South Tacoma	Tacoma	WA		315		1,378		1,693		(419	)		1987		1975		360
Spokane	Spokane	WA		227		1,053		1,280		(227	)		1997		1976		360
Sprague	Tacoma	WA		1,169		3,283		4,452		(984	)		1996		1950/89		360
Totem Lake	Kirkland	WA		660		2,887		3,547		(890	)		1984		1978		360
Vancouver Mall	Vancouver	WA		364		1,676		2,040		(595	)		1980		1982		360
West Olympia	Olympia	WA		351		1,468		1,819		(276	)		1997		1978		360
West Seattle	Seattle	WA		698		4,237		4,935		(857	)		1997		1997		360
Whitecenter	Seattle	WA		559		2,427		2,986		(751	)		1980		1981		360
Woodinville	Woodinville	WA		674		2,823		3,497		(850	)		1984		1982/84		360
Bellevue	Bellevue	Wa		2,385		12,070		14,455		(2,894	)		1984		1975		360
Containerized storage				—		4,035		4,035		(3,248	)

			$	293,306	$	1,236,743	$	1,530,049	$	(274,842	)

(1) These properties are encumbered through one mortgage loan totaling $66.3 million.

(2) These properties were acquired through a lease of the building and land.

(3) These properties are encumbered through one mortgage loan totaling $14.7 million.

SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

The following tables reconcile the changes in land, building, equipment and other, as well as accumulated depreciation over the last two years.

(Amounts in thousands)

Land, Building, Equipment and Other

Balance at January 1, 2000
$ 1,120,477

Additions during the period

Acquistions
$ 40,963

Developments
91,897

Facility Expansions
187

Improvements and Other
8,030

141,077

Cost of Real Estate Sold
(867 )

Balance at December 31, 2000
1,260,687

Consolidation of Storage to Go
4,890

Additions during the period

Acquistions
$ 34,301

Developments
32,359

Facility Expansions
—

Improvements and Other
19,033

85,693

Cost of Real Estate Sold
(2,272 )

Balance at December 31, 2001
1,348,998

Additions during the period

Acquistions
$ 173,639

Developments
3,147

Improvements and Other
6,085

182,871

Cost of Real Estate Sold
(1,820 )

Balance at December 31, 2002
$ 1,530,049

Accumulated Depreciation

Balance at January 1, 2000
$ 134,366

Depreciation expense
36,247

Disposal
(782 )

Balance at December 31, 2000
169,831

Consolidation of Storage to Go
2,502

Depreciation expense
41,581

Disposal
(508 )

Balance at December 31, 2001
213,405

Depreciation expense
46,084

Depreciation from Morningstar Acquisition
16,208

Disposal
(855 )

Balance at December 31, 2002
$ 274,842

See Notes to Consolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholders
Shurgard Storage Centers, Inc.
Seattle, Washington

We have audited the accompanying consolidated balance sheets of Shurgard Storage Centers, Inc. and subsidiaries (the Corporation) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 16. These financial statements and financial statement schedule are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Shurgard Storage Centers, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note P, in 2001 the Corporation changed its method of accounting for derivative activities to conform to Statement of Financial Accounting Standards (SFAS) No. 133.

As described in Note B, in 2002 the Corporation changed its method of accounting for goodwill to conform to SFAS No. 142.

As discussed in Note X, the accompanying 2002 and 2001 consolidated financial statements have been restated.

DELOITTE & TOUCHE LLP

Seattle, Washington
February 21, 2003
(March 11, 2003 as to Note W; May 20, 2003 as to the effects of the restatement described in Note X )

Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10 — Directors and Executive Officers of the Registrant

Information regarding the Registrant’s executive officers called for by Part III Item 10 is set forth in Item I of Part I herein under the caption “Executive Officers of the Registrant.” Information regarding directors of the Company and Section 16 reporting is set forth in our proxy statement for the annual meeting of shareholders to be held May 13, 2003, and is incorporated herein by reference.

Item 11 — Executive Compensation

Information regarding executive compensation is set forth in our proxy statement for the annual meeting of shareholders to be held May 13, 2003, and is incorporated herein by reference.

Item 12 — Security Ownership of Certain Beneficial Owners and Management

Information regarding security ownership of certain beneficial owners and management is set forth in our proxy statement for the annual meeting of shareholders to be held May 13, 2003, and is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, 2002, regarding shares outstanding and available for issuance under the Company’s existing stock option plans:

(a)

(b)

(c)

Number of Securities

Remaining Available for

Number of Securities

Weighted-Average

Future Issuance Under

to be Issued Upon

Exercise Price of

Equity Compensation

Exercise of

Outstanding

Plans (Excluding

Outstanding Options,

Options, Warrants

Securities Reflected in

Plan Category

Warrants and Rights

and Rights

Column (a))

Equity compensation plans approved by security holders (1)

2,886,461

26.15

1,058,827

Total

2,886,461

26.15

1,058,827

(1) Includes the 1993 Stock Option Plan approved by the shareholders at the 1993 Annual Meeting held on July 24, 1993, the 1995 Long-Term Incentive Plan approved by the shareholders at the 1995 Annual Meeting held July 26, 1995, and the 2000 Long-Term Incentive Plan approved by the shareholders at the 2000 Annual Meeting held May 9, 2000, and as amended at the Annual Meeting held May 14, 2002.

Item 13 — Certain Relationships and Related Transactions

Information regarding certain relationships and related transactions is set forth in our proxy statement for the annual meeting of shareholders to be held May 13, 2003, and is incorporated herein by reference.

Item 14 — Disclosure Controls

(a) Within 90 days prior to the date of this report, the Corporation carried out an evaluation - under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer - of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-5. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that the Corporation’s disclosure controls and procedures are effective.

(b) There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described in the preceding paragraph.

PART IV

Item 16 — Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements


		Page
		No.

Consolidated Balance Sheets at December 31, 2002 and 2001			47
For the years ended December 31, 2002, 2001 and 2000:
	Consolidated Statements of Income		48
	Consolidated Statements of Shareholders’ Equity		50
	Consolidated Statements of Cash Flows		51
	Notes to Consolidated Financial Statements		53
	Schedule III Real Estate and Accumulated Depreciation		76
	Independent Auditors’ Report		89

2. Financial Statement Schedules

Schedule III — Real Estate and Accumulated Depreciation has been included as noted above.

3. Exhibits


3.1		Articles of Incorporation of the Registrant(1)

3.2		Designation of Rights and Preferences of Series A Junior Participating Preferred Stock (Exhibit 3.2)(2)

3.3		Designation of Rights and Preferences of 8.8% Series B Cumulative Redeemable Preferred Stock (Exhibit 3.3)(2)

3.4		Restated Bylaws of the Registrant (Exhibit 3.4)(2)

3.5		Designation of Rights and Preferences of 8.7% Series C Cumulative Redeemable Preferred Stock (Exhibit 3)(3)

4.1		Rights Agreement between the Registrant and Gemisys Corporation dated as of March 17, 1994 (Exhibit 2.1)(4)

4.2		First Amendment to Rights Agreement between the Registrant and Gemisys Corporation dated May 13, 1997 (Exhibit 4.2)(5)

4.3		Indenture between the Registrant and LaSalle National Bank, as Trustee, dated April 25, 1997, (Exhibit 10.4)(6)

4.4		Supplemental Indenture dated July 11, 1997**

4.5		Form of 7 1/2% Notes due 2001 (Exhibit 4.1)(7)

4.6		Form of 7 5/8% Notes due 2007 (Exhibit 4.2)(7)

10.1		Amended and Restated Loan Agreement between Nomura Asset Capital Corp., as Lender, and SSC Property Holdings, Inc., as Borrower, dated as of June 8, 1994 (Exhibit 10.4)(8)


10.2		Amended and Restated Collection Account and Servicing Agreement among SSC Property Holdings, Inc., Pacific Mutual Life Insurance Company, LaSalle National Bank and Nomura Asset Capital Corp. dated as of June 8, 1994 (Exhibit 10.5)(8)

10.3		Amended and Restated Loan Agreement among Shurgard Storage Centers, Inc., Seattle-First National Bank, KeyBank of Washington, U.S. Bank of Washington and LaSalle National Bank dated September 9, 1996 (Exhibit 99.40)(9)

10.4		First Amendment to Amended and Restated Loan Agreement dated as of November 14, 1996 (Exhibit 10.8)(5)

10.5		Second Amendment to Amended and Restated Loan Agreement dated as of March 12, 1997 (Exhibit 10.10)(10)

10.6		Third Amendment to Amended and Restated Loan Agreement dated as of July 27, 1997 (Exhibit 10.6)(11)

10.7		Fourth Amendment to Amended and Restated Loan Agreement dated as of January 30, 1998 (Exhibit 10.7)(11)

10.8		Fifth Amendment to Amended and Restated Loan Agreement dated as of May 1, 1998 ((Exhibit 10.1)(12)

10.9		Sixth Amendment to Amended and Restated Loan Agreement dated as of October 27, 1998 (Exhibit 10.1)(13)

10.10		Agreement and Plan of Merger between the Registrant and Shurgard Incorporated dated as of December 19, 1994 (Exhibit 10.7)(14)

*10.11		Amended and Restated 1993 Stock Option Plan (Exhibit 10.7)(11)

*10.12		Amended and Restated Stock Incentive Plan for Nonemployee Directors (Exhibit 10.7)(15)

*10.13		1995 Long-Term Incentive Compensation Plan(16)

*10.14		Form of Business Combination Agreement, together with schedule of actual agreements(23)

10.15		Partnership Agreement, dated April 28, 1998, between Shurgard Development I, Inc. and Fremont Storage Partners I, L.P. forming Shurgard/Fremont Partners I (Exhibit 1.1)(17)

10.16		Seventh Amendment to Amended and Restated Loan Agreement dated as of April 28, 1999 (Exhibit 10.3)(18)

10.17		Partnership Agreement, dated March 17, 1999, between Shurgard Development II, Inc. and Fremont Storage Partners II, L.L.C, forming Shurgard/Fremont Partners II (Exhibit 10.1)(18)

10.18		First Amendment to Partnership Agreement between Shurgard Development II, Inc. and Fremont Storage Partners II, L.L.C, forming Shurgard/Fremont Partners II as of April 27, 1999. (Exhibit 10.2)(18)

10.19		Second Amended and Restated Loan Agreement among Shurgard Storage Centers, Inc., Bank of America, N.A., Key Bank National Association, U.S. Bank National Association, and LaSalle Bank National Association, dated September 30, 1999. (Exhibit 10.1)(19)

10.20		First Amendment to Second Amended and Restated Loan agreement among Shurgard Storage Centers, Inc., Bank of America, N.A., Key Bank National Association, U.S. Bank National Association, and LaSalle Bank National Association, dated September 30, 1999(20)

10.21		Second Amendment to Second Amended and Restated Loan agreement among Shurgard Storage Centers, Inc., Bank of America, N.A., Key Bank National Association, U.S. Bank National Association, LaSalle Bank National Association, The Bank of Nova Scotia, and Bank One, dated December 16, 1999(20)

10.22		Separation Agreement and Mutual General Release among Shurgard Storage Centers, Inc. and Michael and Tina Rowe, dated January 26, 2000(20)

10.23		Third Amendment to the Second Amended and Restated Loan Agreement among Shurgard Storage Centers, Inc., Bank of America, N.A., Key Bank National Association, U.S. Bank National Association, LaSalle Bank National Association, The Bank of Nova Scotia and Bank One, N.A., dated March 31, 2000(21)

10.24		Service Agreement between Shurgard Storage Centers, Inc., David K. Grant, and SSC Benelux & Co., SCA dated June 7, 2000(22)

10.25		Limited Liability Company Agreement between Shurgard Development IV, Inc. and Chase Capital Partners Real Estate Storage, LLC forming CCP/Shurgard Venture, LLC, dated May 12, 2000(22)


10.26		Form of Business Combination Agreement dated July 27, 2000, together with schedule of actual agreements(23)

10.27		2000 Long-Term Incentive Compensation Plan (24)

10.28		Agency Agreement between Shurgard Storage Centers, Inc. and First Security Bank, N. A., dated February 26, 2001 (24)

10.29		Credit Agreement among Shurgard Storage Centers, Inc., First Security Bank, N.A. and Bank of America, N.A., dated February 26, 2001 (24)

10.30		Lease Agreement between First Security Bank, N.A. and Shurgard Storage Centers, Inc., dated February 26, 2001 (24)

10.31		Security Agreement between Shurgard Storage Centers, Inc., First Security Bank, N.A. and Bank of America, N.A., dated February 26, 2001 (24)

10.32		Participation Agreement among Shurgard Storage Centers, Inc., Shurgard Evergreen, L.P., Shurgard Texas, L.P., Shurgard Institutional Fund, L.P. II, SSC Evergreen, Inc., First Security Bank, N.A., Bank of America, N.A., Bank Hapoalim B.M., The Bank of Nova Scotia, Bank One, N.A., Commerzbank, AG, New York and Grand Cayman Branches, Keybank, N.A., Suntrust Bank, U.S. Bank, N.A., Washington Mutual Bank, Fleet National Bank, and LaSalle Bank, N.A., dated February 26, 2001 (24)

10.33		Trust Agreement among Shurgard Storage Centers, Inc., First Security Bank, N.A., Bank of America, N.A., Bank Hapoalim, B.M., Bank of Nova Scotia, Commerzbank, AG, New York and Grand Cayman Branches, Keybank, N.A., Suntrust Bank, U.S. Bank, N.A., Washington Mutual Bank, Fleet National Bank, and LaSalle Bank, N.A., dated February 26, 2001 (24)

10.34		Amended and Restated Limited Liability Company Agreement of CCP/Shurgard Venture, LLC, between Shurgard Development IV, Inc. and CCPRE-Storage, LLC, dated December 26, 2000 (24)

10.35		Loan Agreement between CCP/Shurgard Venture, LLC and General Electric Capital Corporation, dated December 28, 2000 (24)

10.36		Contribution Agreement between Shurgard Development IV, Inc., Shurgard Storage Centers, Inc., Shurgard Texas L.P., SSC Evergreen, CCPRE-Storage, LLC, and CCP/Shurgard Venture, LLC, dated December 28, 2000 (24)

10.37		Third Amended and Restated Loan Agreement among Shurgard Storage Centers, Inc., and Bank of America, N.A., Bank One, N.A. Commerzbank AG, New York and Grand Cayman Branches and U.S. Bank, N.A. dated February 26, 2001 (24)

10.38		Amendment of 1996 Employee Stock Purchase Plan dated January 30, 2001 (25)

10.39		Amended and restated Class A Common Stock Dividend Reinvestment Plan, dated January 30, 2001 (25)

10.40		Separation Agreement, Confidentiality Agreement and General Release for John Steckler

10.41		First Amendment to Third Amended and Restated Loan Agreement among Shurgard Storage Centers, inc., and Bank of America, N.A., Bank One, N.A. Commerzbank AG, New York and Grand Cayman Branches and U.S. Bank, N.A. dated November 27, 2001

10.42		Agreement and pan of merger by and among Shurgard Storage Inc. (“Shurgard”) SSCI Minnesota Corporation (“Merger Subsidiary”) and Two S Properties, Inc., Three S Properties, Inc., Superior Storage I, LLC, Superior Storage II, LLC, Superior Woodbury, LLC (collectively, the “Companies”) and the revocable Trust of Gerald A. Schwalbach, the revocable Trust of Patrick L. Stotesbery (collectively, the “Trusts”), and Gerald A. Schwalbach, Patrick L. Stotesbery dated March 10, 2003.

10.43		Securities Purchase Agreement, SSC Benelux Inc. as Buyer, SSC General Partner (Guensey) Limited and SSC Partner (Guernsey) Limited as Seller, and Credit Suisse First Boston Europe (Limited) as date March 10, 2003.

12.1		Statement Re: Computation of Earnings to Fixed Charges**

21.1		Subsidiaries of the Registrant**

23.1		Consent of Deloitte & Touche LLP

99.1		Certification CEO (26)

99.2		Certification CFO (27)

(1)		Incorporated by reference to Exhibit B contained in the Definitive Additional Proxy Materials on Form DEF14A filed on April 29, 1997.

(2)		Incorporated by reference to designated exhibit filed with the Registrant’s Current Report on Form 8-K dated May 14, 1997.

(3)		Incorporated by reference to designated exhibit filed with Registrant’s Registration Statement on Form 8-A filed on December 4, 1998.

(4)		Incorporated by reference to designated exhibit filed with the Registrant’s Registration Statement on Form 8-A filed on March 17, 1994.

(5)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 8-B Registration on July 16, 1997.

(6)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March 31, 1997.

(7)		Incorporated by reference to designated exhibit filed with the Registrant’s Current Reports on Form 8-K dated April 22, 1997.

(8)		Incorporated by reference to designated exhibit filed with the Registrant’s Registration Statement on Form S-4, Amendment No. 1, filed on January 25, 1995.

(9)		Incorporated by reference to designated exhibit filed with the Registrant’s Schedule 13E-3/A Amendment No. 11 filed on October 12, 1996.

(10)		Incorporated by reference to designated exhibit filed with the Registrant’s Annual Report on Form 10-K for the year-ended December 31, 1996.

(11)		Incorporated by reference to designated exhibit filed with the Registrant’s Annual Report on Form 10-K for the year-ended December 31, 1997.

(12)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March 31, 1998.

(13)		Incorporated by reference to designated exhibit filed with the Registrant’s Current Report on Form 8-K filed December 3, 1998.

(14)		Incorporated by reference to Appendix I filed as part of the Registrant’s definitive Proxy Statement/ Prospectus dated February 15, 1995.

(15)		Incorporated by reference to designated exhibit filed with the Registrant’s Annual Report on Form 10-K filed on March 31, 1995.

(16)		Incorporated by reference to Appendix B filed as part of the Registrant’s definitive Proxy Statement dated June 8, 1995.

(17)		Incorporated by reference to designated exhibit filed with the Registrant’s Current Reports on Form 8-K dated May 29, 1998.

(18)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March 31, 1999.

(19)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended September 30, 1999.

(20) Incorporated by reference to designated exhibit filed with the Registrant’s Annual Report on Form 10-K filed March 14, 2000.

(21) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2000.

(22) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended June 30, 2000.

(23) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended September 30, 2000.

(24) Incorporated by reference to designated exhibit filed with the Registrant’s From 10-K for the year ended December 31, 2000.

(25) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March, 31, 2001.

(26) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarters ended June, 30, 2002 and September 30, 2002.

(27) Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarters ended June, 30, 2002 and September 30, 2002.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington, on the 20th day of May 2003.


SHURGARD STORAGE CENTERS, INC.

By:	/s/ HARRELL L. BECK

		Harrell L. Beck
	Senior Vice President
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the following persons in the capacities indicated below on the 20th day of May 2003.


Signature		Title

/s/ Charles K. Barbo Charles K. Barbo		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

/s/ Harrell L. Beck Harrell L. Beck		Senior Vice President, Treasurer, Chief Financial Officer and Director (Principal Financial and Accounting Officer)

/s/ George P. Hutchinson George P.Hutchinson		Director

/s/ Raymond A. Johnson Raymond A. Johnson		Director

/s/ W. J. Smith W. J. Smith		Director

/s/ W. Thomas Porter W. Thomas Porter		Director

/s/ Anna Karin Andrews Anna Karin Andrews		Director

/s/ Howard P. Behar Howard P. Behar		Director

CERTIFICATIONS*

I, Charles K. Barbo, Chairman, President and Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Shurgard Storage Centers, Inc.:

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 20, 2003

/s/ Charles K. Barbo

Charles K. Barbo
Chief Executive Officer

CERTIFICATIONS*

I, Harrell Beck, Senior Vice President, Treasurer and Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Shurgard Storage Centers, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: May 20, 2003

/s/ Harrell Beck

Harrell Beck
Chief Financial Officer

	•		Quality Employees. We view the quality of customers’ interaction with employees as critical to our long-term success. Accordingly, we emphasize teamwork in our employee training programs. Through our emphasis on training, personnel development and decentralized decision-making, we believe we attract well-qualified, highly motivated employees who are committed to providing superior levels of customer service.

	•		Convenient and Secure Stores. Our stores are easily accessible, offer a range of storage products and services for customer convenience and emphasize security and product quality. We believe that our strategy of offering high-quality, convenient stores strengthens the brand image of Shurgard, attracts customers and enables us to maintain premium rents.

	—	Store Location and Hours. Our stores are generally located in major metropolitan areas along retail and high-traffic corridors for easy customer access and usually have significant road frontage for high visibility. Although hours vary from store to store, customers can generally access their individual units between 6 a.m. and 9 p.m seven days a week.

	—	One-Stop Convenience. Our stores offer a range of storage products and ancillary services, including supplies such as packing and storage materials, locks and boxes, as well as services such as property insurance referrals, moving company referrals and Ryder truck rentals that we believe conveniently and efficiently address customers’ storage needs. In addition, we generally offer premium features such as computer-controlled access and electronic security systems. Finally, a number of our stores offer climate-controlled storage space.

	—	Property Security. We use a variety of measures at our stores, as appropriate, to enhance security. Such measures may include, among others, on-site personnel, electronic devices such as intrusion and fire alarms, access controls, video and intercom surveillance devices, individual unit alarms, perimeter beams, fencing and

		lighting. We assign each customer a designated personal identification number for use in connection with a computerized gate access system. Each access is automatically logged into a computer database. In addition, we have developed and plan to continue to improve our package of security controls, including software, video and interactive communication.

	—	Capital Expenditures and Maintenance. We budget for a level of capital expenditures consistent with our commitment to maintaining attractive, well-maintained and secure self storage centers, which enable us to pursue a premium pricing strategy. In addition, capital expenditures for consistent signage and color scheme among our properties strengthen the brand image of Shurgard.

	•		Marketing and Sales. We provide managers with sales skills to elicit customer needs and turn prospects into customers. We also have a national sales center to field telephone sales calls from individual properties. Employees at the national sales center are able to sell space at the store most convenient to the customer. We have implemented additional sales and marketing programs to broaden our distribution channels, such as a web site for our enhanced e-commerce business and an expanded commercial accounts and direct sales force in selected markets.

			— Market Research. We maintain an extensive market research database on our primary markets and closely track occupancy levels, rental rates and other operational data regarding self storage properties within these markets. We have conducted focus group research and telephone surveys, and use customer comment cards to identify the primary considerations in customers’ self storage choices and satisfaction so that we can better attract and service customers.

			— Market Share. We employ various means to increase our share of the self storage market. We place prominent advertisements in the yellow pages and seek to promote customer awareness of our stores through highly visible store locations, site signage and architectural features. We locate our stores along retail and high-traffic corridors, usually with significant road frontage to increase visibility. We build on most newly developed stores a distinctive “lighthouse” office to distinguish us from competitors and to increase customer awareness of the Shurgard brand.

	•		Revenue Optimization. We seek to optimize our revenue by achieving the highest rental rate structure for our stores, consistent with strong levels of occupancy, through the use of teams of store employees and district managers who are trained and authorized to set rental rates and make rental rate changes based on their analysis of demand and availability at a particular store. Market personnel regularly evaluate their properties’ rental rates on a periodic basis, based on unit demand and unit availability, and can quickly change marginal rental rates to ensure that revenue is optimized.

	•		Cost Containment and Improved Operating Leverage. We seek to increase cash flow by carefully containing operating expenses. For example, we closely monitor our real estate tax assessments appealing such assessments, as appropriate, and engage consultants to manage certain utility costs. In addition, as we increase the number of properties in our targeted markets, we achieve economies of scale and lessen the impact of corporate overhead expense. We believe that our management and operational procedures, which can be implemented over a large number of properties, enable us to add new properties quickly and with little disruption to our system.

	•		Strategic Expansions. We seek to increase revenue by building additional rentable storage space at suitable stores either through on site expansion or acquisition of property adjacent to existing stores. We typically receive high incremental returns on such build-out investments, because resulting revenue increases are achieved with little increase in fixed operating costs.

	•		Development. We believe that several factors favor our development strategy:

	—	Development Expertise. We have substantial real estate development, construction management and architectural expertise that has been developed over the past 30 years. Along with our predecessors, we developed more than a third of the properties we currently own, lease or manage, and, since 1972, we have maintained an internal development staff, which currently employs 18 people.

	—	Strategic Site Selection to Maximize Revenues. To obtain the best store locations, we target sites for development in urban areas and up-scale retail areas that often require rezoning and other complex development measures. We believe that the difficulties of developing storage properties in such in-fill areas may discourage competitors from locating nearby and, as a result, enable us to operate in underserved areas. This in turn enables us to charge higher rental rates.

	—	Focus on Quality and Brand Image Development. We have greater control of quality and brand image by developing our own self storage properties. This enables us to focus on high construction quality and standards and a consistent and inviting building design. We believe our focus on quality and consistency will enable us to further strengthen awareness of the Shurgard brand, obtain repeat business, maintain premium prices and differentiate us from our competitors.

	•		Acquisitions. We also selectively acquire high-quality properties that are consistent with our business plan. Additional acquisitions allow us to spread overhead and certain management, marketing and advertising costs over a greater number of revenue-producing assets. As a result, we can achieve increasing economies of scale with each new property acquired. We complete a thorough analysis of each property that we intend to acquire, including, but not limited to, a review of capital expenditures that will be required for the property to meet our standards. In addition to adding high-quality properties, we look for high-quality portfolios of properties that would establish a market presence for us in a new market.

	•		European Investment. As of December 31, 2002, we had a 7.57% interest in an entity that owns 96 storage centers operating in six countries. We have the right to purchase an additional interest in that entity and intend to do so in 2003. The business strategies that we employ in the United States also apply to our European investment. During the past eight years, that entity has introduced our product to local consumers and built the infrastructure necessary to support an accelerated expansion program. Because of the density of the areas where Shurgard Europe develops and the limited availability of land, substantially all of the European stores have multistory buildings. In general, European customers prefer interior units in large buildings which are perceived as being safer than the drive-up units in single story buildings. The length of stay, customer use and customer profile of the European customer is similar to U.S. customers. Additionally, there are fewer acquisition opportunities in the European markets. Today, Shurgard Europe employs over 360 employees with a senior management team made up of seasoned managers with substantial local development, finance, operations and marketing experience.

	•		the rules governing REITs are highly complex;

	•		we do not control all factual determinations that affect REIT status; and

	•		our circumstances may change in the future.

(1)		Includes 409 facilities owned or leased by us and entities controlled by us. The remaining 125 facilities are owned or leased by entities in which we have a non-controlling interest. See Schedule III in our Form 10-K/A for a complete list of properties for which financial information is consolidated by us.

(2)		Revenue includes all Same Store and New Store revenue regardless of ownership interest in the property.

(1)		For the year 1998, the European operations were consolidated. Beginning in 1999, European operations are not consolidated but are reported under the equity method.

(2)		Total borrowing includes participation rights liability net of discount (See Note H to our Consolidated Financial Statements).

(3)		See Note X to the consolidated financial statements included in Item 8 on this Form 10-K/A.

(1)		Includes owned and leased properties in which we have a 100% interest other than those included under Tax Retention Operating Leases.

(2)		Includes properties developed by CCP/Shurgard.

(3)		Includes properties in which we own an interest less than 100% but that are consolidated in our financial statements.

(4)		Includes properties that are not consolidated in our financial statements because we own less than 100% and do not exercise control.

(5)		Includes properties operated, acquired or developed through the tax retention operating lease arrangements.

(1)		The actual completed cost of these projects could vary due to delays during construction caused by weather, unforeseen site conditions, labor shortages, personnel turnover, scheduling problems with contractors, subcontractors or suppliers, or resource constraints.

(2)		Includes amounts for which we have not yet been reimbursed as construction agent.

(3)		We have subleased the operations of one property to a third party in which we have no ownership. Therefore, the operating results of this property are not included in our discussion of operating properties.

(4)		We have subcontracted out the construction agent responsibilities for 2 of these properties to an affiliate.

(5)		We have subcontracted out the construction agent responsibilities for 1 of these properties to an affiliate.

	(1)		Amounts have been translated from local currencies using the average exchange rate for 2002 for the 2002 to 2001 comparison and using the average exchange rate for 2001 for the 2001 to 2000 comparison.

	(2)		Includes all direct property and real estate tax expense. Does not include any allocation of indirect operating expense.

	(3)		Indirect operating expense includes certain shared property costs such as district and regional management, national contracts personnel and marketing, as well as certain overhead costs allocated to property operations such as business information technology, human resources and accounting. Does not include internal real estate acquisition cost or abandoned development expense. Indirect operating expense is allocated to stores based on number of months in operation during the period.

	(4)		Average annual rent per square foot is calculated by dividing actual rent collected by the average number of square feet occupied during the period.

(1)		Total market capitalization is based on the closing market price as of December 31, 2002, of the Class A Common Stock, Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock multiplied by their respective total number of outstanding shares plus total debt.

(2)		Debt includes notes payable and line of credit and participation rights.

(3)		Represents weighted average interest rate on our outstanding domestic line of credit and notes payable.

(1)		Estimate of amount and timing of cash flows. See Development Financing Joint Ventures under OWNERSHIP AND LEASING
ARRANGEMENTS.

(2)		See Unconsolidated Joint Ventures under OWNERSHIP AND LEASING ARRANGEMENTS.

(3)		See Tax Retention Operating Leases under OWNERSHIP AND LEASING ARRANGEMENTS.

(4)		See EUROPEAN OPERATIONS. Bank debt for which we are contingently liable as a general partner of Recom. The debt matures in 2003, or sooner, if we, our partners in Recom or Shurgard Europe default in our separate indebtedness.


								Accumu-			Accumu-
								lated Net			lated Other
			Loans to					Income			Compre-
			Class B			Additional		Less Dis-			hensive
			Share-			Paid in		tributions			Income			Total
(in thousands)			holders			Capital		(as restated)			(as restated)			(as restated)

Balance, Jan 1, 2000			$	(4,002	)	$	614,860	$	(86,858	)	$	—		$	620,200
Comprehensive income:
	Net income			—			—		32,307			—			32,307
Issuance of common stock				—			12,490		—			—			12,491
Payments on loan to shareholder				326			—		—			—			326
Distributions:
		Preferred		—			—		(8,750	)		—			(8,750	)
		Common		—			—		(59,936	)		—			(59,936	)

Balance, Dec. 31, 2000				(3,676	)		627,350		(123,237	)		—			596,638
Comprehensive income:
	Net income (as restated)			—			—		33,312			—			33,312
	Other comprehensive income (as restated)			—			—		—			(961	)		(961	)

Total comprehensive income (as restated)				—			—		—			—			32,351
Issuance of common and preferred stock				—			79,967		—			—			164,982
Payments on loan to shareholder				904			—		—			—			904
Distributions:
		Preferred		—			—		(15,098	)		—			(15,098	)
		Common		—			—		(63,354	)		—			(63,354	)

Balance, Dec. 31, 2001 (as restated)				(2,772	)		707,317		(168,377	)		(961	)		716,423
Comprehensive income:
	Net income (as restated)			—			—		56,633			—			56,633
	Other comprehensive income (as restated)			—			—		—			(912	)		(912	)

Total comprehensive income (as restated)				—			—		—			—			55,721
Issuance of common and preferred stock				—			97,265		—			—			97,268
Redemption of common				—			—		—			—			(50,000	)
and preferred stock Payments on loan to shareholder				2,772			—		—			—			2,772
Distributions:
		Preferred		—			—		(14,695	)		—			(14,695	)
		Common		—			—		(72,778	)		—			(72,778	)

Balance, Dec. 31, 2002 (as restated)			$	—		$	804,582	$	(199,217	)	$	(1,873	)	$	734,711

(1)		These properties are encumbered through one mortgage loan totaling $66.3 million.

(2)		These properties were acquired through a lease of the building and land.

(3)		These properties are encumbered through one mortgage loan totaling $14.7 million.


(Amounts in thousands)
Land, Building, Equipment and Other
Balance at January 1, 2000					$	1,120,477
	Additions during the period
		Acquistions	$	40,963
		Developments		91,897
		Facility Expansions		187
		Improvements and Other		8,030

						141,077
		Cost of Real Estate Sold				(867	)

Balance at December 31, 2000						1,260,687
	Consolidation of Storage to Go					4,890
	Additions during the period
		Acquistions	$	34,301
		Developments		32,359
		Facility Expansions		—
		Improvements and Other		19,033

						85,693
		Cost of Real Estate Sold				(2,272	)

Balance at December 31, 2001						1,348,998
	Additions during the period
		Acquistions	$	173,639
		Developments		3,147
		Improvements and Other		6,085

						182,871
		Cost of Real Estate Sold				(1,820	)

Balance at December 31, 2002					$	1,530,049

Accumulated Depreciation
Balance at January 1, 2000					$	134,366
	Depreciation expense					36,247
	Disposal					(782	)

Balance at December 31, 2000						169,831
	Consolidation of Storage to Go					2,502
	Depreciation expense					41,581
	Disposal					(508	)

Balance at December 31, 2001						213,405
	Depreciation expense					46,084
	Depreciation from Morningstar Acquisition					16,208
	Disposal					(855	)

Balance at December 31, 2002					$	274,842

(20)		Incorporated by reference to designated exhibit filed with the Registrant’s Annual Report on Form 10-K filed March 14, 2000.

(21)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2000.

(22)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended June 30, 2000.

(23)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended September 30, 2000.

(24)		Incorporated by reference to designated exhibit filed with the Registrant’s From 10-K for the year ended December 31, 2000.

(25)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarter ended March, 31, 2001.

(26)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarters ended June, 30, 2002 and September 30, 2002.

(27)		Incorporated by reference to designated exhibit filed with the Registrant’s Form 10-Q for the quarters ended June, 30, 2002 and September 30, 2002.