SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

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

For the quarterly period ended September 30, 1999
                               ------------------

                                       or

[ ] 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: 1-8389
                        ------

                              PUBLIC STORAGE, INC.
                              --------------------
             (Exact name of registrant as specified in its charter)


               California                                     95-3551121
------------------------------------------------       ------------------------
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                     Identification Number)

701 Western Avenue, Glendale, California                      91201-2394
------------------------------------------------       ------------------------
(Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code: (818) 244-8080.
                                                    --------------



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.

                                [ X ] Yes [ ] No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of October 27, 1999:

Common Stock, $.10 par value, 129,354,257 shares outstanding
------------------------------------------------------------
Class B Common Stock, $.10 Par Value - 7,000,000 shares
-------------------------------------------------------
Equity Stock, Series AA, $.01 Par Value - 225,000 shares
--------------------------------------------------------

<PAGE>

                              PUBLIC STORAGE, INC.

                                      INDEX


                                                                          Pages
                                                                          -----
PART I.    FINANCIAL INFORMATION
           ---------------------

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at
              September 30, 1999 and December 31, 1998                        1

         Condensed Consolidated Statements of Income for the
              Three and Nine Months Ended September 30, 1999 and 1998         2

         Condensed Consolidated Statements of Shareholders' Equity
              for the Nine Months Ended September 30, 1999                    3

         Condensed Consolidated Statements of Cash Flows
              for the Nine Months Ended September 30, 1999 and 1998       4 - 5

         Notes to Condensed Consolidated Financial Statements            6 - 18

Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations             19 - 29

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          29

PART II.   OTHER INFORMATION (Items 2, 3, 4 and 5 are not applicable)
           -----------------

Item 1.  Legal Proceedings                                                   30

Item 6.  Exhibits and Reports on Form 8-K                               30 - 35

<PAGE>

                              PUBLIC STORAGE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30,        DECEMBER 31,
                                                                                 1999                 1998
                                                                            --------------       --------------
                                                                             (Unaudited)
                                     ASSETS
                                     ------
<S>                                                                         <C>                  <C>
Cash and cash equivalents..........................................         $      85,768        $      51,225
Real estate facilities, at cost:
     Land..........................................................             1,021,628              803,226
     Buildings.....................................................             2,725,187            2,159,065
                                                                            --------------       --------------
                                                                                3,746,815            2,962,291
     Accumulated depreciation......................................              (500,870)            (411,176)
                                                                            --------------       --------------
                                                                                3,245,945            2,551,115
     Construction in process.......................................               138,531               83,138
                                                                            --------------       --------------
                                                                                3,384,476            2,634,253

Investment in real estate entities.................................               440,379              450,513
Intangible assets, net.............................................               196,651              203,635
Notes receivable from affiliates...................................                25,016                5,415
Other assets.......................................................                73,849               58,863
                                                                            --------------       --------------
              Total assets.........................................         $   4,206,139        $   3,403,904
                                                                            ==============       ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Notes payable......................................................         $     171,952        $      81,426
Accrued and other liabilities......................................                99,653               63,813
                                                                            --------------       --------------
              Total liabilities....................................               271,605              145,239

Minority interest..................................................               136,393              139,325

Commitments and contingencies

Shareholders' equity:
     Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
       11,141,100   shares  issued  and  outstanding   (11,129,650
       issued  and outstanding at December 31, 1998), at liquidation
       preference:
         Cumulative Preferred Stock, issued in series..............             1,155,150              868,900
     Common Stock, $0.10 par value,  200,000,000 shares authorized,
       128,925,283 shares issued and outstanding (115,965,945 at
       December 31, 1998)..........................................                12,893               11,598
     Class B Common Stock, $0.10 par value, 7,000,000 shares
       authorized and issued.......................................                   700                  700
     Paid-in capital...............................................             2,512,338            2,178,465
     Cumulative net income.........................................             1,014,333              802,088
     Cumulative distributions paid.................................              (897,273)            (742,411)
                                                                            --------------       --------------
         Total shareholders' equity................................             3,798,141            3,119,340
                                                                            --------------       --------------
              Total liabilities and shareholders' equity...........         $   4,206,139        $   3,403,904
                                                                            ==============       ==============
</TABLE>
                            See accompanying notes.
                                       1

<PAGE>

                              PUBLIC STORAGE, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                     For the Three Months Ended            For the Nine Months Ended
                                                            September 30,                        September 30,
                                                   ------------------------------       ------------------------------
                                                      1999               1998              1999               1998
                                                   -----------        -----------       -----------        -----------
REVENUES:
   Rental income:
<S>                                                <C>                <C>               <C>                <C>
       Storage facilities.................         $  165,983         $  136,165        $  456,633         $  379,019
       Commercial properties..............              2,111              1,833             5,973             21,229
  Equity earnings of real estate entities.              6,500              6,662            23,969             16,598
  Interest and other income...............              4,369              5,083            12,640             15,950
                                                   -----------        -----------       -----------        -----------
                                                      178,963            149,743           499,215            432,796
                                                   -----------        -----------       -----------        -----------
EXPENSES:
  Cost of operations:
       Storage facilities.................             54,266             50,008           156,022            146,419
       Commercial properties..............                724                685             1,993              7,187
   Depreciation and amortization..........             36,640             27,243           101,565             82,683
   General and administrative.............              3,953              3,118             9,371              9,591
   Interest expense.......................              2,136                831             5,870              2,926
                                                   -----------        -----------       -----------        -----------
                                                       97,719             81,885           274,821            248,806
                                                   -----------        -----------       -----------        -----------

   Income before minority interest........             81,244             67,858           224,394            183,990

   Minority interest in income............             (4,492)            (5,572)          (12,149)           (16,141)
                                                   -----------        -----------       -----------        -----------

NET INCOME................................         $   76,752         $   62,286        $  212,245         $  167,849
                                                   ===========        ===========       ===========        ===========
NET INCOME ALLOCATION:
  Allocable to preferred shareholders.....         $   24,412         $   19,053        $   69,766         $   59,322
  Allocable to common shareholders........             52,340             43,233           142,479            108,527
                                                   -----------        -----------       -----------        -----------
                                                   $   76,752         $   62,286        $  212,245         $  167,849
                                                   ===========        ===========       ===========        ===========
PER COMMON SHARE:
  Net income per share - Basic............              $0.41              $0.37             $1.13              $0.96
                                                   ===========        ===========       ===========        ===========
  Net income per share - Diluted..........              $0.40              $0.37             $1.13              $0.95
                                                   ===========        ===========       ===========        ===========

  Weighted average common shares :
     Basic................................            129,041            116,421           125,561            113,311
                                                   ===========        ===========       ===========        ===========
     Diluted..............................            129,249            116,726           125,833            113,762
                                                   ===========        ===========       ===========        ===========
</TABLE>
                            See accompanying notes.
                                       2

<PAGE>

                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                  (AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               Cumulative
                                                                 Senior                           Class B
                                                               Preferred         Common           Common           Paid-in
                                                                 Stock           Stock            Stock            Capital
                                                            ---------------  ---------------  ---------------  ---------------
<S>                                                         <C>              <C>              <C>              <C>
Balances at December 31, 1998..........................     $     868,900    $      11,598    $         700    $   2,178,465

Issuance of common stock:
   In connection with the Storage Trust merger
     (13,009,485 shares)...............................                 -            1,301                -          345,922
   Acquisition of  minority interest  (1,131,487 shares)                -              113                -           29,079
   Conversion of OP units (241,071 shares) ............                 -               24                -            6,410
   Exercise of stock options (405,822 shares)..........                 -               40                -            8,141

Repurchase of common stock (1,828,527 shares) .........                 -             (183)               -          (46,362)

Issuance of preferred stock:
   Series K , Series L  and Series M (11,450 shares)...           286,250                -                -           (9,317)

Net income.............................................                 -                -                -                -

Cash distributions:
   Cumulative Senior Preferred Stock ..................                 -                -                -                -
   Common Stock........................................                 -                -                -                -
                                                            ---------------  ---------------  ---------------  ---------------
Balances at September 30, 1999.........................     $   1,155,150    $      12,893    $         700    $   2,512,338
                                                            ===============  ===============  ===============  ===============
</TABLE>

<TABLE>
<CAPTION>

                                                                                                    Total
                                                                Cumulative       Cumulative      Shareholders'
                                                                Net Income      Distributions       Equity
                                                             ---------------  ---------------  ---------------
<S>                                                          <C>              <C>              <C>
Balances at December 31, 1998..........................      $     802,088    $    (742,411)   $   3,119,340

Issuance of common stock:
   In connection with the Storage Trust merger
     (13,009,485 shares)...............................                  -                -          347,223
   Acquisition of  minority interest  (1,131,487 shares)                 -                -           29,192
   Conversion of OP units (241,071 shares) ............                  -                -            6,434
   Exercise of stock options (405,822 shares)..........                  -                -            8,181

Repurchase of common stock (1,828,527 shares) .........                  -                -          (46,545)

Issuance of preferred stock:
   Series K , Series L  and Series M (11,450 shares)...                  -                -          276,933

Net income.............................................            212,245                -          212,245

Cash distributions:
   Cumulative Senior Preferred Stock ..................                  -          (69,766)         (69,766)
   Common Stock........................................                  -          (85,096)         (85,096)
                                                             ---------------  ---------------  ---------------
Balances at September 30, 1999.........................      $   1,014,333    $    (897,273)   $   3,798,141
                                                             ===============  ===============  ===============
</TABLE>

                            See accompanying notes.
                                       3

<PAGE>

                              PUBLIC STORAGE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            For the Nine Months Ended
                                                                                                  September 30,
                                                                                        ---------------------------------
                                                                                             1999               1998
                                                                                        --------------     --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                     <C>                <C>
   Net income..................................................................         $     212,245      $     167,849
   Adjustments  to  reconcile  net  income  to net cash  provided  by
     operating activities:
     Depreciation and amortization.............................................               101,565             82,683
     Depreciation included in equity earnings of real estate entities..........                14,405              9,902
     Minority interest in income...............................................                12,149             16,141
                                                                                        --------------     --------------
         Total adjustments.....................................................               128,119            108,726
                                                                                        --------------     --------------
             Net cash provided by operating activities.........................               340,364            276,575
                                                                                        --------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Principal payments received on notes receivable from affiliates...........                28,082             27,456
     Notes receivable from affiliates..........................................               (30,484)           (33,000)
     Capital improvements to real estate facilities............................               (18,158)           (19,257)
     Construction in process...................................................               (76,345)           (58,371)
     Acquisition of minority interests in consolidated real estate partnerships               (27,228)           (17,508)
     Proceeds from the liquidation of real estate facilities and real estate
       investments.............................................................                 8,552             10,275
     Acquisition of investment in real estate entities.........................               (55,190)           (74,964)
     Acquisition of real estate facilities.....................................                (6,162)           (47,392)
     Acquisition cost of business combinations.................................              (181,034)           (84,576)
     Refund of deposit on real estate purchase.................................                     -             12,500
     Reduction in cash due to deconsolidation of PS Business Parks, Inc. (Note 2)                   -            (11,259)
                                                                                        --------------     --------------
             Net cash used in investing activities.............................              (357,967)          (296,096)
                                                                                        --------------     --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Repayment of borrowings on the line of credit.............................                     -             (7,000)
     Principal payments on notes payable.......................................                (9,474)           (10,940)
     Net proceeds from the issuance of common stock............................                 8,182            237,447
     Net proceeds from the issuance of preferred stock.........................               276,933                  -
     Repurchase of common stock................................................               (46,546)           (71,375)
     Distributions paid to shareholders........................................              (154,862)          (134,592)
     Distributions from operations to minority interests in real estate entities              (19,501)           (25,565)
     Net reinvestment by minority interests in consolidated real estate entities                  880             52,899
     Other.....................................................................                (3,466)            (7,858)
                                                                                        --------------     --------------
             Net cash provided by financing activities.........................                52,146             33,016
                                                                                        --------------     --------------
Net increase in cash and cash equivalents.....................................                 34,543             13,495
Cash and cash equivalents at the beginning of the period......................                 51,225             41,455
                                                                                        --------------     --------------
Cash and cash equivalents at the end of the period............................          $      85,768      $      54,950
                                                                                        ==============     ==============
</TABLE>
                            See accompanying notes.
                                       4

<PAGE>

                              PUBLIC STORAGE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

                                   (UNAUDITED)

                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                              For the Nine Months Ended
                                                                                                    September 30,
                                                                                            -------------------------------
                                                                                                1999             1998
                                                                                            -------------     -------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Assets and liabilities acquired with respect to business combinations:
     <S>                                                                                    <C>               <C>
     Real estate facilities..........................................................       $   (729,294)     $   (225,202)
     Construction in process.........................................................            (11,449)                -
     Investment in real estate entities..............................................               (356)                -
     Mortgage notes receivable.......................................................             (6,739)                -
     Other assets....................................................................             (1,697)             (670)
     Accrued and other liabilities...................................................             22,387             3,793
     Minority interest...............................................................             32,201            37,367
     Notes payable...................................................................            100,000                 -

 Deconsolidation of PS Business Parks Inc.  (Note 2):
     Investments in real estate entities.............................................                  -          (219,224)
     Real estate facilities, net of accumulated depreciation.........................                  -           433,446
     Other assets....................................................................                  -             2,048
     Accrued and other liabilities...................................................                  -           (10,106)
     Notes payable...................................................................                  -           (14,526)
     Minority interest...............................................................                  -          (202,897)

 Notes receivable issued in connection with real estate dispositions.................            (10,460)                -

 Other assets received in connection with real estate dispositions...................             (3,800)                -

 Other assets disposed of in exchange for real estate facilities.....................              3,800                 -

 Assets and liabilities  assumed in connection  with  acquisitions of real estate
   facilities:
     Cancellation of mortgage notes receivable.......................................                  -             2,495
     Assumption of note payable......................................................                  -            14,526
     Minority interest...............................................................                  -             1,205

 Reduction to investment in real estate entities in connection with business
   combinations and acquisitions of real estate facilities...........................             66,690            86,846

 Disposition of real estate facilities in exchange for notes receivable and
   other assets......................................................................             14,260                 -

 Acquisition of real estate facilities in exchange for the assumption of notes
   payable,  increase in minority interest, and reduction in other assets............             (3,800)          (18,753)

 Acquisition of minority interest and real estate in exchange for common stock:
     Real estate facilities..........................................................            (34,192)          (19,475)
     Minority interest...............................................................            (28,661)          (17,098)

 Issuance of common stock:
     In connection with business combinations........................................            347,223            13,817
     In connection with the conversion of Convertible Preferred Stock................                  -            53,308
     To acquire interests in real estate entities....................................                  -            17,133
     To acquire minority interest in consolidated real estate entities...............             35,625            19,065

 Conversion of 8.25% convertible preferred stock.....................................                  -           (53,308)
 Acquisition of investment in real estate entities for common stock..................                  -           (17,133)
</TABLE>
                             See accompanying notes
                                       5

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)


1.   Description of the business
     ---------------------------

              Public Storage, Inc. (the "Company") is a California  corporation,
     which  was  organized  in  1980.   The  Company  is  a  fully   integrated,
     self-administered  and self-managed  real estate  investment trust ("REIT")
     that acquires,  develops,  owns and operates storage facilities which offer
     storage spaces for lease,  usually on a month-to-month  basis, for personal
     and business use. The Company invests in real estate  facilities  primarily
     through  the  acquisition  of wholly  owned  facilities  combined  with the
     acquisition of equity  interests in real estate entities owning real estate
     facilities.  At  September  30,  1999,  the Company had direct and indirect
     equity interests in 1,447 properties located in 38 states,  including 1,323
     storage facilities and 124 commercial properties.

2.   Summary of significant accounting policies
     ------------------------------------------

     Basis of presentation
     ---------------------
              The  accompanying   unaudited  condensed   consolidated  financial
     statements  have  been  prepared  in  accordance  with  generally  accepted
     accounting   principles  for  interim   financial   information   and  with
     instructions  to Form 10-Q and Article 10 of Regulation  S-X.  Accordingly,
     they do not  include  all of the  information  and  footnotes  required  by
     generally accepted accounting principles for complete financial statements.
     The preparation of the consolidated financial statements in conformity with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates  and  assumptions   that  affect  the  amounts  reported  in  the
     consolidated  financial  statements and accompanying  notes. Actual results
     could differ from estimates. In the opinion of management,  all adjustments
     (consisting of normal recurring accruals) necessary for a fair presentation
     have been included.  Operating  results for the three and nine months ended
     September 30, 1999 is not necessarily indicative of the results that may be
     expected for the year ended  December 31,  1999.  For further  information,
     refer  to the  consolidated  financial  statements  and  footnotes  thereto
     included  in the  Company's  annual  report on Form 10-K for the year ended
     December 31, 1998.

              The consolidated  financial statements include the accounts of the
     Company  and  entities  in which the  Company  has a  controlling  interest
     (collectively,   these  entities  are  referred  to  as  the  "Consolidated
     Entities").

              At September 30, 1999, the Company also has equity  investments in
     14 other entities whose principal  business is the ownership of 122 storage
     facilities,  which are managed by the Company. In addition, the Company has
     an ownership  interest in PS Business Parks, Inc.  ("PSB"),  which owns and
     operates 123  commercial  properties.  The Company  does not control  these
     entities;  accordingly,  the Company's  investments  in these  entities are
     accounted for using the equity method.

              From the time of PSB's  formation  through  March  31,  1998,  the
     Company  consolidated  the  accounts  of PSB in its  financial  statements.
     During the second quarter of 1998, the Company's  ownership interest in PSB
     was  reduced  below  50% and,  accordingly,  the  Company  ceased to have a
     controlling interest in PSB. Accordingly,  the Company,  effective April 1,
     1998, no longer includes the accounts of PSB in its consolidated  financial
     statements  and has accounted for its  investment  using the equity method.
     For all periods  after March 31, 1998,  the income  statement  includes the
     Company's equity in income of PSB. Further,  commercial property operations
     for the periods after March 31, 1998 reflect only the  commercial  property
     operations of  facilities  owned by the Company which have both storage and
     commercial use combined at the same property location.

                                       6

<PAGE>

     Use of estimates
     ----------------
              The preparation of the condensed consolidated financial statements
     in  conformity  with  generally  accepted  accounting  principles  requires
     management  to make  estimates  and  assumptions  that  affect the  amounts
     reported in the consolidated  financial  statements and accompanying notes.
     Actual results could differ from those estimates.

     Income taxes
     ------------
              For all taxable years  subsequent to 1980,  the Company  qualified
     and intends to continue to qualify as a REIT,  as defined in Section 856 of
     the  Internal  Revenue  Code.  As a REIT,  the Company is not taxed on that
     portion of its taxable  income,  which is distributed to its  shareholders,
     provided that the Company meets certain tests. The Company believes it will
     meet these tests  during 1999 and,  accordingly,  no  provision  for income
     taxes has been made in the accompanying financial statements.

     Financial instruments
     ---------------------
              For  purposes of  financial  statement  presentation,  the Company
     considers all highly liquid debt  instruments  purchased with a maturity of
     three months or less to be cash equivalents.

     Real estate facilities
     ----------------------
              Real  estate  facilities  are  recorded at cost.  Depreciation  is
     computed using the straight-line  method over the estimated useful lives of
     the buildings and improvements, which are generally between 5 and 25 years.

     Allowance for possible losses
     -----------------------------
              The Company has no allowance for possible  losses  relating to any
     of its real estate  investments,  including  notes  receivable.  Management
     periodically reviews its investment portfolio to evaluate the need for such
     an allowance.

     Intangible assets
     -----------------
              Intangible  assets  consist  of  property   management   contracts
     ($165,000,000)  and the  cost  over  the fair  value  of net  tangible  and
     identifiable  intangible assets ($67,726,000)  acquired.  Intangible assets
     are amortized by the  straight-line  method over 25 years. At September 30,
     1999, intangible assets are net of accumulated  amortization of $36,075,000
     ($29,091,000  at  December  31,  1998).   Included  in   depreciation   and
     amortization expense for the three and nine months ended September 30, 1999
     and  1998  is  $2,328,000  and  $6,984,000,  respectively,  related  to the
     amortization of intangible assets.

     Revenue and expense recognition
     -------------------------------
              Rental income is recognized as earned.  Equity in earnings of real
     estate entities are recognized based on the Company's ownership interest in
     the  earnings  of  each  of  the   unconsolidated   real  estate  entities.
     Advertising costs are expensed as incurred.

     Net income per common share
     ---------------------------
              In 1997, the Financial Accounting Standards Board issued Statement
     No. 128,  Earning per Share.  Statement  128  replaced the  calculation  of
     primary  and fully  diluted net income per share with basic and diluted net
     income per share. Unlike primary net income per share, basic net income per
     share  excludes any dilutive  effects of options,  warrants or  convertible
     securities that are convertible into common shares of the Company.

              Diluted net income per common share is computed using the weighted
     average common shares  outstanding,  plus the impact of stock options.  The
     Class B Common Stock is not included in the determination of net income per
     common  share  because all  contingencies  required for the  conversion  to
     common stock have not been satisfied as of September 30, 1999. In addition,

                                       7

<PAGE>

     the  inclusion  of  the  Company's   convertible  preferred  stock  in  the
     determination  of net  income per common  share has been  determined  to be
     anti-dilutive for the nine months ended September 30, 1998.

              In computing earnings per common share,  preferred stock dividends
     totaling  $24,412,000  and $19,053,000 for the three months ended September
     30, 1999 and 1998,  respectively,  and  $69,766,000 and $59,322,000 for the
     nine months ended September 30, 1999 and 1998, respectively, reduced income
     available to common shareholders.

     Stock-based compensation
     ------------------------
              In October  1995,  the FASB  issued SFAS No. 123  "Accounting  for
     Stock-Based  Compensation"  ("Statement  123") which provides  companies an
     alternative to accounting for stock-based  compensation as prescribed under
     APB Opinion No. 25 (APB 25). Statement 123 encourages, but does not require
     companies to recognize  expense for stock-based  awards based on their fair
     value at date of grant.  Statement  123 allows  companies  to  continue  to
     follow  existing  accounting  rules  (intrinsic  value method under APB 25)
     provided  that  pro-forma  disclosures  are  made of what  net  income  and
     earnings per share would have been had the new fair value method been used.
     The Company has elected to adopt the disclosure  requirements  of Statement
     123 but will continue to account for stock-based compensation under APB 25.

     Reclassifications
     -----------------
              Certain  reclassifications  have  been  made  to the  consolidated
     financial statements for 1998 in order to conform to the 1999 presentation.

3.   Business Combinations
     ---------------------

              On March 12, 1999, the Company completed a merger transaction with
     Storage Trust Realty,  Inc. ("Storage  Trust").  As a result of the merger,
     the Company  acquired  interests  in 215 storage  facilities  located in 16
     states totaling  approximately  12 million net rentable square feet. In the
     merger,  each share of  beneficial  interest of Storage Trust was exchanged
     for 0.86 shares of the  Company's  common stock.  Approximately  13,009,485
     shares of the  Company's  common  stock were  issued and  approximately  an
     additional  1,011,963  shares were reserved for issuance upon conversion of
     limited  partnership  units in Storage Trust's operating  partnership.  The
     aggregate  acquisition cost of the merger was approximately $575.7 million,
     consisting of the issuance of the Company's  common stock of  approximately
     $347.2 million,  cash of  approximately  $105.2 million,  the assumption of
     debt in the  amount  of  $100.0  million,  and the  Company's  pre-existing
     investment in Storage Trust of approximately $23.3 million.

              On  June  30,  1999,  the  Company  acquired  all of  the  limited
     partnership  interests  in  13  affiliated   partnerships  which  owned  an
     aggregate of 36 storage facilities.  As a result of the Company's increased
     ownership  interest and control of the  partnerships,  the Company began to
     consolidate the accounts of these partnerships. The total consideration was
     approximately  $109.7 million,  consisting of cash of  approximately  $66.7
     million and the Company's  pre-existing  investment in the  Partnerships of
     approximately $43.0 million.

              On August  19,  1999,  the  Company  acquired  all of the  limited
     partnership interests in an affiliated partnership which owned four storage
     facilities.  As a result of the Company's  increased ownership interest and
     control of the  partnership,  the Company began to consolidate the accounts
     of  this  partnership.  The  total  consideration  was  approximately  $9.6
     million, consisting of cash of approximately $9.1 million and the Company's
     pre-existing investment in the Partnership of approximately $0.5 million

              The  merger  with  Storage  Trust  was  structured  as a  tax-free
     transaction.  The merger and  acquisitions  of affiliated  limited  partner
     interests have been accounted for using the purchase  method.  Accordingly,

                                       8

<PAGE>

     allocations of the total  acquisition  cost to the net assets acquired were
     made based upon the fair value of such assets and liabilities  assumed,  as
     follows:

<TABLE>
<CAPTION>
                                               Storage Trust       Partnership
                                                  Merger          Acquisitions          Total
                                               --------------     --------------     --------------
                                                             (Amounts in thousands)
<S>                                            <C>                <C>                <C>
Real estate facilities..................       $     598,577      $     130,717      $     729,294
Construction in process.................              11,449                  -             11,449
Investment in real estate entities......                 356                  -                356
Mortgage notes receivable...............               6,739                  -              6,739
Other assets............................               1,309                388              1,697
Accrued liabilities.....................             (15,745)            (6,642)           (22,387)
Minority interest.......................             (27,009)            (5,192)           (32,201)
                                               --------------     --------------     --------------
                                               $     575,676      $     119,271      $     694,947
                                               ==============     ==============     ==============
</TABLE>

              The   historical   operating   results   of  the  above   business
     combinations  prior to their dates of acquisition have not been included in
     the Company's  historical  operating results.  Pro forma selected financial
     data for the nine months  ended  September  30, 1999 and 1998 as though the
     above acquisitions had been effective at January 1, 1998 are as follows:


<TABLE>
<CAPTION>
                                                  Nine months Ended       Nine months Ended
     (In thousands, except per share data)        September 30, 1999      September 30, 1998
----------------------------------------------    ------------------      ------------------
<S>                                                      <C>                    <C>
Revenues....................................             $524,730               $504,628
Net income..................................             $213,966               $176,982
Net income per common share (Basic).........                $1.11                  $0.92
Net income per common share (Diluted).......                $1.11                  $0.92
</TABLE>

              The pro forma data does not purport to be indicative of operations
     that  would  have  occurred  had the  merger  and  acquisitions  of limited
     partnership  interests  occurred at the  beginning of each period or future
     results of operations of the Company.  Certain pro forma  adjustments  were
     made to the combined  historical amounts to reflect (i) expected reductions
     in  general  and   administrative   expenses,   (ii)  certain   significant
     acquisitions  made by  Storage  Trust in 1998,  (iii)  estimated  increased
     interest  costs to finance the cash portion of the  acquisition  cost,  and
     (iv) estimated increased depreciation expense.

                                       9

<PAGE>

4.   Real estate facilities
     ----------------------

              Activity in real estate facilities during 1999 is as follows:

                                                                  In thousands
                                                                  ------------
Operating facilities, at cost
  Balance at December 31, 1998 ................................   $ 2,962,291
  Property acquisitions - business combinations ...............       729,294
  Facilities contributed to development joint venture .........       (15,415)
  Disposition of facilities ...................................       (24,068)
  Property acquisitions - third party purchases ...............         9,962
  Developed facilities ........................................        32,401
  Acquisition of minority interest ............................        34,192
  Capital improvements ........................................        18,158
                                                                  ------------
  Balance at September 30, 1999 ...............................     3,746,815
                                                                  ------------

Accumulated depreciation:
  Balance at December 31, 1998 ................................      (411,176)
  Additions during the year ...................................       (90,950)
  Disposition of facilities ...................................         1,256
                                                                  ------------
  Balance at September 30, 1999 ...............................      (500,870)
                                                                  ------------

Construction in progress:
  Balance at December 31, 1998 ................................        83,138
  Current development .........................................        76,345
  Property acquisitions - merger with Storage Trust ...........        11,449
  Developed facilities ........................................       (32,401)
                                                                  ------------
  Balance at September 30, 1999 ...............................       138,531
                                                                  ------------

  Total real estate facilities at September 30, 1999 ..........   $ 3,384,476
                                                                  ============

              Construction in progress at September 30, 1999 includes 38 storage
     facilities and expansions of ten existing storage facilities. The Company's
     policy is to  capitalize  interest  incurred  on debt  during the course of
     construction of its storage  facilities.  Interest  capitalized  during the
     three  and  nine  months  ended  September  30,  1999  was  $1,285,000  and
     $3,231,000,  respectively,  compared with $997,000 and  $3,277,000  for the
     same periods in 1998.

              Effective April 30, 1999, the Company sold six properties acquired
     in the merger  with  Storage  Trust for  approximately  $10.5  million  and
     granted the acquirer an option to acquire an  additional  eight  properties
     acquired in the merger with Storage Trust in January 2000 for approximately
     $18.8  million.  The Company is now leasing  these eight  properties to the
     acquirer. There was no material gain or loss on this transaction.

              In addition,  during the nine months ended September 30, 1999, the
     Company disposed of a developed industrial facility, two storage facilities
     through condemnation proceedings,  and three plots of land for an aggregate
     of approximately $12.2 million. There was no material gain or loss on these
     transactions.

5.   Investment in real estate entities
     ----------------------------------

              At September  30, 1999,  the  Company's  investment in real estate
     entities  consists  of  (i)  partnership   interests  in  approximately  13
     affiliated partnerships,  which principally own storage facilities,  (ii) a

                                       10

<PAGE>

     partnership interest in a joint venture, established to develop and operate
     storage  facilities and (iii) ownership interest in PSB. Such interests are
     accounted for using the equity method of accounting.

              In April 1997, the Company formed a joint venture partnership with
     an  institutional  investor  (the "Joint  Venture") to  participate  in the
     development of approximately $220 million of storage facilities.  The Joint
     Venture  has a total of 41 opened  facilities  with a total  cost of $193.1
     million  at  September  30,  1999,  and has 5 projects  in process  with an
     aggregate  cost  incurred  to date of  approximately  $19.2  million  ($9.6
     million estimated to complete) at September 30, 1999.

              Summarized combined financial data (based on historical cost) with
     respect to those  unconsolidated  real estate entities in which the Company
     had an ownership interest at September 30, 1999 are as follows:

<TABLE>
<CAPTION>
                                                               For the nine months ended September 30, 1999
                                                   --------------------------------------------------------------------
                                                    Other Equity      Development
                                                     Investments     Joint Venture          PSB             Total
                                                   --------------    --------------    --------------    --------------
                                                                          (Amounts in thousands)

     <S>                                               <C>            <C>               <C>              <C>
     Rental income...........................          $ 36,784       $   10,500        $    92,544      $   139,828
     Other income............................               921              449              1,236            2,606
                                                   --------------    --------------    --------------    --------------
     Total revenues..........................            37,705           10,949             93,780          142,434
                                                   --------------    --------------    --------------    --------------

     Cost of operations......................            11,421            5,372             26,021           42,814
     Depreciation............................             4,420            2,996             21,641           29,057
     Other expenses..........................             3,531               59              4,997            8,587
                                                   --------------    --------------    --------------    --------------
     Total expenses..........................            19,372            8,427             52,659           80,458
                                                   --------------    --------------    --------------    --------------

     Net income before minority interest.....            18,333            2,522             41,121           61,976
     Minority interest.......................                 -                -            (10,769)         (10,769)
                                                   --------------    --------------    --------------    --------------
     Net income..............................          $ 18,333       $    2,522        $    30,352      $    51,207
                                                   ==============    ==============    ==============    ==============
     At September 30, 1999:
     Real estate, net .......................          $112,239       $  207,729        $   779,142      $ 1,099,110
     Total assets............................           145,414          211,319            906,387        1,263,120
     Total liabilities.......................            59,533           11,006             65,038          135,577
     Minority interest.......................                 -                -            288,960          288,960
     Total equity............................            85,881          200,313            552,389          838,583

     The Company's investment (book value) at
       September 30, 1999....................          $136,333       $   60,094        $   243,952      $   440,379

     The Company's effective average ownership
       interest at September 30, 1999........               40%              30%                41%              39%
</TABLE>

6.   Revolving line of credit
     ------------------------

              As of September  30, 1999,  the Company had no  borrowings  on its
     unsecured  credit  agreement with a group of commercial  banks.  The credit
     agreement (the "Credit Facility") has a borrowing limit of $150 million and
     an expiration date of July 31, 2001. The expiration date may be extended by
     one  year  on  each  anniversary  of  the  credit  agreement.  Interest  on
     outstanding  borrowings is payable  monthly.  At the option of the Company,
     the rate of interest  charged is equal to (i) the prime rate or (ii) a rate
     ranging  from the London  Interbank  Offered Rate  ("LIBOR")  plus 0.40% to

                                       11

<PAGE>

     LIBOR plus 1.10%  depending on the  Company's  credit  ratings and coverage
     ratios, as defined. In addition, the Company is required to pay a quarterly
     commitment  fee of 0.250% (per  annum) of the unused  portion of the Credit
     Facility. The Credit Facility allows the Company, at its option, to request
     the  group of banks to  propose  the  interest  rate they  would  charge on
     specific borrowings not to exceed $50 million.  However, in no case may the
     interest  rate  proposal be greater than the amount  provided by the Credit
     Facility.

7.   Minority interest
     -----------------

              In consolidation,  the Company classifies  ownership  interests in
     the net assets of each of the Consolidated Entities, other than its own, as
     minority  interest  on  the  consolidated  financial  statements.  Minority
     interest  in  income  consists  of the  minority  interests'  share  of the
     operating results of the Company relating to the consolidated operations of
     the  Consolidated  Entities,  except as  described  below  with  respect to
     minority interest acquired in the merger with Storage Trust.

              In  connection  with  the  merger  with  Storage  Trust,  minority
     interest  increased by  approximately  $27.0  million,  reflecting the fair
     value of  1,011,963  operating  partnership  units ("OP  Units") in Storage
     Trust's operating partnership owned by minority interests.  As of September
     30, 1999,  770,892 of such units are outstanding.  OP Units are convertible
     on a one-for-one basis (subject to certain  limitations) into common shares
     of the Company at the option of the unitholder. Minority interest in income
     with respect to OP Units  reflects the OP Units' share of the net income of
     the Company,  with net income allocated to minority  interests with respect
     to  weighted  average  outstanding  OP Units on a per unit  basis  equal to
     diluted  earnings per common share.  During the nine months ended September
     30, 1999,  241,071 OP units were exchanged for an equal number of shares of
     the Company's common stock, for a total cost of approximately $6.4 million.
     These  transactions  had  the  effect  of  reducing  minority  interest  by
     approximately $6.4 million.

              In addition,  during the nine months ended September 30, 1999, the
     Company   acquired  limited   partnership   interests  in  certain  of  the
     Consolidated  Entities in several  transactions  for an  aggregate  cost of
     $56.4 million,  consisting of approximately $27.2 million in cash and $29.2
     million in the issuance of the Company's common stock.  These  transactions
     had the  effect  of  reducing  minority  interest  by  approximately  $22.2
     million.  The  excess of the cost over the  underlying  book  value  ($34.2
     million) has been allocated to real estate facilities in consolidation.

8.   Shareholders' equity
     --------------------

     Preferred stock
     ---------------
              At September  30, 1999 and December 31, 1998,  the Company had the
     following series of Preferred Stock outstanding:

                                       12

<PAGE>

<TABLE>
<CAPTION>
                                               At September 30, 1999              At December 31, 1998
                                            ------------------------------     ------------------------------
                                Dividend       Shares                             Shares
               Series             Rate      Outstanding   Carrying Amount      Outstanding  Carrying Amount
----------------------------   ----------   -----------  -----------------     -----------  -----------------
<S>                            <C>            <C>         <C>                   <C>         <C>
Series A ..................        10.000     1,825,000   $   45,625,000        1,825,000   $   45,625,000
Series B ..................         9.200     2,386,000       59,650,000        2,386,000       59,650,000
Series C ..................    Adjustable     1,200,000       30,000,000        1,200,000       30,000,000
Series D ..................         9.500     1,200,000       30,000,000        1,200,000       30,000,000
Series E ..................        10.000     2,195,000       54,875,000        2,195,000       54,875,000
Series F ..................         9.750     2,300,000       57,500,000        2,300,000       57,500,000
Series G ..................         8.875         6,900      172,500,000            6,900      172,500,000
Series H ..................         8.450         6,750      168,750,000            6,750      168,750,000
Series I ..................         8.625         4,000      100,000,000            4,000      100,000,000
Series J ..................         8.000         6,000      150,000,000            6,000      150,000,000
Series K ..................         8.250         4,600      115,000,000                -                -
Series L ..................         8.250         4,600      115,000,000                -                -
Series M ..................         8.750         2,250       56,250,000                -                -
                                            -----------  -----------------     -----------  -----------------
Total  Cumulative  Senior  Preferred
   Stock ...........................         11,141,100   $1,155,150,000       11,129,650   $  868,900,000
                                            ===========  =================     ===========  =================
</TABLE>

              On January 19,  1999,  the Company  issued 4.6 million  depositary
     shares  (each  representing  1/1,000  of a share) of its  Preferred  Stock,
     Series K, raising net proceeds of  approximately  $111.3 million.  On March
     10,  1999,  the  Company  issued  4.6  million   depositary   shares  (each
     representing  1/1,000 of a share) of its Preferred Stock, Series L, raising
     net proceeds of  approximately  $111.3  million.  On August 12,  1999,  the
     Company issued 2.25 million depositary shares (each representing 1/1,000 of
     a share)  of its  Preferred  Stock,  Series  M,  raising  net  proceeds  of
     approximately $54.4 million.

              Holders of the Company's  preferred  stock will not be entitled to
     vote on most matters,  except under certain  conditions and as noted above.
     In the event of a cumulative  arrearage equal to six quarterly dividends or
     failure by the  Company to  maintain  a Debt Ratio (as  defined)  of 50% or
     less, the holders of all outstanding series of preferred stock (voting as a
     single  class  without  regard to series)  will have the right to elect two
     additional  members to serve on the Company's  Board of Directors until all
     events of default  have been cured.  At September  30, 1999,  there were no
     dividends in arrears and the Debt Ratio was 4.1%.

              Except  under  certain   conditions   relating  to  the  Company's
     qualification  as a REIT,  the Senior  Preferred  Stock are not  redeemable
     prior to the following dates: Series A - September 30, 2002, Series B March
     31, 2003, Series C - June 30, 1999, Series D - September 30, 2004, Series E
     - January 31,  2005,  Series F - April 30,  2005,  Series G - December  31,
     2000,  Series H - January 31, 2001, Series I - October 31, 2001, Series J -
     August 31, 2002, Series K - January 19, 2004, Series L - March 10, 2004 and
     Series M - August 17, 2004. On or after the respective  dates,  each of the
     series of Senior  Preferred  Stock will be  redeemable at the option of the
     Company,  in whole or in part. The  redemption  price will be $25 per share
     (or  depositary  share in the case of the  Series G,  Series  H,  Series I,
     Series J,  Series K,  Series L and Series M),  plus any  accrued and unpaid
     dividends.

     Equity Stock
     ------------
              The Company is  authorized to issue  200,000,000  shares of Equity
     Stock. The Articles of  Incorporation  provide that the Equity Stock may be
     issued  from  time to time in one or more  series  and  give  the  Board of
     Directors  broad  authority to fix the dividend  and  distribution  rights,
     conversion and voting rights,  redemption provisions and liquidation rights
     of each series of Equity Stock.

                                       13

<PAGE>

     Common Stock
     ------------
              During the nine  months  ended  September  30,  1999,  the Company
     issued 13,009,485 shares of common stock in connection with the merger with
     Storage  Trust,  1,131,487  shares of common stock in  connection  with the
     acquisition  of  minority  interests,  405,822  shares of  common  stock in
     connection with the exercise of stock options, and 241,071 shares of common
     stock in connection with the conversion of OP units.

              In June 1998,  the  Company's  Board of Directors  authorized  the
     repurchase  from time to time of up to  10,000,000  shares of the Company's
     common  stock on the open market or in privately  negotiated  transactions.
     During the nine months ended September 30, 1999, the Company  repurchased a
     total of 1,828,527  shares,  for a total  aggregate  cost of  approximately
     $46.5  million.  Cumulatively  since the  repurchase  announcement  through
     September 30, 1999, the Company has repurchased a total of 4,647,927 shares
     of common stock (of the 10,000,000 shares  authorized) at an aggregate cost
     of approximately  $118.8 million.  From October 1, 1999 through October 27,
     1999, the Company  repurchased an additional 357,200 shares of common stock
     at an aggregate cost of approximately $8.6 million.

     Class B Common Stock
     --------------------
              The Class B Common Stock will (i) not participate in distributions
     until the later to occur of funds from operations  ("FFO") per Common Share
     as defined below,  aggregating  $1.80 during any period of four consecutive
     calendar quarters, or January 1, 2000. Thereafter, the Class B Common Stock
     will participate in distributions, other than liquidating distributions, at
     the  rate  of 97% of the  per  share  distributions  on the  Common  Stock,
     provided that  cumulative  distributions  of at least $0.22 per quarter per
     share  have  been  paid  on the  Common  Stock,  (ii)  not  participate  in
     liquidating  distributions,  (iii)  not be  entitled  to  vote  (except  as
     expressly required by California law) and (iv)  automatically  convert into
     Common  Stock,  on a share for share basis,  upon the later to occur of FFO
     per Common Share  aggregating  $3.00 during any period of four  consecutive
     calendar quarters or January 1, 2003.

              For these  purposes,  FFO means net income  (loss) before (i) gain
     (loss) on early  extinguishment  of debt, (ii) minority  interest in income
     and (iii) gain (loss) on disposition  of real estate,  adjusted as follows:
     (i) plus depreciation and  amortization,  and (ii) less FFO attributable to
     minority  interest.  FFO per Common  Share means FFO less  preferred  stock
     dividends (other than dividends on convertible  preferred stock) divided by
     the outstanding weighted average shares of Common Stock assuming conversion
     of all outstanding convertible securities and the Class B Common Stock.

              For these purposes, FFO per share of Common Stock (as defined) was
     $2.57 for the four consecutive calendar quarters ended September 30, 1999.

     Dividends
     ---------
              The  following  summarizes  dividends  paid  during the first nine
     months of 1999:

                                       14

<PAGE>

                              Distributions Per Share
                                 or Depositary Share       Total Distributions
                               -----------------------   -----------------------
     Series A................           $1.875                $   3,422,000
     Series B................           $1.725                    4,116,000
     Series C................           $1.266                    1,519,000
     Series D................           $1.781                    2,137,000
     Series E................           $1.875                    4,116,000
     Series F................           $1.828                    4,205,000
     Series G................           $1.664                   11,482,000
     Series H................           $1.584                   10,694,000
     Series I................           $1.617                    6,469,000
     Series J................           $1.500                    9,000,000
     Series K ...............           $1.449                    6,668,000
     Series L ...............           $1.157                    5,323,000
     Series M ...............           $0.273                      615,000
                                                         -----------------------
                                                                 69,766,000
     Common..................           $0.66                    85,096,000
                                                         -----------------------
        Total dividends paid.                                 $ 154,862,000
                                                         =======================

              The  dividends  paid with  respect to the  Series K,  Series L and
     Series M,  represent  a partial  period  from the date of  issuance  though
     September 30, 1999.

              The dividend rate on the Series C Preferred  Stock for the each of
     the three quarters of 1999 was equal to 6.75% per annum.  The dividend rate
     per annum will be  adjusted  quarterly  and will be equal to the highest of
     one of three U.S.  Treasury indices  (Treasury Bill Rate, Ten Year Constant
     Maturity Rate, or Thirty Year Constant  Maturity Rate)  multiplied by 110%.
     However,  the dividend  rate for any  dividend  period will neither be less
     than 6.75% per annum nor greater  than 10.75%.  The  dividend  rate for the
     quarter ending December 31, 1999 will be equal to 6.75% per annum.

9.   Segment Information
     -------------------

              In July 1997,  the FASB issued  Statement of Financial  Accounting
     Standards No. 131, "Disclosures about Segments of an Enterprise and Related
     Information"  ("FAS 131"),  which  establishes  standards  for the way that
     public business  enterprises report  information about operating  segments.
     This statement is effective for financial  statements for periods beginning
     after  December 15, 1997.  The Company has adopted this standard  beginning
     with the year ended December 31, 1998.

              DESCRIPTION OF EACH REPORTABLE SEGMENT:  The Company's  reportable
     segments reflect the Company's  significant  operating  activities that are
     evaluated  separately  by  management.   The  company  has  two  reportable
     segments: storage operations and commercial property operations.

              The storage segment comprises the direct  ownership,  development,
     and operation of storage  facilities and the ownership of equity  interests
     in entities that own storage  properties.  The commercial  property segment
     reflects the Company's interest in the ownership, operation, and management
     of commercial  properties.  The vast  majority of the Company's  commercial
     property  operations are conducted through PSB, and to a much lesser extent
     the Company and certain of its  unconsolidated  subsidiaries own commercial
     space,   managed  by  PSB,  within  facilities  that  combine  storage  and
     commercial space for rent.

                                       15

<PAGE>

              MEASUREMENT  OF  SEGMENT  PROFIT OR LOSS:  The  Company  evaluates
     performance  and allocates  resources  based upon the net segment income of
     each segment.  Net segment income  represents net income in conformity with
     Generally  Accepted  Accounting  Principles  and the Company's  significant
     accounting policies as denoted in Note 2, before interest and other income,
     depreciation expense, interest expense, general and administrative expense,
     and minority  interest in income.  This net segment  income is reflected on
     the Company's  financial  statements  not only as rental income and cost of
     operations,  but also as a  component  of equity in earnings of real estate
     entities.  The accounting  policies of the reportable segments are the same
     as those described in the Summary of Significant Accounting Policies.

              Corporate general and  administrative  expense,  interest expense,
     interest and other income,  depreciation  expense, and minority interest in
     income are not allocated to segments  because  management  does not utilize
     them to evaluate of the results of operations of each segment.

              MEASUREMENT OF SEGMENT ASSETS:  No segment data relative to assets
     or  liabilities is presented by the Company,  management  does not evaluate
     performance   based  upon  the  assets  or  liabilities  of  the  segments.
     Management believes that the historical cost of the Company's real property
     does  not  have  any  significant  bearing  upon  the  performance  of  the
     commercial  property and storage segments.  In the same manner,  management
     believes that the book value of investment in real estate  entities have no
     bearing  upon the  results of those  investments.  The only other  types of
     assets  that  might  be   allocated  to   individual   segments  are  trade
     receivables,  payables, and other assets which arise in the ordinary course
     of business,  but they are also not a significant factor in the measurement
     of segment performance.  The company performs  post-acquisition analysis of
     various investments;  however, such evaluations are beyond the scope of FAS
     131.

              PRESENTATION  OF  SEGMENT   INFORMATION:   The  Company's   income
     statement  provides most of the information  required in order to determine
     the  performance of each of the Company's  segments.  The following  tables
     reconcile the performance of each segment, in terms of segment revenues and
     segment income, to the consolidated revenues and net income of the Company.
     It  further  provides  detail  of the  segment  components  of  the  income
     statement item, "Equity in earnings of real estate entities."

<TABLE>
<CAPTION>
                                                                      Nine months ended
                                                                         September 30,
                                                                   -----------------------
                                                                     1999          1998         Change
                                                                   ---------     ---------     ---------
                                                                       (Dollar amounts in thousands)

RECONCILIATION OF REVENUES BY SEGMENT:

Storage
-------
<S>                                                                <C>           <C>            <C>
  Storage property rentals.................................        $456,633      $379,019       $77,614
  Equity in earnings - storage property operations.........          15,483        14,161         1,322
                                                                   ---------     ---------     ---------
      Storage segment revenues.............................         472,116       393,180        78,936
                                                                   ---------     ---------     ---------
Commercial  properties
----------------------
  Commercial property rentals..............................           5,973        21,229       (15,256)
  Equity in earnings - commercial property operations......          26,531        14,881        11,650
                                                                   ---------     ---------     ---------
      Commercial properties  segment revenues..............          32,504        36,110        (3,606)
                                                                   ---------     ---------     ---------
Other items not allocated to segments
-------------------------------------
  Equity in earnings - Depreciation (storage) .............          (5,784)       (5,084)         (700)
  Equity in earnings - Depreciation (commercial properties)          (8,621)       (4,818)       (3,803)
  Equity in earnings - general and administrative and other          (3,640)       (2,542)       (1,098)
  Interest and other income................................          12,640        15,950        (3,310)
                                                                   ---------     ---------     ---------
      Total other items not allocated to segments..........          (5,405)        3,506        (8,911)
                                                                   ---------     ---------     ---------
      Total revenues.......................................        $499,215      $432,796       $66,419
                                                                   =========     =========     =========
</TABLE>

                                       16

<PAGE>

<TABLE>
<CAPTION>
                                                                     Nine months ended
                                                                        September 30,
                                                                  -----------------------
                                                                     1999         1998       Change
                                                                  ----------  -----------  ----------
                                                                     (Dollar amounts in thousands)
RECONCILIATION OF NET INCOME BY SEGMENT:

Storage
-------
<S>                                                               <C>         <C>          <C>
  Storage properties ......................................       $  300,611  $  232,600   $  68,011
  Equity in earnings - storage property operations.........           15,483      14,161       1,322
                                                                  ----------  -----------  ----------
      Total storage segment net income.....................          316,094     246,761      69,333
                                                                  ----------  -----------  ----------

Commercial  properties
----------------------
  Commercial properties....................................            3,980      14,042     (10,062)
  Equity in earnings - commercial property operations......           26,531      14,881      11,650
                                                                  ----------  -----------  ----------
      Total commercial property segment net income.........           30,511      28,923       1,588
                                                                  ----------  -----------  ----------

Other items not allocated to segments
-------------------------------------
  Equity in earnings - depreciation (storage) .............           (5,784)     (5,084)       (700)
  Equity in earnings - depreciation (commercial properties)           (8,621)     (4,818)     (3,803)
  Equity in earnings - general and administrative and other           (3,640)     (2,542)     (1,098)
  Depreciation - storage...................................         (100,238)    (77,976)    (22,262)
  Depreciation - commercial properties.....................           (1,327)     (4,707)      3,380
  Interest and other income................................           12,640      15,950      (3,310)
  General and administrative...............................           (9,371)     (9,591)        220
  Interest expense.........................................           (5,870)     (2,926)     (2,944)
  Minority interest in income..............................          (12,149)    (16,141)      3,992
                                                                  ----------  -----------  ----------
      Total other items not allocated to segments..........         (134,360)   (107,835)    (26,525)
                                                                  ----------  -----------  ----------

      Total net income ....................................       $  212,245  $  167,849   $  44,396
                                                                  ==========  ===========  ==========
</TABLE>

10.  Subsequent Events
     -----------------

              On November 4, 1999, the Company's  Board of Directors  declared a
     $0.22 per common share quarterly  dividend,  along with quarterly dividends
     payable on the Company's  various series of preferred stock.  Distributions
     are payable on December 31, 1999 to  shareholders  of record as of December
     15, 1999.

              In   addition,   the  Board  of   Directors   declared  a  special
     distribution to the Company's common shareholders. The special distribution
     is  comprised of (i) $.65 per common share  payable in  depositary  shares,
     representing  interests in Equity Stock,  Series A, with cash being paid in
     lieu  of  fractional  shares  or  (ii)  at  the  election  of  each  common
     shareholder $.62 per common share payable in cash. The special distribution
     is payable on January 14, 2000 to shareholders of record as of November 15,
     1999.

              No shares of Equity Stock, Series A are presently outstanding, and
     no  market  currently  exists  for the  Equity  Stock.  The  fair  value of
     depositary  shares  on the  date  of  payment  is  expected  to be $20  per
     depositary share. The valuation of the depositary shares will be determined
     by our Board of Directors based on advice from a financial advisor.

                                       17

<PAGE>

              The  following  summarizes  the  terms  of the  depositary  shares
     representing the Equity Stock, Series A:

(i)               Distributions: During any calendar year (prorated for the year
                  2000),  each depositary  share shall receive the lesser of: a)
                  five times the per share  dividend  on the Common  Stock or b)
                  $2.45.

(ii)              Redemption:  except in order to preserve the Company's federal
                  income tax status as a REIT,  the  Company  may not redeem the
                  depositary shares before March 31, 2005. On or after March 31,
                  2005,  the Company may, at its option,  redeem the  depositary
                  shares at $24.50 per depositary share.

(iii)             Liquidation:  if the Company is liquidated, the amount payable
                  per  depositary  share is the same as the amount  payable  per
                  share of the Company's  common stock, but cannot exceed $24.50
                  per depositary share.

(iv)              Preferences: the depositary shares have no preference over the
                  Company's   common   stock   either  as  to  dividends  or  in
                  liquidation,  and the Company has no  obligation to redeem the
                  depositary shares.

(v)               Conversion:  if the  Company  fails to  preserve  its  federal
                  income tax status as a REIT,  the  depositary  shares  will be
                  convertible  into  common  stock.  The  depositary  shares are
                  otherwise not convertible into common stock.

(vi)              Voting rights:  holders of depositary  shares vote as a single
                  class with our holders of common stock on shareholder matters,
                  but the depositary  shares have the equivalent of one-tenth of
                  a vote per depositary share.

                                       18

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        ------------------------------------------------------------------------
        OF OPERATIONS
        -------------

         The following  discussion  and analysis  should be read in  conjunction
with the Company's consolidated financial statements and notes thereto.

         FORWARD LOOKING STATEMENTS:  When used within this document,  the words
"expects,"  "believes,"   "anticipates,"   "should,"  "estimates,"  and  similar
expressions  are intended to identify  "forward-looking  statements"  within the
meaning of that term in Section 27A of the  Securities  Exchange Act of 1933, as
amended,  and in Section 21F of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks,  uncertainties,
and other  factors,  which may cause the actual  results and  performance of the
Company  to be  materially  different  from  those  expressed  or implied in the
forward looking statements.  Such factors include the impact of competition from
new and existing storage and commercial  facilities which could impact rents and
occupancy levels at the Company's facilities; the Company's ability to evaluate,
finance,  and  integrate  acquired and developed  properties  into the Company's
existing operations; the Company's ability to effectively compete in the markets
that it does business in; the impact of the  regulatory  environment  as well as
national,  state, and local laws and regulations including,  without limitation,
those governing Real Estate  Investment  Trusts;  the acceptance by consumers of
the Pickup and Delivery concept;  the impact of general economic conditions upon
rental  rates  and  occupancy  levels  at  the  Company's  facilities;  and  the
availability of permanent capital at attractive rates.

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

         Net  income  for  the  three  months  ended   September  30,  1999  was
$76,752,000 compared to $62,286,000 for the same period in 1998, representing an
increase of $14,466,000 or 23.2%. Net income for the nine months ended September
30, 1999 was $212,245,000  compared to $167,849,000 for the same period in 1998,
representing an increase of $44,396,000 or 26.4%. The increase in net income was
primarily  the  result of  improved  property  operations,  the  acquisition  of
additional  real estate  investments  during 1998 and 1999 and the  reduction in
losses with respect to the portable self-storage operations.

         Net income allocable to the common  shareholders was $52,340,000 ($0.40
per diluted common share, based on 129,249,000  weighted average diluted shares)
for the three months ended September 30, 1999 compared to $43,233,000 ($0.37 per
diluted common share, based on 116,726,000  weighted average diluted shares) for
the same period in 1998. In computing net income per common share,  dividends to
the Company's preferred shareholders ($24,412,000 and $19,053,000,  respectively
for the three months ended September 30, 1999 and 1998,  respectively) have been
deducted from net income in  determining  net income  allocable to the Company's
common shareholders.

         Net income allocable to the common shareholders was $142,479,000 ($1.13
per diluted common share, based on 125,833,000  weighted average diluted shares)
for the nine months ended September 30, 1999 compared to $108,527,000 ($0.95 per
diluted common share, based on 113,762,000  weighted average diluted shares) for
the same period in 1998. In computing net income per common share,  dividends to
the Company's preferred  shareholders  ($69,766,000 and $59,322,000 for the nine
months ended September 30, 1999 and 1998,  respectively) have been deducted from
net  income  in  determining  net  income  allocable  to  the  Company's  common
shareholders.

REAL ESTATE OPERATIONS
--------------------------------------------------------------------------------

         Rental income and cost of operations  have  increased for the three and
nine months ended  September  30, 1999  compared to the same periods in 1998 due
primarily to the Company's merger and acquisition activities throughout 1998 and
1999, most notably the merger with Storage Trust.  This was offset  partially by
the deconsolidation of PSB whereby the accounts of PSB, effective April 1, 1998,
were no longer  consolidated with the Company's and the Company began to account
for its investment in PSB using the equity method.  As a result of the Company's
merger and acquisition activities,  the number of storage facilities included in
the  Company's  consolidated  financial  statements  has  increased  from 953 at
September 30, 1998 to 1,201 at September 30, 1999.

                                       19

<PAGE>

         STORAGE  OPERATIONS:  The  following  table  summarizes  the  operating
results (before depreciation) of (i) the 885 storage facilities that the Company
has owned and operated on a stabilized  basis throughout the period from January
1, 1998 to September 30, 1999 (the  "Consistent  Group") and (ii) operations for
all other storage facilities:

SUMMARY OF STORAGE OPERATIONS - HISTORICAL
------------------------------------------

<TABLE>
<CAPTION>
                                           Three months ended                         Nine months ended
                                             September 30,                              September 30,
                                          ----------------------                     ----------------------
                                            1999         1998      Change              1999         1998      Change
                                          ---------    ---------  ---------          ---------    ---------  ---------
                                                     (Amounts in thousands, except per square foot data)

Rental income
-------------
<S>                                       <C>          <C>            <C>            <C>          <C>            <C>
    Consistent Group.............         $124,970     $120,407       3.8%           $362,506     $347,445       4.3%
    Other facilities.............           41,013       15,758     160.3%             94,127       31,574     198.1%
                                          ---------    ---------  ---------          ---------    ---------  ---------
                                           165,983      136,165      21.9%            456,633      379,019      20.5%
                                          ---------    ---------  ---------          ---------    ---------  ---------
Cost of Operations
------------------
    Consistent Group.............           35,443       35,113       0.9%            107,064      104,483       2.5%
    Other facilities.............           18,823       14,895      26.4%             48,958       41,936      16.7%
                                          ---------    ---------  ---------          ---------    ---------  ---------
                                            54,266       50,008       8.5%            156,022      146,419       6.6%
                                          ---------    ---------  ---------          ---------    ---------  ---------
Net operating income
--------------------
    Consistent Group.............           89,527       85,294       5.0%            255,442      242,962       5.1%
    Other facilities.............           22,190          863   2,471.3%             45,169      (10,362)        -
                                          ---------    ---------  ---------          ---------    ---------  ---------
                                          $111,717      $86,157      29.7%           $300,611     $232,600      29.2%
                                          =========    =========  =========          =========    =========  =========
FOR FACILITIES OWNED AT PERIOD END:

Number of facilities.............            1,201          953      26.0%              1,201          953      26.0%

Net rentable square feet
    (in 000's)...................           71,137       57,262      24.2%             71,137        57,262     24.2%

CONSISTENT GROUP DATA:

Weighted average annualized
    realized rent per occupied
    square foot..................            $10.26       $9.86       4.1%              $10.00        $9.59      4.3%
Weighted average annualized
    scheduled rent per square                $10.25      $10.09       1.6%              $10.23        $9.99      2.4%
    foot.........................
Weighted average occupancy for
    the period...................             93.0%       93.4%      (0.4)%              92.2%        92.3%     (0.1)%

</TABLE>

         Operations  with  respect to the "other  facilities"  include a partial
period of operations  with respect to facilities  that were acquired or disposed
of since January 1, 1998, as well as other  facilities that were not operated on
a stabilized basis throughout this period.

         Rental income for the  Consistent  Group  facilities  for the three and
nine months  ended  September  30,  1999,  respectively,  is net of  promotional
discounts  totaling $2.9 million and $10.4  million,  respectively,  compared to
$3.4 million and $11.2 million for the same periods in 1998. Costs of operations
for the  Consistent  Group  facilities  for the  three  and  nine  months  ended
September 30, 1999,  respectively,  includes costs associated with the telephone
reservation  center and  advertising  totaling  $3.4 million and $10.6  million,
respectively,  compared to $2.8 million and $8.3 million,  respectively, for the
same periods in 1998.

         COMMERCIAL  PROPERTY  OPERATIONS:  The  following  table sets forth the
commercial property operations included in the Company's financial statements:

                                       20

<PAGE>

   COMMERCIAL PROPERTY OPERATIONS - HISTORICAL
   -------------------------------------------

<TABLE>
<CAPTION>
                                      Three months ended                             Nine months ended
                                        September 30,                                  September 30,
                                   -----------------------                        -----------------------
                                     1999          1998          Change             1999          1998         Change
                                   ---------     ---------     ---------          ---------     ---------     ---------
                                                                (Amounts in thousands)

   <S>                             <C>           <C>              <C>             <C>            <C>           <C>
   Rental income.............      $  2,111      $   1,833        15.2%           $  5,973       $ 21,229      (71.9)%
   Cost of operations........           724            685         5.7%              1,993          7,187      (72.3)%
                                   ---------     ---------     ---------          ---------     ---------     ---------
   Net operating income......      $  1,387      $   1,148        20.8%           $  3,980       $ 14,042      (71.7)%
                                   =========     =========     =========          =========     =========     =========
</TABLE>

         During  the  second  quarter  of 1998,  the  Company  ceased  to have a
controlling  interest in PSB. As a result,  effective April 1, 1998, the Company
no longer includes the accounts of PSB in its consolidated  financial statements
and began  accounting  for its  investment  in PSB using the equity  method (see
"Equity in earnings of real estate entities"). The income statement for the nine
months ended September 30, 1998 includes the consolidated  operating  results of
PSB for the three  months  ended March 31,  1998.  The  significant  decrease in
rental  income and cost of  operations  for the nine months ended  September 30,
1999  as  compared  to  the  same  period  in  1998   reflects   the   Company's
deconsolidation of PSB.

         EQUITY  IN  EARNINGS  OF  REAL  ESTATE  ENTITIES:  In  addition  to its
ownership of 12,723,625  common shares and operating  partnership  units in PSB,
the  Company  had  general  and  limited  partnership  interests  in 14  limited
partnerships  at  September  30,  1999.  (PSB and the limited  partnerships  are
collectively referred to as the "Unconsolidated Entities"). Due to the Company's
limited  ownership  interest and limited control of these entities,  the Company
does not  consolidate  the accounts of these  entities for  financial  reporting
purposes, and accounts for such investments using the equity method.

         Equity in earnings of real estate  entities  for the nine months  ended
September   30,  1999   consists  of  the   Company's  pro  rata  share  of  the
Unconsolidated  Entities  based upon the  Company's  ownership  interest for the
period. In the aggregate,  the  Unconsolidated  Entities own a total of 245 real
estate facilities, 122 of which are storage facilities. The following table sets
forth the  significant  components of the  Company's  equity in earnings of real
estate entities:

<TABLE>
<CAPTION>
                                       Three months ended                           Nine months ended
                                         September 30,                                September 30,
                                   -------------------------                      -----------------------
                                      1999         1998            Change           1999          1998         Change
                                   ---------       ---------      ---------       ---------     ---------     ---------
                                                                 ( Amounts in thousands)
  Property operations:
  <S>                               <C>            <C>             <C>            <C>           <C>          <C>
      PSB......................     $  9,231       $  7,437        $ 1,794        $ 26,531      $ 14,881      $ 11,650
      Development Joint Venture          690            252            438           1,605           432         1,173
      Other partnerships.......        3,674          3,061            613          13,878        13,729           149
                                   ---------       ---------      ---------       ---------     ---------     ---------
                                      13,595         10,750          2,845          42,014        29,042        12,972
                                   ---------       ---------      ---------       ---------     ---------     ---------
  Depreciation:
      PSB......................       (3,014)        (2,423)          (591)         (8,621)       (4,818)       (3,803)
      Development Joint Venture         (335)          (173)          (162)           (900)         (364)         (536)
      Other partnerships.......       (1,482)          (667)          (815)         (4,884)       (4,720)         (164)
                                   ---------       ---------      ---------       ---------     ---------     ---------
                                      (4,831)        (3,263)        (1,568)        (14,405)       (9,902)       (4,503)
                                   ---------       ---------      ---------       ---------     ---------     ---------
  Other: (1)
      PSB......................       (1,479)          (275)        (1,204)         (3,362)         (776)       (2,586)
      Development Joint Venture            8             29            (21)             51            87           (36)
      Other partnerships.......         (793)          (579)          (214)           (329)       (1,853)        1,524
                                   ---------       ---------      ---------       ---------     ---------     ---------
                                      (2,264)          (825)        (1,439)         (3,640)       (2,542)       (1,098)
                                   ---------       ---------      ---------       ---------     ---------     ---------

  Total equity in earnings of
    real estate entities.......     $  6,500       $  6,662        $  (162)       $ 23,969      $ 16,598      $  7,371
                                   =========       =========      =========       =========     =========     =========
</TABLE>

                                       21

<PAGE>

         (1)  "Other" reflects the Company's share of general and administrative
              expense,    interest   expense,   interest   income,   and   other
              non-property,  non-depreciation related operating results of these
              entities.  For  PSB,  it also  includes  the  Company's  share  of
              preferred dividends paid by PSB.


         The  increase  in 1999  earnings  compared to 1998 is  principally  the
result of the  deconsolidation  of PSB  whereby the  accounts of PSB,  effective
April 1, 1998,  were no longer  consolidated  with the Company's and the Company
began to account for its investment in PSB using the equity method.

OTHER INCOME AND EXPENSE ITEMS
--------------------------------------------------------------------------------

         INTEREST AND OTHER INCOME: The Company operates  additional  businesses
through affiliates,  including management of facilities,  retail sales of locks,
boxes, and packing supplies as well as the rental of trucks.  The net results of
these  businesses  are  presented  along  with  interest  and other  income,  as
"interest  and other  income." The  components  of interest and other income are
detailed as follows:

  INTEREST AND OTHER INCOME:
  --------------------------
<TABLE>
<CAPTION>
                                       Three months ended                           Nine months ended
                                         September 30,                                September 30,
                                    -------------------------                     ------------------------
                                       1999           1998           Change          1999          1998         Change
                                    ----------     ----------      ----------     ----------    ----------    ----------
                                                                 (Amounts in thousands)
  Sales of packaging material and
  truck rental income:
  <S>                               <C>            <C>               <C>          <C>           <C>              <C>
     Revenues.................      $   3,987      $   2,572         55.0%        $   9,606     $   6,243        53.9%
     Cost of operations.......         (2,801)        (1,764)        58.8%           (6,998)       (4,897)       42.9%
                                    ----------     ----------      ----------     ----------    ----------    ----------
       Net operating income...          1,186            808         46.8%            2,608         1,346        93.8%
  Facility management
     Revenues.................          1,327          1,388         (4.4)%           4,150         4,805       (13.6)%
     Cost of operations.......           (179)          (226)       (20.8)%            (651)         (780)      (16.5)%
                                    ----------     ----------      ----------     ----------    ----------    ----------
       Net operating income...          1,148          1,162         (1.2)%           3,499         4,025       (13.1)%
  Interest and other income...          2,035          3,113        (34.6)%           6,533        10,579       (38.2)%
                                    ----------     ----------      ----------     ----------    ----------    ----------
   Total interest and other
   income.....................      $   4,369      $   5,083        (14.0)%       $  12,640     $  15,950       (20.8)%
                                    ==========     ==========      ==========     ==========    ==========    ==========
</TABLE>

         Interest and other income  principally  consists of interest  earned on
cash balances and interest related to mortgage notes receivable. The decrease in
interest  income for the nine months ended  September  30, 1999  compared to the
same periods in 1998 is primarily  due to  decreased  interest  income on excess
cash balances.

         DEPRECIATION AND  AMORTIZATION:  Depreciation and amortization  expense
has increased $9,397,000 to $36,640,000 for the three months ended September 30,
1999 as compared to $27,243,000  for the same period in 1998.  Depreciation  and
amortization  expense has increased  $18,882,000  to  $101,565,000  for the nine
months ended  September 30, 1999 as compared to $82,683,000  for the same period
in 1998.  These  increases are  principally due to the acquisition of additional
real  estate   facilities   during  1998  and  1999,  offset  partially  by  the
deconsolidation of PSB.  Amortization  expense with respect to intangible assets
totaled  $2,328,000 and $6,984,000 for the three and nine months,  respectively,
ended September 30, 1999 and 1998.

         MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Entities, which are not
owned  by  the  Company.   Minority   interest  in  income  was  $4,492,000  and
$12,149,000,  respectively,  for the three and nine months ended  September  30,
1999,  as compared to $5,572,000  and  $16,141,000,  respectively,  for the same
periods in 1998.

         The decrease in minority  interest in income is primarily the result of
the  deconsolidation  of PSB, whereby the minority  interest with respect to PSB
after September 30, 1998 was removed from the Company's  consolidated  financial
statements.

                                       22

<PAGE>

         SUPPLEMENTAL  PROPERTY DATA AND TRENDS:  At September  30, 1999,  there
were  approximately  48 ownership  entities  owning in aggregate  1,323  storage
facilities,  including the facilities which the Company owns and/or operates. At
September 30, 1999,  122 of these  facilities  were owned by the  Unconsolidated
Entities,  in which the Company has an  ownership  interest  and uses the equity
method of accounting.  The remaining  1,201  facilities are owned by the Company
and  Consolidated   Entities.  The  following  table  summarizes  the  Company's
investment in real estate facilities as of September 30, 1999:

<TABLE>
<CAPTION>
                                                Number of Facilities in which the      Net Rentable Square Footage
                                                Company has an ownership interest             (in thousands)
                                                ---------------------------------    ---------------------------------
                                                  Storage    Commercial               Storage    Commercial
                                                Facilities   Properties    Total     Facilities  Properties    Total
                                                -----------------------   -------    -----------------------   -------
<S>                                                <C>            <C>       <C>        <C>         <C>         <C>
Wholly-owned facilities....................          633            1         634      38,708             9      38,717
Facilities owned by Consolidated Entities            568            -         568      32,429             -      32,429
                                                ----------    ---------   -------     ----------    ---------   -------
    Total consolidated facilities..........        1,201            1       1,202      71,137             9      71,146
Facilities owned by Unconsolidated Entities          122          123         245       7,171        11,986      19,157
                                                ----------    ---------   -------     ----------    ---------   -------
    Total  facilities  in which  the  Company
      has an ownership interest............        1,323          124       1,447      78,308        11,995      90,303
                                                ==========    =========   =======     ==========    =========   =======
</TABLE>

         In order to evaluate how the Company's overall portfolio has performed,
management  analyzes the operating  performance of a consistent group of storage
facilities representing 978 (57.2 million net rentable square feet) of the 1,323
storage facilities (herein referred to as "Same Store" storage facilities).  The
978 facilities  represent a pool of  properties,  which have been operated under
the "Public  Storage" name, at a stabilized  level, by the Company since January
1, 1994. From time to time, the Company  removes  facilities from the Same Store
pool as a result of expansions or dispositions of the properties, primarily from
condemnations by governmental  authorities,  which make such facilities' results
not comparable to previous periods.  The Same Store group of properties includes
896 consolidated facilities and 82 facilities owned by Unconsolidated  Entities.
The following table summarizes the pre-depreciation historical operating results
of the Same Store storage facilities:

SAME STORE STORAGE FACILITIES (978 FACILITIES):
-----------------------------------------------
(historical property operations)

<TABLE>
<CAPTION>
                                     Three months ended September 30,           Nine months ended September 30,
                                  --------------------------------------    --------------------------------------
                                     1999            1998        Change         1999           1998        Change
                                  ------------   ------------   --------    ------------   ------------   --------
                                                                 (Amounts in thousands)
<S>                               <C>            <C>              <C>       <C>            <C>              <C>
Rental income .................   $   140,494    $   134,639      4.3%      $  406,592     $   388,331      4.7%
Cost of operations (include
  an imputed 6% property
  management fee) (1) .........        46,386         45,311      2.4%         139,242         135,048       3.1%
                                  ------------   ------------   --------    ------------   ------------   --------
Net operating income ..........   $    94,108    $    89,328      5.4%      $  267,350     $   253,283       5.6%
                                  ============   ============   ========    ============   ============   ========

Gross profit margin (2) .......         67.0%          66.3%      0.7%            65.8%          65.2%       0.6%

Weighted Average:
  Occupancy during the
     period ...................         93.4%          93.7%     (0.3)%           92.7%          92.7%       0.0%

   Annualized realized rent
     per sq. ft. for period.(3)   $     10.51    $     10.06      4.5%      $     10.23    $      9.77       4.7%

   Annualized scheduled rent
     per sq. ft. for period (3)   $     10.51    $     10.31      1.9%      $     10.49    $     10.20       2.8%

</TABLE>

1.     Assumes payment of property management fees on all facilities,  including
       those  facilities  owned by the Company for which effective  November 16,
       1995 no fee is paid.

                                       23

<PAGE>

2.     Gross profit margin is computed by dividing property net operating income
       (which  excludes  depreciation  expense)  by  rental  revenues.  Cost  of
       operations  includes  a  6%  management  fee.  The  gross  profit  margin
       excluding the property  management  fee was 73.0% and 72.3% for the three
       months ended  September  30, 1999 and 1998,  respectively;  and 71.8% and
       71.2%  for  the  nine  months   ended   September   30,  1999  and  1998,
       respectively.

3.     Realized rent per square foot  represents  the actual  revenue earned per
       occupied square foot during the period - annualized.  Management believes
       this is a more relevant  measure than the scheduled  rental rates,  since
       scheduled rates can be discounted through the use of promotions.

         Rental  income  for the  Same  Store  facilities  included  promotional
discounts totaling $3,058,000 and $11,095,000,  respectively,  for the three and
nine months ended September 30, 1999, respectively as compared to $3,556,000 and
$11,901,000 for the same periods in 1998.

         During the year ended  December  31, 1998 as compared to the year ended
December 31, 1997, the Same Store  facilities  exhibited growth in rental income
and net  operating  income  of 7.6%  and  8.2%,  respectively,  as a  result  of
increased  realized rents and  occupancies.  The growth in rental income and net
operating income has decreased in the first nine months of 1999 to 4.7% and 5.6%
,  respectively,  as  compared  to the first nine  months of 1998.  The  Company
expects the level of growth to continue at levels less than that  experienced in
1998,  as it  expects  no  significant  increases  in  occupancies  and  expects
continued moderated increases in realized rents.

         Same Store cost of operations are analyzed as follows:

<TABLE>
<CAPTION>
                                       Three months ended September 30,           Nine months ended September 30,
                                     ---------------------------------------    --------------------------------------
                                        1999           1998         Change         1999           1998        Change
                                     ---------       ---------     ---------    ---------       ---------    ---------
                                                                 (Amounts in thousands)
   <S>                               <C>             <C>            <C>         <C>             <C>             <C>
   Payroll expense.............      $  11,297       $  11,390       (0.8)%     $  34,480       $  33,800        2.0%
   Property taxes..............         11,912          11,875        0.3%         35,634          36,059       (1.2)%
   Imputed 6% property
     management fees...........          8,430           8,078        4.4%         24,395          23,299        4.7%
   Advertising.................          1,648           1,070       54.0%          5,595           3,774       48.3%
   Telephone reservation center
     costs.....................          2,144           2,001        7.1%          6,103           5,295       15.3%
   Other.......................         10,955          10,897        0.5%         33,035          32,821        0.6%
                                     ---------       ---------     ---------    ---------       ---------    ---------
                                     $  46,386       $  45,311        2.4%      $ 139,242       $ 135,048        3.1%
                                     =========       =========     =========    =========       =========    =========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

         The Company believes that its internally generated net cash provided by
operating  activities  will  continue to be  sufficient to enable it to meet its
operating  expenses,   capital  improvements,   debt  service  requirements  and
distributions to shareholders for the foreseeable future.

         Operating as a real estate  investment  trust  ("REIT"),  the Company's
ability to retain cash flow for  reinvestment  is  restricted.  In order for the
Company to maintain its REIT status, a substantial portion of its operating cash
flow must be used to make  distributions to its shareholders  (see "REIT STATUS"
below). However, despite the significant distribution requirements,  the Company
has been able to retain a  significant  amount of its operating  cash flow.  The
following table summarizes the Company's ability to pay the minority  interests'
distributions,   its  dividends  to  the  preferred   shareholders  and  capital
improvements  to maintain  the  facilities  through the use of cash  provided by
operating  activities.  The  remaining  cash flow  generated is available to the
Company to make both scheduled and optional  principal  payments on debt and for
reinvestment.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                                        For the nine months ended
                                                                             September 30,
                                                                       ----------------------------
                                                                           1999           1998
                                                                       ------------    ------------
                                                                          (Amounts in thousands)
<S>                                                                     <C>             <C>
Net income........................................................      $ 212,245       $ 167,849
Depreciation and amortization.....................................        101,565          82,683
Less - Depreciation with respect to non-real estate assets........         (3,631)         (3,055)
Depreciation from Unconsolidated Entities.........................         14,405           9,902
Minority interest in income.......................................         12,149          16,141
                                                                       ------------    ------------
  Net cash provided by operating activities.......................        336,733         273,520

Distributions from operations to minority interests...............        (19,501)        (25,565)
                                                                       ------------    ------------
Cash from operations allocable to the Company's shareholders......        317,232         247,955

Less: preferred stock dividends...................................        (69,766)        (59,322)
                                                                       ------------    ------------
Cash from operations available to common shareholders.............        247,466         188,633

Capital improvements to maintain facilities:......................        (18,158)        (19,257)
Add back: minority interest share of capital improvements
     to maintain facilities.......................................            888           1,582
                                                                       ------------    ------------
Funds available for principal payments on debt, common
     dividends and reinvestment...................................        230,196         170,958

Cash distributions to common shareholders.........................        (85,096)        (75,270)
                                                                       ------------    ------------
Funds available for principal payments on debt and reinvestment...      $ 145,100       $  95,688
                                                                       ============    ============
</TABLE>

         The Company expects to fund its growth  strategies with cash on hand at
September 30, 1999,  internally  generated  retained  cash flows,  proceeds from
issuing equity securities and borrowings under its $150 million credit facility.
The Company  intends to repay amounts  borrowed  under the credit  facility from
undistributed  operating  cash  flow or,  as market  conditions  permit  and are
determined to be  advantageous,  from the public or private  placement of equity
securities.

         The Company's portfolio of real estate facilities remains substantially
unencumbered.  At September 30, 1999, the Company had debt outstanding of $172.0
million, of which $30.0 million is mortgage debt and $142.0 million is unsecured
senior notes, and had consolidated  real estate  facilities with a book value of
$3.4 billion.  The Company has been reluctant to finance its  acquisitions  with
debt and  generally  will only  increase  its  mortgage  borrowing  through  the
assumption of pre-existing debt on acquired real estate facilities.

         During the first  quarter of 1999,  the  Company  issued a total of 9.2
million  depositary  shares  (each  representing  1/1,000  of a  share)  of  its
Preferred Stock,  Series K and L, raising net proceeds of  approximately  $222.6
million.  During the third  quarter of 1999,  the Company  issued a total of 2.3
million  depositary  shares  (each  representing  1/1,000  of a  share)  of  its
Preferred Stock,  Series M, raising net proceeds of approximately $54.4 million.
Proceeds  from  these  offerings  were used to fund the  Company's  real  estate
investment activities.

         DISTRIBUTION  REQUIREMENTS:  The  Company's  conservative  distribution
policy  has been the  principal  reason  for the  Company's  ability  to  retain
significant  operating  cash  flows  which  have  been  used to make  additional
investments and reduce debt. During the nine months ended September 30, 1999 and
1998, the Company  distributed to common  shareholders  approximately  34.4% and
39.9% of its cash available from  operations  allocable to common  shareholders,
respectively.

         During the nine months  ended  September  30,  1999,  the Company  paid
dividends totaling  $69,766,000 to the holders of the Company's Senior Preferred
Stock and $85,096,000 to the holders of Common Stock. The Company  estimates the
regular  distribution  requirements  for  fiscal  1999  with  respect  to Senior
Preferred  Stock  outstanding  at September 30, 1999 to be  approximately  $94.8
million.

         On November 4, 1999, the Company's Board of Directors  declared a $0.22
per common share quarterly  dividend,  along with quarterly dividends payable on
the Company's  various series of preferred stock.  Distributions  are payable on

                                       25

<PAGE>

December 15, 1999 to shareholders of record as of December 31, 1999.

         In addition,  the Board of Directors declared a special distribution to
the Company's common shareholders.  The special distribution is comprised of (i)
$.65 per common share payable in depositary  shares,  representing  interests in
Equity  Stock,  Series A, with cash being paid in lieu of  fractional  shares or
(ii) at the election of each common shareholder $.62 per common share payable in
cash. The special distribution is payable on January 14, 2000 to shareholders of
record as of November 15, 1999.

         The federal  income tax rules  applicable to REITs impose an excise tax
if a REIT does not meet certain  minimum  distribution  requirements.  For 1999,
after taking into account our regular  distributions on our common and preferred
stocks,  we  estimate  we need an  additional  distribution  in  order  to avoid
incurring  that excise tax.  The  special  distribution  is intended to meet our
distribution   requirement   for  1999  and  will  be   taxable  to  our  common
shareholders, and deductible by the Company, in 1999.

         No shares of Equity Stock, Series A are presently  outstanding,  and no
market  currently  exists for the  Equity  Stock.  The fair value of  depositary
shares on the date of payment is expected to be $20 per  depositary  share.  The
valuation of the depositary  shares will be determined by our Board of Directors
based on advice from a financial advisor.

         The  creation of the Equity  Stock,  Series A may expand our  financial
flexibility  by  providing us with a third  permanent  equity  security.  If the
Equity Stock is well received by the  shareholders  and the market,  the Company
may be able to  continue  our  growth by  issuing  additional  Equity  Stock and
preferred stock. Using those sources of permanent  capital,  rather than issuing
additional  common stock,  may be less likely to dilute the interest of existing
common shareholders in future growth.

              The  following  summarizes  the  terms  of the  depositary  shares
representing the Equity Stock, Series A:

(i)    Distributions:  During any calendar  year  (prorated  for the year 2000),
       each depositary  share shall receive the lesser of: a) five times the per
       share dividend on the Common Stock or b) $2.45.

(ii)   Redemption:  except in order to preserve the Company's federal income tax
       status as a REIT, the Company may not redeem the depositary shares before
       March 31,  2005.  On or after March 31,  2005,  the  Company  may, at its
       option, redeem the depositary shares at $24.50 per depositary share.

(iii)  Liquidation:  if the  Company  is  liquidated,  the  amount  payable  per
       depositary  share  is the same as the  amount  payable  per  share of the
       Company's common stock, but cannot exceed $24.50 per depositary share.

(iv)   Preferences:  the depositary shares have no preference over the Company's
       common stock either as to  dividends or in  liquidation,  and the Company
       has no obligation to redeem the depositary shares.

(v)    Conversion:  if the  Company  fails to preserve  its  federal  income tax
       status as a REIT, the depositary  shares will be convertible  into common
       stock.  The depositary  shares are otherwise not convertible  into common
       stock.

(vi)   Voting rights:  holders of depositary  shares vote as a single class with
       our holders of common stock on  shareholder  matters,  but the depositary
       shares have the equivalent of one-tenth of a vote per depositary share.

         CAPITAL  IMPROVEMENT  REQUIREMENTS:  During 1999, the Company  budgeted
approximately  $20.1  million  for  capital   improvements  in  respect  of  its
consolidated  properties  ($19.5  million  for its storage  facilities  and $0.6
million for its commercial space), excluding amounts to be incurred with respect

                                       26

<PAGE>

to the facilities  acquired in the Storage Trust merger. The minority interests'
share of the budgeted capital improvements is approximately $1.5 million. During
the  nine  months  ended  September  30,  1999,  the  Company  incurred  capital
improvements of approximately $18.2 million. In addition, the Company expects to
spend  approximately  $15 million in  property  improvements  to the  properties
acquired in the Storage Trust merger in the period following the merger.

         DEBT  SERVICE  REQUIREMENTS:  The  Company  does not believe it has any
significant refinancing risks with respect to its notes payable, all of which is
fixed rate.  At September  30,  1999,  the Company had total  outstanding  notes
payable  of  approximately   $171,952,000  (including  $100,000,000  assumed  in
connection with the March 1999 merger with Storage Trust). Approximate principal
maturities of notes payable at September 30, 1999 are as follows:

                                   Unsecured      Fixed Rate
                                 Senior Notes    Mortgage Debt       Total
                                 ------------    -------------    -----------
                                              (Amounts in thousands)
  1999 (remainder of)......       $    4,000     $      924       $    4,924
  2000.....................            8,750          2,622           11,372
  2001.....................            9,500          2,910           12,410
  2002.....................           24,450          3,229           27,679
  2003.....................           35,900          3,584           39,484
  Thereafter...............           59,400         16,683           76,083
                                 ------------    -------------    -----------
                                  $  142,000     $   29,952       $  171,952
                                 ============    =============    ===========
  Weighted Average Rate                 7.4%          10.3%             7.9%
                                 ============    =============    ===========

         REPURCHASES OF THE COMPANY'S COMMON STOCK: As previously announced, the
Company's  Board of Directors  authorized the repurchase from time to time of up
to  10,000,000  shares of the  Company's  common  stock on the open market or in
privately negotiated transactions.  In the nine months ended September 30, 1999,
the Company  repurchased a total of 1,828,527 shares, for a total aggregate cost
of approximately $46.5 million.  Cumulatively since the repurchase announcement,
through  September  30, 1999,  the Company has  repurchased a total of 4,647,927
shares of common stock at an aggregate  cost of  approximately  $118.8  million.
From  October 1, 1999  through  October 27,  1999,  the Company  repurchased  an
additional  357,200 shares of common stock at an aggregate cost of approximately
$8.6 million.

         DEVELOPMENT  ACTIVITIES:  As previously  announced,  in April 1997, the
Company and an institutional investor formed a joint venture partnership for the
purpose  of  developing  up to $220  million of  storage  facilities.  The joint
venture is funded solely with equity capital  consisting of 30% from the Company
and 70% from the institutional  investor. The Company's share of the cost of the
real estate in the joint venture is approximately $63.7 million at September 30,
1999.

         During the nine months  ended  September  30, 1999,  the joint  venture
opened 15 new storage  facilities that it had developed  (approximately  903,000
net rentable  sq.  ft.).  In  addition,  2 projects  that were  completed by the
Company in 1998 were  contributed  to the joint  venture  during the nine months
ended  September 30, 1999.  As of September  30, 1999,  the joint venture had 41
operating  facilities,  with  2,476,000  net  rentable  square  feet  and  total
development costs of approximately $193.1 million. As of September 30, 1999, the
joint venture is  developing 5 additional  projects  (approximately  376,000 net
rentable  square feet) that were in process,  with total costs incurred of $19.2
million and estimated remaining costs to complete of $9.6 million.

         The joint  venture is  reviewing  the final 2  projects  (approximately
131,000 net rentable sq. ft), and upon  approval the joint venture will be fully
committed.  These  projects are developed by the Company until they are approved
by the joint  venture.  As of September 30, 1999, the Company has incurred total
development  costs of $11.3 million  (estimated  remaining  costs to complete of
$0.3 million) with respect to these 2 projects.

         Excluding the 2 properties that are being reviewed by the joint venture
and the 5  properties  that the joint  venture  is  developing,  the  Company is
developing  37  additional  storage  facilities  with  total  incurred  costs at
September 30, 1999 of $100.1 million  (estimated  remaining costs to complete of
$104.2  million),  and has  identified  23  additional  storage  facilities  for

                                       27

<PAGE>

development,  with total estimated costs of approximately $115.3 million.  These
projects are subject to significant contingencies.

         REIT STATUS: The Company believes that it has operated,  and intends to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that it will at all times so
qualify.  To the extent that the Company continues to qualify as a REIT, it will
not be taxed,  with certain  limited  exceptions,  on the taxable income that is
distributed  to its  shareholders,  provided  that at least  95% of its  taxable
income is so  distributed  prior to  filing of the  Company's  tax  return.  The
Company has satisfied the REIT distribution requirement since 1980.

         FUNDS FROM  OPERATIONS:  Total funds from operations or "FFO" increased
to  $317,232,000  for the nine  months  ended  September  30,  1999  compared to
$247,955,000  for the same period in 1998. FFO available to common  shareholders
(after deducting  preferred stock  dividends)  increased to $247,466,000 for the
nine months  ended  September  30, 1999  compared to  $188,633,000  for the same
period in 1998.  FFO means net income or (loss)  (computed  in  accordance  with
generally accepted  accounting  principles)  before: (i) gain or (loss) on early
extinguishment  of debt,  (ii)  minority  interest  in income  and (iii) gain or
(loss)  on the  disposition  of real  estate,  adjusted  as  follows:  (i)  plus
depreciation  and  amortization  (including  the  Company's  pro-rata  share  of
depreciation   and   amortization  of   unconsolidated   equity   interests  and
amortization  of assets  acquired  in a merger,  including  property  management
agreements and goodwill), and (ii) less FFO attributable to minority interest.

         FFO is a supplemental  performance  measure for equity REITs as defined
by the National  Association of Real Estate Investment Trusts, Inc.  ("NAREIT").
The NAREIT  definition does not  specifically  address the treatment of minority
interest in the  determination  of FFO or the treatment of the  amortization  of
property  management  agreements and goodwill.  In the case of the Company,  FFO
represents  amounts  attributable to its  shareholders  after deducting  amounts
attributable   to  the  minority   interests  and  before   deductions  for  the
amortization of property  management  agreements and goodwill.  FFO is presented
because  management,  as well as many industry  analysts  consider FFO to be one
measure of the  performance  of the Company and it is used in  establishing  the
terms of the Class B Common Stock. FFO does not take into consideration  capital
improvements,  scheduled  principal  payments on debt,  distributions  and other
obligations  of  the  Company.  Accordingly,  FFO is not a  substitute  for  the
Company's  cash flow or net  income  (as  discussed  above) as a measure  of the
Company's liquidity or operating performance. FFO is not comparable to similarly
entitled  items  reported  by other  REITs  that do not define it exactly as the
Company defines it.

         IMPACT OF YEAR 2000
         -------------------

         The Company has  completed  an  assessment  of all of its  hardware and
software applications to identify susceptibility to what is commonly referred to
as the "Y2K Issue" whereby certain computer programs have been written using two
digits  rather than four to define the  applicable  year.  Any of the  Company's
computer  programs  or  hardware  with the Y2K Issue  that  have  date-sensitive
applications  or embedded chips may recognize a date using "00" as the year 1900
rather  than the year  2000,  resulting  in  miscalculations  or system  failure
causing disruptions of operations.

         The Company has two phases in its process  with  respect to each of its
systems; i) assessment,  whereby the Company evaluates whether the system is Y2K
compliant and identifies the plan of action with respect to remediating  any Y2K
issues identified and ii) implementation, whereby the Company completes the plan
of action prepared in the assessment  phase and verifies that Y2K compliance has
been achieved.

         Implementations   have  been   completed  on  the  Company's   critical
applications  that  impact the  Company,  such as the general  ledger,  property
operations,  and related systems.  Contingency plans have been developed for use
in case the  Company's  assessment  did not identify  all Y2K issues,  or if the
implementation  were  subsequently  determined to not fully remediate Y2K issues
that were identified.  While the Company  presently  believes that the impact of
the Y2K  Issue  on its  systems  can be  mitigated,  if the  Company's  plan for
ensuring Year 2000 compliance and the related contingency plans were to fail, be
insufficient,  or not be implemented on a timely basis, Company operations could
be materially impacted.

                                       28

<PAGE>

         Certain of the Company's other non-computer related systems that may be
impacted by the Y2K Issue, such as security systems, have been evaluated.  Based
upon  its  evaluation,  the  Company  has no  reason  to  believe  that  lack of
compliance  or  failure  of  required  solutions  would  materially  impact  the
Company's operations.

         The Company  exchanges  electronic data with certain outside vendors in
the banking and payroll  processing areas. The Company has been advised by these
vendors that their systems are Year 2000 compliant.  The Company is not aware of
any other vendors,  suppliers,  or other  external  agents with a Y2K Issue that
would  materially  impact the Company's  results of  operations,  liquidity,  or
capital resources.  However,  the Company has no means of ensuring that external
agents  will be Year 2000  compliant,  and there  can be no  assurance  that the
Company has  identified  all such  external  agents.  The  inability of external
agents to complete their Year 2000 compliance  process in a timely fashion could
materially  impact the Company.  The effect of non-compliance by external agents
is not determinable.

         The  cost of the  Company's  year  2000  compliance  activities  (which
primarily  consists of the costs of new systems) is  estimated at  approximately
$4.4  million,  of which  approximately  $4.2 million has been incurred to date.
These costs are capitalized. The Company's year 2000 compliance efforts have not
resulted in any significant deferrals in other information system projects.

         The costs of the projects and the date on which the Company  expects to
achieve Year 2000 Compliance are based upon  management's  best  estimates,  and
were derived utilizing  numerous  assumptions of future events.  There can be no
assurance that these estimates will be achieved, and actual results could differ
materially  from those  anticipated.  There can be no assurance that the Company
has identified all potential Y2K Issues either within the Company or at external
agents.  In addition,  the impact of the Y2K issue on governmental  entities and
utility  providers  and  the  resultant  impact  on  the  Company,  as  well  as
disruptions  in the general  economy,  may be material but cannot be  reasonably
determined or quantified.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

         To limit the Company's exposure to market risk, the Company principally
finances its operations and growth with permanent equity capital,  consisting of
either common or preferred stock. At September 30, 1999, the Company's debt as a
percentage of total shareholders' equity (based on book values) was 4.5%.

         The Company's preferred stock is not redeemable by the holders.  Except
under certain conditions relating to the Company's  qualification as a REIT, the
Senior  Preferred  Stock is not redeemable by the Company prior to the following
dates: Series A - September 30, 2002, Series B - March 31, 2003, Series C - June
30, 1999, Series D - September 30, 2004, Series E - January 31, 2005, Series F -
April 30,  2005,  Series G - December  31,  2000,  Series H - January 31,  2001,
Series I - October 31, 2001,  Series J - August 31, 2002, Series K - January 19,
2004,  Series L - March 10, 2004 and Series M - August 17, 2004. On or after the
respective  dates,  each  of the  series  of  Senior  Preferred  Stock  will  be
redeemable  at the option of the Company,  in whole or in part, at $25 per share
(or depositary  share in the case of the Series G, Series H, Series I, Series J,
Series K, Series L and Series M), plus accrued and unpaid dividends.

         The Company's market risk sensitive  instruments include notes payable,
which totaled  $172.0  million at September 30, 1999.  Substantially  all of the
Company's  notes payable bear interest at fixed rates.  See Item 2  Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital  Resources  for  approximate  principal  maturities of the
notes payable as of September 30, 1999.

                                       29

<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
         -----------------

Anderson v. Public Storage,  Inc., San Francisco Superior Court (filed September
----------------------------------
19, 1997)
Grant v. Public Storage, Inc., San Diego Superior Court (filed October 6, 1997)
------------------------------
Wren v. Public  Storage,  Inc., San Francisco  Superior Court (filed October 16,
-------------------------------
1997)

         Each of the plaintiffs in these cases is suing the Company on behalf of
a  purported  class of  California  tenants who rented  storage  spaces from the
Company and contends that the Company's  fees for late payments under its rental
agreements  for  storage  space  constitute   unlawful   "penalties"  under  the
liquidated damages  provisions of California law and under  California's  unfair
business practices act. None of the plaintiffs has assigned any dollar amount to
the claims.

         In February 1998,  the lower court  dismissed the Anderson case, but in
May 1999 the  court of  appeal  reversed  the  lower  court's  dismissal  of the
plaintiff's  claim  under  the  California  unfair  business  practices  act and
affirmed the dismissal  under the  liquidated  damages  provisions of California
law. The Company is  continuing  to  vigorously  contest the claims in all three
legal proceedings.

Grinnel v. Public Storage,  Inc.,  Baltimore City Circuit Court (filed August 4,
---------------------------------
1999)

         Plaintiff  in this case is suing the  Company on behalf of a  purported
class of  Maryland  tenants  who rented  storage  spaces  from the  Company  and
contends that the Company's fees for late payments  under its rental  agreements
for storage  space  exceeds the amount of interest that can be charged under the
Maryland  constitution  and  are  therefore  unlawful  "penalties."  None of the
plaintiffs has assigned any dollar amount to the claims.
The Company intends to vigorously contest the claims in the proceedings.

         In addition,  the Company is a party to various claims,  complaints and
other legal  actions that have arisen in the normal course of business from time
to time. The Company believes the outcome of these pending legal proceedings, in
the  aggregate,  will not have a material  adverse  effect on the  operations or
financial position of the Company.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

(a)      Exhibits:

     3.1    Restated   Articles  of   Incorporation.   Filed  with  Registrant's
            Registration  Statement  No.  33-54557  and  incorporated  herein by
            reference.

     3.2    Certificate of Determination for the 10% Cumulative Preferred Stock,
            Series  A.  Filed  with  Registrant's   Registration  Statement  No.
            33-54557 and incorporated herein by reference.

     3.3    Certificate  of  Determination  for the 9.20%  Cumulative  Preferred
            Stock, Series B. Filed with Registrant's  Registration Statement No.
            33-54557 and incorporated herein by reference.

     3.4    Amendment to Certificate of  Determination  for the 9.20% Cumulative
            Preferred  Stock,  Series B.  Filed with  Registrant's  Registration
            Statement No. 33-56925 and incorporated herein by reference.

     3.5    Certificate of  Determination  for the 8.25%  Convertible  Preferred
            Stock. Filed with Registrant's  Registration  Statement No. 33-54557
            and incorporated herein by reference.

                                       30

<PAGE>

     3.6    Certificate  of  Determination  for the Adjustable  Rate  Cumulative
            Preferred  Stock,  Series C.  Filed with  Registrant's  Registration
            Statement No. 33-54557 and incorporated herein by reference.

     3.7    Certificate  of  Determination  for the 9.50%  Cumulative  Preferred
            Stock,  Series D. Filed with  Registrant's  Form 8-A/A  Registration
            Statement relating to the 9.50% Cumulative Preferred Stock, Series D
            and incorporated herein by reference.

     3.8    Certificate of Determination for the 10% Cumulative Preferred Stock,
            Series E. Filed with Registrant's Form 8-A/A Registration  Statement
            relating  to  the  10%  Cumulative  Preferred  Stock,  Series  E and
            incorporated herein by reference.

     3.9    Certificate  of  Determination  for the 9.75%  Cumulative  Preferred
            Stock,  Series F. Filed with  Registration's Form 8-A/A Registration
            Statement relating to the 9.75% Cumulative Preferred Stock, Series F
            and incorporated herein by reference.

     3.10   Certificate  of  Determination  for  the  Convertible  Participating
            Preferred Stock. Filed with Registrant's  Registration Statement No.
            33-63947 and incorporated herein by reference.

     3.11   Certificate  of Amendment of Articles of  Incorporation.  Filed with
            Registrant's  Registration  Statement No. 33-63947 and  incorporated
            herein by reference.

     3.12   Certificate of  Determination  for the 8-7/8%  Cumulative  Preferred
            Stock,  Series G. Filed with  Registration's Form 8-A/A Registration
            Statement  relating  to  the  Depositary  Shares  Each  Representing
            1/1,000th of a Share of 8-7/8% Cumulative  Preferred Stock, Series G
            and incorporated herein by reference.

     3.13   Certificate  of  Determination  for the 8.45%  Cumulative  Preferred
            Stock,  Series H. Filed with  Registrant's  Form 8-A/A  Registration
            Statement  relating  to  the  Depositary  Shares  Each  Representing
            1/1,000th of a Share of 8.45% Cumulative  Preferred Stock,  Series H
            and incorporated herein by reference.

     3.14   Certificate of  Determination  for the Convertible  Preferred Stock,
            Series  CC.  Filed  with  Registrant's  Registration  Statement  No.
            333-03749 and incorporated herein by reference.

     3.15   Certificate of Correction of Certificate  of  Determination  for the
            Convertible  Participating  Preferred Stock. Filed with Registrant's
            Registration  Statement  No.  333-08791 and  incorporated  herein by
            reference.

     3.16   Certificate of Determination for 8-5/8% Cumulative  Preferred Stock,
            Series I. Filed with Registrant's Form 8-A/A Registration  Statement
            relating to the  Depositary  Shares Each  Representing  1/1,000 of a
            Share  of  8-5/8%   Cumulative   Preferred   Stock,   Series  I  and
            incorporated herein by reference.

     3.17   Certificate  of Amendment of Articles of  Incorporation.  Filed with
            Registrant's  Registration  Statement No. 333-18395 and incorporated
            herein by reference.

     3.18   Certification  of  Determination  for Equity Stock,  Series A. Filed
            with  Registrant's Form 10-Q for the quarterly period ended June 30,
            1997 and incorporated herein by reference.

     3.19   Certificate  of  Determination  for Equity  Stock,  Series AA. Filed
            herewith.

     3.20   Certificate  Decreasing Shares  Constituting Equity Stock, Series A.
            Filed herewith.

                                       31

<PAGE>

     3.21   Certificate of Determination for Equity Stock, Series A. Filed
          herewith.

     3.22   Certification  of Determination  for 8% Cumulative  Preferred Stock,
            Series J. Filed with Registrant's Form 8-A/A Registration  Statement
            relating to the  Depositary  Shares Each  Representing  1/1,000 of a
            Share of 8% Cumulative  Preferred  Stock,  Series J and incorporated
            herein by reference.

     3.23   Certificate of Correction of Certificate  of  Determination  for the
            8.25%   Convertible   Preferred  Stock.   Filed  with   Registrant's
            Registration  Statement  No.  333-61045 and  incorporated  herein by
            reference.

     3.24   Certification  of  Determination  for  8-1/4%  Cumulative  Preferred
            Stock,  Series K. Filed with  Registrant's  Form 8-A/A  Registration
            Statement  relating  to  the  Depositary  Shares  Each  Representing
            1/1,000 of a Share of 8-1/4%  Cumulative  Preferred Stock,  Series K
            and incorporated herein by reference.

     3.25   Certificate of Determination for 8-1/4% Cumulative  Preferred Stock,
            Series L. Filed with Registrant's Form 8-A/A Registration  Statement
            relating to the  Depositary  Shares Each  Representing  1/1,000 of a
            Share  of  8-1/4%   Cumulative   Preferred   Stock,   Series  L  and
            incorporated herein by reference.

     3.26   Certificate of Determination  for 8.75% Cumulative  Preferred Stock,
            Series M. Filed with Registrant's Form 8-A/A Registration  Statement
            relating  to the  Depositary  Shares Each  Representing  1/1000 of a
            Share of 8.75% Cumulative Preferred Stock, Series M and incorporated
            herein by reference.

     3.27   Bylaws, as amended.  Filed with Registrant's  Registration Statement
            No. 33-64971 and incorporated herein by reference.

     3.28   Amendment to Bylaws adopted on May 9, 1996. Filed with  Registrant's
            Registration  Statement  No.  333-03749 and  incorporated  herein by
            reference.

     3.29   Amendment  to  Bylaws   adopted  on  June  26,   1997.   Filed  with
            Registrant's  Registration  Statement No. 333-41123 and incorporated
            herein by reference.

     3.30   Amendment  to  Bylaws  adopted  on  January  6,  1998.   Filed  with
            Registrant's  Registration  Statement No. 333-41123 and incorporated
            herein by reference.

     3.31   Amendment  to Bylaws  adopted  on  February  10,  1998.  Filed  with
            Registrant's  Current Report on Form 8-K dated February 10, 1998 and
            incorporated herein by reference.

     3.32   Amendment   to  Bylaws   adopted  on  March  4,  1999.   Filed  with
            Registrant's  Current  Report  on Form 8-K  dated  March 4, 1999 and
            incorporated herein by reference.

     3.33   Amendment to Bylaws adopted on May 6, 1999. Filed with  Registrant's
            Form  10-Q  for the  quarterly  period  ended  March  31,  1999  and
            incorporated herein by reference.

     10.1   Second  Amended  and  Restated  Management  Agreement  by and  among
            Registrant and the entities  listed therein dated as of November 16,
            1995. Filed with PS Partners,  Ltd.'s Annual Report on Form 10-K for
            the  year  ended  December  31,  1996  and  incorporated  herein  by
            reference.

                                       32

<PAGE>

     10.2   Amended  Management  Agreement between Registrant and Public Storage
            Commercial  Properties  Group,  Inc.  dated as of February 21, 1995.
            Filed  with  Registrant's  Annual  Report  on Form 10-K for the year
            ended December 31, 1994 and incorporated herein by reference.

     10.3   Loan Agreement  between  Registrant and Aetna Life Insurance Company
            dated as of July 11, 1988. Filed with Registrant's Current Report on
            Form 8-K dated July 14, 1988 and incorporated herein by reference.

     10.4   Amendment  to Loan  Agreement  between  Registrant  and  Aetna  Life
            Insurance  Company  dated  as  of  September  1,  1993.  Filed  with
            Registrant's  Annual Report on Form 10-K for the year ended December
            31, 1993 and incorporated herein by reference.

     10.5   Second   Amended  and  Restated   Credit   Agreement  by  and  among
            Registrant,  Wells Fargo Bank, National  Association,  as agent, and
            the  financial  institutions  party thereto dated as of February 25,
            1997. Filed with Registrant's  Registration  Statement No. 333-22665
            and incorporated herein by reference.

     10.6   Note  Assumption and Exchange  Agreement by and among Public Storage
            Management,  Inc., Public Storage,  Inc., Registrant and the holders
            of the notes dated as of November 13, 1995. Filed with  Registrant's
            Registration  Statement  No.  33-64971  and  incorporated  herein by
            reference.

     10.7   Registrant's 1990 Stock Option Plan. Filed with Registrant's  Annual
            Report  on Form  10-K  for the  year  ended  December  31,  1994 and
            incorporated herein by reference.

     10.8   Registrant's 1994 Stock Option Plan. Filed with Registrant's  Annual
            Report  on Form  10-K  for the  year  ended  December  31,  1997 and
            incorporated herein by reference.

     10.9   Registrant's  1996  Stock  Option  and  Incentive  Plan.  Filed with
            Registrant's  Annual Report on Form 10-K for the year ended December
            31, 1997 and incorporated herein by reference.

     10.10  Agreement  and  Plan  of  Reorganization  among  Registrant,  Public
            Storage Properties IX, Inc., and PS Business Parks, Inc. dated as of
            December 13, 1995. Filed with  Registrant's  Registration  Statement
            No. 333-00591 and incorporated herein by reference.

     10.11  Deposit  Agreement dated as of December 13, 1995, among  Registrant,
            The First National Bank of Boston, and the holders of the depositary
            receipts evidencing the Depositary Shares Each Representing  1/1,000
            of a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with
            Registrant's  Form  8-A/A  Registration  Statement  relating  to the
            Depositary  Shares Each  Representing  1/1,000th of a Share of 8-7/8
            Cumulative  Preferred  Stock,  Series G and  incorporated  herein by
            reference.

     10.12  Deposit  Agreement dated as of January 25, 1996,  among  Registrant,
            The First National Bank of Boston, and the holders of the depositary
            receipts evidencing the Depositary Shares Each Representing  1/1,000
            of a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
            Registrant's  Form  8-A/A  Registration  Statement  relating  to the
            Depositary  Shares Each  Representing  1/1,000th of a Share of 8.45%
            Cumulative  Preferred  Stock,  Series H and  incorporated  herein by
            reference.

     10.13  Employment Agreement between Registrant and B. Wayne Hughes dated as
            of November 16, 1995. Filed with Registrant's  Annual Report on Form
            10-K for the year ended December 31, 1995 and incorporated herein by
            reference.

                                       33

<PAGE>

     10.14  Deposit  Agreement dated as of November 1, 1996,  among  Registrant,
            The First National Bank of Boston, and the holders of the depositary
            receipts evidencing the Depositary Shares Each Representing  1/1,000
            of a Share of 8-5/8%  Cumulative  Preferred  Stock,  Series I. Filed
            with Registrant's Form 8-A/A Registration  Statement relating to the
            Depositary Shares Each  Representing  1/1,000th of a Share of 8-5/8%
            Cumulative  Preferred  Stock,  Series I and  incorporated  herein by
            reference.

     10.15  Agreement  and  Plan  of  Reorganization  among  Registrant,  Public
            Storage Properties XIV, Inc. and, Public Storage Properties XV, Inc.
            dated as of December 5, 1996. Filed with  Registrant's  Registration
            Statement No. 333-22665 and incorporated herein by reference.

     10.16  Agreement  and  Plan  of  Reorganization  among  Registrant,  Public
            Storage  Properties XVI, Inc., Public Storage Properties XVII, Inc.,
            Public Storage  Properties XVIII, Inc. and Public Storage Properties
            XIX,  Inc.  dated as of  April  9,  1997.  Filed  with  Registrant's
            Registration  Statement  No.  333-26959 and  incorporated  herein by
            reference.

     10.17  Limited Partnership  Agreement of PSAF Development  Partners,  L. P.
            between PSAF  Development,  Inc. and the Limited Partner dated as of
            April 10, 1997. Filed with  Registrant's Form 10-Q for the quarterly
            period ended March 31, 1997 and incorporated herein by reference.

     10.18  Deposit Agreement dated as of August 28, 1997 among Registrant,  The
            First  National  Bank of Boston,  and the holders of the  depositary
            receipts evidencing the Depositary Shares Each Representing  1/1,000
            of a Share of 8% Cumulative  Preferred  Stock,  Series J. Filed with
            Registrant's  Form  8-A/A  Registration  Statement  relating  to the
            Depositary  Shares  Each  Representing  1/1,000  of a  Share  of  8%
            Cumulative  Preferred  Stock,  Series J and  incorporated  herein by
            reference.

     10.19  Agreement and Plan of Reorganization  between  Registrant and Public
            Storage  Properties  XX, Inc.  dated as of December 13, 1997.  Filed
            with   Registrant's   Registration   Statement  No.   333-49247  and
            incorporated herein by reference.

     10.20  Agreement of Limited  Partnership of PS Business  Parks, L. P. dated
            as of March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly
            Report on Form 10-Q for the quarterly period ended June 30, 1998 and
            incorporated herein by reference.

     10.21  Deposit  Agreement  dated as of January 19,  1999 among  Registrant,
            BankBoston,  N.  A.  and  the  holders  of the  depositary  receipts
            evidencing  the  Depositary  Shares Each  Representing  1/1,000 of a
            Share of 8-1/4%  Cumulative  Preferred  Stock,  Series K. Filed with
            Registrant's  Form  8-A/A  Registration  Statement  relating  to the
            Depositary  Shares  Each  Representing  1/1,000 of a Share of 8-1/4%
            Cumulative  Preferred  Stock,  Series K and  incorporated  herein by
            reference.

     10.22  Agreement and Plan of Merger among Storage Trust Realty,  Registrant
            and Newco  Merger  Subsidiary,  Inc.  dated as of November 12, 1998.
            Filed with  Registrant's  Registration  Statement No.  333-68543 and
            incorporated herein by reference.

     10.23  Amendment  No. 1 to Agreement and Plan of Merger among Storage Trust
            Realty,  Registrant,  Newco Merger  Subsidiary,  Inc. and STR Merger
            Subsidiary,   Inc.  dated  as  of  January  19,  1999.   Filed  with
            Registrant's  Registration  Statement No. 333-68543 and incorporated
            herein by reference.
                                       34

<PAGE>

     10.24  Amended and  Restated  Agreement of Limited  Partnership  of Storage
            Trust  Properties,  L. P.,  dated as of March 12,  1999.  Filed with
            Registrant's  Form 10-Q for the quarterly period ended June 30, 1999
            and incorporated herein by reference.

     10.25  Storage Trust Realty 1994 Share Incentive  Plan.  Filed with Storage
            Trust  Realty's  Annual  Report  on Form  10-K  for the  year  ended
            December 31, 1997 and incorporated herein by reference.

     10.26  Amended and  Restated  Storage  Trust  Realty  Retention  Bonus Plan
            effective  as  of  November  12,  1998.   Filed  with   Registrant's
            Registration  Statement  No.  333-68543 and  incorporated  herein by
            reference.

     10.27  Deposit Agreement dated as of March 10, 1999 among Registrant,  Bank
            Boston,  N.A. and the holders of the depositary  receipts evidencing
            the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
            Cumulative  Preferred Stock,  Series L. Filed with Registrant's Form
            8-A/A Registration  Statement relating to the Depositary Shares Each
            Representing  1/1,000  of a Share  of  8-1/4%  Cumulative  Preferred
            Stock, Series L and incorporated herein by reference.

     10.28  Note  Purchase  Agreement  and  Guaranty  Agreement  with respect to
            $100,000,000 of Senior Notes of Storage Trust Properties, L.P. Filed
            with Storage Trust Realty's  Annual Report on Form 10-K for the year
            ended December 31, 1996 and incorporated herein by reference.

     10.29  Deposit Agreement dated as of August 17, 1999 among Registrant, Bank
            Boston,  N.A. and the holders of the depositary  receipts evidencing
            the Depositary Shares Each Representing  1/1,000 of a Share of 8.75%
            Cumulative  Preferred Stock,  Series M. Filed with Registrant's Form
            8-A/A Registration  Statement relating to the Depositary Shares Each
            Representing 1/1,000 of a Share of 8.75% Cumulative Preferred Stock,
            Series M and incorporated herein by reference.

     11     Statement Re: Computation of Earnings Per Share. Filed herewith.

     12     Statement  Re:  Computation  of Ratio of Earnings to Fixed  Charges.
            Filed herewith.

     27     Financial data schedule. Filed herewith.

(b)      Reports on Form 8-K

              The Company  filed a Current  Report on Form 8-K dated  August 12,
              1999, pursuant to Item 5, which filed certain exhibits relating to
              the  Company's   public   offering  of   Depositary   Shares  each
              representing  1/1,000  of a share  of 8.75%  Cumulative  Preferred
              Stock, Series M.

                                       35

<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                      DATED:  November 9, 1999

                      PUBLIC STORAGE, INC.


                      BY:      /s/ John Reyes
                               --------------
                               John Reyes
                               Senior Vice President and Chief Financial Officer
                               (Principal financial officer and duly authorized
                               officer)

                                       36