Published: 2022-05-03 00:00:00 ET

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Public Storage (referred to herein as “the Company,” “we,” “us,” or “our”), a Maryland real estate investment trust (“REIT”), was organized in 1980. Our principal business activities include the ownership and operation of self-storage facilities that offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities such as tenant reinsurance, merchandise sales, and third party management, as well as the acquisition and development of additional self-storage space.

At March 31, 2022, we have direct and indirect equity interests in 2,797 self-storage facilities (with approximately 199.1 million net rentable square feet) located in 39 states in the United States (“U.S.”) operating under the Public Storage® name, and 0.9 million net rentable square feet of commercial and retail space.

We own an approximate 35% common equity interest in Shurgard Self Storage SA (“Shurgard”), a public company traded on Euronext Brussels under the “SHUR” symbol, which owns 254 self-storage facilities (with approximately 14 million net rentable square feet) located in seven Western European countries, all operating under the Shurgard® name. We also own an approximate 41% common equity interest in PS Business Parks, Inc. (“PSB”), a REIT traded on the New York Stock Exchange under the “PSB” symbol, which owns 27 million net rentable square feet of commercial properties, primarily multi-tenant industrial, flex, and office space, located in six states.

Basis of Presentation

We have prepared the accompanying interim consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Accounting Standards Codification of the Financial Accounting Standards Board (“FASB”), and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, the interim consolidated financial statements presented herein reflect all adjustments, primarily of a normal recurring nature, that are necessary to present fairly the interim consolidated financial statements. Because they do not include all of the disclosures required by GAAP for complete annual financial statements, these interim consolidated financial statements should be read together with the audited Consolidated Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Operating results for the quarter ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Summary of Significant Accounting Policies

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Activity in real estate facilities during the three months ended March 31, 2022 is as follows:

			Three Months Ended March 31, 2022
			(Amounts in thousands)
Operating facilities, at cost:
Beginning balance			$	22,807,833
Capital expenditures to maintain real estate facilities			91,344
Acquisitions			125,534
Dispositions			(383)
Developed or expanded facilities opened for operation			19,379
Ending balance			23,043,707
Accumulated depreciation:
Beginning balance			(7,773,308)
Depreciation expense			(185,409)
Dispositions			181
Ending balance			(7,958,536)
Construction in process:
Beginning balance			272,471
Costs incurred to develop and expand real estate facilities			84,460
Developed or expanded facilities opened for operation			(19,379)
Ending balance			337,552
Total real estate facilities at March 31, 2022			$	15,422,723

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The following tables set forth our investments in, and equity in earnings of, the Unconsolidated Real Estate Entities (amounts in thousands):

			Investments in Unconsolidated Real Estate Entities at
			March 31, 2022						December 31, 2021
PSB			$	537,331					$	515,312
Shurgard			313,318						313,451
Total			$	850,649					$	828,763

			Equity in Earnings of Unconsolidated Real Estate Entities for the
			Three Months Ended March 31,
			2022						2021
PSB			$	36,886					$	14,476
Shurgard			6,538						4,980
Total			$	43,424					$	19,456

Investment in PSB

Throughout all periods presented, we owned 7,158,354 shares of PSB’s common stock and 7,305,355 limited partnership units in an operating partnership controlled by PSB, representing an approximate 41% common equity interest as of March 31, 2022 (41% as of December 31, 2021). The limited partnership units are convertible at our option, subject to certain conditions, on a one-for-one basis into PSB common stock.

Based upon the closing price at March 31, 2022 ($168.08 per share of PSB common stock), the shares and units we owned had a market value of approximately $2.4 billion. During each of the three months ended March 31, 2022 and 2021, we received cash distributions from PSB totaling $15.2 million.

PSB is a publicly held entity traded on the New York Stock Exchange under the symbol “PSB”.

Refer to Note “15. Subsequent Events” for additional information about our investment in PSB.

Investment in Shurgard

Throughout all periods presented, we effectively owned, directly and indirectly 31,268,459 Shurgard common shares, representing an approximate 35% equity interest in Shurgard.

Based upon the closing price at March 31, 2022 (€56.30 per share of Shurgard common stock, at 1.111 exchange rate of US Dollars to the Euro), the shares we owned had a market value of approximately $2.0 billion.

Our equity in earnings of Shurgard comprised our equity share of Shurgard’s net income, less amortization of the Shurgard Basis Differential (defined below). We eliminated $0.3 million intra-entity profits and losses for each of the three months ended March 31, 2022 and 2021, representing our equity share of the trademark license fees that Shurgard pays to us for the use of the Shurgard® trademark. We classify the remaining license fees we receive from Shurgard as interest and other income on our income statement.

At March 31, 2022, our investment in Shurgard’s real estate assets included in investment in unconsolidated real estate entities exceeds our pro-rata share of the underlying amounts on Shurgard’s balance sheet by approximately $73.4 million ($74.7 million at December 31, 2021). This differential (the “Shurgard Basis Differential”) includes our cost basis adjustment in Shurgard’s real estate assets net of related deferred income taxes. The real estate assets basis differential is being amortized as a reduction to equity in earnings of the Unconsolidated Real Estate Entities. Such

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amortization totaled approximately $1.3 million and $2.5 million during the three months ended March 31, 2022 and 2021, respectively.

Shurgard is a publicly held entity trading on Euronext Brussels under the symbol “SHUR”.

Goodwill and other intangible assets consisted of the following (amounts in thousands):

			At March 31, 2022																		At December 31, 2021
			Gross Book Value						Accumulated Amortization						Net Book Value						Gross Book Value						Accumulated Amortization						Net Book Value
Goodwill			$	165,843					$	—					$	165,843					$	165,843					$	—					$	165,843
Shurgard® Trade Name			18,824						—						18,824						18,824						—						18,824
Finite-lived intangible assets, subject to amortization			196,178						(109,718)						86,460						198,180						(79,953)						118,227
Total goodwill and other intangible assets			$	380,845					$	(109,718)					$	271,127					$	382,847					$	(79,953)					$	302,894

Finite-lived intangible assets consist primarily of acquired customers in place. Amortization expense related to intangible assets subject to amortization was $33.9 million and $6.1 million for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, intangibles increased $2.2 million, in connection with the acquisition of self-storage facilities (Note 3).

The estimated future amortization expense for our finite-lived intangible assets at March 31, 2022 is as follows (amounts in thousands):

Year						Amount
Remainder of 2022						$	54,379
2023						24,876
Thereafter						7,205
Total						$	86,460

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Our notes payable are reflected net of issuance costs (including original issue discounts), which are amortized as interest expense on the effective interest method over the term of each respective note. Our notes payable at March 31, 2022 and December 31, 2021 are set forth in the tables below:

															Amounts at March 31, 2022
			Coupon Rate						Effective Rate						Principal						Unamortized Costs						Book  Value						Fair  Value
															($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022			2.370%						2.483%						$	500,000					$	(231)					$	499,769					$	501,283
Notes due April 23, 2024			SOFR+0.47%						0.619%						700,000						(1,452)						698,548						696,594
Notes due February 15, 2026			0.875%						1.030%						500,000						(2,877)						497,123						461,600
Notes due November 9, 2026			1.500%						1.640%						650,000						(4,010)						645,990						608,077
Notes due September 15, 2027			3.094%						3.218%						500,000						(2,888)						497,112						493,907
Notes due May 1, 2028			1.850%						1.962%						650,000						(4,107)						645,893						599,449
Notes due November 9, 2028			1.950%						2.044%						550,000						(3,179)						546,821						505,937
Notes due May 1, 2029			3.385%						3.459%						500,000						(2,179)						497,821						504,863
Notes due May 1, 2031			2.300%						2.419%						650,000						(6,211)						643,789						600,303
Notes due November 9, 2031			2.250%						2.322%						550,000						(3,399)						546,601						502,782
															5,750,000						(30,533)						5,719,467						5,474,795
Euro Denominated Unsecured Debt
Notes due April 12, 2024			1.540%						1.540%						111,148						—						111,148						112,427
Notes due November 3, 2025			2.175%						2.175%						268,993						—						268,993						277,704
Notes due September 9, 2030			0.500%						0.640%						778,036						(9,449)						768,587						679,225
Notes due January 24, 2032			0.875%						0.978%						555,740						(5,260)						550,480						491,274
															1,713,917						(14,709)						1,699,208						1,560,630
Mortgage Debt, secured by 11 real estate facilities with a net book value of $65.7 million			3.877%						3.896%						23,048						—						23,048						23,782
															$	7,486,965					$	(45,242)					$	7,441,723					$	7,059,207

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			Amounts at
			December 31, 2021
			Book Value						Fair Value
			($ amounts in thousands)
U.S. Dollar Denominated Unsecured Debt
Notes due September 15, 2022			$	499,637					$	506,362
Notes due April 23, 2024			698,372						700,314
Notes due February 15, 2026			496,939						488,141
Notes due November 9, 2026			645,773						649,996
Notes due September 15, 2027			496,980						535,206
Notes due May 1, 2028			645,724						649,221
Notes due November 9, 2028			546,701						548,241
Notes due May 1, 2029			497,743						545,580
Notes due May 1, 2031			643,617						656,546
Notes due November 9, 2031			546,512						551,932
			5,717,998						5,831,539
Euro Denominated Unsecured Debt
Notes due April 12, 2024			113,431						117,526
Notes due November 3, 2025			274,518						295,256
Notes due September 9, 2030			784,287						769,561
Notes due January 24, 2032			561,761						551,842
			1,733,997						1,734,185
Mortgage Debt			23,284						24,208
			$	7,475,279					$	7,589,932

U.S. Dollar Denominated Unsecured Notes

The U.S. Dollar Denominated Unsecured Notes have various financial covenants, with which we were in compliance at March 31, 2022. Included in these covenants are (a) a maximum Debt to Total Assets of 65% (approximately 15% at March 31, 2022) and (b) a minimum ratio of Adjusted EBITDA to Interest Expense of 1.5x (approximately 27x for the twelve months ended March 31, 2022) as well as covenants limiting the amount we can encumber our properties with mortgage debt.

Euro Denominated Unsecured Notes

Our Euro denominated unsecured notes (the “Euro Notes”) consist of four tranches: (i) €242.0 million issued to institutional investors on November 3, 2015, (ii) €100.0 million issued to institutional investors on April 12, 2016, (iii) €500.0 million issued in a public offering on January 24, 2020, and (iv) €700.0 million issued in a public offering on September 9, 2021. The Euro Notes have financial covenants similar to those of the U.S. Dollar Denominated Unsecured Notes.

We reflect changes in the U.S. Dollar equivalent of the amount payable, as a result of changes in foreign exchange rates as “Foreign currency exchange gain” on our income statement (gains of $35.4 million and $45.4 million for the three months ended March 31, 2022 and 2021, respectively).

Mortgage Notes

We assumed our non-recourse mortgage debt in connection with property acquisitions, and we recorded such debt at fair value with any premium or discount to the stated note balance amortized using the effective interest method.

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At March 31, 2022, the related contractual interest rates of our mortgage notes are fixed, ranging between 3.2% and 7.1%, and mature between November 1, 2022 and July 1, 2030.

At March 31, 2022, approximate principal maturities of our Notes Payable are as follows (amounts in thousands):

			Unsecured Debt						Mortgage Debt						Total
Remainder of 2022			$	500,000					$	2,246					$	502,246
2023			—						19,219						19,219
2024			811,148						124						811,272
2025			268,993						131						269,124
2026			1,150,000						138						1,150,138
Thereafter			4,733,776						1,190						4,734,966
			$	7,463,917					$	23,048					$	7,486,965
Weighted average effective rate			1.8%						3.9%						1.8%

Cash paid for interest totaled $22.2 million and $19.4 million for the three months ended March 31, 2022 and 2021, respectively. Interest capitalized as real estate totaled $1.2 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

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Preferred Shares

At March 31, 2022 and December 31, 2021, we had the following series of Cumulative Preferred Shares (“Preferred Shares”) outstanding:

																		At March 31, 2022												At December 31, 2021
Series						Earliest Redemption Date						Dividend Rate						Shares Outstanding						Liquidation Preference						Shares Outstanding						Liquidation Preference
																		(Dollar amounts in thousands)
Series F						6/2/2022						5.150		%				11,200						$	280,000					11,200						$	280,000
Series G						8/9/2022						5.050		%				12,000						300,000						12,000						300,000
Series H						3/11/2024						5.600		%				11,400						285,000						11,400						285,000
Series I						9/12/2024						4.875		%				12,650						316,250						12,650						316,250
Series J						11/15/2024						4.700		%				10,350						258,750						10,350						258,750
Series K						12/20/2024						4.750		%				9,200						230,000						9,200						230,000
Series L						6/17/2025						4.625		%				22,600						565,000						22,600						565,000
Series M						8/14/2025						4.125		%				9,200						230,000						9,200						230,000
Series N						10/6/2025						3.875		%				11,300						282,500						11,300						282,500
Series O						11/17/2025						3.900		%				6,800						170,000						6,800						170,000
Series P						6/16/2026						4.000		%				24,150						603,750						24,150						603,750
Series Q						8/17/2026						3.950		%				5,750						143,750						5,750						143,750
Series R						11/19/2026						4.000		%				17,400						435,000						17,400						435,000
Series S						1/13/2027						4.100		%				10,000						250,000						—						—
Total Preferred Shares																		174,000						$	4,350,000					164,000						$	4,100,000

The holders of our Preferred Shares have general preference rights with respect to liquidation, quarterly distributions, and any accumulated unpaid distributions. Except as noted below, holders of the Preferred Shares do not have voting rights. In the event of a cumulative arrearage equal to six quarterly dividends, holders of all outstanding series of preferred shares (voting as a single class without regard to series) will have the right to elect two additional members to serve on our Board of Trustees (our “Board”) until the arrearage has been cured. At March 31, 2022, there were no dividends in arrears. The affirmative vote of at least 66.67% of the outstanding shares of a series of Preferred Shares is required for any material and adverse amendment to the terms of such series. The affirmative vote of at least 66.67% of the outstanding shares of all of our Preferred Shares, voting as a single class, is required to issue shares ranking senior to our Preferred Shares.

Except under certain conditions relating to the Company’s qualification as a REIT, the Preferred Shares are not redeemable prior to the dates indicated on the table above. On or after the respective dates, each of the series of Preferred Shares is redeemable at our option, in whole or in part, at $25.00 per depositary share, plus accrued and unpaid dividends. Holders of the Preferred Shares cannot require us to redeem such shares.

Upon issuance of our Preferred Shares, we classify the liquidation value as preferred equity on our consolidated balance sheet with any issuance costs recorded as a reduction to Paid-in capital.

On January 13, 2022, we issued 10.0 million depositary shares, each representing 0.001 of a share of our 4.100% Series S Preferred Shares, at an issuance price of $25.00 per depositary share, for a total of $250.0 million in gross proceeds, and we incurred $7.2 million in issuance costs.

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Dividends

Common share dividends paid, including amounts paid to our restricted share unitholders, totaled $351.2 million ($2.00 per share) and $350.1 million ($2.00 per share) for the three months ended March 31, 2022 and 2021, respectively. Preferred share dividends paid totaled $48.4 million and $46.1 million for the three months ended March 31, 2022 and 2021, respectively.

Under various share-based compensation plans and under terms established or modified by our Board or a committee thereof, we grant equity awards to trustees, officers, and key employees, including non-qualified options to purchase the Company’s common shares, restricted stock units (“RSUs”), deferred stock units (“DSUs”), and unrestricted common stock issued in lieu of trustee compensation.

We recorded share-based compensation expense associated with our equity awards in the various expense categories in the Consolidated Statements of Income as set forth in the following table. In addition, $1.0 million and $1.2 million share-based compensation cost was capitalized as real estate facilities for the three months ended March 31, 2022 and 2021, respectively.

			Three Months Ended March 31,
			2022						2021
			(Amounts in thousands)
Self-storage cost of operations			$	4,864					$	6,365
Ancillary cost of operations			266						386
General and administrative			8,798						7,680
Total			$	13,928					$	14,431

Included in share-based compensation is $4.2 million and $3.8 million during the three months ended March 31, 2022 and 2021, respectively, in connection with retirement acceleration as discussed in Note 2 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

As of March 31, 2022, there was $119.1 million of total unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of three years.

Stock Options

We have service-based, performance-based and market-based stock options outstanding, which generally vest over 3 to 5 years, expire 10 years after the grant date, and have an exercise price equal to the closing trading price of

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our common shares on the grant date. New shares are issued for options exercised. Employees cannot require the Company to settle their award in cash.

During the three months ended March 31, 2022, 77,683 stock options were granted, 36,050 options were exercised, and no options were forfeited. A total of 3,081,584 stock options were outstanding at March 31, 2022 (3,039,951 at December 31, 2021). For the stock options granted during the three months ended March 31, 2022, vesting is dependent upon meeting certain market conditions over the three-year period from January 1, 2022 through December 31, 2024, with continued service-based vesting through the first quarter of 2027. These stock options require relative achievement of the Company’s total shareholder return as compared to the weighted average total shareholder return of specified peer groups and can result in grantees earning up to 200% of the target options originally granted.

For the three months ended March 31, 2022 and 2021, we incurred share-based compensation cost for outstanding stock options of $3.9 million and $4.4 million, respectively.

Restricted Share Units

We have service-based, performance-based and market-based RSUs outstanding, which generally vest over 5 to 8 years from the grant date. Upon vesting, the grantee receives new common shares equal to the number of vested RSUs, less common shares withheld to satisfy the grantee’s statutory tax liabilities arising from the vesting. During the three months ended March 31, 2022, 24,725 RSUs were granted, 8,821 RSUs were forfeited and 57,349 RSUs vested. The vesting resulted in the issuance of 41,847 common shares. A total of 529,377 RSUs were outstanding at March 31, 2022 (570,822 at December 31, 2021).

Included in the RSUs granted during the three months ended March 31, 2022 are 21,985 RSUs where vesting is dependent upon meeting certain market conditions over a three-year period from January 1, 2022 through December 31, 2024, with continued service-based vesting through the first quarter of 2027. These RSUs require relative achievement of the Company’s total shareholder return as compared to the weighted average total shareholder return of the specified peer groups and can result in grantees earning up to 200% of the target RSUs originally granted.

Also included in the RSUs granted during the three months ended March 31, 2022 are 2,740 service-based RSUs.

For the three months ended March 31, 2022 and 2021, we incurred share-based compensation cost for RSUs of $10.8 million and $11.0 million, respectively.

Trustee Deferral Program

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We allocate net income to (i) noncontrolling interests based upon their contractual rights in the respective subsidiaries or for participating noncontrolling interests based upon their participation in both distributed and undistributed earnings of the Company, (ii) preferred shareholders, for distributions paid or payable, (iii) preferred shareholders, to the extent redemption cost exceeds the related original net issuance proceeds (an “preferred share redemption charge”), and (iv) restricted share units, for non-forfeitable dividends paid and adjusted for participation rights in undistributed earnings of the Company.

We calculate basic and diluted net income per common share based upon net income allocable to common shareholders, divided by (i) weighted average common shares for basic net income per common share, and (ii) weighted average common shares adjusted for the impact of dilutive stock options outstanding for diluted net income per common share.

The following table reconciles the numerators and denominators of the basic and diluted net income per common shares computation for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per share amounts):

			Three Months Ended March 31,
			2022						2021
Numerator for basic and dilutive net income per common share – net income allocable to common shareholders			$	464,124					$	385,810
Denominator for basic net income per share - weighted average common shares outstanding			175,170						174,611
Net effect of dilutive stock options - based on treasury stock method			1,166						229
Denominator for dilutive net income per share - weighted average common shares outstanding			176,336						174,840
Net income per common share:
Basic			$	2.65					$	2.21
Dilutive			$	2.63					$	2.21

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Our operating segments reflect the significant components of our operations where discrete financial information is evaluated separately by our chief operating decision maker.

Self-Storage Operations

The Self-Storage Operations reportable segment reflects the aggregated rental operations from the self-storage facilities we own from (i) Same Store Facilities, (ii) Acquired Facilities, (iii) Developed and Expanded Facilities, and (iv) Other Non-Same Store Facilities. The presentation in the table below sets forth the Net Operating Income ("NOI") of this reportable segment, as well as the related depreciation expense. For all periods presented, substantially all of our real estate facilities, goodwill and other intangible assets, other assets, and accrued and other liabilities are associated with the Self-Storage Operations reportable segment.

Ancillary Operations

The Ancillary Operations reflects the combined operations of our tenant reinsurance, merchandise sales, and third party property management operating segments.

Presentation of Segment Information

The following table reconciles NOI and net income attributable to our reportable segment to our consolidated net income:

									Three Months Ended March 31,
															2022						2021
															(amounts in thousands)
Self-Storage Operations Reportable Segment
Revenue															$	917,015					$	716,347
Cost of operations															(245,494)						(212,105)
Net operating income															671,521						504,242
Depreciation and amortization															(222,128)						(146,859)
Net income															449,393						357,383
Ancillary Operations
Revenue															56,430						50,915
Cost of operations															(15,515)						(16,318)
Net operating income															40,915						34,597
Total net income allocated to segments															490,308						391,980
Other items not allocated to segments:
General and administrative															(23,069)						(19,574)
Interest and other income															3,379						2,852
Interest expense															(33,124)						(15,250)
Equity in earnings of unconsolidated real estate entities															43,424						19,456
Foreign currency exchange gain															35,377						45,385
Gain on sale of real estate															—						9,413
Net income															$	516,295					$	434,262

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Contingent Losses

We are a party to various legal proceedings and subject to various claims and complaints; however, we believe that the likelihood of these contingencies resulting in a material loss to the Company, either individually or in the aggregate, is remote.

Insurance and Loss Exposure

We carry property, earthquake, general liability, employee medical insurance, and workers compensation coverage through internationally recognized insurance carriers, subject to deductibles. Our deductible for general liability is $2.0 million per occurrence. Our annual deductible for property loss is $25.0 million per occurrence. This deductible decreases to $5.0 million once we reach $35.0 million in aggregate losses for occurrences that exceed $5.0 million. Insurance carriers’ aggregate limits on these policies of $75.0 million for property losses and $102.0 million for general liability losses are higher than estimates of maximum probable losses that could occur from individual catastrophic events determined in recent engineering and actuarial studies; however, in case of multiple catastrophic events, these limits could be exceeded.

We reinsure a program that provides insurance to our customers from an independent third-party insurer. This program covers customer claims for losses to goods stored at our facilities as a result of specific named perils (earthquakes are not covered by this program), up to a maximum limit of $5,000 per storage unit. We reinsure all risks in this program, but purchase insurance to cover this exposure for a limit of $15.0 million for losses in excess of $5.0 million per occurrence. We are subject to licensing requirements and regulations in several states. Customers participate in the program at their option. At March 31, 2022, there were approximately 1.2 million certificates held by our self-storage customers, representing aggregate coverage of approximately $5.2 billion.

Commitments

We have construction commitments representing future expected payments for construction under contract totaling $204.9 million at March 31, 2022. We expect to pay approximately $142.3 million in the remainder of 2022, $60.0 million in 2023 and $2.6 million in 2024 for these construction commitments.

We have future contractual payments on land, equipment and office space under various lease commitments totaling $65.4 million at March 31, 2022. We expect to pay approximately $2.2 million in the remainder of 2022, $3.1 million in 2023, $3.0 million in each of 2024, 2025 and 2026 and $51.1 million thereafter for these commitments.

Subsequent to March 31, 2022, we acquired or were under contract to acquire eleven self-storage facilities across nine states with 0.9 million net rentable square feet, for $147.2 million.

On April 24, 2022, PSB entered into an Agreement and Plan of Merger (the "Merger Agreement") whereby affiliates of Blackstone Real Estate ("Blackstone") will acquire all outstanding shares of PSB's common stock for $187.50 per share in cash. Subject to the terms and conditions set forth in the Merger Agreement, each share of PSB common stock and each common unit of partnership interest will be converted into the right to receive an amount in cash equal to $187.50, without interest. If the transaction is consummated, we expect to (i) receive approximately $2.7 billion of cash proceeds in exchange for the approximate 41% common equity interest we hold in PSB, (ii) recognize an approximate $2.2 billion gain on the sale of our equity investment in PSB in the Consolidated Statement of Income, and (iii) distribute a $2.3 billion estimated tax gain on the sale to our common shareholders. The merger transaction is expected to close in the third quarter of 2022, however, the merger transaction is subject to customary closing conditions, including approval by PSB’s common stockholders. Pursuant to a support agreement entered into with PSB and Blackstone, we have committed to vote our equity interests in favor of the transaction, subject to certain conditions.

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