FILED PURSUANT TO
                                                                 RULE 424 (b)(5)
                                                     REGISTRATION NOS. 333-81041
                                                                   AND 333-68992

PROSPECTUS SUPPLEMENT
(To Prospectus dated July 8, 1999)

                               20,000,000 Shares

                             Public Storage, Inc.   [LOGO OF PUBLIC STORAGE(R)]

           Depositary Shares Each Representing 1/1,000 of a Share of
                  8.000% Cumulative Preferred Stock, Series R
       Liquidation Preference Equivalent to $25.00 Per Depositary Share

                                 -----------

  We are selling 20,000,000 depositary shares each representing 1/1,000 of a
share of our 8.000% Cumulative Preferred Stock, Series R. The shares of
Preferred Stock represented by the depositary shares will be deposited with
Fleet National Bank, as depositary. As a holder of depositary shares, you will
be entitled to all proportional rights, preferences and privileges of the
Preferred Stock. We have granted the underwriters an option to purchase up to
400,000 additional depositary shares to cover over-allotments. The following
is a summary of the Preferred Stock:

  .  We will pay cumulative distributions on the Preferred Stock at the rate
     of 8.000% of the liquidation preference per year ($2.00 per year per
     depositary share).

  .  We will pay distributions on the Preferred Stock quarterly, beginning on
     December 31, 2001 (with the payment on that date representing the full
     distribution for the fourth quarter of 2001).

  .  We are not allowed to redeem the Preferred Stock before September 28,
     2006, except in order to preserve our status as a real estate investment
     trust.

  .  On and after September 28, 2006, we may, at our option, redeem the
     Preferred Stock by paying you $25.00 per depositary share, plus any
     accrued and unpaid distributions.

  .  The Preferred Stock has no stated maturity and is not subject to any
     sinking fund or mandatory redemption and is not convertible into any
     other securities.

  .  Investors in the depositary shares representing interests in the
     Preferred Stock generally have no voting rights, except if we fail to
     pay distributions for six or more quarters or as required by law.

  We have applied to have the depositary shares listed on the New York Stock
Exchange (the "NYSE") under the symbol "PSAPrR." If this application is
approved, trading of the depositary shares on the NYSE is expected to begin
within 30 days following initial delivery of the depositary shares.

                                 -----------
  Investing in the depositary shares involves risks. See "Risk Factors"
beginning on page 1 of the accompanying prospectus.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

                                 -----------


                                                         Per Share    Total
                                                         --------- ------------
                                                             
   Public Offering Price................................ $  25.00  $500,000,000
   Underwriting Discount................................ $ 0.7875  $ 15,750,000
   Proceeds to Public Storage (before expenses)......... $24.2125  $484,250,000


  The underwriters are offering the depositary shares subject to various
conditions. The underwriters expect to deliver the depositary shares to
purchasers on or about September 28, 2001.

                                 -----------
Salomon Smith Barney
    A.G. Edwards & Sons, Inc.
           First Union Securities, Inc.
                 Merrill Lynch & Co.
                       Morgan Stanley
                             UBS Warburg
                                   CIBC World Markets
                                         Credit Suisse First Boston
                                               Deutsche Banc Alex. Brown
                                                       Prudential Securities
                                                                 Raymond James

September 4, 2001


  You should rely only on the information contained in or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of this
prospectus supplement.

                                 ------------

                               TABLE OF CONTENTS

                             Prospectus Supplement



                                                                            Page
                                                                            ----
                                                                         
The Company................................................................  S-3
Use of Proceeds ...........................................................  S-4
Description of Preferred Stock and Depositary Shares.......................  S-5
Federal Income Tax Consequences............................................ S-11
Underwriting............................................................... S-14
Legal Matters.............................................................. S-16
Experts.................................................................... S-16

                                   Prospectus

Risk Factors...............................................................    1
About this Prospectus......................................................    3
Where You Can Find More Information........................................    4
Forward-Looking Statements.................................................    5
The Company................................................................    5
Use of Proceeds............................................................    6
Ratio of Earnings to Fixed Charges.........................................    6
Description of Common Stock and Class B Common Stock.......................    6
Description of Preferred Stock.............................................    9
Description of Equity Stock................................................   14
Description of the Depositary Shares.......................................   16
Description of Warrants....................................................   19
Federal Income Tax Consequences............................................   20
Plan of Distribution.......................................................   32
Legal Opinions.............................................................   34
Experts....................................................................   34


  This Prospectus Supplement and the accompanying Prospectus, including
documents incorporated by reference, contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are inherently subject to risk and uncertainties, many of which
cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ materially from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors" in the accompanying Prospectus and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our most recent annual and quarterly reports.

                                      S-2


                                  THE COMPANY

  We are a fully integrated, self-administered and self-managed real estate
investment trust that acquires, develops, owns and operates self-storage
facilities which offer self-storage spaces for lease for personal and business
use. We are the largest owner and operator of self-storage facilities in the
United States with equity interests (through direct ownership, as well as
general and limited partnership interests), as of June 30, 2001, in 1,376
storage facilities located in 37 states. We also have a significant ownership
in PS Business Parks, Inc., a REIT that, as of June 30, 2001, had equity
interests in 152 commercial properties located in nine states.

  The following table reflects the geographic diversification of our storage
facilities:



                                                        At June 30, 2001
                                                 ------------------------------
                                                 Number of  Net Rentable Square
                                                 Facilities  Feet (in thousands)
                                                 ---------- -------------------
                                                      
California:
  Southern......................................     160          10,306
  Northern......................................     138           7,704
Texas...........................................     164          11,115
Florida.........................................     140           8,384
Illinois........................................      94           5,816
Georgia.........................................      62           3,626
Colorado........................................      51           3,199
Washington......................................      39           2,533
New Jersey......................................      38           2,244
Virginia........................................      37           2,247
Missouri........................................      37           2,128
Maryland........................................      37           2,097
New York........................................      35           2,084
Ohio............................................      31           1,899
Oregon..........................................      25           1,171
Tennessee.......................................      25           1,494
South Carolina..................................      24           1,082
North Carolina..................................      24           1,266
Kansas..........................................      22           1,278
Nevada..........................................      22           1,409
Alabama.........................................      21             835
Pennsylvania....................................      20           1,360
Indiana.........................................      18           1,050
Other states (15 states)........................     112           6,770
                                                   -----          ------
  Totals........................................   1,376          83,097
                                                   =====          ======


                                      S-3


                                USE OF PROCEEDS

  We estimate net proceeds from this offering of approximately $484,050,000,
after all anticipated issuance costs (approximately $493,735,000 if the
underwriters' over-allotment option is exercised in full). We intend to use the
net proceeds from this offering (1) to redeem in full all outstanding shares of
our 8 7/8% Cumulative Preferred Stock, Series G held by the depositary, and, as
a result, the depositary will redeem in full all outstanding depositary shares
representing interests in our Series G Preferred Stock, having an aggregate
liquidation preference of $172,500,000, (2) to redeem in full all outstanding
shares of our 8.45% Cumulative Preferred Stock, Series H held by the
depositary, and, as a result, the depositary will redeem in full all
outstanding depositary shares representing interests in our Series H Preferred
Stock, having an aggregate liquidation preference of $168,750,000, and (3) to
fund development activity, acquisitions of mini-warehouses, purchases of
interests in real estate entities, general corporate purposes and additional
investments in the portable self-storage business. For additional information
on this business, you should read our most recent annual and quarterly reports.

  Pending application of the net proceeds as described above, the net proceeds
of this offering will be deposited in interest bearing accounts or invested in
certificates of deposit, United States government obligations or other short-
term, high-quality debt instruments selected at our discretion.

                                      S-4


              DESCRIPTION OF PREFERRED STOCK AND DEPOSITARY SHARES

General

  Under our Articles of Incorporation, as amended, the Board of Directors is
authorized without further shareholder action to provide for the issuance of up
to 50,000,000 shares of preferred stock, in one or more series, with such
voting powers, full or limited, and with such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be set forth in resolutions
providing for the issue of preferred stock adopted by the Board of Directors.
At June 30, 2001, we had outstanding 11,148,000 shares of preferred stock and
had reserved for issuance an additional 14,600 shares of preferred stock.

  Prior to issuance, the Board of Directors will have adopted resolutions
creating the 8.000% Cumulative Preferred Stock, Series R (the "Preferred
Stock"). When issued, the Preferred Stock will have a liquidation value of
$25,000 per share, will be fully paid and nonassessable, will not be subject to
any sinking fund or other obligation of the Company to repurchase or retire the
Preferred Stock, and will have no preemptive rights.

   Fleet National Bank will be the transfer agent and dividend disbursing agent
for the Preferred Stock.

  Each Depositary Share represents 1/1,000 of a share of Preferred Stock. The
shares of the Preferred Stock will be deposited with Fleet National Bank, as
Depositary (the "Preferred Stock Depositary"), under a Deposit Agreement among
the Company, the Preferred Stock Depositary and the holders from time to time
of the depositary receipts (the "Depositary Receipts") issued by the Preferred
Stock Depositary under the Deposit Agreement. The Depositary Receipts will
evidence the Depositary Shares. Subject to the terms of the Deposit Agreement,
each holder of a Depositary Receipt evidencing a Depositary Share will be
entitled, proportionately, to all the rights and preferences of, and subject to
all of the limitations of, the interest in the Preferred Stock represented by
the Depositary Share (including dividend, voting, redemption and liquidation
rights and preferences). See "Description of the Depositary Shares" in the
accompanying Prospectus and "--Depositary Shares" below.

  Immediately following our issuance of the Preferred Stock, we will deposit
the Preferred Stock with the Preferred Stock Depositary, which will then issue
and deliver the Depositary Receipts to us. We will, in turn, deliver the
Depositary Receipts to the underwriters. Depositary Receipts will be issued
evidencing only whole Depositary Shares.

  We have applied to have the Depositary Shares listed on the NYSE. The
Preferred Stock will not be listed and we do not expect that there will be any
trading market for the Preferred Stock except as represented by the Depositary
Shares.

Ownership Restrictions

  For a discussion of ownership limitations that apply to the Preferred Stock
and related Depositary Shares, see "Description of Common Stock and Class B
Common Stock--Ownership Limitations" in the accompanying Prospectus.

Preferred Stock

  The following is a brief description of the terms of the Preferred Stock
which does not purport to be complete and is subject to and qualified in its
entirety by reference to the Certificate of Determination of the Preferred
Stock, the form of which is filed as an exhibit to, or incorporated by
reference in, the Registration Statement of which this Prospectus Supplement
constitutes a part.

                                      S-5


 Ranking

  With respect to the payment of dividends and amounts upon liquidation, the
Preferred Stock will rank pari passu with our 10% Cumulative Preferred Stock,
Series A, 9.20% Cumulative Preferred Stock, Series B, Adjustable Rate
Cumulative Preferred Stock, Series C, 9.50% Cumulative Preferred Stock, Series
D, 10% Cumulative Preferred Stock, Series E, 9.75% Cumulative Preferred Stock,
Series F, 8 7/8% Cumulative Preferred Stock, Series G (which we expect to
redeem with the net proceeds of the offering of the Preferred Stock), 8.45%
Cumulative Preferred Stock, Series H (which we expect to redeem with the net
proceeds of the offering of the Preferred Stock), 8 5/8% Cumulative Preferred
Stock, Series I, 8% Cumulative Preferred Stock, Series J, 8 1/4% Cumulative
Preferred Stock, Series K, 8 1/4% Cumulative Preferred Stock, Series L, 8.75%
Cumulative Preferred Stock, Series M and 8.600% Cumulative Preferred Stock,
Series Q (collectively, together with the Preferred Stock, the "Senior
Preferred Stock") and any other shares of preferred stock issued by us, whether
now or hereafter issued, ranking pari passu with the Senior Preferred Stock
(including shares of preferred stock issued upon conversion of the 9.5% Series
N, 9.125% Series O, and 8.75% Series P Cumulative Redeemable Perpetual
Preferred Units of one of our operating partnerships), and will rank senior to
the Common Stock and any other capital stock of the Company ranking junior to
the Preferred Stock. In August 2001, we purchased at par $30,000,000 of the
9.125% Series O Cumulative Redeemable Perpetual Preferred Units.

 Dividends

  Holders of shares of Preferred Stock, in preference to the holders of shares
of the Common Stock, and of any other capital stock issued by us ranking junior
to the Preferred Stock as to payment of dividends, will be entitled to receive,
when and as declared by the Board of Directors out of assets of the Company
legally available for payment, cash dividends payable quarterly at the rate of
8.000% of the liquidation preference per year ($2,000 per year per share,
equivalent to $2.00 per year per Depositary Share). Dividends on the shares of
Preferred Stock will be cumulative from the date of issue and will be payable
quarterly on or before March 31, June 30, September 30 and December 31,
commencing December 31, 2001, to holders of record as they appear on the stock
register of the Company on such record dates, not less than 15 or more than 45
days preceding the payment dates thereof, as shall be fixed by the Board of
Directors. After full dividends on the Preferred Stock have been paid or
declared and funds set aside for payment for all past dividend periods and for
the then current quarter, the holders of shares of Preferred Stock will not be
entitled to any further dividends with respect to that quarter.

  When dividends are not paid in full upon the Preferred Stock and any other
shares of preferred stock of the Company ranking on a parity as to dividends
with the Preferred Stock (including the other series of Senior Preferred
Stock), all dividends declared upon the Preferred Stock and any other preferred
shares of the Company ranking on a parity as to dividends with the Preferred
Stock shall be declared pro rata so that the amount of dividends declared per
share on such Preferred Stock and such other shares shall in all cases bear to
each other the same ratio that the accrued dividends per share on the Preferred
Stock and such other preferred shares bear to each other. Except as set forth
in the preceding sentence, unless full dividends on the Preferred Stock have
been paid for all past dividend periods, no dividends (other than in Common
Stock or other shares of capital stock issued by us ranking junior to the
Preferred Stock as to dividends and upon liquidation) shall be declared or paid
or set aside for payment, nor shall any other distribution be made on the
Common Stock or on any other shares of capital stock issued by us ranking
junior to or on a parity with the Preferred Stock as to dividends or upon
liquidation.

  Unless full dividends on the Preferred Stock have been paid for all past
dividend periods, we and our subsidiaries may not redeem, repurchase or
otherwise acquire for any consideration (nor may we or they pay or make
available any moneys for a sinking fund for the redemption of) any shares of
Common Stock or any other shares of capital stock issued by us ranking junior
to or on a parity with the Preferred Stock as to dividends or upon liquidation
except by conversion into or exchange for shares of capital stock issued by us
ranking junior to the Preferred Stock as to dividends and upon liquidation.

  Our revolving credit facility with a commercial bank restricts our ability to
pay distributions in excess of "Funds from Operations" for the prior four
fiscal quarters less scheduled principal payments and less capital

                                      S-6


expenditures. Funds from operations is defined in the loan agreement generally
as net income before gain on sale of real estate, extraordinary loss on early
retirement of debt and deductions for depreciation, amortization and non-cash
charges. Our management believes that this restriction will not impede our
ability to pay the dividends on the Preferred Stock in full.

 Conversion Rights

  The Preferred Stock will not be convertible into shares of any other class or
series of capital stock of the Company.

 Liquidation Rights

  In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Preferred Stock will be entitled
to receive out of our assets available for distribution to stockholders, before
any distribution of assets is made to holders of Common Stock or of any other
shares of capital stock issued by us ranking as to such distribution junior to
the Preferred Stock, liquidating distributions in the amount of $25,000 per
share (equivalent to $25.00 per Depositary Share), plus all accrued and unpaid
dividends (whether or not earned or declared) for the then current, and all
prior, dividend periods. If upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Preferred Stock and any other shares of stock issued by us ranking as to
any such distribution on a parity with the Preferred Stock (including other
series of Senior Preferred Stock) are not paid in full, the holders of the
Preferred Stock and of such other shares will share ratably in any such
distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of the Preferred Stock will not be entitled to any further participation in any
distribution of assets by us.

  For purposes of liquidation rights, a consolidation or merger of the Company
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Company is not a liquidation,
dissolution or winding up of the Company.

 Redemption

  Except in certain circumstances relating to our qualification as a REIT, we
may not redeem the shares of Preferred Stock prior to September 28, 2006. On
and after September 28, 2006, at any time or from time to time, we may redeem
the shares of Preferred Stock in whole or in part at our option at a cash
redemption price of $25,000 per share of Preferred Stock (equivalent to $25 per
Depositary Share), plus all accrued and unpaid dividends to the date of
redemption. If fewer than all the outstanding shares of Preferred Stock are to
be redeemed, the shares to be redeemed will be determined by the Board of
Directors of the Company, and such shares shall be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares
held by such holders (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by the Board of Directors of the
Company.

  Notwithstanding the foregoing, if any dividends, including any accumulation,
on the Preferred Stock are in arrears, we may not redeem any Preferred Stock
unless we redeem simultaneously all outstanding Preferred Stock, and we may not
purchase or otherwise acquire, directly or indirectly, any Preferred Stock;
provided, however, that this shall not prevent the purchase or acquisition of
the Preferred Stock pursuant to a purchase or exchange offer if such offer is
made on the same terms to all holders of the Preferred Stock.

  Notice of redemption of the Preferred Stock will be given by publication in a
newspaper of general circulation in the County of Los Angeles and the City of
New York, such publication to be made once a week for two successive weeks
commencing not less than 30 nor more than 60 days prior to the redemption date.
A similar notice will be mailed by us, postage prepaid, not less than 30 or
more than 60 days prior to the redemption date, addressed to the respective
holders of record of shares of Preferred Stock to be redeemed at

                                      S-7


their respective addresses as they appear on the stock transfer records of the
Company. Each notice shall state: (1) the redemption date; (2) the number of
shares of Preferred Stock to be redeemed; (3) the redemption price per share of
Preferred Stock; (4) the place or places where certificates for the Preferred
Stock are to be surrendered for payment of the redemption price; and (5) that
dividends on the shares of Preferred Stock to be redeemed will cease to accrue
on such redemption date. If fewer than all the shares of Preferred Stock held
by any holder are to be redeemed, the notice mailed to such holder shall also
specify the number of shares of Preferred Stock to be redeemed from such
holder. In order to facilitate the redemption of shares of Preferred Stock, the
Board of Directors may fix a record date for the determination of shares of
Preferred Stock to be redeemed, such record date to be not less than 30 nor
more than 60 days prior to the date fixed for such redemption.

  Notice having been given as provided above, from and after the date specified
therein as the date of redemption, unless we default in providing funds for the
payment of the redemption price on such date, all dividends on the Preferred
Stock called for redemption will cease. From and after the redemption date,
unless we so default, all rights of the holders of the Preferred Stock as
stockholders of the Company, except the right to receive the redemption price
(but without interest), will cease. Upon surrender in accordance with such
notice of the certificates representing any such shares (properly endorsed or
assigned for transfer, if the Board of Directors of the Company shall so
require and the notice shall so state), the redemption price set forth above
shall be paid out of the funds provided by the Company. If fewer than all the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.

  Subject to applicable law and the limitation on purchases when dividends on
the Preferred Stock are in arrears, we may, at any time and from time to time,
purchase any shares of Preferred Stock in the open market, by tender or by
private agreement.

 Voting Rights

  Except as indicated below, or except as expressly required by applicable law,
holders of the Preferred Stock will not be entitled to vote.

  If the equivalent of six quarterly dividends payable on the Preferred Stock
or any other series of preferred stock are in default (whether or not declared
or consecutive), holders of the Preferred Stock (voting as a class with all
other series of Senior Preferred Stock) will be entitled to elect two
additional directors until all dividends in default have been paid or declared
and set apart for payment.

  Such right to vote separately to elect directors shall, when vested, be
subject, always, to the same provisions for vesting of such right to elect
directors separately in the case of future dividend defaults. At any time when
such right to elect directors separately shall have so vested, we may, and upon
the written request of the holders of record of not less than 20% of the total
number of preferred shares of the Company then outstanding shall, call a
special meeting of shareholders for the election of directors. In the case of
such a written request, such special meeting shall be held within 90 days after
the delivery of such request and, in either case, at the place and upon the
notice provided by law and in our Bylaws, provided that we shall not be
required to call such a special meeting if such request is received less than
120 days before the date fixed for the next ensuing annual meeting of
shareholders, and the holders of all classes of outstanding preferred stock are
offered the opportunity to elect such directors (or fill any vacancy) at such
annual meeting of shareholders. Directors so elected shall serve until the next
annual meeting of our shareholders or until their respective successors are
elected and qualify. If, prior to the end of the term of any director so
elected, a vacancy in the office of such director shall occur, during the
continuance of a default in dividends on preferred shares of the Company, by
reason of death, resignation, or disability, such vacancy shall be filled for
the unexpired term of such former director by the appointment of a new director
by the remaining director or directors so elected.

  The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Preferred Stock and any other series of preferred
stock ranking on a parity with the Preferred Stock as to dividends or

                                      S-8


upon liquidation (which includes the other series of Senior Preferred Stock),
voting as a single class, will be required to authorize another class of shares
senior to the Preferred Stock with respect to the payment of dividends or the
distribution of assets on liquidation. The affirmative vote or consent of the
holders of at least 66 2/3% of the outstanding shares of the Preferred Stock
will be required to amend or repeal any provision of or add any provision to,
the Articles of Incorporation, including the Certificate of Determination, if
such action would materially and adversely alter or change the rights,
preferences or privileges of the Preferred Stock.

  No consent or approval of the holders of shares of the Preferred Stock will
be required for the issuance from the Company's authorized but unissued
preferred stock of other shares of any series of preferred stock ranking on a
parity with or junior to the Preferred Stock as to payment of dividends and
distribution of assets, including other shares of Preferred Stock.

Depositary Shares

  The following is a brief description of the terms of the Depositary Shares
which does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Deposit Agreement (including
the form of Depositary Receipt contained therein), which is filed as an exhibit
to, or incorporated by reference in, the Registration Statement of which this
Prospectus Supplement constitutes a part.

 Dividends

  The Depositary will distribute all cash dividends or other cash distributions
received in respect of the Preferred Stock to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such holders
on the relevant record date, which will be the same date as the record date
fixed by us for the Preferred Stock. In the event that the calculation of such
amount to be paid results in an amount which is a fraction of one cent, the
amount the Depositary shall distribute to such record holder shall be rounded
to the next highest whole cent.

  In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
entitled thereto, in proportion, as nearly as may be practicable, to the number
of Depositary Shares owned by such holders on the relevant record date, unless
the Depositary determines (after consultation with us) that it is not feasible
to make such distribution, in which case the Depositary may (with our approval)
adopt any other method for such distribution as it deems equitable and
appropriate, including the sale of such property (at such place or places and
upon such terms as it may deem equitable and appropriate) and distribution of
the net proceeds from such sale to such holders.

 Liquidation Preference

  In the event of the liquidation, dissolution or winding up of the affairs of
the Company, whether voluntary or involuntary, the holders of each Depositary
Share will be entitled to 1/1000th of the liquidation preference accorded each
share of the Preferred Stock.

 Redemption

  Whenever we redeem any Preferred Stock held by the Depositary, the Depositary
will redeem as of the same redemption date the number of Depositary Shares
representing the Preferred Stock so redeemed. The Depositary will publish a
notice of redemption of the Depositary Shares containing the same type of
information and in the same manner as our notice of redemption and will mail
the notice of redemption promptly upon receipt of such notice from us and not
less than 30 nor more than 60 days prior to the date fixed for redemption of
the Preferred Stock and the Depositary Shares to the record holders of the
Depositary Receipts. In case less than all the outstanding Depositary Shares
are to be redeemed, the Depositary Shares to be so redeemed shall be determined
pro rata or by lot in a manner determined by the Board of Directors.

                                      S-9


 Voting

  Promptly upon receipt of notice of any meeting at which the holders of the
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Receipts as of the record date for such meeting. Each such record holder of
Depositary Receipts will be entitled to instruct the Depositary as to the
exercise of the voting rights pertaining to the number of shares of Preferred
Stock represented by such record holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote such Preferred Stock represented
by such Depositary Shares in accordance with such instructions, and we will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary will abstain from
voting any of the Preferred Stock to the extent that it does not receive
specific instructions from the holders of Depositary Receipts.

 Withdrawal of Preferred Stock

  Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of any unpaid amount due the Depositary, and subject
to the terms of the Deposit Agreement, the owner of the Depositary Shares
evidenced thereby is entitled to delivery of the number of whole shares of
Preferred Stock and all money and other property, if any, represented by such
Depositary Shares. Partial shares of Preferred Stock will not be issued. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
whole shares of Preferred Stock to be withdrawn, the Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares. Holders of Preferred Stock thus withdrawn will not
thereafter be entitled to deposit such shares under the Deposit Agreement or to
receive Depositary Receipts evidencing Depositary Shares therefor.

 Amendment and Termination of Deposit Agreement

  The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between us and the Depositary. However, any amendment
which materially and adversely alters the rights of the holders (other than any
change in fees) of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. No such amendment may impair the right,
subject to the terms of the Deposit Agreement, of any owner of any Depositary
Shares to surrender the Depositary Receipt evidencing such Depositary Shares
with instructions to the Depositary to deliver to the holder the Preferred
Stock and all money and other property, if any, represented thereby, except in
order to comply with mandatory provisions of applicable law. The Deposit
Agreement may be terminated by us or the Depositary only if (i) all outstanding
Depositary Shares have been redeemed or (ii) there has been a final
distribution in respect of the Preferred Stock in connection with any
dissolution of the Company and such distribution has been made to all the
holders of Depositary Shares.

 Charges of Depositary

  We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the Depositary in connection with the initial deposit of the Preferred Stock
and the initial issuance of the Depositary Shares, and redemption of the
Preferred Stock and all withdrawals of Preferred Stock by owners of Depositary
Shares. Holders of Depositary Receipts will pay transfer, income and other
taxes and governmental charges and certain other charges as are provided in the
Deposit Agreement to be for their accounts. In certain circumstances, the
Depositary may refuse to transfer Depositary Shares, may withhold dividends and
distributions and sell the Depositary Shares evidenced by such Depositary
Receipt if such charges are not paid.

                                      S-10


 Miscellaneous

  The Depositary will forward to the holders of Depositary Receipts all reports
and communications from us which are delivered to the Depositary and which we
are required to furnish to the holders of the Preferred Stock. In addition, the
Depositary will make available for inspection by holders of Depositary Receipts
at the principal office of the Depositary, and at such other places as it may
from time to time deem advisable, any reports and communications received from
the Company which are received by the Depositary as the holder of Preferred
Stock.

  Neither the Depositary nor any Depositary's Agent (as defined in the Deposit
Agreement), nor the Registrar (as defined in the Deposit Agreement) nor the
Company assumes any obligation or will be subject to any liability under the
Deposit Agreement to holders of Depositary Receipts other than for its gross
negligence, willful misconduct or bad faith. Neither the Depositary, any
Depositary's Agent, the Registrar nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The Company and the
Depositary are not obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares, Depositary Receipts or Preferred Stock unless
reasonably satisfactory indemnity is furnished. The Company and the Depositary
may rely on written advice of counsel or accountants, on information provided
by holders of Depositary Receipts or other persons believed in good faith to be
competent to give such information and on documents believed to be genuine and
to have been signed or presented by the proper party or parties.

 Resignation and Removal of Depositary

  The Depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Depositary and its acceptance of such appointment. Such successor Depositary
must be appointed within 60 days after delivery of the notice for resignation
or removal and must be a bank or trust company having its principal office in
the United States of America and having a combined capital and surplus of at
least $150,000,000.

                        FEDERAL INCOME TAX CONSEQUENCES

  The following is a summary of certain federal income tax considerations
pertaining to the acquisition, ownership and disposition of the Depositary
Shares. The following summary relates solely to the tax considerations relevant
specifically to the acquisition, ownership and disposition of Depositary
Shares. For a discussion of the taxation of the Company and the tax
considerations relevant to shareholders generally, see "Federal Income Tax
Consequences--Taxation of the Company" and "--Taxation of U.S. Shareholders
Holding Common Stock" in the accompanying Prospectus. This discussion is
general in nature and not exhaustive of all possible tax considerations, nor
does the discussion address any state, local or foreign tax considerations. The
discussion is based on current law and does not purport to deal with all
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of its particular circumstances or to certain types of
shareholders (including insurance companies, financial institutions, broker-
dealers, tax exempt investors, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws. We have not requested and will not request a
ruling from the Internal Revenue Service (the "Service") with respect to any of
the federal income tax issues discussed below. Prospective investors should
consult, and must depend on, their own tax advisors regarding the federal,
state, local, foreign and other tax consequences of holding and disposing of
the Depositary Shares.

Taxation of Holders of Depositary Shares

  General. Owners of the Depositary Shares will be treated for federal income
tax purposes as if they were owners of the Preferred Stock represented by such
Depositary Shares. Accordingly, such owners will be

                                      S-11


entitled to take into account, for federal income tax purposes, income and
deductions to which they would be entitled if they were holders of such
Preferred Stock. See "Description of the Depositary Shares--Federal Income Tax
Considerations" in the accompanying Prospectus. Withdrawals of Preferred Stock
for Depositary Shares are not taxable events for federal income tax purposes.

  Dividends and Other Distributions; Backup Withholding. For a discussion of
the taxation of the Company, the treatment of dividends and other distributions
with respect to shares of the Company, and the backup withholding rules, see
"Federal Income Tax Consequences--Taxation of the Company" and "--Taxation of
U.S. Shareholders Holding Common Stock" in the accompanying Prospectus.
Effective for dividend payments made after August 6, 2001, the backup
withholding rate will be decreased from 31% to 30.5% and is scheduled to be
further reduced through 2006 as federal ordinary income tax rates decrease.

  Sale or Exchange of Depositary Shares. Upon the sale, exchange or other
disposition of Depositary Shares to a party other than the Company, a holder of
Depositary Shares will realize capital gain or loss measured by the difference
between the amount realized on the sale, exchange or other disposition of the
Depositary Shares and such shareholder's adjusted tax basis in the Depositary
Shares (provided the Depositary Shares are held as a capital asset). Gain
recognized by a shareholder who is an individual, estate or trust upon a sale,
exchange or other disposition of Depositary Shares that have been held for more
than 12 months will generally be subject to tax at a rate not to exceed 20%.
Gain recognized from the sale, exchange or other disposition of Depositary
Shares that have been held for 12 months or less will be subject to tax at
ordinary income tax rates. In addition, capital gain recognized by a corporate
shareholder will continue to be subject to tax at the ordinary income tax rates
applicable to corporations. Any loss on a sale, exchange or other disposition,
of Depositary Shares that were held for six months or less and with respect to
which a "capital gain dividend" was received will be treated as a long term
capital loss, up to the amount of the capital gain dividend received with
respect to such Depositary Shares. For a discussion of capital gain taxation
see "Federal Income Tax Consequences--Taxation of U.S. Shareholders Holding
Common Stock--Taxpayer Relief Act and IRS Restructuring Act Changes to Capital
Gain Taxation" in the accompanying Prospectus.

  Redemption of Depositary Shares. Whenever the Company redeems any Preferred
Stock held by the Depositary, the Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the Preferred
Stock so redeemed. The treatment to a holder of Depositary Shares accorded to
any redemption by the Company (as distinguished from a sale, exchange or other
disposition) of Preferred Stock held by the Depositary and corresponding
redemption of Depositary Shares can only be determined on the basis of
particular facts as to the holder of Depositary Shares at the time of
redemption. In general, a holder of Depositary Shares will recognize capital
gain or loss measured by the difference between the amount received upon the
redemption and the holder of the Depositary Shares' adjusted tax basis in the
Depositary Shares redeemed (provided the Depositary Shares are held as a
capital asset) if such redemption (i) results in a "complete termination" of a
holder's interest in all classes of stock of the Company under Section
302(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code") or (ii)
is "not essentially equivalent to a dividend" with respect to the holder under
Section 302(b)(1) of the Code. In applying these tests, there must be taken
into account not only any Depositary Shares owned by the holder, but also such
holder's ownership of Common Stock, equity stock, other series of preferred
stock and any options (including stock purchase rights) to acquire any of the
foregoing. The holder also must take into account any such securities
(including options) which are considered to be owned by such holder by reason
of the constructive ownership rules set forth in Sections 318 and 302(c) of the
Code.

  If a particular holder of Depositary Shares owns (actually or constructively)
no shares of Common Stock or equity stock of the Company or an insubstantial
percentage of the outstanding shares of Common Stock, equity stock or preferred
stock of the Company, based upon current law, it is probable that the
redemption of Depositary Shares from such a holder would be considered "not
essentially equivalent to a dividend." However, whether a distribution is "not
essentially equivalent to a dividend" depends on all of the facts and
circumstances, and a holder of Depositary Shares intending to rely on any of
these tests at the time of redemption should consult its tax advisor to
determine their application to its particular situation.

                                      S-12


  If the redemption does not meet any of the tests under Section 302 of the
Code, then the redemption proceeds received from the Depositary Shares will be
treated as a distribution on the Depositary Shares as described under "Federal
Income Tax Consequences--Taxation of U.S. Shareholders Holding Common Stock" in
the accompanying Prospectus. If the redemption is taxed as a dividend, the
holder of Depositary Shares' adjusted tax basis in the Depositary Shares will
be transferred to any other stockholdings of the holder of Depositary Shares in
the Company. If the holder of Depositary Shares owns no other stockholdings in
the Company, under certain circumstances, such basis may be transferred to a
related person, or it may be lost entirely.

Legislation Affecting REITs

  On December 17, 1999, the Work Incentives Improvement Act of 1999 (the
"Act"), which includes certain provisions affecting REITs, was enacted. The
REIT provisions of the Act generally are effective for taxable years beginning
after December 31, 2000. The Act was intended to ease the restrictions on a
REIT's ability to own the stock of taxable companies. The Act allows REITs to
own up to 100% of the stock of companies that have made a joint election with
the REIT to be treated as "taxable REIT subsidiaries" ("TRSs"). A TRS will be
subject to federal income tax on income as a regular corporation. Under prior
law, a REIT generally could not own more than 10% of the voting securities of
other corporate issuers, such as the Lock/Box Company (see "Federal Income Tax
Consequences--Taxation of the Company--Asset Tests" in the accompanying
prospectus). Under the Act, the prior law 10% voting securities test was
expanded so that REITs also are prohibited from owning more than (1) 10% of the
value of outstanding equity securities of any one corporate issuer, or (2) 10%
of the value of certain debt securities of any one issuer of any type, except
for companies that elect to be treated as TRSs or companies that qualify for
certain grandfather provisions in the Act.

  An important effect of the Act is that TRSs are permitted to offer
noncustomary services to the tenants of the REIT (such services could be
provided under prior law only by "independent contractors" from which the REIT
could not earn any income). TRSs also are able to engage in other income
producing activities that typically had been undertaken by REITs only through
entities in which a REIT could have a substantial economic interest, but was
limited to a 10% or less voting interest (such as the Lock/Box Company). The
Act includes certain limitations that prevent income shifting between a REIT
and its TRSs (including, for example, interest payments in excess of certain
specified levels), in an effort to ensure that TRSs in fact are taxable on the
income that they earn. (The Act is designed to force REITs to subject their
taxable subsidiaries to the income shifting limitations by prohibiting a REIT
from owning more than 10% in either vote or value of the equity securities of a
corporate issuer that is not a TRS or 10% of the value of certain debt
securities of any one issuer of any type that is not a TRS.) In addition, under
prior law, a REIT could not own securities of any single issuer with a value in
excess of 5% of the value of all assets of the REIT. The Act also relaxed this
limitation, so that a REIT may own all or any portion of the securities of a
TRS (or TRSs), so long as (1) the aggregate value of the TRSs does not exceed
20% of the value of all assets of the REIT and (2) the aggregate value of the
TRSs, when combined with all other non-REIT assets, does not exceed 25% of the
value of all assets of the REIT. The Company and the Lock/Box Company jointly
made the TRS election effective January, 2001.

  Other provisions of the Act that are targeted at REITs include: (1) a
reduction in the size of a REIT's required annual distributions to 90% of REIT
taxable income (from the prior 95%) (a change that seems likely to have limited
effect, given that REITs typically seek to have distributions equal to 100% of
their REIT taxable income, so as to avoid paying taxes on any undistributed
portion); (2) provisions directed at other segments of the REIT industry,
principally the lodging and health-care sectors; and (3) various other
technical changes.

                                      S-13


                                  UNDERWRITING

  Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, each underwriter named below has
agreed to purchase, and we have agreed to sell to that underwriter, the number
of shares set forth opposite the underwriter's name.



                                      Number
   Underwriter                       of shares
   -----------                       ----------
                                  
   Salomon Smith Barney
    Inc. ...................          2,900,000
   A.G. Edwards & Sons,
    Inc. ...................          2,760,000
   First Union Securities,
    Inc. ...................          2,760,000
   Merrill Lynch, Pierce,
    Fenner & Smith
            Incorporated....          2,760,000
   Morgan Stanley & Co. ....          2,760,000
   UBS Warburg LLC..........          2,760,000
   CIBC World Markets
    Corp. ..................            200,000
   Credit Suisse First
    Boston Corporation......            200,000
   Deutsche Banc Alex. Brown
    Inc. ...................            200,000
   Prudential Securities
    Incorporated............            200,000
   Raymond James &
    Associates, Inc.  ......            200,000
   ABN Amro Incorporated....            100,000
   Bear, Stearns & Co.
    Inc. ...................            100,000
   Charles Schwab & Co.,
    Inc. ...................            100,000
   Dain Rauscher
    Incorporated............            100,000
   J.P. Morgan Chase &
    Co. ....................            100,000
   H&R BLOCK Financial
    Advisors, Inc. .........            100,000
   Legg Mason Wood Walker,
    Inc. ...................            100,000
   McDonald Investments
    Inc.* ..................            100,000
   Quick & Reilly, Inc.  ...            100,000
   Tucker Anthony
    Incorporated............            100,000
   U.S. Bancorp Piper
    Jaffray Inc. ...........            100,000
   Wells Fargo Van Kasper,
    LLC.....................            100,000
   Advest, Inc. ............             50,000
   BB&T Capital Markets, a
    Division of Scott &
    Stringfellow, Inc. .....             50,000
   C.L. King & Associates,
    Inc. ...................             50,000
   Crowell, Weedon & Co. ...             50,000
   D.A. Davidson & Co. .....             50,000
   Davenport & Company LLC..             50,000
   Fahnestock & Co. Inc. ...             50,000
   Gibraltar Securities.....             50,000
   Gruntal & Co., L.L.C. ...             50,000
   HSBC Securities (USA)
    Inc.  ..................             50,000
   J.J.B. Hilliard, W.L.
    Lyons, Inc. ............             50,000
   Janney Montgomery Scott
    LLC.....................             50,000
   Mesirow Financial,
    Inc. ...................             50,000
   Morgan Keegan & Company,
    Inc. ...................             50,000
   NatCity Investments,
    Inc. ...................             50,000
   Parker/Hunter
    Incorporated............             50,000
   Robert W. Baird & Co.
    Incorporated............             50,000
   SWS Securities, Inc. ....             50,000
   Stifel, Nicolaus &
    Company, Incorporated...             50,000
   Wachovia Securities,
    Inc. ...................             50,000
   Wedbush Morgan Securities
    Inc. ...................             50,000
   William Blair & Company,
    L.L.C. .................             50,000
                                     ----------
      Total.................         20,000,000
                                     ==========

--------
* McDonald Investments Inc. is a member of the Key financial network.

                                      S-14


  The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriters
are obligated to purchase all of the shares (other than those covered by the
over-allotment option described below) if they purchase any of the shares.

  The underwriters, for whom Salomon Smith Barney Inc., A.G. Edwards & Sons,
Inc., First Union Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, UBS Warburg LLC, CIBC World
Markets Corp., Credit Suisse First Boston Corporation, Deutsche Banc Alex.
Brown Inc., Prudential Securities Incorporated and Raymond James & Associates,
Inc. are acting as representatives, propose to offer some of the shares
directly to the public at the public offering price set forth on the cover page
of this prospectus supplement and some of the shares to dealers at the public
offering price less a concession not to exceed $0.50 per share. The
underwriters may allow, and dealers may reallow, a concession not to exceed
$0.35 per share on sales to other dealers. If all of the shares are not sold at
the initial offering price, the representatives may change the public offering
price and the other selling terms.

  We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 400,000 additional
depositary shares at the public offering price less the underwriting discount.
The underwriters may exercise the option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter must purchase a number of additional
shares approximately proportionate to that underwriter's initial purchase
commitment.

  We have applied to have our depositary shares listed on the NYSE.

  The following table shows the underwriting discounts and commissions that we
are to pay to the underwriters in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional depositary shares.



                                                       No Exercise Full Exercise
                                                       ----------- -------------
                                                             
   Per share.......................................... $    0.7875  $    0.7875
   Total.............................................. $15,750,000  $16,065,000


  In connection with the offering, Salomon Smith Barney on behalf of the
underwriters may purchase and sell depositary shares in the open market. These
transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales of depositary
shares in excess of the number of depositary shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
"Covered" short sales are sales of depositary shares made in an amount up to
the number of shares represented by the underwriters' over-allotment option. In
determining the source of depositary shares to close out the covered syndicate
short position, the underwriters will consider, among other things, the price
of depositary shares available for purchase in the open market as compared to
the price at which they may purchase depositary shares through the over-
allotment option. Transactions to close out the covered syndicate short involve
either purchases of the depositary shares in the open market after the
distribution has been completed or the exercise of the over-allotment option.
The underwriters may also make "naked" short sales of depositary shares in
excess of the over-allotment option. The underwriters must close out any naked
short position by purchasing depositary shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the depositary shares in
the open market after pricing that could adversely affect investors who
purchase in the offering. Stabilizing transactions consist of bids for or
purchases of depositary shares in the open market while the offering is in
progress.

  The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney repurchases depositary shares originally sold by that
syndicate member in order to cover syndicate short positions or make
stabilizing purchases.


                                      S-15


  Any of these activities may have the effect of preventing or retarding a
decline on the market price of the depositary shares. They may also cause the
price of the depositary shares to be higher than the price that would otherwise
exist in the open market in the absence of these transactions. The underwriters
may conduct these transactions on the New York Stock Exchange or in the over-
the-counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue any of them at any time.

  We estimate that our portion of the total expenses of this offering will be
$200,000.

  First Union National Bank, an affiliate of First Union Securities, Inc., is a
lender under our credit facility which we repaid in April 2001 from the net
proceeds of an offering of securities underwritten by a syndicate of investment
banks including First Union Securities, Inc. First Union National Bank received
its proportionate share (one-fifteenth) of the amounts repaid.

  Certain of the underwriters have performed investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The underwriters may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their business.

  We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.

  We expect that delivery of the depositary shares will be made against payment
therefor on or about September 28, 2001, which is the 18th business day
following the expected date of the Prospectus Supplement. Under Rule 15c6-1 of
the Securities Exchange Act, trades in the secondary market generally are
required to settle in three business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the
depositary shares on the expected date of the Prospectus Supplement or the next
seventeen succeeding business days will be required, by virtue of the fact that
the depositary shares initially will settle in T+18, to specify an alternative
settlement cycle at the time of any such trade to prevent a failed settlement
and should consult their own advisor.

                                 LEGAL MATTERS

  Certain legal matters relating to the Preferred Stock and Depositary Shares
will be passed upon for us by David Goldberg, our vice-president and senior
counsel, and for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
Los Angeles, California. Hogan & Hartson L.L.P., Washington, D.C., has
delivered an opinion as to our status as a REIT. See "Federal Income Tax
Consequences" in the accompanying Prospectus. Mr. Goldberg owns 117,881 shares
of Common Stock, 3,396 depositary shares representing interests in equity
stock, 600 shares of preferred stock, and has options to acquire an additional
349,500 shares of Common Stock. Skadden, Arps, Slate, Meagher & Flom LLP has
from time to time represented us and our affiliates on unrelated matters.

                                    EXPERTS

  Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report given on their authority as experts
in accounting and auditing.

                                      S-16


Prospectus

$800,000,000

Public Storage, Inc.

  By this prospectus, we may offer-

    Common Stock
    Preferred Stock
    Equity Stock
    Depositary Shares
    Warrants

                                          We will provide the
                                          specific terms of these
                                          securities in
                                          supplements to this
                                          prospectus. You should
                                          read this prospectus and
                                          the supplements
                                          carefully before you
                                          invest.


  Please read "Risk Factors" beginning on page 1 for a discussion of material
risks you should consider before you invest.

  Our common stock is listed and traded on the New York Stock Exchange and the
Pacific Exchange under the symbol "PSA."

 Neither the Securities and Exchange Commission nor any state securities
 regulator has approved or disapproved the securities to be issued under this
 prospectus or determined if this prospectus is accurate or adequate. Any
 representation to the contrary is a criminal offense.


This prospectus may not be used to sell securities unless accompanied by a
prospectus supplement.

                                  July 8, 1999



  You should rely only on the information contained in or incorporated by
reference in this prospectus and any accompanying prospectus supplement. We
have not authorized anyone to provide you with different information. We are
not making an offer to sell these securities in any state where the offer is
not permitted. The information contained in or incorporated by reference in
this prospectus is accurate only as of the date on the front of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.

                                 ------------

                               TABLE OF CONTENTS



                                                                           Page
                                                                           ----
                                                                        
Risk Factors
  The Hughes family could control us......................................   1
  Provisions in our organizational documents may prevent changes in
   control................................................................   1
  We would incur adverse tax consequences if we fail to qualify as a
   REIT...................................................................   1
  We would incur a corporate level tax if we sell certain assets..........   1
  We and our shareholders are subject to financing risks..................   1
    Debt increases risk of loss...........................................   1
    Issuing additional shares reduces the interest of existing
     shareholders.........................................................   1
  Since our business consists primarily of acquiring and operating real
   estate, we are subject to real estate operating risks..................   2
    Value of our investments may be reduced by general risks of real
     estate ownership.....................................................   2
    There is significant competition among mini-warehouses................   2
    We may incur significant environmental costs and liabilities..........   2
  The Hughes family receives the benefit of tenant reinsurance premiums...   3
  We have no interest in Canadian mini-warehouses owned by the Hughes
   family.................................................................   3
  The Hughes family has an interest in our merchandise operations.........   3
  Our portable self-storage business has incurred operating losses........   3
About This Prospectus.....................................................   3
Where You Can Find More Information.......................................   4
Forward-Looking Statements................................................   5
The Company...............................................................   5
Use of Proceeds...........................................................   6
Ratio of Earnings to Fixed Charges........................................   6
Description of Common Stock and Class B Common Stock......................   6
  Common Stock............................................................   6
  Ownership Limitations...................................................   7
  Class B Common Stock....................................................   8
Description of Preferred Stock............................................   9
  Outstanding Preferred Stock.............................................   9
  Ownership Limitations...................................................   9
  Future Series of Preferred Stock........................................  10
Description of Equity Stock...............................................  14
  Ownership Limitations...................................................  14
  Terms of Equity Stock...................................................  14
Description of the Depositary Shares......................................  16
  Dividends...............................................................  16
  Liquidation Rights......................................................  17
  Redemption..............................................................  17
  Conversion..............................................................  17
  Voting..................................................................  17
  Withdrawal of Preferred Stock or Equity Stock...........................  17
  Amendment and Termination of Deposit Agreement..........................  18
  Charges of Depositary...................................................  18



                         TABLE OF CONTENTS--(Continued)



                                                                           Page
                                                                           ----
                                                                        
  Miscellaneous...........................................................  18
  Resignation and Removal of Depositary...................................  18
  Federal Income Tax Consequences.........................................  19
Description of Warrants...................................................  19
Federal Income Tax Consequences...........................................  20
  Taxation of the Company.................................................  20
  Taxation of U.S. Shareholders Holding Common Stock......................  26
  Taxation of Non-U.S. Shareholders.......................................  29
  Administration's Proposed Changes to REIT Qualification Requirements....  31
  Taxation of Holders of Preferred Stock, Equity Stock, Depositary Shares
   and Warrants...........................................................  32
  State and Local Taxes...................................................  32
Plan of Distribution......................................................  32
Legal Opinions............................................................  34
Experts...................................................................  34



                                 RISK FACTORS

  Before investing in our securities, you should consider the following risks
and detriments:

The Hughes family could control us.

  The Hughes family owns approximately 30% of our outstanding shares of common
stock (approximately 33% upon conversion of our class B common stock).
Consequently, the Hughes family could control matters submitted to a vote of
our shareholders, including electing directors, amending our organizational
documents, dissolving and approving other extraordinary transactions, such as
a takeover attempt.

Provisions in our organizational documents may prevent changes in control.

  Restrictions in our organizational documents may further limit changes in
control. Unless our board of directors waives these limitations, no
shareholder may own more than (1) 2.0% of the outstanding shares of our common
stock or (2) 9.9% of the outstanding shares of each class or series of our
preferred or equity stock. Our organizational documents in effect provide,
however, that the Hughes family may continue to own the shares of our common
stock held at the time of a 1995 reorganization. These limitations are
designed, to the extent possible, to avoid a concentration of ownership that
might jeopardize our ability to qualify as a real estate investment trust or
REIT. These limitations, however, also make a change of control significantly
more difficult (if not impossible) even if it would be favorable to the
interests of our public shareholders. These provisions will prevent future
takeover attempts not approved by our board of directors even if a majority of
our public shareholders deem it to be in their best interests because they
would receive a premium for their shares over the shares' then market value or
for other reasons. See "Description of Common Stock and Class B Common Stock--
Ownership Limitations."

We would incur adverse tax consequences if we fail to qualify as a REIT.

  You will be subject to the risk that we may not qualify as a REIT. As a
REIT, we must distribute at least 95% of our REIT taxable income to our
shareholders, which include not only holders of our common stock but also
holders of our preferred stock. Failure to pay full dividends on the preferred
stock would prevent us from paying dividends on our common stock and could
jeopardize our qualification as a REIT. See "Federal Income Tax Consequences--
Taxation of the Company."

  For any taxable year that we fail to qualify as a REIT and the relief
provisions do not apply, we would be taxed at the regular corporate rates on
all of our taxable income, whether or not we make any distributions to our
shareholders. Those taxes would reduce the amount of cash available for
distribution to our shareholders or for reinvestment. As a result, our failure
to qualify during any taxable year as a REIT could have a material adverse
effect upon us and our shareholders. Furthermore, unless certain relief
provisions apply, we would not be eligible to elect REIT status again until
the fifth taxable year that begins after the first year for which we fail to
qualify.

We would incur a corporate level tax if we sell certain assets.

  We will generally be subject to a corporate level tax if before November
2005 we sell any of the assets we acquired in a November 1995 reorganization.

We and our shareholders are subject to financing risks.

  Debt increases risk of loss. In making real estate investments, we may
borrow money, which increases the risk of loss. At March 31, 1999, our debt of
$180.8 million was approximately 4.4% of our total assets.

  Issuing additional shares reduces the interest of existing shareholders.
Issuing additional securities can dilute the interest of our shareholders in our
company. We intend to issue additional securities under this registration
statement. See "Description of Common Stock and Class B Common Stock",
"Description of Preferred Stock" and "Description of Equity Stock," for a
discussion of the terms of the preferred stock, common stock and equity stock.


  If we liquidated, holders of our preferred stock will be entitled to
receive, before any distribution of assets to holders of our common stock,
liquidating distributions (a total of approximately $1.1 billion with respect
to preferred stock outstanding at March 31, 1999), plus any accrued and unpaid
dividends. Holders of preferred stock are entitled to receive, when declared
by our board of directors, cash dividends (a total of approximately $95.2
million per year with respect to preferred stock outstanding at March 31,
1999), in preference to holders of our common stock.

Since our business consists primarily of acquiring and operating real estate,
we are subject to real estate operating risks.

  Value of our investments may be reduced by general risks of real estate
ownership. Since we derive substantially all of our income from real estate
operations, we are subject to the general risks of owning real estate-related
assets, including

  . lack of demand for rental spaces or units in a locale;

  . changes in general economic or local conditions;

  . changes in supply of or demand for similar or competing facilities in an
    area;

  . the impact of environmental protection laws;

  . changes in interest rates and availability of permanent mortgage funds
    which may render the sale or financing of a property difficult or
    unattractive; and

  . changes in tax, real estate and zoning laws.

  There is significant competition among mini-warehouses. Most of our
properties are mini-warehouses, which represented 91% of our total revenues
generated during 1998. Competition in the market areas in which many of our
properties are located is significant and has affected the occupancy levels,
rental rates and operating expenses of some of our properties. Any increase in
availability of funds for investment in real estate may accelerate
competition. Recent increases in development of mini-warehouses are expected
to further intensify competition among mini-warehouse operators in certain
market areas in which we operate.

  We may incur significant environmental costs and liabilities. As an owner
and operator of real properties, under various federal, state and local
environmental laws, we are required to clean up spills or other releases of
hazardous or toxic substances on or from our properties. Certain environmental
laws impose liability whether or not the owner knew of, or was responsible
for, the presence of the hazardous or toxic substances. In some cases,
liability may not be limited to the value of the property. The presence of
these substances, or the failure to properly remediate any resulting
contamination, also may adversely affect the owner's or operator's ability to
sell, lease or operate its property or to borrow using its property as
collateral.

  We have conducted preliminary environmental assessments of most of our
properties (and intend to conduct these assessments in connection with
property acquisitions) to evaluate the environmental condition of, and
potential environmental liabilities associated with, our properties. These
assessments generally consist of an investigation of environmental conditions
at the property (not including soil or groundwater sampling or analysis), as
well as a review of available information regarding the site and publicly
available data regarding conditions at other sites in the vicinity. In
connection with these property assessments, our operations and recent property
acquisitions, we have become aware that prior operations or activities at some
facilities or from nearby locations have or may have resulted in contamination
to the soil or groundwater at these facilities. In this regard, some of our
facilities are or may be the subject of federal or state environmental
investigations or remedial actions. We have obtained, with respect to recent
acquisitions and intend to obtain with respect to pending or future
acquisitions, appropriate purchase price adjustments or indemnifications that
we believe are sufficient to cover any related potential liabilities. Although
we cannot provide any assurance, based on the preliminary environmental
assessments, we believe we have funds available to cover any liability
(estimated at $4 million) from environmental contamination or potential
contamination and we are not aware of any environmental contamination of our
facilities material to our overall business, financial condition or results of
operation.

                                       2


The Hughes family receives the benefit of tenant reinsurance premiums.

  A corporation owned by the Hughes family reinsures policies insuring against
losses to goods stored by tenants in our mini-warehouses. We believe that the
availability of insurance reduces our potential liability to tenants for
losses to their goods from theft or destruction. That corporation will
continue to receive the premiums and bear the risks associated with the
reinsurance. We have a right of first refusal to acquire the stock or assets
of that corporation if the Hughes family or the corporation agree to sell
them, but we have no interest in its operations and no right to acquire the
stock or assets of the corporation unless the Hughes family decides to sell.
If we owned the reinsurance business, the insurance premiums would be
nonqualifying income under the REIT tax rules. In the absence of a change in
tax laws, REIT requirements would likely preclude us from exercising our right
of first refusal to acquire the stock of the reinsurance corporation.

We have no interest in Canadian mini-warehouses owned by the Hughes family.

  The Hughes family owns and operates mini-warehouses in Canada. We have a
right of first refusal to acquire the stock or assets of the corporation
engaged in these operations if the Hughes family or the corporation agree to
sell them. However, we have no interest in the operations of that corporation
and no right to acquire that stock or assets unless the Hughes family decides
to sell.

The Hughes family has an interest in our merchandise operations.

  At almost all of our mini-warehouses, a related corporation offers for sale
to the general public, including mini-warehouse tenants, a variety of items
such as locks and boxes to assist in the moving and storage of goods. Because
the revenues received from the sale of these items would be nonqualifying
income under the REIT tax rules, we own the nonvoting preferred stock of that
corporation (representing 95% of the equity). The Hughes family owns the
voting common stock of that corporation (representing 5% of the equity).

Our portable self-storage business has incurred operating losses.

  We organized Public Storage Pickup & Delivery in 1996 to operate a portable
self-storage business. We own substantially all of the economic interest of
Pickup & Delivery. Since Pickup & Delivery will operate profitably only if it
can succeed in the relatively new field of portable self-storage, we cannot
provide any assurance as to its profitability. As a start-up enterprise,
Pickup & Delivery incurred operating losses of $31,700,000 in 1997,
$31,022,000 in 1998 and $3,936,000 for the first quarter of 1999. See "Federal
Income Tax Consequences--Taxation of the Company" concerning the treatment of
income from and investment in Pickup & Delivery for purposes of the REIT
income and asset tests.

                             ABOUT THIS PROSPECTUS

  This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may sell from time to time up to $800,000,000 of our
common stock, preferred stock, equity stock, depositary shares and warrants,
in any combination. This prospectus provides a general description of the
securities that we may offer. Each time we offer any of the types of
securities described in this prospectus, we will prepare and distribute a
prospectus supplement that will contain a description of the specific terms of
the securities being offered and of the offering. The prospectus supplement
may also supplement the information contained in this prospectus. You should
read both this prospectus and the applicable prospectus supplement, together
with the additional information described under the heading "Where You Can
Find More Information," before purchasing any securities.

  Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "the Company," "we," "us," "our" and similar
references mean Public Storage, Inc. and its subsidiaries.

                                       3


                      WHERE YOU CAN FIND MORE INFORMATION

  We are subject to the reporting requirements of the Securities Exchange Act
of 1934, and are required to file annual, quarterly and special reports with
the Securities and Exchange Commission. You may read and copy any of these
documents at the Commission's public reference rooms at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. You may telephone the Commission at 1-800-SEC-0330 for
further information on the Commission's public reference facilities. The
Commission also maintains a computer site on the World Wide Web
(http://www.sec.gov) that contains the reports, proxy and information
statements and other information that we and other registrants file
electronically with the Commission. You can also inspect reports and other
information we file at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, and the Pacific Exchange, 301 Pine Street,
San Francisco, California 94104.

  This prospectus is a part of a registration statement on Form S-3 filed with
the Commission to register offers and sales of the securities described in
this prospectus under the Securities Act of 1933. The registration statement
contains additional information about us and the securities. You may obtain
the registration statement and its exhibits from the Commission as indicated
above or from us.

  The Commission allows us to provide information about our business and other
important information to you by "incorporating by reference" the information
we file with the Commission, which means that we can disclose that information
to you by referring in this prospectus to the documents we file with the
Commission. Under the Commission's regulations, any statement contained in a
document incorporated by reference in this prospectus is automatically updated
and superseded by any information contained in this prospectus, or in any
subsequently filed document of the types described below.

  We incorporate into this prospectus by reference the following documents
filed by us with the Commission, each of which should be considered an
important part of this prospectus:



             SEC Filing (File No. 1-8389)            Period Covered or Date of Filing
             ----------------------------            --------------------------------
                                                 
   Annual Report on Form 10-K...................... Year ended December 31, 1998
   Quarterly Report on Form 10-Q................... Quarter ended March 31, 1999
   Current Reports on Form 8-K..................... Dated January 13, 1999 and March 4,
                                                     1999
   Description of our common stock contained in
    Registration Statement on Form 8-A, as
    supplemented by the description of our common
    stock contained in this prospectus............. Effective June 30, 1981
   All subsequent documents filed by us under
    Sections 13(a), 13(c), 14 or 15(d) of the       After the date of this prospectus
    Exchange Act of 1934...........................  and
                                                     before the termination of the
                                                     offering


  You may request a copy of each of our filings at no cost, by writing or
telephoning us at the following address, telephone or facsimile number:

      Investor Services Department
      Public Storage, Inc.
      701 Western Avenue
      Glendale, California 91201-2397
      Telephone: (800) 807-3055
                  (800) 421-2856
                  (818) 244-8080
      Facsimile: (818) 241-0627

  Exhibits to a document will not be provided unless they are specifically
incorporated by reference in that document.

                                       4


                          FORWARD-LOOKING STATEMENTS

  This prospectus includes or incorporates by reference forward-looking
statements, including those identified by the words "expects," "believes,"
"anticipates," "should," "estimates," "may," "will," "seeks," "intends,"
"plans," "pro forma," or the negative of these words and phrases or similar
expressions that convey the uncertainty of future events or outcomes.
Discussions of strategy, plans or intentions also include forward-looking
statements. Forward-looking statements are subject to risks and uncertainties
and you should not rely on them as predictions of future events. In addition
to the factors described in this prospectus under "Risk Factors," some of
these factors include:

  . the impact of competition from new and existing mini-warehouse and
    commercial facilities which could impact rents and occupancy levels at
    our facilities;

  . our ability to evaluate, finance and integrate acquired and developed
    properties into our existing operations;

  . our ability to effectively compete in the markets in which we do
    business;

  . 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;

  . profitability of the Pickup and Delivery business;

  . the impact of general economic conditions upon rental rates and occupancy
    levels at our facilities; and

  . the availability of permanent capital at attractive rates.

  These factors, as well as changes in the mini-warehouse and commercial real
estate markets and the general economy, could cause future events and actual
results to differ materially from those set forth or contemplated in the
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information
or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus or in the incorporated
documents might not occur and actual results could be substantially different
than expected.

                                  THE COMPANY

  We are a fully integrated, self-administered and self-managed real estate
investment trust or REIT that acquires, develops, owns and operates mini-
warehouses. We are the largest owner and operator of mini-warehouses in the
United States. At March 31, 1999, we had equity interests (through direct
ownership, as well as general and limited partnership interests) in 1,313
mini-warehouses located in 37 states. We also own an interest in PS Business
Parks, Inc., a REIT that owns and operates commercial properties.

  We elected to be taxed as a REIT beginning with our 1981 taxable year. To
the extent that we continue to qualify as a REIT, we will not be taxed, with
certain limited exceptions, on the net income that we distribute currently to
our shareholders. We were incorporated in California in 1980. Our principal
executive offices are located at 701 Western Avenue, Glendale, California
91201-2397. Our telephone number is (818) 244-8080.

                                       5


                                USE OF PROCEEDS

  We intend to use the net proceeds from the sale of the securities described
in this prospectus to make investments in mini-warehouses, including
development, interests in partnerships and mortgage loans and for general
business purposes, including repayment of debt. Pending their use, we may
invest the net proceeds in short-term, interest bearing securities.

                      RATIO OF EARNINGS TO FIXED CHARGES

  We compute our ratio of earnings to combined fixed charges and preferred
stock dividends by dividing our earnings by the sum of our fixed charges and
preferred stock dividends. Earnings consists of net income before minority
interest in income, loss on early extinguishment of debt and gain on
disposition of real estate plus fixed charges (other than preferred stock
dividends) less the portion of minority interest in income which does not
contribute to fixed charges.


                                        For the Three
                                        Months Ended     For the Year Ended
                                          March 31,         December 31,
                                        ------------- ------------------------
                                         1999   1998  1998 1997 1996 1995 1994
                                        ------ ------ ---- ---- ---- ---- ----
                                                     
   Ratio of earnings to combined fixed
    charges and preferred stock
    dividends.........................    2.67   2.21 2.73 1.91 2.07 2.04 2.22


             DESCRIPTION OF COMMON STOCK AND CLASS B COMMON STOCK

  We are authorized to issue up to 200,000,000 shares of common stock and up
to 7,000,000 shares of class B common stock. At May 31, 1999, we had
outstanding 129,253,891 shares of common stock (excluding shares issuable upon
conversion of convertible securities and shares subject to options) and
7,000,000 shares of class B common stock.

Common Stock

  The following description of our common stock sets forth certain general
terms and provisions of our common stock to which any prospectus supplement
may relate, including a prospectus supplement providing that common stock will
be issuable upon conversion of preferred stock or equity stock or upon the
exercise of warrants. The statements below describing our common stock are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of our articles of incorporation and bylaws.

  Holders of our common stock will be entitled to receive dividends when, as
and if declared by our board of directors, out of funds legally available for
distribution. If we fail to pay dividends on our outstanding preferred stock,
generally we may not pay dividends on our common stock or repurchase those
shares. If we liquidate, dissolve or wind up our affairs, holders of common
stock will be entitled to share equally and ratably in any assets available
for distribution to them, after payment or provision for payment of our debts
and other liabilities and the preferential amounts owing with respect to any
of our outstanding preferred stock. Holders of our common stock have no
preemptive rights, which means they have no right to acquire any additional
shares of common stock that we may issue at a later date. See "Description of
Preferred Stock."

  The holders of our common stock are entitled to cast one vote for each share
on all matters presented to our holders for a vote, with the exception that
they have cumulative voting rights with respect to the election of our board
of directors, in accordance with California law. Cumulative voting means that
each holder of our common stock is entitled to cast as many votes as there are
directors to be elected multiplied by the number of shares registered in his
or her name. A holder of our common stock may cumulate the votes for directors
by casting all of the votes for one candidate or by distributing the votes
among as many candidates as he or she chooses. The outstanding shares of our
common stock are, and additional shares of common stock will be, when issued,
fully paid and nonassessable.

                                       6


  The rights, preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of our preferred stock or our equity stock which are
outstanding or which we may designate and issue in the future. See
"Description of Preferred Stock" and "Description of Equity Stock."

Ownership Limitations

  To qualify as a REIT under the Internal Revenue Code of 1986, as amended
(the "Code"), no more than 50% in value of our outstanding shares of capital
stock may be owned, directly or constructively under the applicable
attribution rules of the Code, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year. In
order to maintain our qualification as a REIT, our articles of incorporation
restrict the number of shares of capital stock that any shareholder may own.

  In a series of transactions among Public Storage Management, Inc. and its
affiliates (collectively, "Public Storage Management"), culminating in the
November 16, 1995 merger of Public Storage Management into Storage Equities,
Inc., Storage Equities became self-administered and self-managed, acquired
substantially all of Public Storage Management's United States real estate
interests and was renamed "Public Storage, Inc."

  Our articles of incorporation and bylaws provide that, subject to certain
exceptions, no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than (A) 2.0% of the outstanding
shares of our common stock and (B) 9.9% of the outstanding shares of each
class or series of shares of our preferred stock or equity stock and that all
shares of stock be imprinted with a legend setting forth that restriction. Our
articles of incorporation provide, however, that no person will be deemed to
exceed the ownership limit solely by reason of the beneficial ownership of
shares of any class of stock to the extent that those shares of stock were
beneficially owned by the person (including the Hughes family) after the
merger with Public Storage Management. Thus, this limitation does not affect
the ownership of common stock held by the Hughes family at the time of the
merger. The ownership limitation is intended to preserve our REIT status in
view of the Hughes family's substantial ownership interest in us. We cannot
provide any assurance, however, that this ownership limit will enable us to
satisfy the requirement that a REIT not be "closely held" within the meaning
of Section 856(h) of the Code for any given taxable year.

  Our articles of incorporation and bylaws provide that our board of
directors, in its sole and absolute discretion, may grant exceptions to the
ownership limits, so long as (A) our board has determined that we would not be
"closely held" within the meaning of Section 856(h) of the Code (without
regard to whether the event in question takes place during the second half of
a taxable year) and would not otherwise fail to qualify as a REIT, after
giving effect to an acquisition by an excepted person of beneficial ownership
of the maximum amount of capital stock permitted as a result of the exception
to be granted, and taking into account the existing and permitted ownership by
other persons of stock (taking into account any other exceptions granted) and
(B) the excepted persons provide to our board the representations and
undertakings as our board may require. In any case, no holder may own or
acquire, either directly, indirectly or constructively under the applicable
attribution rules of the Code, any shares of any class of capital stock if the
ownership or acquisition (1) would cause more than 50% in value of our
outstanding capital stock to be owned, either directly or constructively,
under the applicable attribution rules of the Code, by five or fewer
individuals (as defined in the Code to include certain tax-exempt entities,
other than, in general, qualified domestic pension funds), (2) would result in
our stock being beneficially owned by less than 100 persons (determined
without reference to any rules of attribution), or (3) would otherwise result
in our failing to qualify as a REIT.

  Our articles of incorporation and bylaws generally provide that if any
holder of capital stock purports to transfer shares to a person or there is a
change in our capital structure, and either the transfer or the change in
capital structure would result in our failing to qualify as a REIT, or the
transfer or the change in capital structure would cause the transferee to hold
shares in excess of the applicable ownership limit, then the shares causing
the violation will be automatically transferred to a trust for the benefit of
a designated charitable beneficiary. The purported transferee of those shares
will have no right to receive dividends or other distributions with respect to

                                       7


them and will have no right to vote the shares. Any dividends or other
distributions paid to the purported transferee prior to our discovery that the
shares have been transferred to a trust will be paid to the trustee of the
trust for the benefit of the charitable beneficiary upon demand. The trustee
will designate a transferee of those shares so long as the shares would not
violate the restrictions on ownership or transfer in our articles of
incorporation in the hands of the designated transferee. Upon the sale of the
shares, the purported transferee will receive out of any proceeds remaining
after payment of expenses of the charitable trust and us the lesser of (A)(1)
the price per share the purported transferee paid for the stock in the
purported transfer that resulted in the transfer of the shares to the trust,
or (2) if the transfer or other event that resulted in the transfer of the
shares to the trust was not a transaction in which the purported transferee
gave full value for the shares, a price per share equal to the market price on
the date of the purported transfer or other event that resulted in the
transfer of the shares to the trust and (B) the price per share received by
the trustee from the sale or other disposition of the shares held in the
trust. Each purported transferee will be deemed to have waived any claims the
purported transferee may have against the trustee and us arising from the
disposition of the shares, except for claims arising from the trustee's or our
gross negligence, willful misconduct, or failure to make payments when
required by our articles of incorporation.

  In addition, our bylaws provide our board of directors with the power to
prevent the transfer of shares of capital stock or to redeem shares of capital
stock if the board of directors determines in good faith that the action is
necessary to preserve our status as a REIT.

Class B Common Stock

  Our class B common stock:

    (1) Does not participate in distributions on our common stock until the
  later to occur of (A) funds from operations per common share (as defined
  below) totalling $1.80 during any period of four consecutive calendar
  quarters and (B) January 1, 2000. After January 1, 2000, our class B common
  stock will participate in distributions (other than liquidating
  distributions) at the rate of 97% of the per share distributions on our
  common stock, provided that cumulative distributions of at least $.22 per
  quarter (beginning with the 4th quarter of 1995) per share have been paid
  on our common stock;

    (2) Does not participate in liquidating distributions;

    (3) Is not entitled to vote (except as expressly required by California
  law); and

    (4) Will automatically convert into our common stock, on a share for
  share basis, upon the later to occur of (A) funds from operations per
  common share aggregating $3.00 during any period of four consecutive
  calendar quarters and (B) January 1, 2003.

  For these purposes:

    (1) Funds from operations means net income (loss) (computed in accordance
  with GAAP) before (A) gain (loss) on early extinguishment of debt, (B)
  minority interest in income and (C) gain (loss) on disposition of real
  estate, adjusted as follows: (1) plus depreciation and amortization
  (including our pro-rata share of depreciation and amortization of
  unconsolidated equity interests and amortization of assets acquired in the
  1995 merger (including property management agreements and goodwill)), and
  (2) less funds from operations attributable to minority interest. Funds
  from operations is a supplemental performance measure for equity REITs as
  defined by the National Association of Real Estate Investment Trusts, Inc.
  This definition does not specifically address the treatment of minority
  interest in the determination of funds from operations or the treatment of
  the amortization of property management agreements and goodwill. In our
  case, funds from operations represents amounts attributable to shareholders
  after deducting amounts attributable to the minority interests and before
  deductions for the amortization of property management agreements and
  goodwill. Funds from operations does not take into consideration scheduled
  principal payments on debt, capital improvements, distributions and our
  other obligations. Accordingly, funds from operations is not a substitute
  for our cash flow or net income as a measure of our liquidity or operating
  performance or ability to pay distributions.

                                       8


    (2) Funds from operations per common share means funds from operations
  less dividends on preferred stock (other than dividends on our convertible
  preferred stock) divided by the outstanding weighted average shares of our
  common stock assuming conversion of all outstanding convertible securities
  and our class B common stock.

                        DESCRIPTION OF PREFERRED STOCK

  We are authorized to issue up to 50,000,000 shares of preferred stock. At
May 31, 1999, we had outstanding 11,138,850 shares of preferred stock (of
which 32,850 shares were represented by 32,850,000 depositary shares). Our
articles of incorporation provide that the preferred stock may be issued from
time to time in one or more series and give our board of directors broad
authority to fix the dividend and distribution rights, conversion and voting
rights, if any, redemption provisions and liquidation preferences of each
series of preferred stock. Holders of preferred stock have no preemptive
rights. The preferred stock will be, when issued, fully paid and
nonassessable.

  Although the issuance of preferred stock with special voting rights (or
common stock) could be used to deter attempts to obtain control of us in
transactions not approved by our board of directors, we have no present
intention to issue stock for that purpose.

Outstanding Preferred Stock

  At May 31, 1999, we had outstanding 12 series of preferred stock. Each
series (1) has a stated value of $25.00 per share or depositary share, (2) in
preference to the holders of shares of our common stock and any other capital
stock ranking junior to our preferred stock as to payment of dividends,
provides for cumulative quarterly dividends calculated as a percentage of the
stated value (ranging from 8% to 10% per year in the case of 11 series of our
fixed rate preferred stock and a rate adjustable quarterly ranging from 6.75%
to 10.75% per year in the case of a series of our adjustable rate preferred
stock) and (3) is subject to redemption, in whole or in part, at our option at
a cash redemption price of $25.00 per share or depositary share, plus accrued
and unpaid dividends (on and after June 30, 1999 in the case of our adjustable
rate preferred stock and on or after various dates between December 31, 2000
and April 30, 2005 in the case of the series of our fixed rate preferred
stock).

  If we voluntarily or involuntarily liquidate, dissolve or wind up, the
holders of the preferred stock will be entitled to receive out of our assets
available for distribution to shareholders, before any assets are distributed
to holders of our common stock or any other shares of capital stock ranking
junior to the preferred stock, liquidating distributions equal to $25 per
share or depositary share, plus all accrued and unpaid dividends.

  Except as expressly required by law and in certain other limited
circumstances, holders of the preferred stock are not entitled to vote. Our
board of directors will not, without the consent of holders of at least
66 2/3% of the outstanding shares of the preferred stock, voting as a single
class, authorize another class of shares senior to the preferred stock.

Ownership Limitations

  For a discussion of the ownership limitations that apply to preferred stock,
see "Description of Common Stock and Class B Common Stock--Ownership
Limitations."

                                       9


Future Series of Preferred Stock

  Below is a description of some general terms and provisions of our preferred
stock which may be specified in a prospectus supplement. The statements below
describing the preferred stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of our articles of
incorporation (including the applicable form of certificate of determination)
and bylaws.

  You should read the prospectus supplement relating to the preferred stock
being offered for specific terms, including:

     (1) the title and stated value of the preferred stock;

     (2) the number of shares of the preferred stock being offered, the
  liquidation preference per share and the offering price of the preferred
  stock;

     (3) the dividend rate, period and payment date or method of calculation
  applicable to the preferred stock;

     (4) the date from which dividends on the preferred stock accumulates, if
  applicable;

     (5) the provision for a sinking fund, if any, for the preferred stock;

     (6) the provision for redemption, if applicable, of the preferred stock;

     (7) any listing of the preferred stock on any securities exchange;

     (8) the terms and conditions, if applicable, upon which the preferred
  stock will be convertible into common stock, including the conversion price
  (or manner of calculation);

     (9) the voting rights, if any, of the preferred stock;

    (10) any other specific terms, preferences, rights, limitations or
  restrictions of the preferred stock;

    (11) the relative ranking and preferences of the preferred stock as to
  dividend rights and rights upon liquidation, dissolution or winding up of
  our affairs; and

    (12) any limitations on issuance of any series of preferred stock ranking
  senior to or on a parity with the series of preferred stock as to dividend
  rights and rights upon liquidation, dissolution or winding up of our
  affairs.

  Ranking. The ranking of the preferred stock will be set forth in the
applicable prospectus supplement. Unless otherwise specified in the applicable
prospectus supplement, the preferred stock will, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of our affairs,
rank:

    (1) senior to the common stock, any additional class of common stock,
  existing and future equity stock and any series of preferred stock junior
  to the preferred stock;

    (2) on a parity with all preferred stock previously issued by us the
  terms of which specifically provide that the preferred stock rank on a
  parity with the preferred stock being offered; and

    (3) junior to all preferred stock previously issued by us the terms of
  which specifically provide that the preferred stock rank senior to the
  preferred stock being offered.

  Dividends. Holders of shares of the preferred stock of each series being
offered will be entitled to receive, when, as and if declared by our board of
directors, out of our assets legally available for payment, cash dividends at
the rates and on the dates as will be set forth in the applicable prospectus
supplement. Each dividend will be payable to holders of record as they appear
on our stock transfer books on the record dates fixed by our board of
directors.

  Dividends on any series of the preferred stock being offered may be
cumulative or non-cumulative, as provided in the applicable prospectus
supplement. Dividends, if cumulative, will be cumulative from and after

                                      10


the date set forth in the applicable prospectus supplement. If our board of
directors fails to declare a dividend payable on a dividend payment date on
any series of the preferred stock for which dividends are noncumulative, the
holders of the series of the preferred stock will have no right to receive a
dividend in respect of the dividend period ending on that dividend payment
date, and we will have no obligation to pay the dividend accrued for the
period, whether or not dividends on that series are declared payable on any
future dividend payment date.

  No dividends (other than in common stock or other capital stock ranking
junior to the preferred stock of any series as to dividends and upon
liquidation) will be declared or paid or set aside for payment (nor will any
other distribution be declared or made upon our common stock, or any of our
other capital stock ranking junior to or on a parity with the preferred stock
of the series as to dividends or upon liquidation), nor will any common stock
or any other of our capital stock ranking junior to or on a parity with the
preferred stock of the series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any shares of
the stock) by us (except by conversion into or exchange for our other capital
stock ranking junior to the preferred stock of the series as to dividends and
upon liquidation) unless:

    (1) if the series of preferred stock has a cumulative dividend, full
  cumulative dividends on the preferred stock of the series have been or
  contemporaneously are declared and paid or declared and a sum set apart for
  payment for all past dividend periods and the then current dividend period;
  and

    (2) if the series of preferred stock does not have a cumulative dividend,
  full dividends on the preferred stock of the series have been or
  contemporaneously are declared and paid or declared and a sum set apart for
  payment for the then current dividend period.

  Any dividend payment made on shares of a series of cumulative preferred
stock being offered will first be credited against the earliest accrued but
unpaid dividend due with respect to shares of the series which remains
payable.

  Redemption. The shares of preferred stock will be subject to mandatory
redemption or redemption at our option, in whole or in part, in each case to
the extent set forth in the prospectus supplement relating to the series.

  The prospectus supplement relating to a series of preferred stock being
offered that is subject to mandatory redemption will specify the number of
shares of that series that will be redeemed by us in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which will not, if shares of that series do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash, securities or other property, as specified in the applicable prospectus
supplement.

  Notwithstanding the foregoing, no shares of any series of preferred stock
being offered will be redeemed and we will not purchase or otherwise acquire
directly or indirectly any shares of preferred stock of that series (except by
conversion into or exchange for capital stock of us ranking junior to the
preferred stock of that series as to dividends and upon liquidation) unless
all outstanding shares of preferred stock of that series are simultaneously
redeemed unless, in each case:

    (1) if that series of preferred stock has a cumulative dividend, full
  cumulative dividends on the preferred stock of that series will have been
  or contemporaneously are declared and paid or declared and a sum sufficient
  for payment for all past dividend periods and the then current dividend
  period is set apart; and

    (2) if that series of preferred stock does not have a cumulative
  dividend, full dividends on the preferred stock of that series have been or
  contemporaneously are declared and paid or declared and a sum sufficient
  for payment for the then current dividend period is set apart; provided,
  however, that we may acquire shares of preferred stock of the series under
  a purchase or exchange offer made on the same terms to holders of all
  outstanding shares of preferred stock of the series.

                                      11


  If fewer than all of the outstanding shares of preferred stock of any series
being offered are to be redeemed, the number of shares to be redeemed will be
determined by us and these shares may be redeemed pro rata from the holders of
record of these shares in proportion to the number of these shares held by
such holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by us.

  Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of preferred stock of
any series to be redeemed at the address shown on our stock transfer books.
Each notice will state:

    (1) the redemption date;

    (2) the number of shares and series of the preferred stock to be
  redeemed;

    (3) the redemption price;

    (4) the place or places where certificates for that preferred stock are
  to be surrendered for payment of the redemption price;

    (5) that dividends on the shares to be redeemed will cease to accrue on
  the redemption date; and

    (6) the date upon which the holder's conversion rights, if any, as to the
  shares terminate.

  If fewer than all the shares of preferred stock of any series are to be
redeemed, the notice mailed to each holder will also specify the number of
shares of preferred stock to be redeemed from the holder and, upon redemption,
a new certificate will be issued representing the unredeemed shares without
cost to the holder. To facilitate the redemption of shares of preferred stock,
our board of directors may fix a record date for the determination of shares
of preferred stock to be redeemed. The record date may not be not less than 30
or more than 60 days before the date fixed for redemption.

  If notice has been given as provided above, unless we default in providing
funds for the payment of the redemption price on that date, then from and
after the redemption date all dividends on the preferred stock called for
redemption will cease. From and after the redemption date, unless we default,
all rights of the holders of our preferred stock, except the right to receive
the redemption price (but without interest), will cease.

  Subject to applicable law and the limitation on purchases when dividends on
preferred stock are in arrears, we may, at any time and from time to time,
purchase any shares of preferred stock in the open market, by tender or by
private agreement.

  Liquidation Preference. If we voluntarily or involuntarily liquidate,
dissolve or wind-up our affairs, then, before we make any distribution or
payment to the holders of any common stock or any other class or series of our
capital stock ranking junior to the preferred stock in the distribution of
assets upon our liquidation, dissolution or winding up, the holders of each
series of preferred stock will be entitled to receive out of our assets
legally available for distribution to shareholders liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable prospectus supplement), plus an amount equal to all accrued and
unpaid dividends (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if the preferred stock does not
have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of preferred
stock will have no right or claim to any of our remaining assets. In the event
that, upon the voluntary or involuntary liquidation, dissolution or winding
up, our legally available assets are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of any series of preferred
stock and the corresponding amounts payable on all shares of other classes or
series of our capital stock ranking on a parity with the preferred stock in
the distribution of assets upon liquidation, dissolution or winding up, then
the holders of the preferred stock and all other such classes or series of
capital stock will share ratably in any distribution of assets in proportion
to the full liquidating distributions to which they would otherwise be
respectively entitled.


                                      12


  If liquidating distributions have been made in full to all holders of
preferred stock, our remaining assets will be distributed among the holders of
any other classes or series of capital stock ranking junior to the preferred
stock upon liquidation, dissolution or winding up, according to their
respective rights and preferences and in each case according to their
respective number of shares. For these purposes, our consolidation or merger
with or into any other corporation, or the sale, lease, transfer or conveyance
of all or substantially all of our property or business, will not be deemed to
constitute a liquidation, dissolution or winding up.

  Voting Rights. Holders of the preferred stock being offered will not have
any voting rights, except as set forth below or as otherwise expressly
required by law or as indicated in the applicable prospectus supplement.

  If six quarterly dividends payable on any series of preferred stock are in
default (whether or not declared or consecutive), the holders of all the
series of preferred stock, voting as a single class with all other series of
preferred stock upon which similar voting rights have been conferred and are
exercisable, will be entitled to elect two additional directors until all
dividends in default have been paid or declared and set apart for payment.

  The right to vote separately to elect directors will, when vested, be
subject, always, to the same provisions for vesting of the right to elect
directors separately in the case of future dividend defaults. At any time when
the right to elect directors separately has vested, we may, and upon the
written request of the holders of record of not less than 20% of our total
number of preferred shares then outstanding will, call a special meeting of
shareholders for the election of directors. In the case of the written
request, a special meeting will be held within 90 days after the delivery of
the request and, in either case, at the place and upon the notice provided by
law and in the bylaws. However, we will not be required to call a special
meeting if the request is received less than 120 days before the date fixed
for the next annual meeting of shareholders, and the holders of all classes of
outstanding preferred stock are offered the opportunity to elect the directors
(or fill any vacancy) at the annual meeting of shareholders. Directors so
elected will serve until the next annual meeting of shareholders or until
their respective successors are elected and qualify. If, before the end of the
term of any director so elected, a vacancy in the office of the director
occurs, during the continuance of a default by reason of death, resignation,
or disability, the vacancy will be filled for the unexpired term of the former
director by the appointment of a new director by the remaining director or
directors so elected.

  The affirmative vote or consent of the holders of at least a majority of the
outstanding shares of each series of preferred stock will be required to amend
or repeal any provision of, or add any provision to, our articles of
incorporation, including the certificate of determination, if this action
would materially and adversely alter or change the rights, preferences or
privileges of the series of preferred stock.

  No consent or approval of the holders of any series of preferred stock being
offered will be required for the issuance from our authorized but unissued
preferred stock of other shares of any series of preferred stock ranking on a
parity with or junior to that series of preferred stock, or senior to a series
of preferred stock expressly made junior to that series of preferred stock as
to payment of dividends and distribution of assets, including other shares of
the same series of preferred stock.

  These voting provisions will not apply if, at or prior to the time when the
act with respect to which a vote would otherwise be required is effected, all
outstanding shares of the series of preferred stock had been redeemed or
called for redemption upon proper notice and sufficient funds had been
deposited in trust to effect the redemption.

  Conversion Rights. The terms and conditions, if any, upon which shares of
any series of preferred stock being offered are convertible into common stock
will be set forth in the applicable prospectus supplement. The terms will
include the number of shares of common stock into which the preferred stock is
convertible, the conversion price (or manner of calculation), the conversion
period, provisions as to whether conversion will be at our option or at the
option of the holders of the preferred stock or automatically upon the
occurrence of certain events, the events requiring an adjustment of the
conversion price and provisions affecting conversion if we redeem the
preferred stock.

                                      13


                          DESCRIPTION OF EQUITY STOCK

  We are authorized to issue up to 200,000,000 shares of equity stock. At May
31, 1999, we had outstanding 225,000 shares of equity stock which rank on a
parity with our common stock. Our articles of incorporation provide that the
equity stock may be issued from time to time in one or more series and give
our 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. Holders of equity stock have no
preemptive rights. The shares of equity stock will be, when issued, fully paid
and nonassessable.

  The issuance of equity stock with special voting rights could be used to
deter attempts by a single shareholder or group of shareholders to obtain
control of us in transactions not approved by our board of directors. We have
no intention to issue the equity stock for these purposes.

Ownership Limitations

  For a discussion of the ownership limitations that apply to equity stock,
see "Description of Common Stock and Class B Common Stock--Ownership
Limitations."

Terms of Equity Stock

  Below is a description of some general terms and provisions of our equity
stock which may be specified in a prospectus supplement. The statements below
describing the equity stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of our articles of
incorporation (including the applicable form of certificate of determination)
and bylaws.

  You should read the prospectus supplement relating to the equity stock being
offered for specific terms, including:

    (1) the designation of that equity stock;

    (2) the number of shares of that equity stock offered, the liquidation
  rights and the offering price of that equity stock;

    (3) the dividend rate, period and payment date or method of calculation
  applicable to that equity stock;

    (4) the provision for redemption, if applicable, of that equity stock;

    (5) any listing of that equity stock on any securities exchange;

    (6) the terms and conditions, if applicable, upon which that equity stock
  will be convertible into common stock, including the conversion price (or
  manner of calculation);

    (7) the voting rights, if any, of that equity stock;

    (8) any other specific terms, rights, limitations or restrictions of that
  equity stock; and

    (9) the relative ranking of that equity stock as to dividend rights and
  rights if we liquidate, dissolve or wind-up our affairs.

  Ranking. Unless otherwise specified in the applicable prospectus supplement,
equity stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of our affairs, rank on a parity with
the common stock.

  Dividends. Holders of shares of the equity stock of each series being
offered will be entitled to receive, when, as and if declared by our board of
directors, out of our assets legally available for payment, cash dividends at
the rates and on the dates set forth in the applicable prospectus supplement.
Each dividend will be payable to holders of record as they appear on our stock
transfer books on the record dates fixed by our board of directors.

                                      14


Unless otherwise specified in the applicable prospectus supplement, dividends
on equity stock will be non-cumulative.

  Redemption. The shares of equity stock will be subject to mandatory
redemption or redemption at our option, in whole or in part, in each case to
the extent set forth in the applicable prospectus supplement.

  The prospectus supplement relating to a series of equity stock being offered
that is subject to mandatory redemption will specify the number of shares of
that series that we must redeem in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends (which will not, if that
series does not have a cumulative dividend, include any accumulation in
respect of unpaid dividends for prior dividend periods) to the date of
redemption. The redemption price may be payable in cash, securities or other
property, as specified in the applicable prospectus supplement.

  If fewer than all of the outstanding shares of equity stock of any series
offered are to be redeemed, the number of shares to be redeemed will be
determined by us and those shares may be redeemed pro rata from the holders of
record of those shares in proportion to the number of those shares held by
such holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by us.

  Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of equity stock of
any series to be redeemed at the address shown on our stock transfer books.
Each notice will state:

    (1) the redemption date;

    (2) the number of shares and series of the equity stock to be redeemed;

    (3) the redemption price;

    (4) the place or places where certificates for shares of that series are
  to be surrendered for payment of the redemption price;

    (5) that dividends on the shares to be redeemed will cease to accrue on
  the redemption date; and

    (6) the date upon which the holder's conversion rights, if any, as to
  those shares terminates.

  If fewer than all the shares of equity stock of any series are to be
redeemed, the notice mailed to each holder will also specify the number of
shares of equity stock to be redeemed from the holder and, upon redemption, a
new certificate will be issued representing the unredeemed shares without cost
to the holder. To facilitate the redemption of shares of equity stock, our
board of directors may fix a record date for the determination of shares of
equity stock to be redeemed. The record date may not be less than 30 or more
than 60 days before the date fixed for redemption.

  If notice has been given as provided above, unless we default in providing
funds for the payment of the redemption price on that date, then from and
after the redemption date all dividends on the equity stock called for
redemption will cease. From and after the redemption date, unless we default,
all rights of the holders of our equity stock, except the right to receive the
redemption price (but without interest), will cease.

  Liquidation Rights. If we voluntarily or involuntarily liquidate, dissolve
or wind-up our affairs, then, before we make any distribution or payment to
the holders of the equity stock or any other class or series of our capital
stock ranking junior to any series of preferred stock in the distribution of
assets upon our liquidation, dissolution or winding up, the holders of each
series of preferred stock will be entitled to receive out of our assets
legally available for distribution to shareholders liquidating distributions
in the amount of the liquidation preference per share, plus an amount equal to
all accrued and unpaid dividends (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if the preferred stock
does not have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of preferred
stock will have no right or claim to any of our remaining assets.

                                      15


  If liquidating distributions have been made in full to all holders of
preferred stock, our remaining assets will be distributed among the holders of
any other classes or series of capital stock ranking junior to the preferred
stock upon liquidation, dissolution or winding up, including the equity stock,
according to their respective rights and in each case according to their
respective number of shares. For these purposes, our consolidation or merger
with or into any other corporation, or the sale, lease, transfer or conveyance
of all or substantially all of our property or business, will not be deemed to
constitute a liquidation, dissolution or winding up.

  Unless otherwise specified in the applicable prospectus supplement, if we
voluntarily or involuntarily liquidate, dissolve or wind up our affairs,
holders of the equity stock will rank on a parity with the holders of the
common stock, subject to any maximum or minimum distribution to holders of
equity stock specified in the applicable prospectus supplement.

  Voting Rights. Unless otherwise specified in the applicable prospectus
supplement, holders of the equity stock will vote with holders of the common
stock.

  No consent or approval of the holders of any series of equity stock will be
required for the issuance from our authorized but unissued equity stock of
other shares of any series of equity stock including shares of the same series
of equity stock.

  Conversion Rights. The terms and conditions, if any, upon which shares of
any series of equity stock being offered are convertible into common stock
will be set forth in the applicable prospectus supplement. The terms will
include the number of shares of common stock into which the equity stock is
convertible, the conversion price (or manner of calculation), the conversion
period, provisions as to whether conversion will be at our option or at the
option of the holders of the equity stock or automatically upon the occurrence
of certain events, the events requiring an adjustment of the conversion price
and provisions affecting conversion in the event of the redemption of the
series of equity stock.

                     DESCRIPTION OF THE DEPOSITARY SHARES

  We may, at our option, elect to offer depositary shares, each of which will
represent a fractional interest in a share of preferred stock or equity stock
of a specified series as described in the applicable prospectus supplement.
The shares of preferred stock or equity stock represented by the depositary
shares will be deposited with a depositary named in the applicable prospectus
supplement, under a deposit agreement, among the depositary, the holders of
the depositary receipts and us. Depositary receipts, which are certificates
evidencing depositary shares, will be delivered to those persons purchasing
depositary shares in the offering. The depositary will be the transfer agent,
registrar and dividend disbursing agent for the depositary shares. Holders of
depositary receipts agree to be bound by the deposit agreement, which requires
holders to take certain actions such as filing proof of residence and paying
certain charges.

  The summary of terms of the depositary shares contained in this prospectus
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the deposit agreement, our articles of
incorporation and the form of certificate of determination for the applicable
series of preferred stock or equity stock.

Dividends

  The depositary will distribute all cash dividends or other cash
distributions received in respect of the series of preferred stock or equity
stock represented by the depositary shares to the record holders of depositary
receipts in proportion to the number of depositary shares owned by those
holders on the relevant record date, which will be the same date as the record
date fixed by us for the applicable series of preferred stock or equity stock.
The depositary, however, will distribute only an amount as can be distributed
without attributing to any depositary share a fraction of one cent with any
undistributed balance added to and treated as part of the next sum received by
the depositary for distribution to record holders of depositary receipts then
outstanding.

                                      16


  In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
that are entitled to receive the distribution, in proportion, as nearly as may
be practicable, to the number of depositary shares owned by those holders on
the relevant record date, unless the depositary determines (after consultation
with us) that it is not feasible to make the distribution. If this occurs, the
depositary may (with our approval) sell the property and distribute the net
proceeds from that sale to those holders or adopt another method of
distribution as it deems equitable and appropriate.

Liquidation Rights

  If we liquidate, dissolve or wind up our affairs, whether voluntary or
involuntary, the holders of each depositary share will be entitled to the
fraction of the liquidation amount accorded each share of the applicable series
of preferred stock or equity stock, as set forth in the prospectus supplement.

Redemption

  If a series of preferred stock or equity stock represented by that series of
depositary shares is redeemable, those depositary shares will be redeemed from
the proceeds received by the depositary resulting from the redemption, in whole
or in part, of that series of preferred stock or equity stock held by the
depositary. Whenever we redeem any preferred stock or equity stock held by the
depositary, the depositary will redeem as of the same redemption date the
number of depositary shares representing the preferred stock or equity stock so
redeemed. The depositary will mail the notice of redemption promptly upon
receipt of such notice from us and not less than 30 nor more than 60 days prior
to the date fixed for redemption of the preferred stock or equity stock and the
depositary shares to the record holders of the depositary receipts.

Conversion

  If the series of preferred stock or equity stock represented by the
applicable series of depositary shares is convertible into a different class of
our securities, the depositary shares will be also be convertible on the terms
described in the applicable prospectus supplement.

Voting

  Promptly upon receipt of notice of any meeting at which the holders of the
series of preferred stock or equity stock represented by the applicable series
of depositary shares are entitled to vote, the depositary will mail the
information contained in the notice of meeting to the record holders of the
depositary receipts as of the record date for that meeting. Each record holder
of depositary receipts will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the number of shares of preferred
stock or equity stock represented by that record holder's depositary shares.
The depositary will then try, as far as practicable, to vote the preferred
stock or equity stock represented by such depositary shares in accordance with
those instructions, and we will agree to take all action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will not vote any of the preferred stock or equity stock to the
extent that it does not receive specific instructions from the holders of
depositary receipts.

Withdrawal of Preferred Stock or Equity Stock

  Upon surrender of depositary receipts at the principal office of the
depositary, upon payment of any unpaid amount due the depositary, and subject
to the terms of the deposit agreement, the holder of the depositary shares
evidenced by the depositary receipts is entitled to delivery of the number of
whole shares of preferred stock or equity stock and all money and other
property, if any, represented by those depositary shares. Partial shares of
preferred stock or equity stock will not be issued. If the depositary receipts
delivered by the holder evidence a number of depositary shares in excess of the
number of depositary shares representing the number of whole shares of
preferred stock or equity stock to be withdrawn, the depositary will deliver to
that holder at the same time a new depositary receipt evidencing the excess
number of depositary shares. Holders of withdrawn preferred stock or equity
stock will not be entitled to deposit those shares under the deposit agreement
or to receive depositary receipts evidencing depositary shares.

                                       17


Amendment and Termination of Deposit Agreement

  The form of depositary receipt evidencing the depositary shares of any
series and any provision of the deposit agreement may at any time be amended
by agreement between the depositary and us. However, any amendment which
materially and adversely alters the rights of the holders (other than any
change in fees) of depositary shares of any series will not be effective
unless that amendment has been approved by the holders of at least a majority
of the depositary shares of that series then outstanding. No such amendment
may impair the right, subject to the terms of the deposit agreement, of any
owner of any depositary shares to surrender the depositary receipt evidencing
those depositary shares with instructions to the depositary to deliver to the
holder the preferred stock or equity stock and all money and other property,
if any, represented by the depositary receipt, except in order to comply with
mandatory provisions of applicable law. The deposit agreement may be
terminated by the depositary or us only if:

    (1) all outstanding depositary shares have been redeemed or

    (2) there has been a final distribution in respect of the preferred stock
  or equity stock in connection with our liquidation, dissolution or winding
  up and the distribution has been made to all the holders of depositary
  shares.

Charges of Depositary

  We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the depositary in connection with the initial deposit of the preferred
stock or equity stock and the initial issuance of the depositary shares, and
redemption of the preferred stock or equity stock and all withdrawals of
preferred stock or equity stock by owners of depositary shares. Holders of
depositary receipts will pay transfer, income and other taxes and governmental
charges and those other charges as are provided in the deposit agreement to be
for their accounts. In some circumstances, the depositary may refuse to
transfer depositary shares, may withhold dividends and distributions and sell
the depositary shares evidenced by the depositary receipt if the charges are
not paid.

Miscellaneous

  The depositary will forward to the holders of depositary receipts all
reports and communications from us which are delivered to the depositary and
which we are required to furnish to the holders of the preferred stock or
equity stock. In addition, the depositary will make available for inspection
by holders of depositary receipts at the principal office of the depositary,
and at other places as it may from time to time deem advisable, any reports
and communications received from us which are received by the depositary as
the holder of preferred stock or equity stock.

  Neither the depositary nor we assume any obligation or liability under the
deposit agreement to holders of depositary receipts other than for its or our
negligence or willful misconduct. Neither the depositary nor we will be liable
if the depositary is prevented or delayed by law or any circumstance beyond
its control in performing its obligations under the deposit agreement. Our
obligations and those of the depositary under the deposit agreement will be
limited to performance in good faith of the depositary's duties under the
deposit agreement. Neither of us will be obligated to prosecute or defend any
legal proceeding in respect of any depositary shares or preferred stock unless
satisfactory indemnity is furnished. We and the depositary may rely on written
advice of counsel or accountants, on information provided by holders of
depositary receipts or other persons believed in good faith to be competent to
give the information and on documents believed to be genuine and to have been
signed or presented by the proper party or parties.

Resignation and Removal of Depositary

  The depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the depositary. Any
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of the appointment. The successor depositary
must be appointed within 60 days

                                      18


after delivery of the notice for resignation or removal and must be a bank or
trust company having its principal office in the United States of America and
having a combined capital and surplus of at least $150,000,000.

Federal Income Tax Considerations

  Owners of the depositary shares will be treated for federal income tax
purposes as if they were owners of the preferred stock or equity stock
represented by those depositary shares. Accordingly, the owners will be
entitled to take into account, for federal income tax purposes, income and
deductions to which they would be entitled if they were holders of such
preferred stock or equity stock. In addition:

    (1) no gain or loss will be recognized for federal income tax purposes
  upon the withdrawal of preferred stock or equity stock in exchange for
  depositary shares;

    (2) the tax basis of each share of preferred stock or equity stock to an
  exchanging owner of depositary shares will, upon such exchange, be the same
  as the aggregate tax basis of the depositary shares being exchanged; and

    (3) the holding period for preferred stock or equity stock in the hands
  of an exchanging owner of depositary shares will include the period during
  which that person owned those depositary shares.

                            DESCRIPTION OF WARRANTS

  We have no warrants outstanding (other than options issued under our stock
option plan). We may issue warrants for the purchase of common stock,
preferred stock or equity stock. Warrants may be issued independently or
together with any other securities offered by any prospectus supplement and
may be attached to or separate from those securities. Each series of warrants
will be issued under a separate warrant agreement to be entered into between a
warrant agent specified in the applicable prospectus supplement and us. The
warrant agent will act solely as our agent in connection with the warrants of
that series and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants. The following
sets forth certain general terms and provisions of the warrants being offered.
Further terms of the warrants and the applicable warrant agreement will be set
forth in the applicable prospectus supplement.

  The applicable prospectus supplement will describe the terms of the warrants
in respect of which this prospectus is being delivered, including, where
applicable, the following:

     (1) the title of those warrants;

     (2) the aggregate number of those warrants;

     (3) the price or prices at which those warrants will be issued;

     (4) the designation, number and terms of the shares of common stock,
  preferred stock or equity stock purchasable upon exercise of those
  warrants;

     (5) the designation and terms of the other securities, if any, with
  which those warrants are issued and the number of those warrants issued
  with each security;

     (6) the date, if any, on and after which those warrants and the related
  common stock, preferred stock or equity stock, if any, will be separately
  transferable;

     (7) the price at which each share of common stock, preferred stock or
  equity stock purchasable upon exercise of those warrants may be purchased;

     (8) the date on which the right to exercise those warrants will commence
  and the date on which that right expires;

     (9) the minimum or maximum amount of those warrants which may be
  exercised at any one time; and

    (10) any other terms of those warrants, including terms, procedures and
  limitations relating to the exchange and exercise of those warrants.

                                      19


                        FEDERAL INCOME TAX CONSEQUENCES

  The following discussion summarizes certain federal income tax
considerations relating to us and to your acquisition, ownership and
disposition of common stock. The applicable prospectus supplement will contain
information about additional federal income tax considerations, if any,
relating to securities other than common stock. The following discussion,
which is not exhaustive of all possible tax considerations, does not give a
detailed description of any state, local, or foreign tax considerations. Nor
does it discuss all of the aspects of federal income taxation that may be
relevant to a prospective shareholder in light of his or her particular
circumstances or to certain types of Shareholders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the
United States) who are subject to special treatment under federal income tax
laws. The information in this section is based on the Code, current, temporary
and proposed treasury regulations, the legislative history of the Code,
current administrative interpretations and practices of the IRS (including its
practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to the taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. No assurance can be
given that future legislation, treasury regulations, administrative
interpretations and court decisions will not significantly change current law
or adversely affect existing interpretations of current law. Any such change
could apply retroactively to transactions preceding the date of the change. We
have not requested and do not plan to request any rulings from the IRS
concerning the tax treatment of the Company (references to the "Company" are
to Public Storage, Inc). Thus, no assurance can be provided that the
statements below (which do not bind the IRS or the courts) will not be
challenged by the IRS or will be sustained by a court if so challenged.

  EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS HIS OR HER TAX ADVISOR, REGARDING THE TAX CONSEQUENCES
TO HIM OR HER OF THE ACQUISITION, OWNERSHIP AND SALE OF THE SECURITIES,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF
SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.

Taxation of the Company

  General. We elected to be taxed as a REIT under Sections 856 through 860 of
the Code commencing with our taxable year ended December 31, 1981. We believe
that we have been organized and operated in a manner so as to qualify as a
REIT, and we intend to continue to operate in such a manner. So long as we
qualify for taxation as a REIT, we generally will not be subject to federal
corporate income taxes on net income that we distribute currently to
shareholders. However, we will be subject to federal income tax in the
following circumstances. First, we will be taxed at regular corporate rates on
any undistributed REIT taxable income, including undistributed net capital
gains. Second, under certain circumstances, we may be subject to the
"alternative minimum tax" on items of tax preference. Third, if we have (i)
net income from the sale or other disposition of "foreclosure property" (which
is, in general, property acquired by foreclosure or otherwise on default of a
lease or a loan secured by the property) which is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying
income from foreclosure property, it will be subject to tax at the highest
corporate rate on such income. Fourth, if we have net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property (other than foreclosure property) held primarily for sale to
customers in the ordinary course of business), such income will be subject to
a 100% tax. Fifth, if we fail to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), and have nonetheless maintained our
qualification as a REIT because certain other requirements have been met, we
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which we fail the 75% or 95% gross income test. Sixth, if we
fail to distribute during each calendar year at least the sum of (i) 85% of
our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
periods, we would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if we acquire or
have acquired any asset

                                      20


from a taxable C corporation in a transaction in which the basis of the asset
in the acquiror's hands is determined by reference to the basis of the asset
(or any other asset) in the hands of the C corporation (such as in the case of
our 1995 merger with Public Storage Management) and the acquiror recognizes
gain on the disposition of such asset during the 10 year period beginning on
the date on which such asset was acquired by it, then to the extent of such
asset's "Built-In Gain" (i.e., the excess of (a) the fair market value of such
asset at the time of its acquisition by us over (b) the adjusted basis in such
asset, determined at the time of such acquisition), such gain will be subject
to tax at the highest regular corporate rate applicable, pursuant to treasury
regulations that have yet to be promulgated. The results described above with
respect to the recognition of Built-In Gain assume that the Company made an
election pursuant to Notice 88-19 with respect to any such acquisition. Public
Storage Management was taxable as a regular C corporation. After the merger
with Public Storage Management, the Company elected to be subject to the
Built-In Gain rules of Notice 88-19.

  Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors,
(2) the beneficial ownership of which is evidenced by transferable shares of
stock, or by transferable certificates of beneficial interest, (3) that would
be taxable as a domestic corporation, but for Sections 856 through 859 of the
Code, (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code, (5) the beneficial ownership of
which is held by 100 or more persons, (6) that during the last half of each
taxable year not more than 50% in value of the outstanding stock of which is
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities), (7) that makes an election to be taxable as
a REIT, or has made such election for a previous taxable year which has not
been revoked or terminated, and satisfies all relevant filing and other
administrative requirements established by the IRS that must be met in order
to elect and maintain REIT status; (8) that uses a calendar year for federal
income tax purposes and complies with recordkeeping requirements of the Code
and regulations promulgated thereunder; and (9) that meets certain other
tests, described below, regarding the nature of its income and assets and the
amount of its distributions. The Code provides that conditions (1) through
(4), inclusive, must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. For
purposes of determining stock ownership under condition (6), a supplemental
unemployment compensation benefits plan, a private foundation or a portion of
a trust permanently set aside or used exclusively for charitable purposes
generally is considered an individual. However, a trust that is a qualified
trust under Code section 401(a) generally is not considered an individual and
beneficiaries of such trust are treated as holding shares of a REIT in
proportion to their actuarial interests in such trust for purposes of
condition (6).

  In connection with condition (6), a REIT is required to send annual letters
to its shareholders requesting information regarding the actual ownership of
shares. For our taxable years commencing on or after January 1, 1998, if we
comply with the annual letters requirement and do not know, or exercising
reasonable diligence would not have known, whether we failed to meet
requirement (6) above, we will be treated as having met the requirement. Our
articles of incorporation contain restrictions regarding the transfer of our
capital stock that are intended to assist us in continuing to satisfy the
stock ownership requirements described in conditions (5) and (6). The
ownership restrictions in our articles of incorporation and bylaws generally
prohibit the actual or constructive ownership of more than 2% of the
outstanding shares of common stock (excluding the interest held by the Hughes
family) or more than 9.9% of the outstanding shares of each class or series of
shares of preferred stock or equity stock, unless an exception is established
by the board of directors. The restrictions provide that if, at any time, for
any reason, those ownership limitations are violated or more than 50% in value
of our outstanding stock otherwise would be considered owned by five or fewer
individuals, then a number of shares of stock necessary to cure the violation
will automatically and irrevocably be transferred from the person causing the
violation to a designated charitable beneficiary. See "Description of Common
Stock and Class B Common Stock--Ownership Limitations." At the time of the
merger with Public Storage Management, to further assist us in meeting the
ownership restrictions, the Hughes family entered into an agreement with us
for the benefit of the Company and certain designated charitable beneficiaries
providing that if, at any time, for any reason, more than 50% in value of our
outstanding stock otherwise would be considered owned by five or fewer
individuals,

                                      21


then a number of shares of our common stock owned by Wayne Hughes necessary to
cure such violation would automatically and irrevocably be transferred to a
designated charitable beneficiary.

  The REIT protective provisions of our articles and the agreement with the
Hughes Family are modeled after certain arrangements that the IRS has ruled in
private letter rulings will preclude a REIT from being considered to violate
the ownership restrictions so long as the arrangements are enforceable as a
matter of state law and the REIT seeks to enforce them as and when necessary.
There can be no assurance, however, that the IRS might not seek to take a
different position with respect to the Company (a private letter ruling is
legally binding only with respect to the taxpayer to whom it was issued and we
will not seek a private ruling on this or any other issue) or contend that we
failed to enforce these various arrangements. Accordingly, there can be no
assurance that these arrangements necessarily will preserve our REIT status.
We believe, however, that we have issued and outstanding sufficient shares
with sufficient diversity of ownership to allow us to satisfy the REIT
ownership requirements.

  A REIT is not permitted to have at the end of any taxable year any
undistributed earnings and profits that are attributable to a "C corporation"
taxable year. As a result of the 1995 merger with Public Storage Management
and the 1999 merger with Storage Trust Realty, the Company succeeded to
various tax attributes of those entities and their predecessors, including any
undistributed C corporation earnings and profits. We do not believe that we
have acquired any undistributed "C corporation earnings and profits." However,
neither of these entities nor the Company has sought an opinion of counsel or
outside accountants to the effect that we did not acquire any "C corporation
earnings and profits." There can be no assurance that the IRS would not
contend otherwise on a subsequent audit. It appears that we could keep from
being disqualified as a REIT by using "deficiency dividend" procedures to
distribute any such acquired "C corporation" earnings and profits. In order to
use this procedure, an affected REIT would have to make an additional
distribution to its shareholders (in addition to distributions made for
purposes of satisfying the normal REIT distribution requirements), within
90 days of the IRS determination. In addition, the REIT would have to pay to
the IRS an interest charge on 50% of the acquired C corporation earnings and
profits that were not distributed prior to the end of the REIT's taxable year
in which they were acquired. If we were deemed to have acquired C corporation
earnings and profits, there can be no assurance, however, that the IRS would
not take the position either that the procedure is not available at all (in
which case we would fail to qualify as a REIT) or, alternatively, that even if
the procedure is available, we cannot qualify as a REIT for our taxable year
in which the earnings and profits were acquired, but we could qualify as a
REIT for subsequent taxable years.

  Income Tests. In order to maintain qualification as a REIT, we must satisfy
certain gross income requirements, which are applied on an annual basis. For
purposes of applying these income tests, a REIT is considered to earn a
proportionate share of the income of any partnership in which it holds a
partnership interest. First, at least 75% of our gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
directly or indirectly from investments relating to real property or mortgages
on real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments.
Second, at least 95% of our gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from the same
items which qualify under the 75% income test, and from dividends, interest
and gain from the sale or disposition of stock or securities, or from any
combination of the foregoing.

  Rents that we receive will qualify as "rents from real property" in
satisfying the gross income requirements described above only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. We anticipate that none of our annual gross income will
be attributable to rents that are based in whole or in part on the income of
any person (excluding rents based on a percentage of receipts or sales, which,
as described above, are permitted). Second, the Code provides that rents
received from a tenant will not qualify as "rents from real property" if the
Company, or an owner of 10% or more of the Company, directly or constructively
owns 10% or more of such tenant. We do not anticipate that we will receive
income

                                      22


from such related party tenants. Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." We do not anticipate deriving rent attributable to personal
property leased in connection with real property that exceeds 15% of the total
rents. Finally, for rents to qualify as "rents from real property," we
generally must not operate or manage the property or furnish or render
services to tenants, other than through an "independent contractor" that is
adequately compensated and from whom we derive no revenue. The "independent
contractor" requirement, however, does not apply to the extent the services we
provide are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant." Any services with respect to certain properties that we believe may
not be provided by us directly without jeopardizing the qualification of rent
as "rents from real property" will be performed by "independent contractors."

  For our taxable years commencing on or after January 1, 1998, rents received
generally will qualify as rents from real property even if we were to provide
services that are not permissible services so long as the amount received for
such services meets a de minimis standard. The amount received for
"impermissible services" with respect to a property cannot exceed 1% of all
amounts received, directly or indirectly, by the Company with respect to such
property. In computing any such amounts, the amount that we would be deemed to
have received for performing "impermissible services" will be the greater of
the actual amount so received or 150% of the direct cost to us of providing
those services. If the impermissible service income exceeds 1% of our total
income from a property, then all of the income from that property will fail to
qualify as rents from real property.

  In connection with the merger with Public Storage Management, the Company
and the various other owners of mini-warehouses and business parks for which
we performed management activities entered into an agreement with PSCC, Inc.
("PSCC") under which PSCC provides the owners and the Company certain
administrative and cost-sharing services in connection with the operation of
the properties and the performance of certain administrative functions. The
services include the provision of corporate office space and certain
equipment, personnel required for the operation and maintenance of the
properties, and corporate or partnership administration. Each of the owners
and the Company pay PSCC directly for services rendered by PSCC in connection
with the administrative and cost sharing agreement. That payment is separate
from and in addition to the compensation paid to us under the management
agreement for the management of the properties owned by the owners. At the
time of the merger with Public Storage Management, we received a private
letter ruling from the IRS to the effect that the reimbursements and other
payments made to PSCC by the owners will not be treated as our revenues for
purposes of the 95% test.

  We own substantially all of the economic interest in Pickup & Delivery (the
portable self-storage business). The income from that business would be
nonqualifying income to us and the business is conducted by a limited
partnership between the Company and a subsidiary of PS Orangeco, Inc. (the
"Lock/Box Company"). The share of gross income of that business attributable
to our partnership interest, when combined with our other nonqualifying
income, must be less than 5% of our total gross revenues. We anticipate that
we will be able to continue to satisfy both the 95% and 75% gross income
tests.

  If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT for such year if we
are entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances we would be entitled
to the benefit of these relief provisions. Even if these relief provisions
were to apply, however, a 100% tax would be imposed with respect to the
"excess net income" attributable to the failure to satisfy the 75% and 95%
gross income tests.

  Asset Tests. At the close of each quarter of our taxable year, we must
satisfy three tests relating to the nature of our assets. For purposes of
applying these asset tests, a REIT is considered to own a proportionate share
of the assets of any partnership in which it holds a partnership interest.
First, at least 75% of the value of our total assets must be represented by
real estate assets. Our real estate assets include, for this purpose, our
allocable share of real estate assets held by partnerships in which we have an
interest, as well as stock or debt instruments held for less than one year
purchased with the proceeds of a stock offering, or long-term (at least

                                      23


five years) debt offering of the Company, cash, cash items and government
securities. Second, not more than 25% of our total assets may be represented
by securities other than those in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's
securities owned by us may not exceed 5% of the value of our total assets,
and, except for REITs or "qualified REIT subsidiaries," we may not own more
than 10% of any one issuer's outstanding voting securities.

  We believe that we satisfy the asset tests. In this regard, however, the
value of our interest in the Lock/Box Company (including the Lock/Box
Company's interest in Pickup & Delivery) may not exceed 5% of the value of our
total assets and the 10% voting stock prohibition precludes us from
controlling the operations of the Lock/Box Company (in which we own 95% of the
equity in the form of non-voting stock and the Hughes family owns 5% of the
equity but 100% of the voting stock), Pickup & Delivery (a subsidiary of the
Lock/Box Company) or PSCC (in which we own a less than 10% voting interest)
and may preclude us from exercising our rights of first refusal with respect
to the corporations owning the Canadian operations and the reinsurance
business. See "--Proposed Changes to REIT Qualification Requirements" below
for a discussion of proposals that, if enacted, might affect Public Storage's
ability to derive economic benefits from the activities of the Lock/Box
Company and Pickup & Delivery.

  After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT for failure to satisfy the 25% or 5% asset tests
at the end of a later quarter solely by reason of changes in the relative
values of our assets. If the failure to satisfy the 25% or 5% asset tests
results from an acquisition of securities or other property during a quarter,
the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of that quarter. We intend to maintain adequate
records of the value of our assets to ensure compliance with the asset tests
and to take any available actions within 30 days after the close of any
quarter as may be required to cure any noncompliance with the 25% or 5% asset
tests. If we fail to cure noncompliance with the asset tests within such time
period, we would cease to qualify as a REIT.

  Certain Partnership Interests. In the merger with Public Storage Management
and in other transactions, we have acquired interests in various partnerships
that own and operate properties. For purposes of satisfying the REIT asset and
gross income tests, we will be treated as if we directly own a proportionate
share of each of the assets of these partnerships. For these purposes, under
current treasury regulations our interest in each of the partnerships must be
determined in accordance with our "capital interest" in the partnership.

  The ownership of these partnership interests creates several issues
regarding our satisfaction of the 95% gross income test. First, we earn
property management fees from these partnerships. Existing treasury
regulations do not address the treatment of management fees derived by a REIT
from a partnership in which the REIT holds a partnership interest, but the IRS
has issued a number of private letter rulings holding that the portion of the
management fee that corresponds to the REIT's interest in the partnership in
effect is disregarded in applying the 95% gross income test where the REIT
holds a "substantial" interest in the partnership. We disregard the portion of
management fees derived from partnerships in which we are a partner that
corresponds to our interest in these partnerships in determining the amount of
our nonqualifying income. There can be no assurance, however, that the IRS
would not take a contrary position with respect to the Company, either
rejecting the approach set forth in the private letter rulings mentioned above
or contending that our situation is distinguishable from those addressed in
the private letter rulings (for example, arguing that we do not have a
"substantial" interest in the partnerships).

  Second, we acquired interests in certain of these partnerships that entitle
us to a percentage of profits (either from operations, or upon a sale, or
both) in excess of the percentage of total capital originally contributed to
the partnership with respect to such interest. Existing treasury regulations
do not specifically address how our "capital interest" in partnerships of this
type should be determined. This determination is relevant because it affects
both the percentage of the gross rental income of the partnership that is
considered gross rental income (or qualifying income) to us and the percentage
of the management fees paid to us that is disregarded in determining our
nonqualifying income. For example, if we take the position that we have a 25%
"capital interest" in a partnership (because we would receive 25% of the
partnership's assets upon a sale and liquidation)

                                      24


but the IRS determines we only have a 1% "capital interest" (because the
original holder of our interest only contributed 1% of the total capital
contributed to the partnership), our share of the qualifying income from the
partnership would be reduced and the portion of the management fee from the
partnership that would be treated as nonqualifying income would be increased,
thereby adversely affecting our ability to satisfy the 95% gross income test.
In determining our "capital interest" in the various partnerships, we
determine the percentage of the partnership's assets that would be distributed
to us if those assets were sold and distributed among the partners in
accordance with the applicable provisions of the partnership agreements. There
can be no assurance, however, that the IRS will agree with this methodology
and not contend that another, perhaps less favorable, method must be used for
purposes of determining our "capital interests," which could adversely affect
our ability to satisfy the 95% gross income test.

  Annual Distribution Requirements. In order to qualify as a REIT, we are
required to distribute dividends (other than capital gain dividends) to our
shareholders in an amount at least equal to (i) the sum of (a) 95% of our
"REIT taxable income" (computed without regard to the dividends paid deduction
and our net capital gain) and (b) 95% of the net income (after tax), if any,
from foreclosure property, minus (ii) the sum of certain items of non-cash
income. In addition, if we dispose of any Built-In Gain Asset during the 10
year period beginning on the date we acquired that asset, we will be required,
pursuant to Treasury Regulations which have not yet been promulgated, to
distribute at least 95% of the Built-In Gain (after tax), if any, recognized
on the disposition of such asset. See "--General" above for a discussion of
"Built-In Gain Assets." Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before we
timely file our tax return for such year and if paid on or before the first
regular dividend payment date after such declaration.

  To the extent that we do not distribute all of our net capital gain or
distribute at least 95%, but less than 100%, of our "REIT taxable income," as
adjusted, we will be subject to tax at regular ordinary and capital gain
corporate tax rates. We may elect to require the shareholders to include our
undistributed net capital gains in their income by designating, in a written
notice to shareholders, those amounts as undistributed capital gains in
respect of our shareholders' shares. If we make such an election, the
shareholders will (i) include in their income as capital gains their
proportionate share of such undistributed capital gains and (ii) be deemed to
have paid their proportionate share of the tax paid by us on such
undistributed capital gains and thereby receive a credit or refund for such
amount. A shareholder will increase the basis in its common shares by the
difference between the amount of capital gain included in its income and the
amount of the tax that we are deemed to have paid on the shareholder's behalf.
Our earnings and profits will be adjusted appropriately. For a more detailed
description of the tax consequences to a shareholder of such a designation,
see "--Taxation of U.S. Shareholders Holding Common Stock."

  In addition, if we should fail to distribute during each calendar year at
least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95%
of our REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, we would be subject to a 4% excise tax on
the excess of such required distribution over the sum of amounts actually
distributed during the calendar year by us and the amount, if any, on which we
paid income tax for such year.

  In years prior to 1990, we made distributions in excess of our REIT taxable
income. During 1990, we reduced our distribution to our shareholders. As a
result, distributions paid by the Company in 1990 were less than 95% of our
REIT taxable income for 1990. We have satisfied the REIT distribution
requirements for 1990 through 1998 by attributing distributions in 1991
through 1999 to the prior year's taxable income, and we expect to satisfy the
distribution requirement for 1999 by attributing distributions in 2000 to the
1999 taxable income. We may be required, over each of the next several years,
to make distributions after the close of a taxable year and to attribute those
distributions to the prior year, but shareholders will be treated for federal
income tax purposes as having received such distributions in the taxable years
in which they were actually made. The extent to which we will be required to
attribute distributions to the prior year will depend on our operating results
and the level of distributions as determined by the board of directors. As
noted above, reliance on subsequent year distributions could cause us to be
subject to an excise tax. We intend to comply with this 85% distribution
requirement in an effort to minimize any excise tax.

                                      25


  We intend to make timely distributions sufficient to satisfy our annual
distribution requirements. It is expected that our REIT taxable income will be
less than our cash flow due to the allowance of depreciation and other non-
cash charges in computing REIT taxable income. Accordingly, we anticipate that
we will generally have sufficient cash or liquid assets to enable us to
satisfy the distribution requirements described above. It is possible,
however, that the Company, from time to time, may not have sufficient cash or
other liquid assets to meet these distribution requirements due to timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at our taxable income, or due to the need to make
nondeductible payments, such as principal payments on any indebtedness we may
have. If such circumstances occur, in order to meet the distribution
requirements, we may find it necessary to arrange for short-term, or possibly
long-term, borrowings or to pay dividends in the form of taxable stock
dividends.

  Under certain circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends; however, we will be required
to pay interest based upon the amount of any deduction taken for deficiency
dividends.

  Recordkeeping Requirements. Pursuant to applicable Treasury Regulations, we
must comply with certain recordkeeping requirements to qualify for taxation as
a REIT.

  Failure of the Company to Qualify as a REIT. For any taxable year that we
fail to qualify as a REIT, we would be taxed at the usual corporate rates on
all of our taxable income. Those taxes would reduce the amount of cash
available to us for distribution to our shareholders. Distributions to
shareholders in any year in which we fail to qualify as a REIT will not be
deductible and will not be required to be made. In addition, if we fail to
qualify as a REIT, all distributions to shareholders will be taxed as ordinary
income, to the extent of our current and accumulated earnings and profits,
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction.

  Unless certain relief provisions apply, our election to be treated as a REIT
will terminate automatically if we fail to meet the qualification requirements
described above and we will not be eligible to elect REIT status again until
the fifth taxable year that begins after the first year for which our election
was terminated (or revoked). If we lose our REIT status, but later qualify and
elect to be taxed as a REIT again, we may face significant adverse tax
consequences.

Taxation of U.S. Shareholders Holding Common Stock

  As used below, the term "U.S. Shareholder" means a holder of shares of
Common Stock who (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership,
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, (iii) is an estate the income of which
is subject to United States federal income taxation regardless of its source
or (iv) is a trust the administration of which is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to such date that elect to continue to be treated
as United States persons, shall also be considered U.S. Shareholders.

  Distributions by the Company. As long as we qualify as a REIT, distributions
made to our taxable U.S. Shareholders (and not designated as capital gain
dividends) will generally be taxable to such shareholders as ordinary income
to the extent of our current or accumulated earnings and profits. For purposes
of determining whether distributions on shares of common stock are out of
current or accumulated earnings and profits, our earnings and profits will be
allocated first to shares of preferred stock and second to shares of common
stock. There can be no assurance that we will have sufficient earnings and
profits to cover distributions on any shares

                                      26


of preferred stock. Such distributions will not be eligible for the dividends
received deductions in the case of shareholders that are corporations.
Dividends declared during the last quarter of a calendar year and actually
paid during January of the immediately following calendar year generally are
treated as if received by the shareholders on December 31 of the calendar year
during which they were declared.

  Distributions designated by us as capital gain dividends generally will be
taxed as gain from the sale or exchange of a capital asset held for more than
one year (to the extent that the distributions do not exceed our actual net
capital gain for the taxable year) without regard to the period for which the
shareholder has held its stock. Corporate shareholders however, may be
required to treat up to 20% of certain capital gain dividends as ordinary
income.

  Shareholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company. Instead, such losses would
be carried over by us for potential offset against future income (subject to
certain limitations). Distributions made by us and gain arising from the sale
or exchange by a holder of common stock will not be treated as passive
activity income, and, as a result, holders of common stock generally will not
be able to apply any "passive losses" against such income or gain. Future
regulations may require that Shareholders take into account, for purposes of
computing their individual alternative minimum tax liability, certain tax
preference items of the Company. In addition, taxable distributions from the
Company generally will be treated as investment income for purposes of the
investment interest limitations. Capital gain dividends and capital gain from
the disposition of shares, including distributions treated as such, however,
will be treated as investment income for purposes of the investment interest
limitation only if the U.S. Shareholder so elects, in which case such capital
gains will be taxed at ordinary income rates. We will notify shareholders
after the close of our taxable year as to the portions of distributions
attributable to that year that constitute ordinary income, return of capital
and capital gain.

  Distributions in excess of current or accumulated earnings and profits will
not be taxable to a U.S. Shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares of common stock, but rather will
reduce the adjusted basis of such shares of common stock. To the extent that
such distributions exceed the adjusted basis of a U.S. Shareholder's shares of
common stock, they will be included in income as capital gains, assuming the
shares of common stock are a capital asset in the hands of the U.S.
Shareholder.

  For our taxable years commencing on or after January 1, 1998, we may elect
to require the holders of common stock to include our undistributed net long-
term capital gains in their income. If we make such an election, the holders
of common stock will (i) include in their income as long-term capital gains
their proportionate share of such undistributed capital gains and (ii) be
deemed to have paid their proportionate share of the tax paid by us on such
undistributed capital gains and thereby receive a credit or refund for such
amount. A holder of common stock will increase the basis in its common stock
by the difference between the amount of capital gain included in its income
and the amount of the tax it is deemed to have paid. Our earnings and profits
will be adjusted appropriately. With respect to such long-term capital gain of
a taxable domestic shareholder that is an individual or an estate or trust,
the IRS has authority to issue regulations that could apply the special tax
rate applicable to sales of depreciable real property by an individual or an
estate or trust to the portion of the long-term capital gains of an individual
or an estate or trust attributable to deductions for depreciation taken with
respect to depreciable real property.

  Sales of Shares. In general, a U.S. Shareholder will realize gain or loss on
the disposition of shares of common stock equal to the difference between (i)
the amount of cash and the fair market value of any property received on such
disposition and (ii) the shareholder's adjusted basis of such shares of common
stock. Such gain or loss will be capital gain or loss if the shares have been
held as a capital asset. In the case of a taxable U.S. Shareholder who is an
individual or an estate or trust, such gain or loss will be long-term capital
gain or loss, and such long-term capital gain shall be subject to the maximum
capital gain rate of 20%. In the case of a taxable U.S. Shareholder that is a
corporation, such gain or loss will be long-term capital gain or loss if such
shares have been held for more than one year and any such capital gain shall
be subject to the maximum capital gain rate of 35%. Loss upon a sale or
exchange of shares of common stock by a shareholder who has held such shares
of

                                      27


common stock for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such shareholder as
long-term capital gain.

  Taxpayer Relief Act and IRS Restructuring Act Changes to Capital Gain
Taxation. The Taxpayer Relief Act of 1997 (the "Taxpayer Relief Act") altered
the taxation of capital gain income. Under the Taxpayer Relief Act,
individuals, trusts and estates that hold certain investments for more than
18 months may be taxed at a maximum long-term capital gain rate of 20% on the
sale or exchange of those investments. Individuals, trusts and estates that
hold certain assets for more than one year but not more than 18 months may be
taxed at a maximum long-term capital gain rate of 28% on the sale or exchange
of those investments. The Taxpayer Relief Act also provides a maximum rate of
25% for "unrecaptured Section 1250 gain" for individuals, trusts and estates,
special rules for "qualified 5-year gain" and other changes to prior law. The
recently enacted IRS Restructuring Act of 1998, however, reduced the holding
period requirement established by the Taxpayer Relief Act for the application
of the 20% and 25% capital gain tax rates to 12 months from 18 months for
sales of capital gain assets after December 31, 1997 and thus eliminated the
28% rate. The Taxpayer Relief Act allows the IRS to prescribe regulations on
how the Taxpayer Relief Act's capital gain rates will apply to sales of
capital assets by "pass-through entities," including REITs, such as the
Company, and to sales of interests in "pass-through entities." Shareholders
are urged to consult with their own tax advisors with respect to the rules
contained in the Taxpayer Relief Act and the IRS Restructuring Act.

  On November 10, 1997, the IRS issued IRS Notice 97-64, which provides
generally that REITs such as the Company may classify portions of their
designated capital-gain dividends as (i) a 20% rate gain distribution (which
would be taxed as long-term capital gain in the 20% group), (ii) an
unrecaptured Section 1250 gain distribution (which would be taxed as long-term
capital gain in the 25% group), or (iii) a 28% rate gain distribution (which
would be taxed as long-term capital gain in the 28% group). (If no designation
is made, the entire designated capital gain dividend will be treated as a 28%
rate gain distribution.) IRS Notice 97-64 provides that a REIT must determine
the maximum amounts that it may designate as 20% and 25% rate capital gain
dividends by performing the computation required by the Code as if the REIT
were an individual whose ordinary income were subject to a marginal tax rate
of at least 28%. The Notice further provides that designations made by the
REIT will only be effective to the extent that they comply with Revenue Ruling
89-81, which requires that distributions made to different classes of shares
be composed proportionately of dividends of a particular type. Although Notice
97-64 will apply to sales of capital gain assets after July 28, 1997 and
before January 1, 1998, it is expected that the IRS will issue clarifying
guidance, most likely applying the same principles set forth in Notice 97-64,
regarding a REIT's designation of capital gain dividends in light of the new
holding period requirements.

  Backup Withholding. We will report to our domestic shareholders and the IRS
the amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to dividends
paid unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides
a taxpayer identification number and certifies as to no loss of exemption from
backup withholding. Amounts withheld as backup withholding will be creditable
against the stockholder's income tax liability. In addition, we may be
required to withhold a portion of capital gain distributions made to any
shareholders who fail to certify their non-foreign status to the Company. See
"--Taxation of Non-U.S. Shareholders" below.

  Taxation of Tax-Exempt Shareholders. As a general rule, amounts distributed
to a tax-exempt entity by a corporation do not constitute "unrelated business
taxable income" ("UBTI"), and thus our distributions to a stockholder that is
a tax-exempt entity generally should not constitute UBTI, provided that the
tax-exempt entity has not financed the acquisition of its shares of common
stock with "acquisition indebtedness" within the meaning of the Code and the
shares of common stock are not otherwise used in an unrelated trade or
business of the tax-exempt entity. However, distributions by a REIT to a tax-
exempt employee's pension trust that owns more than 10% of the REIT will be
treated as UBTI in an amount equal to the percentage of gross income of the

                                      28


REIT that is derived from an "unrelated trade or business" (determined as if
the REIT were a pension trust) divided by the gross income of the REIT for the
year in which the dividends are paid. This rule only applies, however, if (i)
the percentage of gross income of the REIT that is derived from an unrelated
trade or business for the year in which the dividends are paid is at least 5%,
(ii) the REIT qualifies as a REIT only because the pension trust is not
treated as a single individual for purposes of the "five-or-fewer rule" (see
"--Taxation of the Company--Requirements for Qualification" above), and (iii)
(A) one pension trust owns more than 25 percent of the value of the REIT or,
(B) a group of pension trusts individually holding more than 10 percent of the
value of the REIT collectively own more than 50 percent of the value of the
REIT. We currently do not expect that this rule will apply.

Taxation of Non-U.S. Shareholders

  The rules governing U.S. federal income taxation of non-U.S. Shareholders
are complex, and the following discussion is intended only as a summary of
such rules. Prospective non-U.S. Shareholders should consult with their tax
advisors to determine the impact of federal, state, local and foreign income
tax laws on an investment in the Company, including any reporting
requirements.

  Distributions by the Company. Distributions to a non-U.S. Shareholder that
are not attributable to gain from sales or exchanges by the Company of U.S.
real property interests and not designated by us as capital gain dividends
will generally be subject to tax as ordinary income to the extent of our
current or accumulated earnings and profits as determined for U.S. federal
income tax purposes. Such distributions will generally be subject to a
withholding tax equal to 30% of the gross amount of the distribution, unless
reduced by an applicable tax treaty or unless such dividends are treated as
effectively connected with a United States trade or business. If the amount
distributed exceeds a non-U.S. Shareholder's allocable share of such earnings
and profits, the excess will be treated as a tax-free return of capital to the
extent of such non-U.S. Shareholder's adjusted basis in the common stock. To
the extent that such distributions exceed the adjusted basis of a non-U.S.
Shareholder's common stock, such distributions will generally be subject to
tax if such non-U.S. Shareholder would otherwise be subject to tax on any gain
from the sale or disposition of its common stock, as described below.

  For withholding tax purposes, we currently are required to treat all
distributions as if made out of our current or accumulated earnings and
profits and thus intend to withhold at the rate of 30% (or a reduced treaty
rate if applicable) on the amount of any distribution (other than
distributions designated as capital gain dividends) made to a non-U.S.
Shareholder. Under regulations generally effective for distributions on or
after January 1, 1999, we would not be required to withhold at the 30% rate on
distributions we reasonably estimate to be in excess of our current and
accumulated earnings and profits. If it cannot be determined at the time a
distribution is made whether such distribution will be in excess of current
and accumulated earnings and profits, the distribution will be subject to
withholding at the rate applicable to ordinary dividends. As a result of a
legislative change made by the Small Business Job Protection Act of 1996,
under current law, it appears that we will be required to withhold 10% of any
distribution to a non-U.S. Shareholder in excess of our current and
accumulated earnings and profits. Consequently, although we intend to withhold
at a rate of 30% on the entire amount of any distribution to a non-U.S.
Shareholder (or lower applicable treaty rate), to the extent we do not do so,
any portion of such a distribution not subject to withholding at a rate of 30%
(or lower applicable treaty rate) will be subject to withholding at a rate of
10%. However, the non-U.S. Shareholder may seek a refund of such amounts from
the IRS if it subsequently determined that such distribution was, in fact, in
excess of our current or accumulated earnings and profits, and the amount
withheld exceeded the non-U.S. Shareholder's United States tax liability, if
any, with respect to the distribution.

  Distributions to a non-U.S. Shareholder that are designated by us at the
time of distribution as capital gain dividends (other than those arising from
the disposition of a United States real property interest) generally will not
be subject to United States federal income taxation, unless (i) the investment
in the common stock is effectively connected with the non-U.S. Shareholder's
United States trade or business, in which case the non-U.S. Shareholder will
be subject to the same treatment as U.S. Shareholders with respect to such
gain (except that a shareholder that is a foreign corporation may also be
subject to the 30% branch profits tax) or (ii) the non-U.S.

                                      29


Shareholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and certain other
requirements are met, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.

  Under the Foreign Investment in Real Property Tax Act ("FIRPTA"),
distributions to a non-U.S. Shareholder that are attributable to gain from
sales or exchanges by the Company of United States real property interests
(whether or not designated as a capital gain dividend) will be taxed to a non-
U.S. Shareholder at the normal capital gains rates applicable to domestic
shareholders (subject to a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a non-U.S. Shareholder
that is a corporation and that is not entitled to treaty relief or exemption.
We are required by applicable FIRPTA Treasury Regulations to withhold 35% of
any such distribution that is or could be designated by us as a capital gain
dividend. That amount is creditable against the non-U.S. Shareholder's United
States FIRPTA tax liability.

  Even if we do not qualify or cease to be a domestically controlled REIT,
gain arising from the sale or exchange by a non-U.S. Shareholder of common
stock would still not be subject to U.S. taxation under FIRPTA as a sale of a
United States real property interest if (i) the class or series of shares
being sold is "regularly traded," as defined by applicable Treasury
Regulations, on an established securities market such as the New York Stock
Exchange, and (ii) the selling non-U.S. Shareholder owned 5% or less of the
value of the outstanding class or series of shares being sold throughout the
five-year period ending on the date of the sale or exchange.

  If gain on the sale or exchange of common stock were subject to taxation
under FIRPTA, the non-U.S. Shareholder would be subject to regular United
States income tax with respect to such gain in the same manner as a taxable
U.S. Shareholder, subject to any applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals and the
possible application of the 30% branch profits tax in the case of foreign
corporations. The purchaser of the common stock would be required to withhold
and remit to the IRS 10% of the purchase price.

  Although the law is not entirely clear on the matter, it appears that
amounts designated by us pursuant to the Taxpayer Relief Act as undistributed
capital gains in respect of shares of common stock (see "Taxation of U.S.
Shareholders Holding Common Stock" above) would be treated with respect to
non-U.S. Shareholders in the manner outlined in the preceding paragraph for
actual distributions by us of capital gain dividends. Under that approach, the
non-U.S. Shareholders would be able to offset as a credit against their United
States federal income tax liability resulting therefrom their proportionate
share of the tax paid by us on such undistributed capital gains (and to
receive from the IRS a refund to the extent their proportionate share of such
tax paid by us were to exceed their actual United States federal income tax
liability).

  Sale of Common Stock. Gain recognized by a non-U.S. Shareholder upon a sale
of its common stock will generally not be subject to tax under FIRPTA if we
are a "domestically controlled REIT," which is defined generally as a REIT in
which at all times during a specified testing period less than 50% in value of
its shares were held directly or indirectly by non-U.S. persons. Because only
a minority of the shareholders are non-U.S. Shareholders, we expect to qualify
as a "domestically controlled REIT." Accordingly, a non-U.S. Shareholder
should not be subject to U.S. tax on gains recognized upon disposition of the
common stock, provided that such gain is not effectively connected with the
conduct of a United States trade or business and, in the case of an individual
shareholder, such holder is not present in the United States for 183 days or
more during the year of sale and certain other requirements are met.

  Backup Withholding Tax and Information Reporting. Backup withholding tax
(which generally is a withholding tax imposed at a rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to non-U.S. Shareholders outside the
United States that are treated as (i) dividends subject to the 30% (or lower
treaty rate) withholding tax discussed above, (ii) capital gain dividends, or
(iii) distributions

                                      30


attributable to gain from the sale or exchange by the Company of United States
real property interests. As a general matter, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
common stock by or through a foreign office of a foreign broker. Information
reporting (but not backup withholding) will apply, however, to a payment of
the proceeds of a sale of common stock by a foreign office of a broker that
(a) is a United States person, (b) derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States
or (c) is a "controlled foreign corporation" (generally a foreign corporation
controlled by United States shareholders) for United States tax purposes,
unless the broker has documentary evidence in its records that the holder is a
non-U.S. Shareholder and certain other conditions are met, or the shareholder
otherwise establishes an exemption. Payment to or through a United States
office of a broker of the proceeds of a sale of common stock is subject to
both backup withholding and information reporting unless the shareholder
certifies under penalty of perjury that the shareholder is a non-U.S.
Shareholder, or otherwise establishes an exemption. A non-U.S. Shareholder may
obtain a refund of any amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS.

  The United States Treasury Department has finalized regulations regarding
the withholding and information reporting rules discussed above. In general,
these regulations do not alter the substantive withholding and information
reporting requirements but unify certification procedures and forms and
clarify and modify reliance standards. These regulations generally are
anticipated to be effective for payments made after December 31, 2000, subject
to certain transition rules. Valid withholding certificates that are held on
December 31, 1999, will remain valid until the earlier of December 31, 2000,
or the date of the expiration of the certificate under rules currently in
effect, unless otherwise invalidated due to changes in the circumstances of
the person whose name is on such certificate. A non-U.S. Shareholder should
consult its advisor regarding the effect of the new treasury regulations.

Proposed Changes to REIT Qualification Requirements

  The administration's fiscal year 2000 budget proposal, announced February 1,
1999, includes a proposal that would change the 10% voting securities test to
a 10% vote or value test. Under the proposal, a REIT would not be able to own
more than 10% of the vote or value of the outstanding securities of any
corporation, except for a qualified REIT subsidiary or another REIT (see
"Taxation of the Company--Asset Tests" above). The proposal also contains an
exception to the 5% and 10% asset tests that would allow a REIT to have
"taxable REIT subsidiaries," including both "qualified independent contractor
subsidiaries," which could perform noncustomary and other currently prohibited
services for tenants and other customers, and "qualified business
subsidiaries," which could undertake third-party management and development
activities as well as other non-real estate related activities. Under the
proposal, no more than 15% of a REIT's total assets could consist of taxable
REIT subsidiaries and no more than 5% of a REIT's total assets could consist
of qualified independent contractor subsidiaries. Under the budget proposal, a
taxable REIT subsidiary would not be entitled to deduct any interest on debt
funded directly or indirectly by the REIT. This proposal would be effective
after the date of enactment and a REIT would be allowed to combine and convert
existing corporate subsidiaries into taxable REIT subsidiaries tax-free prior
to a certain date. A transition period would allow for conversion of existing
corporate subsidiaries before the 10% vote or value test would become
effective. For our taxable years after the effective date of the proposal and
after any applicable transition period, the 10% vote or value test would apply
to our ownership in any of the non-qualified REIT subsidiaries not converted
into taxable REIT subsidiaries.

  On April 28, 1999, the Real Estate Investment Trust Modernization Act of
1999 (the "bill") was introduced in Congress. The bill is similar to the
administration's proposal in several respects. Like the administration's
proposal, the bill would create "taxable REIT subsidiaries" that would not be
subject to the 5% asset test, but that would remain subject to the 25% asset
test (see "Taxation of the Company--Asset Tests" above). The "taxable REIT
subsidiaries" would also be subject to "earnings stripping" limitations on the
deductibility of interest. Under the bill, a REIT would be able to rent up to
10% of a property to a taxable REIT subsidiary and generally have the rent
qualify as good income. The bill would also change the 10% voting securities
test to a 10% vote or value test unless the corporation elects to be a taxable
REIT subsidiary or the securities qualify for

                                      31


the "grandfather rule." In general, the "grandfather rule" would apply to
securities of a corporation in which the REIT owned an interest on April 28,
1999. The grandfather rule would also apply to securities acquired in a tax-
free exchange for "grandfathered securities" and to securities acquired in a
qualifying tax-free reorganization with another REIT, if those securities were
grandfathered in the hands of the other REIT. Securities of a corporation will
lose their "grandfathered" status if the corporation acquires any substantial
asset or engages in a substantial new line of business after April 28, 1999
(other than pursuant to a binding contract in effect on that date).

  It is presently uncertain whether any proposal regarding REIT subsidiaries,
including the budget proposal or the bill, will be enacted or, if enacted,
what the terms, including the effective date, of such proposal will be.

Taxation of Holders of Preferred Stock, Equity Stock, Depositary Shares and
Warrants

  If we offer one or more series of preferred stock, equity stock, depositary
shares or warrants, there may be tax consequences for the holders of such
Securities not discussed herein. For a discussion of any such additional
consequences, see the applicable prospectus supplement.

State and Local Taxes

  The tax treatment of the Company and our shareholders in states having
taxing jurisdiction over them may differ from the federal income tax
treatment. Accordingly, no discussion of state taxation of the Company and our
shareholders is provided nor is any representation made as to our tax status
in such states. All investors should consult their tax advisors as to the
treatment of the Company under the respective state tax laws applicable to
them.

                             PLAN OF DISTRIBUTION

  We may sell the securities:

    (1) through underwriters or dealers;

    (2) through agents;

    (3) directly to purchasers; or

    (4) through a combination of any of these methods of sale.

  Any underwriter or agent involved in the offer and sale of the securities
will be named in the applicable prospectus supplement.

  Direct sales to investors or our shareholders may be accomplished through
subscription offerings or through shareholder purchase rights distributed to
shareholders. In connection with subscription offerings or the distribution of
shareholder purchase rights to shareholders, if all of the underlying
securities are not subscribed for, we may sell any unsubscribed securities to
third parties directly or through underwriters or agents. In addition, whether
or not all of the underlying securities are subscribed for, we may
concurrently offer additional securities to third parties directly or through
underwriters or agents. If securities are to be sold through shareholder
purchase rights, the shareholder purchase rights will be distributed as a
dividend to the shareholders for which they will pay no separate
consideration. The prospectus supplement with respect to the offer of
securities under shareholder purchase rights will set forth the relevant terms
of the shareholder purchase rights, including:

    (1) whether common stock, preferred stock or equity stock, or warrants
  for those securities will be offered under the shareholder purchase rights;

    (2) the number of those securities or warrants that will be offered under
  the shareholder purchase rights;

                                      32


    (3) the period during which and the price at which the shareholder
  purchase rights will be exercisable;

    (4) the number of shareholder purchase rights then outstanding;

    (5) any provisions for changes to or adjustments in the exercise price of
  the shareholder purchase rights, and

    (6) any other material terms of the shareholder purchase rights.

  Underwriters may offer and sell the securities at:

    (1) fixed prices, which may be changed;

    (2) prices related to the prevailing market prices at the time of sale;
  or

    (3) negotiated prices.

  We also may, from time to time, authorize underwriters acting as our agents
to offer and sell the securities upon the terms and conditions as are set
forth in the applicable prospectus supplement. In connection with the sale of
securities, underwriters may be deemed to have received compensation from us
in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell securities to or through dealers, and these dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agent, or both.

  The applicable prospectus supplement will disclose (1) any underwriting
compensation we pay to underwriters or agents in connection with the offering
of securities and (2) any discounts, concessions or commissions allowed by
underwriters to participating dealers. Under the Securities Act, (1)
underwriters, dealers and agents participating in the distribution of the
securities may be deemed to be underwriters and (2) any discounts and
commissions received by them and any profit realized by them on resale of the
securities may be deemed to be underwriting discounts and commissions. We may
agree to indemnify underwriters, dealers and agents against civil liabilities,
including liabilities under the Securities Act and to make contribution to
them in connection with those liabilities.

  If indicated in the applicable prospectus supplement, we may also offer and
sell securities through a firm that will remarket the securities. These firms
may act as principals for their own account or as our agents. These firms may
be deemed to be underwriters in connection with the securities being
remarketed. We may agree to indemnify these firms against liabilities,
including liabilities under the Securities Act.

  If indicated in the applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers by institutions to purchase
securities at the offering price set forth in that prospectus supplement under
delayed delivery contracts providing for payment and delivery on the dates
stated in the prospectus supplement. Each contract will be for an amount not
less than, and the aggregate principal amount of securities sold under
contracts will be not less nor more than, the respective amounts stated in the
applicable prospectus supplement. Institutions with whom contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to our
approval. Contracts will not be subject to any conditions except (1) the
purchase by an institution of the securities covered by its contracts will not
at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which the institution is subject, and (2) if the
securities are being sold to underwriters, we will have sold to them the total
principal amount of the securities less the principal amount of the securities
covered by contracts. Agents and underwriters will have no responsibility in
respect of the delivery or performance of contracts.

  Some of the underwriters and their affiliates may engage in transactions
with or perform services for us in the ordinary course of business.

                                      33


                                LEGAL OPINIONS

  David Goldberg, our senior vice president and general counsel, has delivered
an opinion to the effect that the securities offered by this prospectus will
be validly issued, fully paid and nonassessable. Hogan & Hartson L.L.P.,
Washington, D.C., has delivered an opinion as to our status as a REIT. See
"Federal Income Tax Consequences." Mr. Goldberg owns 97,880 shares of common
stock and 600 shares of preferred stock, and has options to acquire an
additional 184,501 shares of common stock.

                                    EXPERTS

  Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.

                                      34


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                               20,000,000 Shares

                              Public Storage, Inc.

                               Depositary Shares
                    Each Representing 1/1,000 of a Share of
                  8.000% Cumulative Preferred Stock, Series R

                          [LOGO OF PUBLIC STORAGE(R)]

                                  -----------

                             PROSPECTUS SUPPLEMENT
                               September 4, 2001

                                  -----------

                              Salomon Smith Barney
                           A.G. Edwards & Sons, Inc.
                          First Union Securities, Inc.
                              Merrill Lynch & Co.
                                 Morgan Stanley
                                  UBS Warburg
                               CIBC World Markets
                           Credit Suisse First Boston
                           Deutsche Banc Alex. Brown
                             Prudential Securities
                                 Raymond James


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