FILED PURSUANT TO
                                                                  RULE 424(B)(5)
                                                      REGISTRATION NO. 333-69468

[LOGO] Public Storage
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 25, 2001)



                               6,000,000 Shares

                             PUBLIC STORAGE, INC.
           Depositary Shares Each Representing 1/1,000 of a Share of
                  7.625% Cumulative Preferred Stock, Series U
       LIQUIDATION PREFERENCE EQUIVALENT TO $25.00 PER DEPOSITARY SHARE

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

   We are selling 6,000,000 depositary shares each representing 1/1,000 of a
share of our 7.625% Cumulative Preferred Stock, Series U. The shares of
Preferred Stock represented by the depositary shares will be deposited with
EquiServe Trust Company, N. A., as depositary. As a holder of depositary
shares, you will be entitled to all proportional rights, preferences and
privileges of the Preferred Stock. The following is a summary of the Preferred
Stock:

    .  We will pay cumulative distributions on the Preferred Stock, from the
       date of original issuance, at the rate of 7.625% of the liquidation
       preference per year ($1.90625 per year per depositary share).

    .  We will pay distributions on the Preferred Stock quarterly, beginning on
       March 31, 2002 (with the payment on that date being based pro rata on
       the number of days from the original issuance of the Preferred Stock).

    .  We are not allowed to redeem the Preferred Stock before February 19,
       2007, except in order to preserve our status as a real estate investment
       trust.

    .  On and after February 19, 2007, 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 intend to apply to have the depositary shares listed on the New York
Stock Exchange (the "NYSE") under the symbol "PSAPrU." 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  $150,000,000
     Underwriting Discount.......................... $ 0.7875  $  4,725,000(1)
     Proceeds to Public Storage (before expenses)... $24.2125  $145,275,000

--------
(1)See "Underwriting" section beginning on page S-14 of this prospectus
   supplement for a discussion regarding certain additional underwriting
   compensation.

   The underwriters are offering the depositary shares subject to various
conditions. The underwriters expect to deliver the depositary shares to
purchasers on or about February 19, 2002.

                                 -------------
SALOMON SMITH BARNEY
        CREDIT SUISSE FIRST BOSTON
                  DEUTSCHE BANC ALEX. BROWN
                            A.G. EDWARDS & SONS, INC.
                                     MORGAN STANLEY
                                              WACHOVIA SECURITIES
                                                        CIBC WORLD MARKETS
                                                                  RAYMOND JAMES

February 13, 2002



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
           Recent Developments.................................  S-4
           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

                                  Prospectus

           Risk Factors........................................    1
           About This Prospectus...............................    4
           Where You Can Find More Information.................    5
           Forward-Looking Statements..........................    6
           The Company.........................................    7
           Use of Proceeds.....................................    7
           Ratio of Earnings to Fixed Charges..................    7
           Description of Common Stock and Class B Common Stock    8
           Description of Preferred Stock......................   11
           Description of Equity Stock.........................   16
           Description of the Depositary Shares-...............   19
           Description of Warrants.............................   22
           Federal Income Tax Consequences.....................   23
           Plan of Distribution................................   39
           Legal Opinions......................................   40
           Experts.............................................   40


   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 September 30, 2001, in 1,378
storage facilities located in 37 states. We also have a significant ownership
in PS Business Parks, Inc., a REIT that, as of September 30, 2001, had equity
interests in 13.6 million net rentable square feet of commercial space located
in nine states.

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



                                          At September 30, 2001
                                          ---------------------
                                                        Net
                                                      Rentable
                                            Number     Square
                                              of      Feet (in
                                          Facilities thousands)
                                          ---------- ----------
                                               
                 California:
                    Southern.............     160      10,306
                    Northern.............     138       7,704
                 Texas...................     163      10,922
                 Florida.................     141       8,459
                 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................      36       2,162
                 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.................      22         895
                 Pennsylvania............      20       1,360
                 Indiana.................      18       1,050
                 Other states (15 states)     112       6,770

                                            -----      ------
                    Totals...............   1,378      83,117

                                            =====      ======


                                      S-3



                              RECENT DEVELOPMENTS

   On September 28, 2001, we issued through a public offering depositary shares
representing interests in our 8.000% Cumulative Preferred Stock, Series R,
having an aggregate liquidation preference of $510,000,000. On October 31,
2001, we issued through a public offering depositary shares representing
interests in our 7.875% Cumulative Preferred Stock, Series S, having an
aggregate liquidation preference of $143,750,000.

   We used the net proceeds from the sale of the depositary shares representing
interests in the Series R Preferred Stock and Series S Preferred Stock
(aggregating approximately $632,756,875) (1) to redeem in full on September 28,
2001 all outstanding shares of our 8 7/8% Cumulative Preferred Stock, Series G
held by the depositary, and, as a result, the depositary redeemed 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 on October 5, 2001 all outstanding shares of our 8.45%
Cumulative Preferred Stock, Series H held by the depositary, and, as a result,
the depositary redeemed in full all outstanding depositary shares representing
interests in our Series H Preferred Stock, having an aggregate liquidation
preference of $168,750,000, (3) to purchase at par on October 15, 2001 all
$50,000,000 of the 8.75% Series P Cumulative Redeemable Perpetual Preferred
Units of one of our operating partnerships, (4) to redeem in full on November
13, 2001 all outstanding shares of our 8 5/8% Cumulative Preferred Stock,
Series I held by the depositary, and, as a result, the depositary redeemed in
full all outstanding depositary shares representing interests in our Series I
Preferred Stock, having an aggregate liquidation preference of $100,000,000 and
(5) to fund development activity, acquisitions of self-storage facilities,
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.

   On December 31, 2001, we acquired all of the capital stock of PS Insurance
Company, Ltd., a corporation that reinsures policies insuring against losses to
goods stored by tenants in our self-storage facilities, in exchange for
1,439,765 shares of our common stock. This corporation owned, and continues to
own, 301,032 shares of our common stock. This corporation was owned by our
chairman and chief executive officer, B. Wayne Hughes, and members of his
family.

   On December 31, 2001, following the acquisition of PS Insurance Company,
Ltd., we acquired the voting common stock of PS Orangeco, Inc., a corporation
that has an interest in our portable self-storage business, sells at our
self-storage facilities a variety of items such as locks and boxes to assist in
the moving and storage of goods and rents trucks. The purchase price was
$554,000. The voting common stock, representing 5% of the equity of this
corporation, was owned by Mr. Hughes and his family. We also own the non-voting
preferred stock of this corporation, representing 95% of its equity.

   On January 16, 2002, we purchased a limited partnership interest,
representing a 70% interest in one of our development partnerships, for
$155,357,786. We also own the other 30% interest in the partnership. The
partnership developed and owns 47 self-storage facilities in 18 states.

   On January 18, 2002, we issued through a public offering depositary shares
representing interests in our 7.625% Cumulative Preferred Stock, Series T,
having a liquidation preference of $150,000,000. We used the net proceeds from
the offering (approximately $145,075,000) to repay outstanding bank borrowings
under our current credit facility incurred to purchase the limited partnership
interest described in the preceding paragraph.

                                USE OF PROCEEDS

   We estimate net proceeds from this offering of approximately $145,075,000,
after all anticipated issuance costs. We intend to use the net proceeds from
this offering to fund development activity, acquire self-storage facilities,
purchase interests in real estate entities, for general corporate purposes and
for additional investments in the portable self-storage business.

   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 September 30, 2001, we had outstanding 11,161,500 shares of preferred stock
and had reserved for issuance an additional 13,400 shares of preferred stock.

   Prior to issuance, the Board of Directors will have adopted resolutions
creating the 7.625% Cumulative Preferred Stock, Series U (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.

   EquiServe Trust Company, N. A. 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 EquiServe Trust Company,
N. A., 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 intend to apply 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% 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, 8.600% Cumulative Preferred Stock, Series Q, 8.000%
Cumulative Preferred Stock, Series R, 7.875% Cumulative Preferred Stock, Series
S and 7.625% Cumulative Preferred Stock, Series T (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 and 9.125% Series O 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.

   Between August and November 2001, we redeemed or purchased at par the
following senior securities of the Company or of one of our operating
partnerships: (1) a portion of the outstanding 9.125% Series O Cumulative
Redeemable Perpetual Preferred Units for $30,000,000, (2) all of the
outstanding shares of 8 7/8% Cumulative Preferred Stock, Series G for
$172,500,000, (3) all of the outstanding shares of 8.45% Cumulative Preferred
Stock, Series H for $168,750,000, (4) all of the outstanding 8.75% Series P
Cumulative Redeemable Perpetual Preferred Units for $50,000,000 and (5) all of
the outstanding shares of our 8 5/8% Cumulative Preferred Stock, Series I for
$100,000,000.

  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
7.625% of the liquidation preference per year ($1,906.25 per year per share,
equivalent to $1.90625 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 March 31, 2002, 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. If the last day of a quarter falls on a non-business day, we may pay
dividends for that quarter on the first business day following the end of the
quarter. 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

                                      S-6



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 95% of our "Funds from Operations" for the
prior four fiscal quarters. 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 February 19, 2007. On and
after February 19, 2007, 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.

                                      S-7



   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 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

                                      S-8



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 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

                                      S-9



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.

  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

                                     S-10



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.

  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 Public Storage as a REIT" and "--Taxation of U.S.
Shareholders" 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.

                                     S-11



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 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 Public Storage as a REIT" and
"--Taxation of U.S. Shareholders" in the accompanying Prospectus. Effective for
dividend payments made after December 31, 2001, the backup withholding rate
decreased from 30.5% to 30% 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" 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

                                     S-12



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.

   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" in the accompanying
Prospectus. If the redemption is taxed as a dividend, the holder of Depositary
Shares' adjusted tax basis in the redeemed 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.


                                     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....................................   820,000
 Credit Suisse First Boston Corporation......................   756,000
 Deutsche Banc Alex. Brown Inc...............................   756,000
 A.G. Edwards & Sons, Inc....................................   756,000
 First Union Securities, Inc.(1).............................   756,000
 Morgan Stanley & Co. Incorporated...........................   756,000
 CIBC World Markets Corp.....................................   120,000
 Raymond James & Associates, Inc.............................   120,000
 Charles Schwab & Co., Inc...................................   100,000
 H&R BLOCK Financial Advisors................................   100,000
 Legg Mason Wood Walker, Incorporated........................   100,000
 McDonald Investments Inc.(2)................................   100,000
 Prudential Securities Incorporated..........................   100,000
 Quick & Reilly, Inc.........................................   100,000
 RBC Dain Rauscher Inc.......................................   100,000
 U.S. Bancorp Piper Jaffray Inc..............................   100,000
 Wells Fargo Securities, LLC.................................   100,000
 Advest, Inc.................................................    20,000
 Fahnestock & Co. Inc........................................    20,000
 Gruntal & Co., L.L.C........................................    20,000
 HSBC Securities (USA) Inc...................................    20,000
 J.J.B. Hilliard, W.L. Lyons, Inc............................    20,000
 Janney Montgomery Scott LLC.................................    20,000
 Mesirow Financial, Inc......................................    20,000
 NatCity Investments, Inc....................................    20,000
 Robert W. Baird & Co. Incorporated..........................    20,000
 Stifel, Nicolaus & Company, Incorporated....................    20,000
 TD Waterhouse Group, Inc....................................    20,000
 Tucker Anthony Incorporated.................................    20,000
 William Blair & Company, L.L.C..............................    20,000
                                                              ---------
      Total.................................................. 6,000,000
                                                              =========

--------
(1)First Union Securities, Inc. is acting under the trade name Wachovia
   Securities.
(2)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 if they purchase any of the shares.

   The underwriters, for whom Salomon Smith Barney Inc., Credit Suisse First
Boston Corporation, Deutsche Banc Alex. Brown Inc., A.G. Edwards & Sons, Inc.,
First Union Securities, Inc., Morgan Stanley & Co. Incorporated, CIBC World
Markets Corp. 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 $0.45 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 intend to apply 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.


                                        
                              Per share... $   0.7875
                              Total....... $4,725,000


   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.
Syndicate covering transactions involve purchases of the Depositary Shares in
the open market after the distribution has been completed in order to cover
syndicate short positions. A 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.

   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.

   Citicorp Real Estate, Inc., an affiliate of Salomon Smith Barney Inc.,
Bankers Trust Company, an affiliate of Deutsche Banc Alex. Brown Inc., First
Union National Bank, an affiliate of First Union Securities, Inc., and Credit
Suisse First Boston, an affiliate of Credit Suisse First Boston Corporation,
are lenders under our current credit facility. In January 2002, we repaid the
then-outstanding bank borrowings under this credit facility with the net
proceeds from an offering of securities underwritten by a syndicate of
investment banks, including these firms. These lending institutions received
their proportionate share (15% in the case of First Union National Bank and
12.5% in the case of each of the other lending institutions) of the amounts
repaid.

                                     S-15



   First Union National Bank, an affiliate of First Union Securities, Inc., was
a lender under our prior 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.

                                 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
253,434 shares of Common Stock. Skadden, Arps, Slate, Meagher & Flom LLP has
from time to time represented us and our affiliates on unrelated matters.


                                     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
 commission 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.

                              September 25, 2001



   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 may pay some taxes................................................................................   1
   We would incur a corporate level tax if we sell certain assets.......................................   1
   We and our shareholders are subject to financing risks...............................................   2
       Debt increases risk of loss......................................................................   2
       Issuing additional shares reduces the interest of existing shareholders..........................   2
   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 self-storage facilities...................................   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 self-storage facilities 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...................................................................................   4
Where You Can Find More Information.....................................................................   5
Forward-Looking Statements..............................................................................   6
The Company.............................................................................................   7
Use of Proceeds.........................................................................................   7
Ratio of Earnings to Fixed Charges......................................................................   7
Description of Common Stock and Class B Common Stock....................................................   8
   Common Stock.........................................................................................   8
   Ownership Limitations................................................................................   8
   Class B Common Stock.................................................................................  10
Description of Preferred Stock..........................................................................  11
   Outstanding Preferred Stock..........................................................................  11
   Ownership Limitations................................................................................  11
   Future Series of Preferred Stock.....................................................................  11
Description of Equity Stock.............................................................................  16
   Ownership Limitations................................................................................  16
   Terms of Equity Stock................................................................................  16
Description of the Depositary Shares....................................................................  19
   Dividends............................................................................................  19
   Liquidation Rights...................................................................................  19
   Redemption...........................................................................................  19
   Conversion...........................................................................................  19


                                       i





                                                                                Page
                                                                                ----
                                                                             
   Voting......................................................................  20
   Withdrawal of Preferred Stock or Equity Stock...............................  20
   Amendment and Termination of Deposit Agreement..............................  20
   Charges of Depositary.......................................................  20
   Miscellaneous...............................................................  21
   Resignation and Removal of Depositary.......................................  21
   Federal Income Tax Considerations...........................................  21
Description of Warrants........................................................  22
Federal Income Tax Consequences................................................  23
   Taxation of Public Storage as a REIT........................................  23
   Taxation of U.S. Shareholders...............................................  33
   Taxation of Tax-Exempt Shareholders.........................................  35
   U.S. Taxation of Non-U.S. Shareholders......................................  35
   Information Reporting and Backup Withholding Tax Applicable to Shareholders.  37
   Other Tax Consequences for Public Storage and Our Shareholders..............  38
Plan of Distribution...........................................................  39
Legal Opinions.................................................................  40
Experts........................................................................  40


                                      ii



                                 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 33.7% of our outstanding shares of
common stock (approximately 37.5% 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 by them
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 90% of our REIT taxable income to our
shareholders, which include not only holders of our common stock and equity
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 Public Storage as a REIT."

   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 as a REIT during any taxable year 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 may pay some taxes.

   Even if we qualify as a REIT for federal income tax purposes, we are
required to pay some federal, state and local taxes on our income and property.
Several corporate subsidiaries of Public Storage have elected to be treated as
"taxable REIT subsidiaries" of Public Storage for federal income tax purposes
since January 1, 2001. A taxable REIT subsidiary is a fully taxable corporation
and is limited in its ability to deduct interest payments made to us. In
addition, we will be subject to a 100% penalty tax on some payments that we
receive if the economic arrangements among our tenants, our taxable REIT
subsidiaries and us are not comparable to similar arrangements among unrelated
parties. To the extent that Public Storage or any taxable REIT subsidiary is
required to pay federal, state or local taxes, we will have less cash available
for distribution to shareholders.

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

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

                                      1



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 June 30, 2001, our debt of
$149.8 million was approximately 3.3% 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 and of preferred units in
one of our operating partnerships would be entitled to receive, before any
distribution of assets to holders of our common stock, liquidating
distributions (a total of approximately $1.7 billion with respect to preferred
stock and preferred units outstanding at June 30, 2001), plus any accrued and
unpaid distributions. Holders of preferred stock and preferred units are
entitled to receive, when declared by our board of directors, cash
distributions (a total of approximately $149.0 million per year with respect to
preferred stock and preferred units outstanding at June 30, 2001), 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 self-storage facilities.  Most of our
properties are self-storage facilities, which represented 91% of our total
revenues generated during 2000. 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 self-storage facilities are
expected to further intensify competition among operators of self-storage
facilities 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

                                      2



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 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.

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 self-storage facilities. We believe
that the availability of insurance reduces our potential liability to tenants
for losses to their goods from theft or destruction. That corporation receives
the premiums and bears the risks associated with the reinsurance. We have an
agreement to acquire that corporation on December 31, 2001. The agreement is
subject to certain conditions and there can be no assurance that the
acquisition will be completed.

We have no interest in Canadian self-storage facilities owned by the Hughes
family.

   The Hughes family owns and operates self-storage facilities 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 self-storage facilities, a related corporation (PS
Orangeco, Inc.) offers for sale to the general public, including tenants of
self-storage facilities, 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.

   Public Storage Pickup & Delivery was organized 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. Pickup & Delivery incurred
operating losses of $7,396,000 in 1999, $5,135,000 in 2000 and $1,538,000 for
the first six months of 2001. See "Federal Income Tax Consequences--Taxation of
Public Storage as a REIT" concerning the treatment of income from and
investment in Pickup & Delivery for purposes of the REIT income and asset tests.

                                      3



                             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.

                                      4



                      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 room at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. 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, as amended. 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, 2000
Quarterly Report on Form 10-Q....................... Quarters ended March 31, 2001 and June 30, 2001
Current Reports on Form 8-K......................... Dated January 16, 2001, April 5, 2001 and
                                                       September 4, 2001
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 Exchange Afterthe date of this prospectus and before the
  Act of 1934.......................................      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.

                                      5



                          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 self-storage 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 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.

                                      6



                                  THE COMPANY

   We are a fully integrated, self-administered and self-managed real estate
investment trust or REIT 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 own an
interest in PS Business Parks, Inc., a REIT that, as of June 30, 2001, had
equity interests in 152 commercial properties located in nine states.

   We elected to be taxed as a REIT beginning with our 1981 taxable year. So
long as 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.

                                USE OF PROCEEDS

   We intend to use the net proceeds from the sale of the securities described
in this prospectus to make investments in self-storage facilities, including
development, interests in partnerships and mortgage loans and for general
corporate purposes, including repayment of debt and the redemption of
outstanding securities. 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
distributions by dividing our earnings by the sum of our fixed charges and
preferred stock and preferred unit distributions. Earnings consists of net
income before minority interest in income, 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
                                                          Six Months
                                                            Ended
                                                           June 30,  For the Year Ended December 31,
                                                          ---------- -------------------------------
                                                          2001  2000  2000   1999  1998  1997  1996
                                                          ----  ---- ----   ----   ----  ----  ----
                                                                          
Ratio of earnings to combined fixed charges and Preferred
  distributions.......................................... 2.21  2.44 2.38   2.78   2.73  1.91  2.07


                                      7



             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 June 30, 2001, we had
outstanding 113,261,141 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.

   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, 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
Internal Revenue Code, by five or fewer individuals (as defined in the Internal
Revenue Code to include certain entities) during the last half of a taxable
year. In order to maintain our qualification as a REIT, our organizational
documents 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."

                                      8



   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 Internal Revenue 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 Internal Revenue 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 Internal Revenue
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 Internal Revenue 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 Internal Revenue
Code, by five or fewer individuals (as defined in the Internal Revenue 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
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.

                                      9



   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) Participates 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.

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

                                      10



                        DESCRIPTION OF PREFERRED STOCK

   We are authorized to issue up to 50,000,000 shares of preferred stock. At
June 30, 2001, we had outstanding 11,148,000 shares of preferred stock (of
which 42,000 shares were represented by 42,000,000 depositary shares) and had
reserved for issuance an additional 14,600 shares of preferred stock. 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 June 30, 2001, we had outstanding 14 series of preferred stock and had
reserved for issuance, upon conversion of preferred units in one of our
operating partnerships, an additional three series. 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 13 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
January 19, 2006 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."

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.

                                      11



   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 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.

                                      12



   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.

   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.

                                      13



   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.

   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.

                                      14



   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.

                                      15



                          DESCRIPTION OF EQUITY STOCK

   We are authorized to issue up to 200,000,000 shares of equity stock. At June
30, 2001, we had outstanding 4,523,220.338 shares of equity stock (of which
8,676.102 shares were represented by 8,676,102 depositary shares) 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

                                      16



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. 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

                                      17



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.

   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.

                                      18



                     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.

   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.


                                      19



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.

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

                                      20



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 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.

                                      21



                            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.

                                      22



                        FEDERAL INCOME TAX CONSEQUENCES

   The following discussion describes the material federal income tax
consequences relating to the taxation of Public Storage as a REIT and the
acquisition, ownership and disposition of our common shares. If we offer
securities other than common stock, information about any additional income tax
consequences to holders of those securities will be included in the documents
pursuant to which those securities are offered.

   Because this summary only addresses the federal income tax consequences that
generally apply to all holders that acquire, own or dispose of our common
shares, it may not contain all the information that may be important in your
specific circumstances. As you review this discussion, you should keep in mind
that:

      (1) The tax consequences to you may vary depending on your particular tax
   situation;

      (2) Special rules that are not discussed below may apply to you if, for
   example, you are a tax-exempt organization, a broker-dealer, a non-U.S.
   person, a trust, an estate, a regulated investment company, a financial
   institution, an insurance company, or otherwise subject to special tax
   treatment under the Internal Revenue Code;

      (3) This summary does not address state, local or foreign tax
   considerations;

      (4) This summary deals only with Public Storage common shareholders that
   hold common shares as "capital assets," within the meaning of Section 1221
   of the Internal Revenue Code; and

      (5) This discussion is not intended to be, and should not be construed
   as, tax advice.

   You are urged both to review the following discussion and to consult with
your own tax advisor to determine the effect of acquiring, owning and disposing
of Public Storage common shares in your individual tax situation, including any
state, local or foreign tax consequences.

   The information in this section is based on the current Internal Revenue
Code, current, temporary and proposed treasury regulations, the legislative
history of the Internal Revenue Code, current administrative interpretations
and practices of the Internal Revenue Service, including its practices and
policies as reflected in private letter rulings, which are not binding on the
Internal Revenue Service, and existing court decisions. Future legislation,
regulations, administrative interpretations and court decisions could change
current law or adversely affect existing interpretations of current law. Any
change could apply retroactively. Except as described under "--Taxation of
Public Storage as a REIT--Income Tests Applicable to REITs," Public Storage has
not obtained any rulings from the Internal Revenue Service concerning the tax
treatment of the matters discussed below. Thus, it is possible that the
Internal Revenue Service could challenge the statements in this discussion,
which do not bind the Internal Revenue Service or the courts, and that a court
could agree with the Internal Revenue Service.

Taxation of Public Storage as a REIT

   General.  We elected to be taxed as a REIT under the Internal Revenue Code
beginning with our taxable year ended December 31, 1981. A REIT generally is
not subject to federal income tax on the net income that it distributes to
shareholders if it meets the applicable REIT distribution requirements and
other requirements for REIT qualification.

   We believe that we have been organized and operated, and we intend to
continue to operate, in a manner to qualify as a REIT, but there can be no
assurance that we will qualify or remain qualified as a REIT. Qualification and
taxation as a REIT depend upon our ability to meet, through actual annual (or
in some cases quarterly) operating results, requirements relating to income,
asset ownership, distribution levels and diversity of share ownership, and the
various other REIT qualification requirements imposed under the Internal
Revenue Code. Given the complex nature of the REIT qualification requirements,
the ongoing importance of factual determinations and the possibility of future
changes in our circumstances, we cannot provide any assurance that

                                      23



our actual operating results will satisfy the requirements for taxation as a
REIT under the Internal Revenue Code for any particular taxable year.

   So long as we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income tax on our net income that is distributed
currently to our shareholders. This treatment substantially eliminates "double
taxation" (that is, taxation at both the corporate and shareholder levels) that
generally results from an investment in a regular corporation. However, we will
be subject to federal corporate income tax as follows:

      (1) We will be taxed at regular corporate rates on any undistributed
   "REIT taxable income." REIT taxable income is the taxable income of the REIT
   subject to specified adjustments, including a deduction for dividends paid;

      (2) Under some circumstances, we may be subject to the "alternative
   minimum tax" on our items of tax preference;

      (3) If we have net income from the sale or other disposition of
   "foreclosure property" (generally, property acquired through foreclosure
   after a default on a loan secured by the property or on a lease of the
   property) that is held primarily for sale to customers in the ordinary
   course of business, or other nonqualifying income from foreclosure property,
   this income will be subject to tax at the highest corporate rate;

      (4) Our net income from "prohibited transactions" will be subject to a
   100% tax. In general, prohibited transactions are sales or other
   dispositions of property (other than foreclosure property) held primarily
   for sale to customers in the ordinary course of business;

      (5) If we fail to satisfy either the 75% gross income test or the 95%
   gross income test discussed below, but still maintain our qualification as a
   REIT because other requirements are met, we will be subject to a tax equal
   to the gross income attributable to the greater of either (1) the amount by
   which 75% of our gross income exceeds the amount of our income qualifying
   under the 75% test for the taxable year or (2) the amount by which 90% of
   our gross income exceeds the amount of our income qualifying for the 95%
   income test for the taxable year, multiplied by a fraction intended to
   reflect our profitability;

      (6) We will be subject to a 4% excise tax if we fail to distribute during
   each calendar year at least the sum of:

          (a) 85% of our REIT ordinary income for the year;

          (b) 95% of our REIT capital gain net income for the year; and

          (c) any undistributed taxable income from prior taxable years.

   The tax applies to the excess of the required distribution over the sum of
amounts actually distributed and amounts retained for which federal income tax
was paid.

      (7) We will be subject to a 100% penalty tax on some payments we receive
   (or on certain expenses deducted by a taxable REIT subsidiary) if
   arrangements among Public Storage, our tenants, and our taxable REIT
   subsidiaries are not comparable to similar arrangements among unrelated
   parties.

   In addition, we could be liable for specified tax liabilities inherited from
a taxable "C" corporation, if we acquired or acquire assets from such a
corporation in a carryover basis transaction (such as in the case of our 1995
merger with Public Storage Management). We also have acquired assets in
carryover basis merger transactions with a number of REITs (including our 1999
merger with Storage Trust Realty). If any such acquired REIT failed to qualify
as a REIT at the time of its merger into Public Storage, it would have been a
"C" corporation and we also would be liable for tax liabilities inherited from
it.

   When assets are acquired from a "C" corporation in a carryover basis
transaction, the "C" corporation is generally required to recognize gain with
respect to the assets' "built-in gain." Built-in gain is the amount by which an
asset's fair market value exceeds its adjusted basis. As the successor to these
acquired entities, we

                                      24



would be liable for any tax owed by them as a result of the recognition of
built-in gain. Applicable treasury regulations, however, allow an acquiring
REIT, such as Public Storage, to make an election to avoid the recognition of
gain and the imposition of corporate level tax on a built-in gain asset
acquired in a carryover basis transaction from a "C" corporation unless and
until the acquiring REIT disposes of that built-in gain asset during the
10-year period following the asset's acquisition, at which time the acquiring
REIT would recognize, and would be subject to the highest regular corporate
rate of tax on, the built-in gain. We elected to be subject to these 10-year
built-in gain rules in connection with our merger with Public Storage
Management. Similar rules would apply if in the future we acquire assets from a
"C" corporation in a carryover basis transaction.

   Requirements for Qualification as a REIT.  The Internal Revenue 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, or by transferable certificates of beneficial interest;

      (3) that would be taxable as a domestic corporation, but for Sections 856
   through 859 of the Internal Revenue Code;

      (4) that is neither a financial institution nor an insurance company
   subject to applicable provisions of the Internal Revenue Code;

      (5) the beneficial ownership of which is held by 100 or more persons;

      (6) during the last half of each taxable year not more than 50% in value
   of the outstanding shares of which is owned directly or indirectly by five
   or fewer individuals, as defined in the Internal Revenue Code to include
   specified entities;

      (7) that makes an election to be taxable as a REIT, or has made this
   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 Internal Revenue Service that must be met to
   elect and maintain REIT status;

      (8) that uses a calendar year for federal income tax purposes and
   complies with the recordkeeping requirements of the Internal Revenue Code
   and regulations; and

      (9) that meets other applicable tests, described below, regarding the
   nature of our income and assets and the amount of our distributions.

   Conditions (1), (2), (3) and (4) above must be met during the entire taxable
year and condition (5) above 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)
above, 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 Internal Revenue Code Section 401(a) generally
is not considered an individual, and beneficiaries of a qualified trust are
treated as holding shares of a REIT in proportion to their actuarial interests
in the trust for purposes of condition (6) above.

   We believe that we have issued sufficient shares with sufficient diversity
of ownership to allow us to satisfy conditions (5) and (6) above. In addition,
our organizational documents contain restrictions regarding the transfer of our
capital stock that are intended to assist us in continuing to satisfy the share
ownership requirements described in conditions (5) and (6) above. 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

                                      25



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 Public Storage 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, 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 organizational documents and the
agreement with the Hughes family are modeled after certain arrangements that
the Internal Revenue Service 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 Internal Revenue Service might not seek to take a different position
concerning Public Storage (a private letter ruling is legally binding only as
to the taxpayer to whom it was issued and we will not seek a private ruling on
this 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.

   To monitor compliance with condition (6) above, a REIT is required to send
annual letters to its shareholders requesting information regarding the actual
ownership of its shares. For 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, of a failure to meet
condition (6) above, then we will be treated as having met condition (6) above.

   To qualify as a REIT, Public Storage cannot have at the end of any taxable
year any undistributed earnings and profits that are attributable to a non-REIT
taxable year. As a result of the 1995 merger with Public Storage Management,
the 1999 merger with Storage Trust Realty and mergers with other affiliated
REITs, Public Storage has succeeded to various tax attributes of those entities
and their predecessors, including any undistributed earnings and profits. We do
not believe that we have acquired any undistributed earnings and profits and we
believe that the REITs with which we have merged qualified as REITs at the time
of acquisition. However, neither these entities nor Public Storage has sought
an opinion of counsel or outside accountants to the effect that we did not
acquire any earnings and profits. There can be no assurance that the Internal
Revenue Service would not contend otherwise on a subsequent audit.
   If the Internal Revenue Service determined that we inherited undistributed
non-REIT earnings and profits and that we did not distribute the non-REIT
earnings and profits by the end of that taxable year, it appears that we could
avoid disqualification as a REIT by using "deficiency dividend" procedures to
distribute the non-REIT earnings and profits. The deficiency dividend
procedures would require us to make a distribution to shareholders, in addition
to the regularly required REIT distributions, within 90 days of the Internal
Revenue Service determination. In addition, we would have to pay to the
Internal Revenue Service interest on 50% of the non-REIT earnings and profits
that were not distributed prior to the end of the taxable year in which we
inherited the undistributed non-REIT earnings and profits. If, however, we were
considered to be a "successor" under the applicable treasury regulations to a
corporation that had failed to qualify as a REIT at the time of its merger with
Public Storage, we could fail to qualify as a REIT and could be prevented from
reelecting REIT status for up to four years after such failure to qualify.

   Qualified REIT Subsidiaries.  If a REIT owns a corporate subsidiary that is
a "qualified REIT subsidiary," the separate existence of that subsidiary will
be disregarded for federal income tax purposes. Generally, a qualified REIT
subsidiary is a corporation, other than a taxable REIT subsidiary (discussed
below), all of the capital stock of which is owned by the REIT. All assets,
liabilities and items of income, deduction and credit of

                                      26



the qualified REIT subsidiary will be treated as assets, liabilities and items
of income, deduction and credit of the REIT itself. A qualified REIT subsidiary
of Public Storage will not be subject to federal corporate income taxation,
although it may be subject to state and local taxation in some states.

   Taxable REIT Subsidiaries.  A "taxable REIT subsidiary" of Public Storage is
a corporation in which we directly or indirectly own stock and that elects,
together with Public Storage, to be treated as a taxable REIT subsidiary under
Section 856(l) of the Internal Revenue Code. In addition, if a taxable REIT
subsidiary of Public Storage owns, directly or indirectly, securities
representing 35% or more of the vote or value of a subsidiary corporation, that
subsidiary will also be treated as a taxable REIT subsidiary of Public Storage.
A taxable REIT subsidiary is a corporation subject to federal income tax, and
state and local income tax where applicable, as a regular "C" corporation.

   Generally, a taxable REIT subsidiary can perform some impermissible tenant
services (as described under "--Income Tests Applicable to REITs") without
causing us to receive impermissible tenant services income under the REIT
income tests. However, several provisions regarding the arrangements between a
REIT and its taxable REIT subsidiaries are intended to ensure that a taxable
REIT subsidiary will be subject to an appropriate level of federal income
taxation. For example, a taxable REIT subsidiary is limited in its ability to
deduct interest payments made to Public Storage. In addition, a REIT will be
obligated to pay a 100% penalty tax on some payments that it receives or on
certain expenses deducted by the taxable REIT subsidiary if the economic
arrangements between the REIT, the REIT's tenants and the taxable REIT
subsidiary are not comparable to similar arrangements among unrelated parties.

   Public Storage and PS Orangeco, Inc. (and its subsidiaries, including PS
Pickup & Delivery, Inc.), PSCC, Inc. and certain other corporations have made
elections for those corporations to be treated as taxable REIT subsidiaries of
Public Storage. These entities engage in businesses such as the portable
self-storage business, providing moving services, selling locks, boxes and
packing materials, renting trucks, among other activities. Upon completion of
our planned acquisition of the stock of PS Insurance Company, Ltd. (which
reinsures policies obtained by tenants covering losses to their goods while in
storage), we also expect to make the election for that corporation to be
treated as a taxable REIT subsidiary of Public Storage.

   Ownership of Partnership Interests by a REIT.  A REIT that is a partner in a
partnership will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to earn its proportionate share of the
partnership's income. The assets and gross income of the partnership retain the
same character in the hands of the REIT for purposes of the gross income and
asset tests applicable to REITs as described below. In the mergers with Public
Storage Management and Storage Trust Realty, the formation of PS Business
Parks, L.P., and in other transactions, we have acquired interests in various
partnerships that own and operate properties. Thus, our proportionate share of
the assets and items of income of Storage Trust Properties, L.P., PS Business
Parks, L.P. or other partnerships, including any such partnerships' shares of
assets and items of income of any subsidiaries that are partnerships or limited
liability companies, are treated as assets and items of income of Public
Storage for purposes of applying the REIT asset and income tests. 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.

   We believe that Storage Trust Properties, L.P., PS Business Parks, L.P. and
each of the partnerships and limited liability companies in which we own an
interest, directly or through another partnership or limited liability company,
will be treated as partnerships or disregarded for federal income tax purposes
and will not be taxable as corporations. If any of these entities were treated
as a corporation, it would be subject to an entity level tax on its income and
we could fail to meet the REIT income and asset tests. See "--Taxation of
Public Storage as a REIT--Income Tests Applicable to REITs" and "--Taxation of
Public Storage as a REIT--Asset Tests Applicable to REITs" below.

   Income Tests Applicable to REITs.  To qualify as a REIT, Public Storage must
satisfy two gross income tests. First, at least 75% of our gross income for
each taxable year, excluding gross income from prohibited

                                      27



transactions, must be derived directly or indirectly from investments relating
to real property or mortgages on real property, including "rents from real
property," gains on the disposition of real estate, dividends paid by another
REIT and interest on obligations secured by mortgages on real property or on
interests in real property, or from some types of temporary investments.
Second, at least 95% of our gross income for each taxable year, excluding gross
income from prohibited transactions, must be derived from any combination of
income qualifying under the 75% test and dividends, interest, some payments
under hedging instruments and gain from the sale or disposition of stock or
securities and some hedging instruments.

   Rents that we receive will qualify as rents from real property in satisfying
the gross income tests for a REIT 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. Second, rents received from a "related party tenant" will not qualify as
rents from real property in satisfying the gross income tests unless the tenant
is a taxable REIT subsidiary and at least 90% of the property is leased to
unrelated tenants and the rent paid by the taxable REIT subsidiary is
substantially comparable to the rent paid by the unrelated tenants for
comparable space. A tenant is a related party tenant if the REIT, or an actual
or constructive owner of 10% or more of the REIT, actually or constructively
owns 10% or more of the tenant. Third, if rent attributable to personal
property that is 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 the personal property will not qualify as rents from real
property.

   Generally, for rents to qualify as rents from real property for the purpose
of satisfying the gross income tests, we are only allowed directly to provide
services that are "usually or customarily rendered" in connection with the
rental of real property and not otherwise considered "rendered to the
occupant." Accordingly, we may not provide "impermissible services" to tenants
(except through a taxable REIT subsidiary, or through an independent contractor
that bears the expenses of providing the services and from whom we derive no
revenue) without giving rise to "impermissible tenant service income," which is
nonqualifying income for purposes of the income tests. For this purpose, the
amount that we would be deemed to have received for performing any
"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 impermissible
tenant service income exceeds 1% of our total income from a property, all of
the income from that property will fail to qualify as rents from real property.
If the total amount of impermissible tenant service income from a property does
not exceed 1% of our total income from the property, the services will not
"taint" the other income from the property (that is, they will not cause the
rent paid by tenants of that property to fail to qualify itself as rents from
real property), but the impermissible tenant service income will not qualify as
rents from real property.

   In light of these requirements, we do not intend to take any of the actions
listed below, unless we determine that the resulting nonqualifying income,
taken together with all other nonqualifying income that we earn in the taxable
year, will not jeopardize our status as a REIT:

      (1)  charge rent for any property that is based in whole or in part on
   the income or profits of any person (unless based on a fixed percentage or
   percentages of receipts or sales, as permitted and described above);

      (2)  rent any property to a related party tenant, including a taxable
   REIT subsidiary;

      (3) derive rental income attributable to personal property other than
   personal property leased in connection with the lease of real property, the
   amount of which is less than 15% of the total rent received under the lease;
   or

      (4) directly perform services considered to be noncustomary or rendered
   to the occupant of the property.

   In connection with our merger with Public Storage Management, Public Storage
and the various other owners of self-storage facilities and business parks for
which we performed management activities entered into

                                      28



an agreement with PSCC, Inc. under which PSCC provides the owners and Public
Storage 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
Public Storage 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 Public Storage under the
management agreements 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 Internal Revenue Service to the effect that the
reimbursements and other payments made to PSCC by the owners would not be
treated as our revenues for purposes of the 95% gross income test, and to the
effect that our income from self-storage facility rentals generally would
qualify as rent from real property for purposes of the REIT gross income tests.
We subsequently received a private letter ruling indicating that the truck
rental activities of an affiliated corporation (PS Orangeco, Inc., now a
taxable REIT subsidiary of Public Storage) would not adversely affect the
treatment of our income from self-storage facility rentals as rent from real
property for purposes of the REIT gross income tests.

   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 Public Storage and a subsidiary of PS Orangeco, Inc. 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 income. While we have earned and will continue to earn
some nonqualifying income from this and other sources, we anticipate that we
will be able to continue to satisfy both the 95% and 75% gross income tests.

   The ownership of certain 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 Internal
Revenue Service 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 when
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 Internal Revenue Service would not take a contrary position with respect to
Public Storage, 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).

   In addition, 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) but the Internal Revenue
Service 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, both of which
would adversely affect our ability to satisfy the 95% gross income test. In
determining our "capital interest" in the various partnerships, we estimate 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

                                      29



assurance, however, that the Internal Revenue Service 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.

   "Interest" income that depends in whole or in part on the income or profits
of any person generally will be nonqualifying income for purposes of the 75% or
95% gross income tests. However, interest based on a fixed percentage or
percentages of receipts or sales may still qualify under the gross income
tests. We do not expect to derive significant amounts of interest that would
fail to qualify under the 75% and 95% gross income tests.

   Our share of any dividends received from our corporate subsidiaries (and
from other corporations in which we own an interest) will qualify for purposes
of the 95% gross income test but not for purposes of the 75% gross income test.
We do not anticipate that we will receive sufficient dividends to cause us to
exceed the limit on nonqualifying income under the 75% gross income test.

   If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may still qualify as a REIT for that year if we are
entitled to relief under the Internal Revenue Code. The relief provisions
generally will be available if our failure to meet the tests is due to
reasonable cause and not due to willful neglect, we attach a schedule of the
sources of our income to our federal income tax return and any incorrect
information on the schedule is not due to fraud with intent to evade tax. It is
not possible, however, to state whether in all circumstances we would be
entitled to the benefit of these relief provisions. For example, if we fail to
satisfy the gross income tests because nonqualifying income that we
intentionally receive exceeds the limits on nonqualifying income, the Internal
Revenue Service could conclude that the failure to satisfy the tests was not
due to reasonable cause. If these relief provisions are inapplicable to a
particular set of circumstances involving Public Storage, we could fail to
qualify as a REIT. As discussed under "--Taxation of Public Storage as a
REIT--General" even if these relief provisions apply, a tax would be imposed
based on the amount of nonqualifying income.
   Any gain that we realize on the sale of any property held as inventory or
other property held primarily for sale to customers in the ordinary course of
business, including our share of this type of gain realized by a partnership in
which we hold an interest, will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. Under existing law, whether
property is held as inventory or primarily for sale to customers in the
ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances of each particular transaction. We intend to
hold our properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating
properties, and to make occasional sales of properties as are consistent with
our investment objectives. We cannot provide any assurance, however, that the
Internal Revenue Service might not contend that one or more of these sales are
subject to the 100% penalty tax.

   Asset Tests Applicable to REITs. At the close of each quarter of our taxable
year, we must satisfy four tests relating to the nature of our assets:

      (1)  at least 75% of the value of our total assets must be represented by
   real estate assets, cash, cash items and government securities. Our real
   estate assets include, for this purpose, our allocable share of real estate
   assets held by partnerships in which we have invested, as well as stock or
   debt instruments held for less than one year purchased with the proceeds of
   an offering of shares or long-term debt of Public Storage;

      (2)  not more than 25% of our total assets may be represented by
   securities other than those in the 75% asset class;

      (3)  except for equity investments in REITs, qualified REIT subsidiaries,
   or taxable REIT subsidiaries or other securities that qualify as "real
   estate assets" for purposes of the test described in clause (1):

          (a)  the value of any one issuer's securities that we own may not
       exceed 5% of the value of our total assets;

          (b)  we may not own more than 10% of any one issuer's outstanding
       voting securities; and

          (c)  we may not own more than 10% of the value of the outstanding
       securities of any one issuer; and

                                      30



      (4) not more than 20% of our total assets may be represented by
   securities of one or more taxable REIT subsidiaries.

   Securities for purposes of the asset tests may include debt securities.
However, debt of an issuer will not count as a security for purposes of the 10%
value test if the debt securities are "straight debt" as defined in Section
1361 of the Internal Revenue Code and (1) the issuer is an individual, (2) the
only securities of the issuer that the REIT holds are straight debt or (3) if
the issuer is a partnership, the REIT holds at least a 20% profits interest in
the partnership.

   Public Storage currently owns approximately 25% of the outstanding common
stock of PS Business Parks, Inc., which has elected to be taxed as a REIT for
federal income tax purposes (as well as a substantial portion of the
outstanding common units of limited partnership interest of PS Business Parks,
L.P., which may be exchangeable for shares of PS Business Parks, Inc.'s common
stock). As a REIT, PS Business Parks, Inc. is subject to the various REIT
qualification requirements. We believe that PS Business Parks, Inc. has been
organized and has operated in a manner to qualify for taxation as a REIT for
federal income tax purposes and will continue to be organized and operated in
this manner. If PS Business Parks, Inc. were to fail to qualify as a REIT, our
stock investment in PS Business Parks, Inc. would cease to be a qualifying real
estate asset for purposes of the 75% gross asset test and would become subject
to the 5% asset test, the 10% voting stock limitation, and the 10% value
limitation generally applicable to our ownership in corporations (other than
REITs, qualified REIT subsidiaries and taxable REIT subsidiaries). If PS
Business Parks, Inc. failed to qualify as a REIT, we would not meet the 10%
voting stock limitation and the 10% value limitation with respect to our
interest in PS Business Parks, Inc., and accordingly, Public Storage also would
fail to qualify as a REIT.

   We believe that the aggregate value of our taxable REIT subsidiaries does
not (and will not, after acquisition of PS Insurance Company, Ltd.) exceed 20%
of the aggregate value of our gross assets. As of each relevant testing date
prior to the election to treat each corporate subsidiary of Public Storage or
any other corporation in which we own an interest as a taxable REIT subsidiary,
which election first became available as of January 1, 2001, we believe we did
not own more than 10% of the voting securities of any such entity. In addition,
we believe that as of each relevant testing date prior to the election to treat
each corporate subsidiary of Public Storage or any other corporation in which
we own an interest as a taxable REIT subsidiary of Public Storage, our pro rata
share of the value of the securities, including debt, of any such corporation
or other issuer did not exceed 5% of the total value of our assets.

   With respect to each issuer in which we currently own an interest that does
not qualify as a REIT, a qualified REIT subsidiary or a taxable REIT
subsidiary, we believe that our pro rata share of the value of the securities,
including debt, of any such issuer does not exceed 5% of the total value of our
assets and that it complies with the 10% voting securities limitation and 10%
value limitation with respect to each such issuer. In this regard, however, we
cannot provide any assurance that the Internal Revenue Service might not
disagree with our determinations.

   After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT if we fail to satisfy the 25%, 20%, and 5% asset
tests and the 10% value limitation 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%, 20%, or 5% asset tests or the 10% value limitation 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 maintain compliance with the asset tests and
would attempt to take any available actions within 30 days after the close of
any quarter in an effort to cure any noncompliance with the 25%, 20%, or 5%
asset tests or 10% value limitation of which we become aware within that
period. If we failed to cure noncompliance with the asset tests within this
time period, we would cease to qualify as a REIT.

   Annual Distribution Requirements Applicable to REITs.  To qualify as a REIT,
we are required to distribute dividends, other than capital gain dividends, to
our shareholders each year in an amount at least equal

                                      31



to (1) the sum of (a) 90% (95% prior to 2001) of our REIT taxable income,
computed without regard to the dividends paid deduction and our net capital
gain, and (b) 90% (95% prior to 2001) of the net income, after tax, from
foreclosure property, minus (2) the sum of certain specified items of noncash
income. In addition, if we recognize any built-in gain, we are required under
the treasury regulations to distribute at least 90% of the built-in gain, after
tax, recognized on the disposition of the applicable asset. See "--Taxation of
Public Storage as a REIT--General" for a discussion of the possible recognition
of built-in gain. These distributions must be paid either in the taxable year
to which they relate, or in the following taxable year if declared before we
timely file our tax return for the prior year and if paid with or before the
first regular dividend payment date after the declaration is made.

   In years prior to 1990, we made distributions in excess of our REIT taxable
income. During 1990, we reduced the level of distributions to our shareholders.
As a result, distributions paid by Public Storage in 1990 were less than 95% of
our REIT taxable income for 1990. We satisfied the REIT distribution
requirements for 1990 through 2000 by attributing distributions in 1991 through
2001 to the prior year's taxable income, and we expect to satisfy the
distribution requirement for 2001 by attributing distributions in 2002 to our
2001 taxable income. We may be required to continue this pattern of making
distributions after the close of a taxable year that are attributed to the
prior year for this purpose, but shareholders will be treated for federal
income tax purposes as having received such distributions in the taxable years
in which they actually are 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 below, reliance on subsequent year distributions could cause us to be
subject to an excise tax, although we intend to comply with the 85% current
distribution requirement under the excise tax in an effort to avoid or minimize
any effect of that tax.

   We intend to make timely distributions sufficient to satisfy our annual
distribution requirements. Although we anticipate that our cash flow will
permit us to make those distributions, it is possible that, from time to time,
we may not have sufficient cash or other liquid assets to meet these
distribution requirements. In this event, we may find it necessary to arrange
for short-term, or possibly long-term, borrowings to fund required
distributions or to pay dividends in the form of taxable dividends of Public
Storage shares.

   Under some 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 to the government based upon the amount of any deduction taken for
deficiency dividends.

   To the extent that we do not distribute all of our net capital gain or
distribute at least 90%, but less than 100%, of our REIT taxable income, as
adjusted, we are subject to tax on these amounts at regular corporate tax rates.

   A REIT may elect to retain rather than distribute all or a portion of its
net capital gains and pay the tax on the gains. In that case, a REIT may elect
to have its shareholders include their proportionate share of the undistributed
net capital gains in income as long-term capital gains and receive a credit for
their share of the tax paid by the REIT. For purposes of the 4% excise tax
described below, any retained amounts would be treated as having been
distributed.

   As mentioned above, we would be subject to a 4% excise tax if we fail to
distribute during each calendar year at least the sum of:

      (1)  85% of our REIT ordinary income for the year;

      (2)  95% of our REIT capital gain net income for the year; and

      (3)  any undistributed taxable income from prior taxable years.

   This 4% excise tax applies to the excess of such required distribution over
the sum of amounts actually distributed and amounts retained for which federal
income tax was paid.

                                      32



   Record-Keeping Requirements.  We are required to comply with applicable
record-keeping requirements. Failure to comply could result in monetary fines.

   Failure of Public Storage to Qualify as a REIT.  If we fail to qualify for
taxation as a REIT in any taxable year, and if relief provisions do not apply,
we will be subject to tax, including any applicable alternative minimum tax, on
our taxable income at regular corporate rates. If we fail to qualify as a REIT,
we will not be required to make any distributions to shareholders and any
distributions that are made to shareholders will not be deductible by us. As a
result, our failure to qualify as a REIT would significantly reduce the cash
available for distributions by us to our shareholders. In addition, if we fail
to qualify as a REIT, all distributions to shareholders will be taxable as
ordinary income to the extent of our current and accumulated earnings and
profits, whether or not attributable to capital gains of Public Storage, and
corporate shareholders may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, we also would be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. There can be no assurance that we
would be entitled to any statutory relief.

Taxation of U.S. Shareholders

   As used in the remainder of this discussion, the term "U.S. shareholder"
means a beneficial owner of a Public Storage common share that is, for United
States federal income tax purposes:

      (1) a citizen or resident, as defined in Section 7701(b) of the Internal
   Revenue Code, of the United States;

      (2) a corporation or partnership, or other entity treated as a
   corporation or partnership for federal income tax purposes, created or
   organized under the laws of the United States, any state or the District of
   Columbia;

      (3) an estate the income of which is subject to federal income taxation
   regardless of its source; or

      (4) in general, a trust subject to the primary supervision of a United
   States court and the control of one or more United States persons.

   Generally, in the case of a partnership that holds Public Storage common
shares, any partner that would be a U.S. shareholder if it held the Public
Storage common shares directly is also a U.S. shareholder. A "non-U.S.
shareholder" is a holder, including any partner in a partnership that holds
Public Storage common shares, that is not a U.S. shareholder.

   Distributions by Public Storage.  So long as we qualify as a REIT,
distributions to U.S. shareholders out of our current or accumulated earnings
and profits that are not designated as capital gain dividends will be taxable
as ordinary income and will not be eligible for the dividends received
deduction generally available for corporations. Distributions in excess of our
current and accumulated earnings and profits will not be taxable to a U.S.
shareholder to the extent that the distributions do not exceed the adjusted tax
basis of the shareholder's shares. Rather, the distributions will reduce the
adjusted tax basis of the shares. Distributions that exceed the U.S.
shareholder's adjusted basis in our shares will be taxable as capital gains. If
we declare a dividend in October, November, or December of any year with a
record date in one of these months and pay the dividend on or before January 31
of the following year, we will be treated as having paid the dividend, and the
shareholder will be treated as having received the dividend, on December 31 of
the year in which the dividend was declared.

   We may elect to designate distributions of our net capital gain as "capital
gain dividends." Capital gain dividends are taxed to shareholders as gain from
the sale or exchange of a capital asset held for more than one year, without
regard to how long the U.S. shareholder has held our shares. Designations that
we make only will 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. If we
designate any portion of a dividend as a capital gain dividend, a U.S.
shareholder will receive an Internal Revenue Service

                                      33



Form 1099-DIV indicating the amount that will be taxable to the shareholder as
capital gain. Corporate shareholders, however, may be required to treat up to
20% of capital gain dividends as ordinary income.

   Instead of paying capital gain dividends, we may designate all or part of
our net capital gain as "undistributed capital gain." We will be subject to tax
at regular corporate rates on any undistributed capital gain. A U.S.
shareholder:

      (1) will include in its income as long-term capital gains its
   proportionate share of such undistributed capital gains and

      (2) will be deemed to have paid its proportionate share of the tax paid
   by Public Storage on such undistributed capital gains and receive a credit
   or refund to the extent that the tax we paid exceeds the U.S. shareholder's
   tax liability on the undistributed capital gain.

   A U.S. 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 tax it is deemed to have paid. Our earnings and profits will be
adjusted appropriately.

   We will classify portions of any designated capital gain dividend or
undistributed capital gain as either:

      (1) a 20% rate gain distribution, which would be taxable to non-corporate
   U.S. shareholders at a maximum rate of 20%; or

      (2) an "unrecaptured Section 1250 gain" distribution, which would be
   taxable to non-corporate U.S. shareholders at a maximum rate of 25%.

   We must determine the maximum amounts that we may designate as 20% and 25%
rate capital gain dividends by performing the computation required by the
Internal Revenue Code as if we were an individual whose ordinary income were
subject to a marginal tax rate of at least 28%.

   Distributions that we make and gain arising from the sale or exchange by a
U.S. shareholder of our shares will not be treated as passive activity income,
and as a result, U.S. shareholders generally will not be able to apply any
"passive losses" against this income or gain. In addition, taxable
distributions from Public Storage generally will be treated as investment
income for purposes of the investment interest limitations. A U.S. shareholder
may elect to treat capital gain dividends and capital gains from the
disposition of shares as investment income for purposes of the investment
interest limitation, in which case the applicable capital gains will be taxed
at ordinary income rates. We will notify shareholders regarding the portions of
distributions for each year that constitute ordinary income, return of capital,
capital gain or represent tax preference items to be taken into account for
purposes of computing the alternative minimum tax liability of the
shareholders. U.S. shareholders may not include in their individual income tax
returns any of our net operating losses or capital losses. Our operating or
capital losses would be carried over by us for potential offset against future
income, subject to applicable limitations.

   Sales of Shares.  Upon any taxable sale or other disposition of shares, a
U.S. shareholder will recognize gain or loss for federal income tax purposes in
an amount equal to the difference between:

      (1) the amount of cash and the fair market value of any property received
   on the sale or other disposition; and

      (2) the holder's adjusted tax basis in the shares for tax purposes.

   This gain or loss will be a capital gain or loss. The applicable tax rate
will depend on the shareholder's holding period for the asset (generally, if an
asset has been held for more than one year it will produce long-term capital
gain) and the shareholder's tax bracket. The Internal Revenue Service has the
authority to prescribe, but has not yet prescribed, regulations that would
apply a capital gain tax rate of 25% (which is generally higher than the
long-term capital gain tax rates for noncorporate shareholders) to a portion of
capital gain realized by a

                                      34



noncorporate shareholder on the sale of REIT shares that would correspond to
the REIT's "unrecaptured Section 1250 gain." Shareholders are urged to consult
with their tax advisors with respect to their capital gain tax liability. A
corporate U.S. shareholder will be subject to tax at a maximum rate of 35% on
capital gain from the sale of Public Storage shares held for more than 12
months. In general, any loss recognized by a U.S. shareholder upon the sale or
other disposition of shares that have been held for six months or less, after
applying the holding period rules, will be treated as a long-term capital loss,
to the extent of distributions received by the U.S. shareholder from us that
were required to be treated as long-term capital gains.

Taxation of Tax-Exempt Shareholders

   Provided that a tax-exempt shareholder has not held its common shares as
"debt financed property" within the meaning of the Internal Revenue Code,
distributions from Public Storage will not be unrelated business taxable
income, referred to as UBTI, to a tax-exempt shareholder. Similarly, income
from the sale of shares will not constitute UBTI unless the tax-exempt
shareholder has held its shares as debt financed property within the meaning of
the Internal Revenue Code or has used the shares in a trade or business.

   However, for tax-exempt shareholders that are social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts and
qualified group legal services plans exempt from federal income taxation under
Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in Public Storage will constitute UBTI
unless the organization properly sets aside or reserves such amounts for
purposes specified in the Internal Revenue Code. These tax-exempt shareholders
should consult their tax advisors concerning these "set aside" and reserve
requirements.

   Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" are treated as UBTI if received by any trust which is
described in Section 401(a) of the Internal Revenue Code, is tax-exempt under
Section 501(a) of the Internal Revenue Code, and holds more than 10%, by value,
of the interests in the REIT. Tax-exempt pension funds that are described in
Section 401(a) of the Internal Revenue Code are referred to below as "pension
trusts."

   A REIT is a pension held REIT if it meets the following two tests:

      (1) it qualified as a REIT only by reason of Section 856(h)(3) of the
   Internal Revenue Code, which provides that stock owned by pension trusts
   will be treated, for purposes of determining if the REIT is closely held, as
   owned by the beneficiaries of the trust rather than by the trust itself; and

      (2) either (a) at least one pension trust holds more than 25% of the
   value of the REIT's stock, or (b) a group of pension trusts each
   individually holding more than 10% of the value of the REIT's shares,
   collectively owns more than 50% of the value of the REIT's shares.

   The percentage of any REIT dividend treated as UBTI is equal to the ratio of
the UBTI earned by the REIT, treating the REIT as if it were a pension trust
and therefore subject to tax on UBTI, to the total gross income of the REIT. An
exception applies where the percentage is less than 5% for any year. The
provisions requiring pension trusts to treat a portion of REIT distributions as
UBTI will not apply if the REIT is able to satisfy the "not closely held
requirement" without relying upon the "look-through" exception for pension
trusts. Based on both our current share ownership and the limitations on
transfer and ownership of shares contained in our organizational documents, we
do not expect to be classified as a pension held REIT.

U.S. Taxation of Non-U.S. Shareholders

   Distributions by Public Storage.  Our distributions to a non-U.S.
shareholder that are neither attributable to gain from sales or exchanges by us
of "U.S. real property interests" nor designated by us as capital gains
dividends will be treated as dividends of ordinary income to the extent that
they are made out of our current or accumulated earnings and profits. These
distributions ordinarily will be subject to withholding of U.S. federal

                                      35



income tax on a gross basis at a rate of 30%, or a lower rate as permitted
under an applicable income tax treaty, unless the dividends are treated as
effectively connected with the conduct by the non-U.S. shareholder of a U.S.
trade or business. Under some treaties, however, lower withholding rates
generally applicable to dividends do not apply to dividends from REITs.
Applicable certification and disclosure requirements must be satisfied to be
exempt from withholding under the effectively connected income exemption.
Dividends that are effectively connected with a trade or business will be
subject to tax on a net basis, that is, after allowance for deductions, at
graduated rates, in the same manner as U.S. shareholders are taxed with respect
to these dividends, and are generally not subject to withholding. Any dividends
received by a corporate non-U.S. shareholder that is engaged in a U.S. trade or
business also may be subject to an additional branch profits tax at a 30% rate,
or lower applicable treaty rate.

   Distributions in excess of current and accumulated earnings and profits that
exceed the non-U.S. shareholder's basis in our Public Storage common shares
will be taxable to a non-U.S. shareholder as gain from the sale of common
shares, which is discussed below. Distributions in excess of current or
accumulated earnings and profits of Public Storage that do not exceed the
adjusted basis of the non-U.S. shareholder in our common shares will reduce the
non-U.S. shareholder's adjusted basis in our common shares and will not be
subject to U.S. federal income tax, but will be subject to U.S. withholding tax
as described below.

   We expect to withhold U.S. income tax at the rate of 30% on any dividend
distributions (including distributions that later may be determined to have
been in excess of current and accumulated earnings and profits) made to a
non-U.S. shareholder unless:

      (1) a lower treaty rate applies and the non-U.S. shareholder files an
   Internal Revenue Service Form W-8BEN evidencing eligibility for that reduced
   treaty rate with Public Storage; or

      (2) the non-U.S. shareholder files an Internal Revenue Service Form
   W-8ECI with us claiming that the distribution is effectively connected
   income.

   We may be required to withhold at least 10% of any distribution in excess of
our current and accumulated earnings and profits, even if a lower treaty rate
applies and the non-U.S. shareholder is not liable for tax on the receipt of
that distribution. However, a non-U.S. shareholder may seek a refund of these
amounts from the Internal Revenue Service if the non-U.S. shareholder's U.S.
tax liability with respect to the distribution is less than the amount withheld.

   Distributions to a non-U.S. shareholder that we designate at the time of the
distribution as capital gain dividends, other than those arising from the
disposition of a U.S. real property interest, generally should not be subject
to U.S. federal income taxation unless:

      (1) the investment in the common shares is effectively connected with the
   non-U.S. shareholder's U.S. trade or business, in which case the non-U.S.
   shareholder will be subject to the same treatment as U.S. shareholders on
   any gain, except that a shareholder that is a foreign corporation also may
   be subject to the 30% branch profits tax, as discussed above, or

      (2) the non-U.S. shareholder is a nonresident alien individual who is
   present in the U.S. for 183 days or more during the taxable year and has a
   "tax home" in the U.S., 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, which is referred to
as "FIRPTA," distributions to a non-U.S. shareholder that are attributable to
gain from sales or exchanges by Public Storage of U.S. real property interests,
whether or not designated as a capital gain dividend, will cause the non-U.S.
shareholder to be treated as recognizing gain that is income effectively
connected with a U.S. trade or business. Non-U.S. shareholders will be taxed on
this gain at the same rates applicable to U.S. shareholders, subject to a
special alternative minimum tax in the case of nonresident alien individuals.
Also, this gain may be subject to a 30% branch profits tax in the hands of a
non-U.S. shareholder that is a corporation.

                                      36



   We will be required to withhold and remit to the Internal Revenue Service
35% of any distributions to foreign shareholders that are designated as capital
gain dividends, or, if greater, 35% of a distribution that could have been
designated as a capital gain dividend. Distributions can be designated as
capital gains to the extent of our net capital gain for the taxable year of the
distribution. The amount withheld is creditable against the non-U.S.
shareholder's United States federal income tax liability.

   Although the law is not clear on the matter, it appears that amounts we
designate as undistributed capital gains in respect of the common shares held
by U.S. shareholders generally should be treated for non-U.S. shareholders in
the same manner as actual distributions by Public Storage 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 from reporting the capital gain their proportionate share of the tax
paid by Public Storage on the undistributed capital gains, and to receive from
the Internal Revenue Service a refund to the extent their proportionate share
of this tax paid by Public Storage were to exceed their actual United States
federal income tax liability.

   Sale of Common Shares.  Gain recognized by a non-U.S. shareholder upon the
sale or exchange of our common shares generally would not be subject to United
States taxation unless:

      (1) the investment in the Public Storage common shares is effectively
   connected with the non-U.S. shareholder's U.S. trade or business, in which
   case the non-U.S. shareholder will be subject to the same treatment as
   domestic shareholders as to any gain;

      (2) the non-U.S. shareholder is a nonresident alien individual who is
   present in the United States for 183 days or more during the taxable year
   and has a tax home in the United States, in which case the nonresident alien
   individual will be subject to a 30% tax on the individual's net capital
   gains for the taxable year; or

      (3) the Public Storage common shares constitute a U.S. real property
   interest within the meaning of FIRPTA, as described below.

   The Public Storage common shares will not constitute a U.S. real property
interest if we are a domestically controlled REIT. We will be a
domestically-controlled REIT if, at all times during a specified testing
period, less than 50% in value of our stock is held directly or indirectly by
non-U.S. shareholders. We believe that we currently are a domestically
controlled REIT and, therefore, that the sale of our common shares would not be
subject to taxation under FIRPTA. Because our shares are publicly traded,
however, we cannot guarantee that we are or will continue to be a domestically
controlled REIT. Even if we do not qualify as a domestically controlled REIT at
the time a non-U.S. shareholder sells our common shares, gain arising from the
sale still would not be subject to FIRPTA tax if:

      (1) the class or series of shares sold is considered regularly traded
   under applicable treasury regulations on an established securities market,
   such as the NYSE; and

      (2) the selling non-U.S. shareholder owned, actually or constructively,
   5% or less in 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 our common shares were subject to
taxation under FIRPTA, the non-U.S. shareholder would be subject to regular
U.S. income tax as to any gain in the same manner as a taxable U.S.
shareholder, subject to any applicable alternative minimum tax and special
alternative minimum tax in the case of nonresident alien individuals.

Information Reporting and Backup Withholding Tax Applicable to Shareholders

   U.S. Shareholders.  In general, information reporting requirements will
apply to payments of distributions on our common shares and payments of the
proceeds of the sale of our common shares to some shareholders,

                                      37



unless an exception applies. Further, the payer will be required to withhold
backup withholding tax at the rate of 30.5% (the rate is subject to reduction
through 2006) if:

      (1) the payee fails to furnish a taxpayer identification number, or TIN,
   to the payer or to establish an exemption from backup withholding;

      (2) the Internal Revenue Service notifies the payer that the TIN
   furnished by the payee is incorrect;

      (3) there has been a notified payee under-reporting of interest,
   dividends or original issue discount described in Section 3406(c) of the
   Internal Revenue Code; or

      (4) there has been a failure of the payee to certify under the penalty of
   perjury that the payee is not subject to backup withholding under the
   Internal Revenue Code.

   Some shareholders, including corporations, will be exempt from backup
withholding. Any amounts withheld under the backup withholding rules from a
payment to a shareholder will be allowed as a credit against the shareholder's
United States federal income tax and may entitle the shareholder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.

   Non-U.S. Shareholders.  Generally, information reporting will apply to
payments of distributions on our common shares, and backup withholding at a
rate of 30.5% (the rate is subject to reduction through 2006) may apply, unless
the payee certifies that it is not a U.S. person or otherwise establishes an
exemption.

   The payment of the proceeds from the disposition of our common shares to or
through the U.S. office of a U.S. or foreign broker will be subject to
information reporting and, possibly, backup withholding unless the non-U.S.
shareholder certifies as to its non-U.S. status or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
shareholder is a U.S. person or that the conditions of any other exemption are
not, in fact, satisfied. The proceeds of the disposition by a non-U.S.
shareholder of our common shares to or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding.
However, if the broker is a U.S. person, a controlled foreign corporation for
U.S. tax purposes, or a foreign person 50% or more of whose gross income from
all sources for specified periods is from activities that are effectively
connected with a U.S. trade or business, information reporting generally will
apply unless the broker has documentary evidence as to the non-U.S.
shareholder's foreign status and has no actual knowledge to the contrary.

   Applicable treasury regulations provide presumptions regarding the status of
shareholders when payments to the shareholders cannot be reliably associated
with appropriate documentation provided to the payer. Under these treasury
regulations, some shareholders are required to have provided new certifications
as to payments made after December 31, 2000. Because the application of the
these treasury regulations varies depending on the shareholder's particular
circumstances, you are urged to consult your tax advisor regarding the
information reporting requirements applicable to you.

Other Tax Consequences for Public Storage and Our Shareholders

   Public Storage and our shareholders are subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of Public
Storage and our shareholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective shareholders of Public
Storage should consult their own tax advisors regarding the effect of state and
local tax laws on an investment in us.

   A portion of the cash to be used by Public Storage to fund distributions may
come from dividends paid by our taxable REIT subsidiaries. The taxable REIT
subsidiaries are subject to federal and state income tax at the full applicable
corporate rates. In addition, a taxable REIT subsidiary may be limited in its
ability to deduct interest payments made to Public Storage. To the extent that
we and our taxable REIT subsidiaries are required to pay federal, state or
local taxes, we will have less cash available for distribution to shareholders.

                                      38



                             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;

      (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

                                      39



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.

                                LEGAL OPINIONS

   David Goldberg, our vice president and senior 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 117,881 shares of common
stock, 3,396 depositary shares representing interests in equity stock and 600
shares of preferred stock, and has options to acquire an additional
289,600 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, 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.

                                      40



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                               6,000,000 SHARES

                             PUBLIC STORAGE, INC.

                               DEPOSITARY SHARES
                    EACH REPRESENTING 1/1,000 OF A SHARE OF
                   7.625% CUMULATIVE PREFERRED STOCK, SERIES U


[LOGO] Public Storage

                                 -------------
                             PROSPECTUS SUPPLEMENT
                               February 13, 2002

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

                             SALOMON SMITH BARNEY
                          CREDIT SUISSE FIRST BOSTON
                           DEUTSCHE BANC ALEX. BROWN
                           A.G. EDWARDS & SONS, INC.
                                MORGAN STANLEY
                              WACHOVIA SECURITIES
                              CIBC WORLD MARKETS
                                 RAYMOND JAMES


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