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Public Storage (PSA) Grows Portfolio With $1.8B ezStorage Buyout

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Public Storage PSA recently announced the expansion of its portfolio with the buyout of ezStorage for $1.8 billion. This transaction, which the company plans to fund with unsecured debt, is expected to close in May and will be immediately accretive to funds from operations (FFO).

The acquisition brings in portfolio of 48 properties, encompassing 4.2 million net rentable square feet, to Public Storage’s platform. The move is a strategic fit as the properties are located in regions with solid demand drivers and high barriers for new property development across Washington DC, Virginia, and Maryland.

Also, there are scopes for expansion. For one of these properties, that is under construction, the company’s development team will assume responsibility. Also, expansion of eight additional properties will take place. Such efforts will lead to a 10% increase in square footage through 2023.

According to Joe Russell, Public Storage’s chief executive officer, “The acquisition is a direct reflection of Public Storage’s unique positioning for growth through acquisitions, development, redevelopment, and third-party management.”

Markedly, Public Storage has fortified its presence in key cities on acquisitions and expansion efforts. Particularly, this self-storage REIT has enhanced its portfolio by adding roughly 21 million net rentable square feet, or 13%, through $4.1 billion of acquisitions, development, and redevelopment, including properties under contract.

The company has emerged as one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry, with presence across all major metropolitan markets of the nation. As such, apart from benefiting from brand recognition, it is likely to gain from economies of scale.

It also has one of the strongest balance sheets in the sector, with adequate liquidity to withstand any market turbulence, and bank on expansion opportunities through acquisitions and developments.

Apart from this, the self-storage asset category is basically need-based and recession-resilient in nature. Additionally, the self-storage industry continues to benefit from favorable demographic changes. Specifically, migration and downsizing trends have escalated the needs of consumers to rent spaces at storage facilities to park their possessions.

Further, demand for self-storage spaces has shot up amid the flexible working environment as well as improving housing market, while move-outs remain low amid the health crisis, resulting in improved year-over-year occupancy trends and increased average length of stay. This supports revenue growth owing to more long-term tenants becoming eligible for rate hikes, and a lesser need to replace vacating tenants with new tenants that lowers promotional expenses and increase its pricing leverage.

Shares of this Zacks Rank #3 (Hold) company have outperformed its industry in three months’ time. The company’s shares have rallied 20.6%, while the industry has gained 11%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Crown Castle International Corp’s CCI Zacks Consensus Estimate for second-quarter 2021 FFO per share has moved marginally north to $1.65 over the past month. The company currently carries a Zacks Rank of 2 (Buy).

Extra Space Storage’s EXR Zacks Consensus Estimate for first-quarter 2021 FFO per share moved 8.8% north to $1.48 in two months’ time. The stock currently carries a Zacks Rank of 2.

Global Net Lease, Inc. GNL has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised 4% upward to $2.10 in the past two months.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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