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Public Storage’s PSA third-quarter 2018 core funds from operations (FFO) per share of $2.70 improved 3.4% from the prior-year quarter figure of $2.61. The reported figure also surpassed the Zacks Consensus Estimate of $2.68.
Results highlight improvement in net operating income (NOI) from same-store and non-same store facilities. Higher realized annual rent per occupied square foot supported the company’s same-store performance. Additionally, Public Storage benefited from its expansion efforts in the reported quarter.
Quarterly revenues of $706.4 million also climbed 2.9% from the prior-year quarter. The figure also exceeded the Zacks Consensus Estimate of $704.5 million.
Behind the Headlines
Same-store revenues advanced 1.2% year over year to $574.5 million during the third quarter, while the company’s NOI inched up 0.6% to $422.3 million. The upside in same-store revenues was primarily driven by a 1.9% rise in realized annual rent per occupied square foot to $17.83. Nonetheless, the weighted-average square foot occupancy of 94.0% contracted 60 basis points year over year.
In addition, the company’s NOI from non-same store facilities grew on the back of the 153 self-storage facilities acquired and developed since January 2016.
During the Sep-end quarter, Public Storage bought 11 self-storage facilities, comprising 0.7 million net rentable square feet of area, for $73.8 million. Following Sep 30, 2018, the company acquired or was under contract to acquire nine self-storage facilities, spanning 0.6 million net rentable square feet of space, for $79.7 million.
Finally, as of Sep 30, 2018, the company had several facilities in development (1.6 million net rentable square feet), with an estimated cost of $251 million, as well as expansion projects (3.8 million net rentable square feet) worth roughly $346 million. Public Storage estimates to incur the remaining $343 million of development costs related to these projects mainly over the next 18 months.
Public Storage exited third-quarter 2018 with around $432.5 million of cash and cash equivalents, slightly down from $433.4 million recorded at the end of the previous year.
On Oct 24, Public Storage’s board of trustees announced a regular quarterly dividend of $2.00 per share. The amount will be paid on Dec 27, to shareholders of record as of Dec 12, 2018.
Shurgard Europe Update
On Oct 15, Shurgard Europe completed an initial public offering. Its shares started trading on Euronext Brussels under the “SHUR” symbol.
As a result of this offering, Public Storage’s equity interest, consisting of a direct and indirect pro-rata ownership interest in 31.3 million shares, shrunk from 49% to 36.6% (35.2% assuming exercise of the “green shoe”). Therefore, even with no share sell off, the company will record a gain on disposition in the current quarter, which will be as if the company had sold a proportionate share of its investment in Shurgard Europe.
Additionally, on Jul 13, 2018, the company received a cash distribution of $145.4 million from Shurgard Europe.
Public Storage is a recognized and established name in the self-storage industry in the United States. Furthermore, a solid balance sheet has enabled the company to pay sustainable dividends. Also, it is benefiting from robust industry fundamentals and favorable demographics in its markets. Amid these, the company’s acquisition and expansion efforts look promising.
Nevertheless, supply has been rising in a number of its markets. This limits the company’s power to raise rents and turn on more discounting. Additionally, rate hike has added to its woes.
Public Storage currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Public Storage Price, Consensus and EPS Surprise
Public Storage Price, Consensus and EPS Surprise | Public Storage Quote
We now look forward to the earnings releases of other REITs like Host Hotels & Resorts, Inc. HST, Equinix, Inc. EQIX and Apartment Investment and Management Company AIV, which are slated to report their quarterly numbers on Nov 2.
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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