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Public Storage Q4 FFO Beats Estimates

Zacks Equity Research

The leading real estate investment trust (:REIT) operating self-storage facilities - Public Storage (PSA) - reported core FFO (funds from operations) of $2.08 per share, beating the Zacks Consensus Estimate of $2.02 per share by 3.0% and the prior-year quarter core FFO of $1.86 per share by 11.8%.

Results were aided by improved property operations leading to a surge in net operating income and the acquisition of 145 self-storage facilities since Jan 2012.

After taking into account the impact of a number of non-core items, reported FFO came in at $2.13 per share, representing an uptick of 14.5% from the year-ago figure of $1.86 per share.

During the reported quarter, Public Storage recorded a 9.3% year-over-year increase in total revenue to $513.5 million. The revenue figure marginally exceeded the Zacks Consensus Estimate of $512 million.

For full-year 2013, Public Storage’s core FFO per share came in at $7.44 on revenues of nearly $2.0 billion. This was higher than the prior-year core FFO per share of $6.68 on revenues of $1.8 billion.

Quarter in Detail

Same-store revenues increased 5.4% year over year to $432.5 million during the quarter, while net operating income (:NOI) climbed 8.0% to $332.3 million. The increase in same-store revenues was primarily due to a 4.2% rise in realized annual rent per occupied square foot to $14.41. Weighted average square foot occupancy in the same-store portfolio also increased 40 basis points (bps) to 91.8% as of Dec 31, 2013 from 91.4% as of Dec 31, 2012.

On the other hand, during the reported quarter, same-store revenues in Shurgard Europe remained flat at $49.3 million. Same-store NOI for Shurgard Europe fell 2.4% from the prior-year quarter to $29.6 million. This was due to a fall in realized annual rent per occupied square foot (down 1.2% to $27.04), partly offset by a rise in weighted average square foot occupancy in the same-store portfolio (up 80 bps to 82.8%).

Acquisitions and Expansion

During fourth-quarter 2013, Public Storage acquired 89 storage facilities (spanning 5.6 million net rentable square feet) for $765 million. These facilities are positioned in California,  Colorado,  Florida,  Georgia,  North  Carolina,  South  Carolina,  Texas,  and  Virginia. This leads the total tally of acquisitions for 2013 to 121 facilities (8 million net rentable square feet) for $1.16 billion.

Public Storage also completed one new development facility for a cost of around $17 million. This facility added 105,000 net rentable square feet of space to the company’s portfolio.

As of Dec 31, 2013, Public Storage had development and expansion projects in its pipeline worth an estimated cost of $196 million ($52.3 million already incurred through the end of the fourth quarter). These projects would add approximately 1.8 million net rentable square feet of storage space.


Public Storage exited the year with around $19.2 million of cash and cash equivalents, up from $17.2 million at year-end 2012.


Concurrent with its earnings release, Public Storage announced a quarterly dividend of $1.40 per share. The dividend will be paid on Mar 31, 2014 to shareholders of record as of Mar 14.

In Conclusion

We are encouraged with the better-than-expected results at Public Storage. The company’s acquisition initiatives helped it carve a niche in the U.S and the European market. Furthermore, the ‘Public Storage’ brand is widely recognized in the self-storage industry.

It also has one of the strongest balance sheets in the sector with adequate liquidity and a major part of its portfolio comprises unencumbered assets. Backed by this, we believe the company is well poised to maintain its growth curve going forward.

Public Storage also owns a 42% common equity interest in PS Business Parks Inc. (PSB), which owns and operates commercial space, primarily flex, multi-tenant office and industrial space.

Public Storage currently has a Zacks Rank #2 (Buy). Investors interested in the REIT industry may consider stocks like Cyrusone Inc.(CONE) and Sovran Self Storage Inc. (SSS). Both these stocks carry the same rank as Public Storage.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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