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Public Storage's FFO Exceeds Est

Zacks Equity Research

Public Storage (PSA), a leading real estate investment trust (:REIT) operating self-storage facilities, reported core FFO (funds from operations) of $1.65 per share, 3 cents ahead of the Zacks Consensus Estimate of $1.62 per share and 14.6% ahead of the prior-year quarter core FFO of $1.44 per share. The increase in FFO per share was primarily due to improved property operations resulting in a surge in net operating income.

After taking into account the impact of a number of non-core items, reported FFO came in at $1.57 per share, representing an uptick of 16.3% from the year ago figure of $1.35 per share.

During the reported quarter, Public Storage recorded a 7.1% year-over-year increase in total revenue to $439.7 million. Yet, the revenue figure narrowly missed the Zacks Consensus Estimate of $445 million.

Quarter in Detail

Same-store revenues increased 5.4% year over year to $409.6 million during the quarter, while net operating income (:NOI) climbed 9.5% to $278.2 million. The increase in same-store revenues was primarily due to a 3.7% rise in realized annual rent per occupied square foot to $13.79. Occupancy in the same-store portfolio also increased 160 basis points (bps) to 92.4% at quarter-end from 90.8% in the prior-year period.

During the reported quarter, same-store revenues in Shurgard Europe decreased 2.0% year over year to $47.0 million. Same-store NOI for Shurgard Europe fell 0.9% from the prior-year quarter to $26.9 million. While the company experienced a 2.1% year-over- year increase in realized annual rent per occupied square foot to $26.57, it was offset by a 370 bps year-over-year decline in occupancy level to 80.0% at the end of the first quarter of 2013.


During first quarter 2013, Public Storage acquired 2 self-storage facilities for about $14 million in cash. The properties are located in Arizona and Georgia and comprise 149,000 net rentable square feet of self-storage space.

Furthermore, Public Storage is under a contract to purchase a facility in Arizona for around $8 million in cash. This facility has 80,000 net rentable square feet of self-storage space.


At the end of the first quarter of 2013, Public Storage had $398.3 million of cash and cash equivalents, compared with $17.2 million at year-end 2012.

During the first quarter, the company generated gross proceeds of $500 million through issuance of 5.20% Series W Preferred Shares. Moreover, it reaped in $225 million as gross proceeds by issuing 5.20% Series X Preferred Shares.


Concurrent with its earnings release, Public Storage announced a quarterly dividend of $1.25 per common share. The dividend will be paid on Jun 27, 2013 to shareholders of record as of Jun 12, 2013. Notably, the company had  hiked its quarterly dividend rate by 14% in the prior quarter.

In Conclusion

We are encouraged by the better-than-expected results at Public Storage. We believe that the company is well poised to maintain its growth curve backed by its robust presence in all the major markets in the U.S.

It is the leading owner and operator of storage facilities in the U.S. and has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that has a considerable presence in the European markets.

It also owns a 41% 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). A number of other REITs that are also performing well and deserve a look include Duke Realty Corporation (DRE) and Host Hotels & Resorts Inc. (HST), both carrying a Zacks Rank #2.

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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