Public Storage (NYSE:PSA) announced today operating results for
the quarter ended March 31, 2019.
Operating Results for the Three Months
Ended March 31, 2019
For the three months ended March 31, 2019, net income allocable
to our common shareholders was $301.7 million or $1.73 per diluted
common share, compared to $287.8 million or $1.65 per diluted
common share in 2018 representing an increase of $13.9 million or
$0.08 per diluted common share. The increase is due primarily to
(i) a $7.4 million increase in self-storage net operating income
(described below), (ii) a $19.6 million increase due to the impact
of foreign currency exchange gains and losses associated with our
euro denominated debt and (iii) a reduction in general and
administrative expense attributable primarily to $7.8 million in
incremental share-based compensation expense in the three months
ended March 31, 2018 for the planned retirement of our former CEO
and CFO. These increases were offset partially by (iv) our $10.9
million equity share of gains on sale of real estate recorded by PS
Business Parks, Inc. in 2018 and (v) an $8.5 million allocation to
our preferred shareholders associated with our preferred share
redemption activities.
The $7.4 million increase in self-storage net operating income
is a result of a $2.3 million increase in our Same Store Facilities
(as defined below) and a $5.1 million increase in our Non Same
Store Facilities (as defined below). Revenues for the Same Store
Facilities increased 1.5% or $8.7 million in the three months ended
March 31, 2019 as compared to 2018, due primarily to higher
realized annual rent per occupied square foot. Cost of operations
for the Same Store Facilities increased by 3.9% or $6.3 million in
the three months ended March 31, 2019 as compared to 2018, due
primarily to increased property taxes and higher marketing
expenses. The increase in net operating income of $5.1 million for
the Non Same Store Facilities is due primarily to the impact of
facilities acquired in 2018 and 2019, and the fill up of recently
developed and expanded facilities.
Funds from Operations
For the three months ended March 31, 2019, funds from operations
(“FFO”) was $2.52 per diluted common share, as compared to $2.37 in
2018, representing an increase of 6.3%. FFO is a non-GAAP measure
defined by the National Association of Real Estate Investment
Trusts and generally represents net income before depreciation and
amortization expense, gains and losses and impairment charges with
respect to real estate assets. A reconciliation of GAAP diluted net
income per share to FFO per share, and additional descriptive
information regarding this non-GAAP measure, is attached.
We also present “Core FFO per share,” a non-GAAP measure that
represents FFO per share excluding the impact of (i) foreign
currency exchange gains and losses, (ii) EITF D-42 charges related
to the redemption of preferred securities, (iii) accelerations of
accruals due to the retirement of our former CEO and CFO and (iv)
certain other non-cash and/or nonrecurring income or expense items.
We review Core FFO per share to evaluate our ongoing operating
performance, and we believe it is used by investors and REIT
analysts in a similar manner. However, Core FFO per share is not a
substitute for net income per share. Because other REITs may not
compute Core FFO per share in the same manner as we do, may not use
the same terminology or may not present such a measure, Core FFO
per share may not be comparable among REITs.
The following table reconciles from FFO per share to Core FFO
per share (unaudited):
Three Months Ended March
31, Percentage 2019 2018 Change FFO per share $ 2.52 $ 2.37
6.3 % Eliminate the per share impact of items excluded from Core
FFO, including our equity share from investments: Foreign currency
exchange (gain) loss (0.04 ) 0.07 Application of EITF D-42 0.05 -
Acceleration of share-based compensation expense due to retirement
of former CEO and CFO - 0.04 Core FFO per
share $ 2.53 $ 2.48 2.0 %
Property Operations – Same Store
Facilities
The Same Store Facilities represent those facilities that have
been owned and operated on a stabilized level of occupancy,
revenues and cost of operations since January 1, 2017. We review
the operations of our Same Store Facilities, which excludes
facilities whose operating trends are significantly affected by
factors such as casualty events, as well as recently developed,
expanded, or acquired facilities, to more effectively evaluate the
ongoing performance of our self-storage portfolio in 2017, 2018 and
2019. We believe the Same Store information is used by investors
and REIT analysts in a similar manner. The Same Store pool
increased from 2,046 facilities at December 31, 2018 to 2,165
facilities at March 31, 2019. The following table summarizes the
historical operating results of these 2,165 facilities (139.8
million net rentable square feet) that represent approximately 85%
of the aggregate net rentable square feet of our U.S. consolidated
self-storage portfolio at March 31, 2019.
Selected
Operating Data for the Same
Store Facilities
(2,165 facilities)
(unaudited):
Three Months Ended March 31, Percentage 2019 2018 Change
(Dollar amounts in thousands, except for per square foot amounts)
Revenues: Rental income $ 562,630 $ 554,116 1.5 % Late charges and
administrative fees 26,117 25,941 0.7 %
Total revenues (a) 588,747 580,057 1.5
% Cost of operations: Property taxes 65,353 62,226 5.0 %
On-site property manager payroll 30,263 30,296 (0.1 )% Supervisory
payroll 9,780 10,132 (3.5 )% Repairs and maintenance 10,613 9,962
6.5 % Snow removal 2,801 2,219 26.2 % Utilities 11,028 11,480 (3.9
)% Marketing 8,780 6,879 27.6 % Other direct property costs 16,439
15,836 3.8 % Allocated overhead 14,130 13,815
2.3 % Total cost of operations (a) 169,187
162,845 3.9 % Net operating income (b) $ 419,560
$ 417,212 0.6 % Gross margin 71.3 % 71.9 %
(0.8 )% Weighted average for the period: Square foot
occupancy 92.5 % 92.1 % 0.4 % Realized annual rental income per
(c): Occupied square foot $ 17.41 $ 17.21 1.2 % Available square
foot (“REVPAF”) $ 16.10 $ 15.86 1.5 % At March 31: Square foot
occupancy 92.1 % 92.0 % 0.1 % Annual contract rent per occupied
square foot (d) $ 17.94 $ 17.71 1.3 %
(a) Revenues and cost of operations do not include ancillary
revenues and expenses generated at the facilities with respect to
tenant reinsurance and retail sales. (b) See attached
reconciliation of self-storage NOI to net income. (c) Realized
annual rent per occupied square foot is computed by dividing
annualized rental income, before late charges and administrative
fees, by the weighted average occupied square feet for the period.
Realized annual rent per available square foot (“REVPAF”) is
computed by dividing annualized rental income, before late charges
and administrative fees, by the total available rentable square
feet for the period. These measures exclude late charges and
administrative fees in order to provide a better measure of our
ongoing level of revenue. Late charges are dependent upon the level
of delinquency, and administrative fees are dependent upon the
level of move-ins. In addition, the rates charged for late charges
and administrative fees can vary independently from rental rates.
These measures take into consideration promotional discounts, which
reduce rental income. (d) Annual contract rent represents the
agreed upon monthly rate that is paid by our tenants in place at
the time of measurement. Contract rates are initially set in the
lease agreement upon move-in and we adjust them from time to time
with notice. Contract rent excludes other fees that are charged on
a per-item basis, such as late charges and administrative fees,
does not reflect the impact of promotional discounts, and does not
reflect the impact of rents that are written off as uncollectible.
The following table summarizes selected quarterly financial data
with respect to the Same Store Facilities (unaudited):
For the Quarter Ended
March 31 June 30 September 30
December 31 Entire Year (Amounts in thousands, except
for per square foot amounts) Total revenues: 2019 $ 588,747 2018 $
580,057 $ 590,585 $ 607,598 $ 594,302 $ 2,372,542 Total cost
of operations: 2019 $ 169,187 2018 $ 162,845 $ 159,631 $ 161,324 $
130,477 $ 614,277 Property taxes: 2019 $ 65,353 2018 $
62,226 $ 62,940 $ 62,750 $ 36,550 $ 224,466 Repairs and
maintenance, including snow removal expenses: 2019 $ 13,414 2018 $
12,181 $ 12,139 $ 11,903 $ 12,475 $ 48,698 Marketing: 2019 $
8,780 2018 $ 6,879 $ 8,115 $ 8,246 $ 9,205 $ 32,445 REVPAF:
2019 $ 16.10 2018 $ 15.86 $ 16.19 $ 16.62 $ 16.25 $ 16.23
Weighted average realized annual rent per occupied square foot:
2019 $ 17.41 2018 $ 17.21 $ 17.25 $ 17.72 $ 17.57 $ 17.44
Weighted average occupancy levels for the period: 2019 92.5 % 2018
92.1 % 93.8 % 93.8 % 92.5 % 93.1 %
Property Operations – Non Same Store
Facilities
In addition to the 2,165 same-store facilities, we have 279
facilities that were not stabilized with respect to occupancies,
revenues or cost of operations since January 1, 2017 or that we did
not own as of January 1, 2017, including 71 facilities that were
acquired from third parties, 74 newly developed facilities, 62
facilities that have been expanded or are targeted for expansion,
and 72 facilities that are unstabilized due to the impact of
casualties and other factors (collectively, the “Non Same Store
Facilities”). Operating data, metrics, and further commentary with
respect to these facilities, including detail by vintage, is
included in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under “Self-Storage
Operations” in our March 31, 2019 Form 10-Q.
Investing and Capital
Activities
During the three months ended March 31, 2019, we acquired 12
self-storage facilities (nine in Virginia and one each in Florida,
Georgia and Kentucky) with 0.8 million net rentable square feet for
$81.3 million. Subsequent to March 31, 2019, we acquired or were
under contract to acquire ten self-storage facilities (four in
Florida, two in Virginia and one each in Arizona, Colorado,
Michigan and Texas) with 0.7 million net rentable square feet for
$116.4 million.
During the three months ended March 31, 2019, we opened four
newly developed facilities and various expansion projects (1.6
million net rentable square feet – 1.3 million in Texas and 0.1
million each in California, Colorado and Florida) costing $133.5
million. At March 31, 2019, we had various facilities in
development (1.2 million net rentable square feet) estimated to
cost $194 million and various expansion projects (2.7 million net
rentable square feet) estimated to cost $318 million. Our aggregate
3.9 million net rentable square foot pipeline of development and
expansion facilities includes 1.0 million in Florida, 0.8 million
in Minnesota, 0.4 million in Washington, 0.3 million each in
Colorado and North Carolina and 1.1 million in other states. The
remaining $299 million of development costs for these projects is
expected to be incurred primarily in the next 18 months.
On February 22, 2019, we called our 6.375% Series Y Preferred
Shares for redemption. The shares were redeemed on March 28, 2019
for $285 million.
On March 11, 2019, we issued our 5.60% Series H Preferred Shares
for gross proceeds of $285 million.
On April 12, 2019, we completed a public offering of $500
million in aggregate principal amount of senior notes bearing
interest at an annual rate of 3.385% maturing on May 1, 2029.
On April 19, 2019, we amended our $500 million revolving line of
credit. This amendment (i) extends the maturity date from March 31,
2020 to April 19, 2024, (ii) decreases the current effective
borrowing spread over LIBOR from 0.850% to 0.70%, and (iii)
decreases the current effective facility fee from 0.080% to 0.070%.
All other terms remain substantially the same.
Distributions Declared
On April 24, 2019, our Board of Trustees declared a regular
common quarterly dividend of $2.00 per common share. The Board also
declared dividends with respect to our various series of preferred
shares. All the dividends are payable on June 27, 2019 to
shareholders of record as of June 12, 2019.
First Quarter Conference
Call
A conference call is scheduled for May 2, 2019 at 10:00 a.m.
(PDT) to discuss the first quarter earnings results. The domestic
dial-in number is (866) 406-5408, and the international dial-in
number is (973) 582-2770 (conference ID number for either domestic
or international is 1168559). A simultaneous audio webcast may be
accessed by using the link at www.publicstorage.com under “Company
Info, Investor Relations, News and Events, Event Calendar.” A
replay of the conference call may be accessed through May 16, 2019
by calling (800) 585-8367 (domestic), (404) 537-3406
(international) or by using the link at www.publicstorage.com under
“Company Info, Investor Relations, News and Events, Event
Calendar.” All forms of replay utilize conference ID number
1168559.
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500,
is a REIT that primarily acquires, develops, owns and operates
self-storage facilities. At March 31, 2019, we had: (i) interests
in 2,444 self-storage facilities located in 38 states with
approximately 164 million net rentable square feet in the United
States, (ii) an approximate 35% common equity interest in Shurgard
Self Storage SA (Euronext Brussels:SHUR) which owned 231
self-storage facilities located in seven Western European nations
with approximately 13 million net rentable square feet operated
under the “Shurgard” brand and (iii) an approximate 42% common
equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned
and operated approximately 28 million rentable square feet of
commercial space at March 31, 2019. Our headquarters are located in
Glendale, California.
Additional information about Public Storage is available on our
website, www.publicstorage.com.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements in this press release, other than statements
of historical fact, are forward-looking statements which may be
identified by the use of the words “expects,” “believes,”
“anticipates,” “should,” “estimates” and similar expressions. These
forward-looking statements involve known and unknown risks and
uncertainties, which may cause our actual results and performance
to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact
future results and performance include, but are not limited to,
those described in Part 1, Item 1A, “Risk Factors” in our most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the “SEC”) on February 27, 2019 and in our
other filings with the SEC and the following: general risks
associated with the ownership and operation of real estate,
including changes in demand, risk related to development of
self-storage facilities, potential liability for environmental
contamination, natural disasters and adverse changes in laws and
regulations governing property tax, real estate and zoning; risks
associated with downturns in the national and local economies in
the markets in which we operate, including risks related to current
economic conditions and the economic health of our customers; the
impact of competition from new and existing self-storage and
commercial facilities and other storage alternatives; difficulties
in our ability to successfully evaluate, finance, integrate into
our existing operations and manage acquired and developed
properties; risks associated with international operations
including, but not limited to, unfavorable foreign currency rate
fluctuations, changes in tax laws, and local and global economic
uncertainty that could adversely affect our earnings and cash
flows; risks related to our participation in joint ventures; the
impact of the regulatory environment as well as national, state and
local laws and regulations including, without limitation, those
governing environmental, taxes, our tenant reinsurance business and
labor, and risks related to the impact of new laws and regulations;
risks of increased tax expense associated either with a possible
failure by us to qualify as a REIT, or with challenges to the
determination of taxable income for our taxable REIT subsidiaries;
risks due to a potential November 2020 statewide ballot initiate
(or other equivalent actions) that could remove the protections of
Proposition 13 with respect to our real estate and result in
substantial increases in our assessed values and property tax bills
in California; changes in federal or state tax laws related to the
taxation of REITs and other corporations; security breaches or a
failure of our networks, systems or technology could adversely
impact our business, customer and employee relationships; risks
associated with the self-insurance of certain business risks,
including property and casualty insurance, employee health
insurance and workers compensation liabilities; difficulties in
raising capital at a reasonable cost; delays in the development
process; ongoing litigation and other legal and regulatory actions
which may divert management’s time and attention, require us to pay
damages and expenses or restrict the operation of our business; and
economic uncertainty due to the impact of war or terrorism. These
forward-looking statements speak only as of the date of this press
release. All of our forward-looking statements, including those in
this press release, are qualified in their entirety by this
statement. We expressly disclaim any obligation to update publicly
or otherwise revise any forward-looking statements, whether as a
result of new information, new estimates, or other factors, events
or circumstances after the date of this press release, except where
expressly required by law. Given these risks and uncertainties, you
should not rely on any forward-looking statements in this press
release, or which management may make orally or in writing from
time to time, as predictions of future events nor guarantees of
future performance.
PUBLIC STORAGE
SELECTED INCOME STATEMENT DATA
(Amounts in thousands, except per share
data)
(Unaudited)
Three Months Ended March 31, 2019
2018
Revenues: Self-storage facilities $
650,408 $ 631,537 Ancillary operations 38,630
38,387 689,038 669,924
Expenses: Self-storage cost of operations 193,656 182,187
Ancillary cost of operations 10,545 10,640 Depreciation and
amortization 121,941 117,979 General and administrative 19,503
31,520 Interest expense 8,143 8,107
353,788 350,433
Other
increase (decrease) to net income: Interest and other income
6,965 5,544 Equity in earnings of unconsolidated real estate
entities 17,672 30,795 Gain on sale of real estate - 424 Foreign
currency exchange gain (loss) 7,791 (11,818 )
Net income 367,678 344,436 Allocation to noncontrolling interests
(1,157 ) (1,439 ) Net income allocable to Public
Storage shareholders 366,521 342,997 Allocation of net income to:
Preferred shareholders – distributions (55,012 ) (54,081 )
Preferred shareholders – redemptions (8,533 ) - Restricted share
units (1,233 ) (1,097 ) Net income allocable to
common shareholders $ 301,743 $ 287,819
Per common
share:
Net income per common share – Basic $ 1.73 $ 1.66 Net
income per common share – Diluted $ 1.73 $ 1.65
Weighted average common shares – Basic 174,177
173,892 Weighted average common shares – Diluted
174,376 174,148
PUBLIC STORAGE
SELECTED BALANCE SHEET DATA
(Amounts in thousands, except share and
per share data)
March 31, 2019 December
31, 2018
ASSETS (Unaudited) Cash and equivalents $
217,973 $ 361,218 Operating real estate facilities: Land and
buildings, at cost 15,537,360 15,296,844 Accumulated depreciation
(6,255,475 ) (6,140,072 ) 9,281,885 9,156,772
Construction in process 213,785 285,339 Investments in
unconsolidated real estate entities 784,314 783,988 Goodwill and
other intangible assets, net 210,459 209,856 Other assets
166,600 131,097 Total assets $ 10,875,016
$ 10,928,270
LIABILITIES AND
EQUITY Senior unsecured notes $ 1,377,403 $ 1,384,880
Mortgage notes 28,747 27,403 Accrued and other liabilities
374,245 371,259 Total liabilities 1,780,395
1,783,542 Equity: Public Storage shareholders’ equity:
Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares
authorized, 161,000 shares issued (in series) and outstanding,
(161,000 at December 31, 2018) at liquidation preference 4,025,000
4,025,000 Common Shares, $0.10 par value, 650,000,000 shares
authorized, 174,215,292 shares issued and outstanding, (174,130,881
shares at December 31, 2018) 17,422 17,413 Paid-in capital
5,708,699 5,718,485 Accumulated deficit (615,329 ) (577,360 )
Accumulated other comprehensive loss (65,971 )
(64,060 ) Total Public Storage shareholders’ equity 9,069,821
9,119,478 Noncontrolling interests 24,800
25,250 Total equity 9,094,621 9,144,728
Total liabilities and equity $ 10,875,016 $
10,928,270
PUBLIC STORAGE SELECTED
FINANCIAL DATA Computation of Funds from Operations
and Funds Available for Distribution
(Unaudited – amounts in thousands except
per share data)
Three Months Ended March 31, 2019 2018
Computation of
FFO per Share:
Net income allocable to common shareholders $ 301,743 $
287,819 Eliminate items excluded from FFO: Depreciation and
amortization 121,941 117,979 Depreciation from unconsolidated real
estate investments 17,514 19,315 Depreciation allocated to
noncontrolling interests and restricted share unitholders (1,198 )
(918 ) Gains on sale of real estate, including our equity share
from investments - (11,891 ) FFO allocable to
common shares (a) $ 440,000 $ 412,304 Diluted
weighted average common shares 174,376 174,148
FFO per share (a) $ 2.52 $ 2.37
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share—Diluted $ 1.73 $ 1.65 Eliminate per share
amounts excluded from FFO: Depreciation and amortization allocable
to common shareholders 0.79 0.78 Gains on sale of real estate,
including our equity share from investments -
(0.06 ) FFO per share (a) $ 2.52 $ 2.37
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares $ 440,000 $ 412,304 Eliminate
effect of items included in FFO but not FAD: Share-based
compensation expense (less than) in excess of cash paid (3,093 )
5,909 Foreign currency exchange (gain) loss (7,791 ) 11,818
Application of EITF D-42 8,533 - Less: Capital expenditures to
maintain real estate facilities (30,205 ) (24,344 )
FAD (a) $ 407,444 $ 405,687 Distributions paid
to common shareholders and restricted share units $ 349,478
$ 349,011 Distribution payout ratio 85.8 %
86.0 % Distributions per common share $ 2.00 $
2.00 (a) FFO and FFO per share are non-GAAP measures
defined by the National Association of Real Estate Investment
Trusts and, along with the non-GAAP measure FAD, are considered
helpful measures of REIT performance by REITs and many REIT
analysts. FFO represents GAAP net income before depreciation and
amortization, real estate gains or losses and impairment charges,
which are excluded because they are based upon historical costs and
assume that building values diminish ratably over time, while we
believe that real estate values fluctuate due to market conditions.
FAD represents FFO adjusted to exclude certain non-cash charges and
to deduct capital expenditures. We utilize FAD in evaluating our
ongoing cash flow available for investment, debt repayment and
common distributions. We believe investors and analysts utilize FAD
in a similar manner. FFO and FFO per share are not a substitute for
net income or earnings per share. FFO and FAD are not substitutes
for GAAP net cash flow in evaluating our liquidity or ability to
pay dividends, because they exclude investing and financing
activities presented on our statements of cash flows. In addition,
other REITs may compute these measures differently, so comparisons
among REITs may not be helpful.
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Self-Storage Net
Operating Income to
Net Income
(Unaudited – amounts in thousands)
Three Months Ended March 31, 2019
2018 Self-storage revenues for: Same Store facilities
$ 588,747 $ 580,057 Acquired facilities 11,208 6,927 Newly
developed and expanded facilities 34,390 28,267 Other non-same
store facilities 16,063 16,286
Self-storage revenues 650,408 631,537 Self-storage cost of
operations for: Same Store facilities 169,187 162,845 Acquired
facilities 4,611 2,529 Newly developed and expanded facilities
14,598 11,041 Other non-same store facilities 5,260
5,772 Self-storage cost of operations 193,656 182,187
Self-storage NOI for: Same Store facilities 419,560 417,212
Acquired facilities 6,597 4,398 Newly developed and expanded
facilities 19,792 17,226 Other non-same store facilities
10,803 10,514 Self-storage NOI (a) 456,752
449,350 Ancillary revenues 38,630 38,387 Ancillary cost of
operations (10,545 ) (10,640 ) Depreciation and amortization
(121,941 ) (117,979 ) General and administrative expense (19,503 )
(31,520 ) Interest and other income 6,965 5,544 Interest expense
(8,143 ) (8,107 ) Equity in earnings of unconsolidated real estate
entities 17,672 30,795 Gain on sale of real estate - 424 Foreign
currency exchange gain (loss) 7,791 (11,818 )
Net income on our income statement $ 367,678 $ 344,436
(a) Net operating income or “NOI” is a non-GAAP
financial measure that excludes the impact of depreciation and
amortization expense, which is based upon historical costs and
assumes that building values diminish ratably over time, while we
believe that real estate values fluctuate due to market conditions.
We utilize NOI in determining current property values, evaluating
property performance, and in evaluating operating trends. We
believe that investors and analysts utilize NOI in a similar
manner. NOI is not a substitute for net income, operating cash
flow, or other related GAAP financial measures, in evaluating our
operating results. This table reconciles from NOI for our
self-storage facilities to the net income presented on our income
statement.
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Ryan Burke(818) 244-8080, Ext. 1141
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