Public Storage (NYSE:PSA) announced today operating results for
the quarter ended March 31, 2017.
Operating Results for the Three Months
Ended March 31, 2017
For the three months ended March 31, 2017, net income allocable
to our common shareholders was $281.1 million or $1.62 per diluted
common share, compared to $241.3 million or $1.39 in 2016
representing an increase of $39.8 million or $0.23. The increase is
due primarily to a $21.1 million increase in self-storage net
operating income (described below), a $5.4 million decrease in
foreign exchange translation losses associated with our euro
denominated debt and an $11.3 million decrease in EITF D-42 charges
as a result of our preferred redemption activities in 2016.
The $21.1 million increase in self-storage net operating income
is a result of a $15.2 million increase in our Same Store
Facilities (as defined below) and $5.9 million increase in our Non
Same Store Facilities (as defined below). Revenues for the Same
Store Facilities increased 4.0% or $20.9 million in the three
months ended March 31, 2017 as compared to 2016, due primarily to
higher realized annual rent per occupied square foot. Cost of
operations for the Same Store Facilities increased by 3.9% or $5.7
million in the three months ended March 31, 2017 as compared to
2016, due primarily to increased property taxes, repairs and
maintenance and advertising and selling costs. The increase in net
operating income for the Non Same Store Facilities is due primarily
to the impact of 283 self-storage facilities acquired, developed or
expanded since January 2015.
Funds from Operations
For the three months ended March 31, 2017, funds from operations
(“FFO”) was $2.34 per diluted common share, as compared to $2.10 in
2016, representing an increase of 11.4%. FFO is a non-GAAP
(generally accepted accounting principles) term defined by the
National Association of Real Estate Investment Trusts and generally
represents net income before depreciation, gains and losses and
impairment charges with respect to real estate assets.
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 and (iii) 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 2017 2016 Change FFO
per share $ 2.34 $ 2.10 11.4 %
Eliminate the per share impact of items
excluded from Core FFO, including our equity share from
investments:
Foreign currency exchange loss, net 0.03 0.05 Application of EITF
D-42 - 0.07 Other items - (0.01 ) Core FFO per share
$ 2.37 $ 2.21 7.2 %
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, 2015. 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 or
acquired facilities, to more effectively evaluate the ongoing
performance of our self-storage portfolio in 2015, 2016 and 2017.
The Same Store pool increased from the 2,000 facilities at December
31, 2016 to 2,060 facilities at March 31, 2017. We believe the Same
Store information is used by investors and analysts in a similar
manner. The following table summarizes the historical operating
results of these 2,060 facilities (131.6 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, 2017.
Selected
Operating Data for the Same
Store Facilities
(2,060 facilities)
(unaudited):
Three Months Ended March 31, Percentage 2017 2016 Change (Dollar
amounts in thousands, except for per square foot amounts) Revenues:
Rental income $ 514,163 $ 493,167 4.3 % Late charges and
administrative fees 24,148 24,240 (0.4
)% Total revenues (a) 538,311 517,407
4.0 % Cost of operations: Property taxes 56,388 54,028 4.4 %
On-site property manager payroll 27,513 27,855 (1.2 )% Supervisory
payroll 10,160 9,390 8.2 % Repairs and maintenance 9,691 8,638 12.2
% Snow removal 2,060 2,882 (28.5 )% Utilities 10,210 10,423 (2.0 )%
Advertising and selling expense 6,808 5,241 29.9 % Other direct
property costs 14,680 14,104 4.1 % Allocated overhead 11,870
11,146 6.5 % Total cost of operations (a)
149,380 143,707 3.9 % Net operating
income (b) $ 388,931 $ 373,700 4.1 % Gross
margin 72.3 % 72.2 % 0.1 % Weighted average for the period:
Square foot occupancy 93.1 % 93.6 % (0.5 )% Realized annual rental
income per (c): Occupied square foot $ 16.81 $ 16.02 4.9 %
Available square foot (“REVPAF”) $ 15.63 $ 14.99 4.3 % At March 31:
Square foot occupancy 93.2 % 93.9 % (0.7 )%
Annual contract rent per occupied square
foot (d)
$ 17.38 $ 16.61 4.6 % (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 net
operating income (“NOI”) to operating 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:
2017 $ 538,311 2016 $ 517,407 $ 533,373 $ 556,194 $ 544,822 $
2,151,796 Total cost of operations: 2017 $ 149,380 2016 $
143,707 $ 140,104 $ 146,519 $ 115,394 $ 545,724 Property
taxes: 2017 $ 56,388 2016 $ 54,028 $ 54,249 $ 53,953 $ 31,548 $
193,778
Repairs and maintenance, including snow
removal expenses:
2017 $ 11,751 2016 $ 11,520 $ 10,708 $ 11,171 $ 11,239 $ 44,638
Advertising and selling expense:
2017 $ 6,808 2016 $ 5,241 $ 5,738 $ 7,767 $ 7,337 $ 26,083
REVPAF: 2017 $ 15.63 2016 $ 14.99 $ 15.49 $ 16.12 $ 15.81 $ 15.60
Weighted average realized annual rent per
occupied square foot:
2017 $ 16.81 2016 $ 16.02 $ 16.25 $ 16.92 $ 16.87 $ 16.51
Weighted average occupancy levels for the
period:
2017 93.1 % 2016 93.6 % 95.4 % 95.3 % 93.8 % 94.5 %
Property Operations-Non Same Store
Facilities
The Non Same Store Facilities at March 31, 2017 represent 283
facilities that were not stabilized with respect to occupancies or
rental rates since January 1, 2015 or that we did not own as of
January 1, 2015. The following table summarizes operating data with
respect to the Non Same Store Facilities (unaudited):
NON SAME STORE Three Months Ended March
31,
FACILITIES 2017 2016
Change (Dollar amounts in thousands, except for per square
foot amounts)
Revenues: 2017 acquisitions $ 339 $ - $ 339
2016 acquisitions 8,581 1,839 6,742 2015 acquisitions 4,072 3,595
477 Developed facilities 8,125 4,257 3,868 Other facilities
48,350 47,488 862 Total revenues
69,467 57,179 12,288
Cost of operations before depreciation
and amortization expense:
2017 acquisitions 151 - 151 2016 acquisitions 3,482 551 2,931 2015
acquisitions 1,335 1,292 43 Developed facilities 4,163 1,810 2,353
Other facilities 13,467 12,503
964 Total cost of operations 22,598
16,156 6,442
Net operating
income: 2017 acquisitions 188 - 188 2016 acquisitions 5,099
1,288 3,811 2015 acquisitions 2,737 2,303 434 Developed facilities
3,962 2,447 1,515 Other facilities 34,883
34,985 (102 ) Net operating income (a) $ 46,869
$ 41,023 $ 5,846
At March
31:
Square foot occupancy: 2017 acquisitions 89.7 % - - 2016
acquisitions 85.9 % 90.8 % (5.4 )% 2015 acquisitions 92.4 % 89.6 %
3.1 % Developed facilities 63.2 % 68.6 % (7.9 )% Other facilities
87.2 % 91.2 % (4.4 )% 82.7 %
88.2 % (6.2 )% Annual contract rent per occupied
square foot: 2017 acquisitions $ 10.74 $ - - 2016 acquisitions 9.86
11.69 (15.7 )% 2015 acquisitions 13.71 12.84 6.8 % Developed
facilities 13.03 12.62 3.2 % Other facilities 17.13
16.45 4.1 % $ 14.88 $ 15.55
(4.3 )%
At March
31:
Number of facilities: 2017 acquisitions 4 - 4 2016 acquisitions 55
12 43 2015 acquisitions 17 17 - Developed facilities 38 22 16 Other
facilities 169 169 -
283 220 63 Net
rentable square feet (in thousands): 2017 acquisitions 214 - 214
2016 acquisitions 4,121 809 3,312 2015 acquisitions 1,285 1,285 -
Developed facilities 4,347 2,125 2,222 Other facilities
12,877 12,613 264 22,844
16,832 6,012 (a)
See attached reconciliation of self-storage NOI to operating
income.
Investing and Capital Markets
Activities
During the three months ended March 31, 2017, we acquired four
self-storage facilities (one each in Minnesota, New York, North
Carolina and Ohio) with 0.2 million net rentable square feet for
$23 million. Subsequent to March 31, 2017, we acquired or were
under contract to acquire five self-storage facilities (two each in
Indiana and South Carolina and one in Ohio) with 0.3 million net
rentable square feet for $25 million.
During the three months ended March 31, 2017, we completed two
newly developed facilities and various expansion projects (0.5
million net rentable square feet) costing $89 million. At March 31,
2017, we had various facilities in development (4.0 million net
rentable square feet) estimated to cost $470 million and various
expansion projects (1.2 million net rentable square feet) estimated
to cost $148 million. The remaining $413 million of development
costs for these projects is expected to be incurred primarily in
the next 18 months.
Distributions Declared
On April 26, 2017, 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 29, 2017 to
shareholders of record as of June 14, 2017.
First Quarter Conference
Call
A conference call is scheduled for April 27, 2017 at 11:00 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 4988562). A simultaneous audio webcast may be
accessed by using the link at www.publicstorage.com under “Company
Info, Investor Relations, News and Events, Events Calendar.” A
replay of the conference call may be accessed through May 11, 2017
by calling (800) 585-8367 (domestic) or (404) 537-3406
(international) or by using the link at www.publicstorage.com under
“Company Info, Investor Relations, News and Events, Events
Calendar.” All forms of replay utilize conference ID number
4988562.
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. The Company’s headquarters are located in
Glendale, California. At March 31, 2017, we had interests in 2,354
self-storage facilities located in 38 states with approximately 155
million net rentable square feet in the United States and 220
storage facilities located in seven Western European nations with
approximately 12 million net rentable square feet operated under
the “Shurgard” brand. We also own a 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, 2017.
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 28, 2017 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;
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, 2017 2016
Revenues: Self-storage facilities $ 607,778 $ 574,586
Ancillary operations 37,769 37,200
645,547 611,786
Expenses:
Self-storage cost of operations 171,978 159,863 Ancillary cost of
operations 10,924 13,423 Depreciation and amortization 110,929
105,128 General and administrative 25,028
23,047 318,859 301,461
Operating income 326,688 310,325
Other income
(expense): Interest and other income 3,998 3,836 Interest
expense (1,048 ) (711 ) Equity in earnings of unconsolidated real
estate entities 19,949 14,164 Gain on real estate investment sales
- 689 Foreign currency exchange loss (5,566 ) (10,954
) Net income 344,021 317,349 Allocation to noncontrolling interests
(1,579 ) (1,476 ) Net income allocable to Public
Storage shareholders 342,442 315,873 Allocation of net income to:
Preferred shareholders – distributions (60,121 ) (62,272 )
Preferred shareholders – redemptions - (11,336 ) Restricted share
units (1,190 ) (930 ) Net income allocable to common
shareholders $ 281,131 $ 241,335
Per common
share:
Net income per common share – Basic $ 1.62 $ 1.40 Net
income per common share – Diluted $ 1.62 $ 1.39
Weighted average common shares – Basic 173,364
172,977 Weighted average common shares – Diluted
174,069 173,850
PUBLIC STORAGE
SELECTED BALANCE SHEET DATA
(Amounts in thousands, except share and
per share data)
March 31, 2017 December 31, 2016
ASSETS (Unaudited)
Cash and cash equivalents $ 120,859 $ 183,688
Operating real estate facilities: Land and buildings, at cost
14,100,659 13,963,229 Accumulated depreciation (5,376,215 )
(5,270,963 ) 8,724,444 8,692,266 Construction in process
205,253 230,310 Investments in unconsolidated real estate entities
698,696 689,207 Goodwill and other intangible assets, net 209,593
212,719 Other assets 125,066 122,148
Total assets $ 10,083,911 $ 10,130,338
LIABILITIES AND EQUITY Senior unsecured notes $
365,349 $ 359,810 Mortgage notes 30,513 30,939 Accrued and other
liabilities 294,542 297,935 Total
liabilities 690,404 688,684 Equity: Public Storage
shareholders’ equity:
Cumulative Preferred Shares, $0.01 par
value, 100,000,000 shares authorized, 174,700 shares issued (in
series) and outstanding, at liquidation preference
4,367,500 4,367,500
Common Shares, $0.10 par value,
650,000,000 shares authorized, 173,543,322 shares issued and
outstanding, (173,288,787 shares at December 31, 2016)
17,354 17,329 Paid-in capital 5,624,358 5,609,768 Accumulated
deficit (553,473 ) (487,581 ) Accumulated other comprehensive loss
(92,225 ) (95,106 ) Total Public Storage
shareholders’ equity 9,363,514 9,411,910 Noncontrolling interests
29,993 29,744 Total equity
9,393,507 9,441,654 Total liabilities and
equity $ 10,083,911 $ 10,130,338
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations
and Funds Available for Distribution
(Unaudited-amounts in thousands, except
per share data)
Three Month Ended March 31, 2017 2016
Computation of
FFO per Share:
Net income allocable to common shareholders $ 281,131 $
241,335 Eliminate items excluded from FFO: Depreciation and
amortization 110,929 105,128 Depreciation from unconsolidated real
estate investments 17,213 19,537
Depreciation allocated to noncontrolling
interests and restricted share unitholders
(962 ) (882 )
Gains on sale of real estate investments,
including our equity share from investments
(1,611 ) (689 ) FFO allocable to common shares (a) $
406,700 $ 364,429 Diluted weighted average common
shares 174,069 173,850 FFO per share
(a) $ 2.34 $ 2.10
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share-diluted $ 1.62 $ 1.39 Eliminate per share
amounts excluded from FFO:
Depreciation and amortization, including
amounts from investments and excluding amounts allocated to
noncontrolling interests and restricted share unitholders
0.73 0.71
Gains on sale of real estate investments,
including our equity share from investments, and other
(0.01 ) - FFO per share (a) $ 2.34 $
2.10
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares $ 406,700 $ 364,429 Eliminate
effect of items included in FFO but not FAD: Cash paid for
stock-based compensation in excess of expensed amount (3,286 )
(5,972 )
Foreign currency exchange loss, including
our equity share from investments
5,566 7,918 Application of EITF D-42 - 11,336 Less: Capital
expenditures to maintain real estate facilities (27,050 )
(14,393 ) FAD (a) $ 381,930 $ 363,318
Distributions paid to common shareholders
and restricted share units
$ 348,213 $ 295,063 Distribution payout ratio
91.2 % 81.2 % Distributions per common share $
2.00 $ 1.70 (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 net income before real
estate depreciation, gains or losses and impairment charges, which
are excluded because they are based upon historical real estate
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
Operating Income
(Unaudited-amounts in thousands)
Three Months Ended March 31, 2017 2016 Self-storage
revenues for: Same Store Facilities $ 538,311 $ 517,407 Non Same
Store Facilities 69,467 57,179
Self-storage revenues 607,778 574,586 Self-storage cost of
operations for: Same Store Facilities 149,380 143,707 Non Same
Store Facilities 22,598 16,156
Self-storage cost of operations 171,978 159,863 Self-storage
net operating income for: Same Store Facilities 388,931 373,700 Non
Same Store Facilities 46,869 41,023
Self-storage net operating income (a) 435,800 414,723 Ancillary
operating revenues 37,769 37,200 Ancillary cost of operations
(10,924 ) (13,423 ) Depreciation and amortization (110,929 )
(105,128 ) General and administrative expense (25,028 )
(23,047 ) Operating income on our income statement $ 326,688
$ 310,325 (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 real estate 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, net 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 operating income presented on our income
statement.
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Public StorageClemente Teng(818) 244-8080, Ext. 1141
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