Public Storage (NYSE:PSA) announced today operating results for
the quarter ended March 31, 2018.
Operating Results for the Three Months
Ended March 31, 2018
For the three months ended March 31, 2018, net income allocable
to our common shareholders was $287.8 million or $1.65 per diluted
common share, compared to $281.1 million or $1.62 per diluted
common share in 2017 representing an increase of $6.7 million or
$0.03 per diluted common share. The increase is due primarily to i)
a $13.6 million increase in self-storage net operating income
(described below), ii) our $10.9 million equity share of a gain
recorded by PS Business Parks in the three months ended March 31,
2018 and iii) a $6.0 million reduction in income allocated to our
preferred shareholders. These increases were offset partially by i)
$7.8 million in additional share based compensation included in
general and administrative expense in the three months ended March
31, 2018 due to the upcoming retirement of our CEO and CFO, ii) a
$7.1 million increase in interest expense due to higher debt
balances and iii) a $6.3 million increase in foreign exchange
losses associated with our euro denominated debt.
The $13.6 million increase in self-storage net operating income
is a result of a $6.5 million increase in our Same Store Facilities
(as defined below) and a $7.1 million increase in our Non Same
Store Facilities (as defined below). Revenues for the Same Store
Facilities increased 2.1% or $11.5 million in the three months
ended March 31, 2018 as compared to 2017, due primarily to higher
realized annual rent per occupied square foot. Cost of operations
for the Same Store Facilities increased by 3.3% or $5.0 million in
the three months ended March 31, 2018 as compared to 2017, due
primarily to increased property taxes and property manager payroll.
The increase in net operating income for the Non Same Store
Facilities is due primarily to the impact of 127 self-storage
facilities acquired and developed since January 2016.
Funds from Operations
For the three months ended March 31, 2018, funds from operations
(“FFO”) was $2.37 per diluted common share, as compared to $2.34 in
2017, representing an increase of 1.3%. 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 and ii) $7.8 million in
additional share-based compensation included in general and
administrative expense in the three months ended March 31, 2018 due
to the upcoming retirement of our CEO and CFO. 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
2018 2017 Change
FFO per share
$ 2.37 $ 2.34 1.3 %
Eliminate the per share impact of items
excluded from Core FFO, including our equity share from
investments:
Foreign currency exchange loss 0.07
0.03
Accelerated expense of executive officer
share based awards due to upcoming retirement
0.04 - Core FFO per share $ 2.48 $ 2.37 4.6 %
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, 2016. 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 2016, 2017 and 2018.
We believe the Same Store information is used by investors and REIT
analysts in a similar manner. The Same Store pool increased from
2,042 facilities at December 31, 2017 to 2,052 facilities at March
31, 2018. The following table summarizes the historical operating
results of these 2,052 facilities (131.6 million net rentable
square feet) that represent approximately 83% of the aggregate net
rentable square feet of our U.S. consolidated self-storage
portfolio at March 31, 2018.
Selected
Operating Data for the Same
Store Facilities
(2,052 facilities)
(unaudited):
Three Months Ended March 31, Percentage 2018
2017 Change Revenues: Rental income $ 525,184
$ 514,263 2.1 % Late charges and administrative fees 24,719
24,173 2.3 % Total revenues (a) 549,903
538,436 2.1 % Cost of operations:
Property taxes 58,582 56,050 4.5 % On-site property manager payroll
28,729 27,577 4.2 % Supervisory payroll 9,617 10,165 (5.4 )%
Repairs and maintenance 9,425 9,702 (2.9 )% Snow removal 2,139
2,030 5.4 % Utilities 10,847 10,235 6.0 % Advertising and selling
6,538 6,816 (4.1 )% Other direct property costs 15,066 14,303 5.3 %
Allocated overhead 13,108 12,222 7.2 %
Total cost of operations (a) 154,051 149,100
3.3 % Net operating income (b) $ 395,852 $ 389,336
1.7 % Gross margin 72.0 % 72.3 % (0.4 )%
Weighted average for the period: Square foot occupancy 92.3 % 93.1
% (0.9 )% Realized annual rental income per (c): Occupied square
foot $ 17.30 $ 16.79 3.0 % Available square foot (“REVPAF”) $ 15.96
$ 15.63 2.1 % At March 31: Square foot occupancy 92.1 % 93.2 % (1.2
)%
Annual contract rent per occupied square
foot (d)
$ 17.81 $ 17.35 2.7 % (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) Contract rent represents the
applicable contractual monthly rent charged to our tenants,
excluding the impact of promotional discounts, late charges and
administrative fees.
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:
2018 $ 549,903 2017 $ 538,436 $ 551,522 $ 569,853 $ 556,999 $
2,216,810 Total cost of operations: 2018 $ 154,051 2017 $
149,100 $ 147,283 $ 148,568 $ 118,606 $ 563,557 Property
taxes: 2018 $ 58,582 2017 $ 56,050 $ 56,180 $ 56,016 $ 32,394 $
200,640
Repairs and maintenance, including snow
removal expenses:
2018 $ 11,564 2017 $ 11,732 $ 11,422 $ 11,450 $ 12,007 $ 46,611
Advertising and selling expense: 2018 $ 6,538 2017 $ 6,816 $
8,158 $ 6,987 $ 6,821 $ 28,782 REVPAF: 2018 $ 15.96 2017 $
15.63 $ 16.03 $ 16.54 $ 16.17 $ 16.09
Weighted average realized annual rent per
occupied square foot:
2018 $ 17.30 2017 $ 16.79 $ 16.95 $ 17.49 $ 17.37 $ 17.15
Weighted average occupancy levels for the
period:
2018 92.3 % 2017 93.1 % 94.6 % 94.6 % 93.1 % 93.8 %
Property Operations – Non Same Store
Facilities
The Non Same Store Facilities at March 31, 2018 represent 341
facilities that were not stabilized with respect to occupancies or
rental rates since January 1, 2016 or that we did not own as of
January 1, 2016. The following table summarizes operating data with
respect to the Non Same Store Facilities (unaudited):
NON SAME STORE Three Months Ended March 31,
FACILITIES 2018 2017
Change
Revenues: 2018 acquisitions $ 67
$ - $ 67 2017 acquisitions 6,860 339 6,521 2016 acquisitions 9,429
8,581 848 2016 - 2018 new developments 7,120 2,327 4,793 2013 -
2015 new developments 6,401 5,798 603 Other facilities
51,757 52,297 (540 ) Total revenues
81,634 69,342 12,292
Cost of operations before depreciation
and amortization expense:
2018 acquisitions 22 - 22 2017 acquisitions 2,507 151 2,356 2016
acquisitions 3,637 3,482 155 2016 - 2018 new developments 4,055
2,296 1,759 2013 - 2015 new developments 2,099 1,867 232 Other
facilities 15,816 15,082 734
Total cost of operations 28,136 22,878
5,258
Net operating income: 2018
acquisitions 45 - 45 2017 acquisitions 4,353 188 4,165 2016
acquisitions 5,792 5,099 693 2016 - 2018 new developments 3,065 31
3,034 2013 - 2015 new developments 4,302 3,931 371 Other facilities
35,941 37,215 (1,274 ) Net
operating income (a) $ 53,498 $ 46,464 $ 7,034
At March
31:
Square foot occupancy: 2018 acquisitions 71.5 % - - 2017
acquisitions 88.8 % 89.7 % (1.0 )% 2016 acquisitions 87.2 % 85.9 %
1.5 % 2016 - 2018 new developments 56.5 % 43.1 % 31.1 % 2013 - 2015
new developments 90.4 % 89.8 % 0.7 % Other facilities 87.2 %
87.2 % 0.0 % 82.1 % 82.4 % (0.4
)% Annual contract rent per occupied square foot: 2018 acquisitions
$ 10.88 $ - - 2017 acquisitions 14.39 10.81 33.1 % 2016
acquisitions 10.19 9.86 3.3 % 2016 - 2018 new developments 11.83
12.69 (6.8 )% 2013 - 2015 new developments 14.88 13.95 6.7 % Other
facilities 16.97 16.80 1.0 % $
14.79 $ 14.92 (0.9 )% Number of facilities:
2018 acquisitions 2 - 2 2017 acquisitions 34 4 30 2016 acquisitions
55 55 - 2016 - 2018 new developments 36 18 18 2013 - 2015 new
developments 20 20 - Other facilities 194 194
- 341 291
50 Net rentable square feet (in thousands): 2018
acquisitions 181 - 181 2017 acquisitions 2,114 214 1,900 2016
acquisitions 4,177 4,121 56 2016 - 2018 new developments 4,632
2,470 2,162 2013 - 2015 new developments 1,877 1,877 - Other
facilities 14,584 14,122 462
27,565 22,804 4,761
(a) See attached reconciliation of
self-storage NOI to operating income.
Investing and Capital Markets
Activities
During the three months ended March 31, 2018, we acquired two
self-storage facilities (one each in Nebraska and Tennessee) with
0.2 million net rentable square feet for $18.0 million. At March
31, 2018, we were under contract to acquire three self-storage
facilities (one each in Indiana, Kentucky and South Carolina) with
0.2 million net rentable square feet for $19 million.
During the three months ended March 31, 2018, we completed four
newly developed facilities and various expansion projects (0.5
million net rentable square feet) costing $60 million. At March 31,
2018, we had various facilities in development (2.7 million net
rentable square feet) estimated to cost $381 million and various
expansion projects (2.3 million net rentable square feet) estimated
to cost $281 million. The remaining $382 million of development
costs for these projects is expected to be incurred primarily in
the next 18 months.
Distributions Declared
On April 25, 2018, 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 28, 2018 to
shareholders of record as of June 13, 2018.
First Quarter Conference
Call
A conference call is scheduled for April 26, 2018 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 3808049). 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 10, 2018
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, Events
Calendar.” All forms of replay utilize conference ID number
3808049.
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, 2018, we had interests in 2,392
self-storage facilities located in 38 states with approximately 159
million net rentable square feet in the United States and 223
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, 2018.
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 March 1, 2018 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, 2018 2017
Revenues: Self-storage facilities $ 631,537 $
607,778 Ancillary operations 38,387 37,769
669,924 645,547
Expenses: Self-storage cost of operations 182,187 171,978
Ancillary cost of operations 10,640 10,924 Depreciation and
amortization 117,979 110,929 General and administrative
31,520 25,028 342,326
318,859 Operating income 327,598 326,688
Other income (expense): Interest and other income 5,544
3,998 Interest expense (8,107 ) (1,048 ) Equity in earnings of
unconsolidated real estate entities 30,795 19,949 Gain on real
estate investment sales 424 - Foreign currency exchange loss
(11,818 ) (5,566 ) Net income 344,436 344,021 Allocation to
noncontrolling interests (1,439 ) (1,579 ) Net income
allocable to Public Storage shareholders 342,997 342,442 Allocation
of net income to: Preferred shareholders – distributions (54,081 )
(60,121 ) Restricted share units (1,097 ) (1,190 )
Net income allocable to common shareholders $ 287,819 $
281,131
Per common
share:
Net income per common share – Basic $ 1.66 $ 1.62 Net
income per common share – Diluted $ 1.65 $ 1.62
Weighted average common shares – Basic 173,892
173,364 Weighted average common shares – Diluted
174,148 174,069
PUBLIC
STORAGE SELECTED BALANCE SHEET DATA
(Amounts in thousands, except share and
per share data)
March 31, 2018 December 31, 2017
ASSETS (Unaudited)
Cash and equivalents
$ 363,030 $ 433,376 Operating real estate facilities: Land
and buildings, at cost 14,766,684 14,665,989 Accumulated
depreciation (5,811,286 ) (5,700,331 ) 8,955,398
8,965,658 Construction in process 279,624 264,441 Investments in
unconsolidated real estate entities 746,254 724,173 Goodwill and
other intangible assets, net 210,733 214,957 Other assets
130,481 130,287 Total assets $ 10,685,520
$ 10,732,892
LIABILITIES AND
EQUITY Senior unsecured notes $ 1,414,144 $ 1,402,109
Mortgage notes 28,767 29,213 Accrued and other liabilities
326,819 337,201 Total liabilities 1,769,730
1,768,523 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, 2017) at
liquidation preference
4,025,000 4,025,000
Common Shares, $0.10 par value,
650,000,000 shares authorized, 173,927,759 shares issued and
outstanding, (173,853,370 shares at December 31, 2017)
17,393 17,385 Paid-in capital 5,655,267 5,648,399 Accumulated
deficit (735,806 ) (675,711 ) Accumulated other comprehensive loss
(70,851 ) (75,064 ) Total Public Storage
shareholders’ equity 8,891,003 8,940,009 Noncontrolling interests
24,787 24,360 Total equity
8,915,790 8,964,369 Total liabilities and
equity $ 10,685,520 $ 10,732,892
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, 2018 2017
Computation of
FFO per Share:
Net income allocable to common shareholders $ 287,819 $ 281,131
Eliminate items excluded from FFO: Depreciation and amortization
117,979 110,929 Depreciation from unconsolidated real estate
investments 19,315 17,213
Depreciation allocated to noncontrolling
interests and restricted share unitholders
(918 ) (962 )
Gains on sale of real estate investments,
including our equity share from investments
(11,891 ) (1,611 ) FFO allocable to common shares (a)
$ 412,304 $ 406,700 Diluted weighted average common
shares 174,148 174,069 FFO per share
(a) $ 2.37 $ 2.34
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share—Diluted $ 1.65 $ 1.62 Eliminate per share
amounts excluded from FFO:
Depreciation and amortization allocable to
common shareholders
0.78 0.73
Gains on sale of real estate investments,
including our equity share from investments and other
(0.06 ) (0.01 ) FFO per share (a) $ 2.37 $
2.34
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares $ 412,304 $ 406,700 Eliminate effect
of items included in FFO but not FAD: Share-based compensation
expense in excess of (less than) cash paid 5,909 (3,286 ) Foreign
currency exchange loss 11,818 5,566 Less: Capital expenditures to
maintain real estate facilities (24,344 ) (27,050 )
FAD (a) $ 405,687 $ 381,930
Distributions paid to common shareholders
and restricted share units
$ 349,011 $ 348,213 Distribution payout ratio
86.0 % 91.2 % 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 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, 2018 2017
Self-storage revenues for: Same Store Facilities $
549,903 $ 538,436 Non Same Store Facilities 81,634
69,342 Self-storage revenues 631,537 607,778
Self-storage cost of operations for: Same Store Facilities 154,051
149,100 Non Same Store Facilities 28,136
22,878 Self-storage cost of operations 182,187 171,978
Self-storage net operating income for: Same Store Facilities
395,852 389,336 Non Same Store Facilities 53,498
46,464 Self-storage net operating income (a) 449,350
435,800 Ancillary revenues 38,387 37,769 Ancillary cost of
operations (10,640 ) (10,924 ) Depreciation and amortization
(117,979 ) (110,929 ) General and administrative expense
(31,520 ) (25,028 ) Operating income on our income statement
$ 327,598 $ 326,688 (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 StorageRyan Burke(818) 244-8080, Ext. 1141
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