Public Storage (NYSE:PSA) announced today operating results for
the quarter and year ended December 31, 2018.
Operating Results for the Three Months
Ended December 31, 2018
For the three months ended December 31, 2018, net income
allocable to our common shareholders was $530.1 million or $3.04
per diluted common share, compared to $334.1 million or $1.92 per
diluted common share in 2017 representing an increase of $196.0
million or $1.12 per diluted common share. The increase is due
primarily to (i) $183.1 million in aggregate gains due to Shurgard
Self Storage SA’s (“Shurgard Europe’s”) initial public offering and
the sale of our facility in West London to Shurgard Europe, (ii) a
$11.1 million increase in self-storage net operating income
(described below) and (iii) a $11.0 million increase due to the
impact of foreign currency exchange gains and losses associated
with our euro denominated debt, offset partially by (iv) a $8.1
million increase in general and administrative expense due to the
acceleration of share-based compensation expense accruals for our
former CEO and CFO in 2018 as a result of their retirement on
December 31, 2018.
The $11.1 million increase in self-storage net operating income
is a result of a $1.9 million increase in our Same Store Facilities
(as defined below) and a $9.2 million increase in our Non Same
Store Facilities (as defined below). Revenues for the Same Store
Facilities increased 1.2% or $6.7 million in the three months ended
December 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 4.1% or $4.8 million in
the three months ended December 31, 2018 as compared to 2017, due
primarily to increased property taxes and higher marketing
expenses. The increase in net operating income of $9.2 million for
the Non Same Store Facilities is due primarily to the impact of 164
self-storage facilities acquired and developed since January
2016.
Operating Results for the Year Ended
December 31, 2018
In 2018, net income allocable to our common shareholders was
$1,488.9 million or $8.54 per diluted common share, compared to
$1,171.6 million or $6.73 per diluted common share in 2017
representing an increase of $317.3 million or $1.81 per diluted
common share. The increase is due primarily to (i) $183.1 million
in aggregate gains due to Shurgard Europe’s initial public offering
and the sale of our facility in West London to Shurgard Europe,
(ii) a $47.1 million increase in self-storage net operating income
(described below), (iii) our $37.7 million equity share of gains
recorded by PS Business Parks in 2018, (iv) a $68.2 million
increase due to the impact of foreign currency exchange gains and
losses associated with our euro denominated debt, (v) a $29.3
million allocation to preferred shareholders associated with
preferred share redemptions in 2017 and (vi) a $7.8 million
casualty loss and $5.2 million in incremental tenant reinsurance
losses related to Hurricanes Harvey and Irma in 2017. These impacts
were offset partially by a $36.1 million increase in general and
administrative expense due to the acceleration of share-based
compensation expense accruals for our former CEO and CFO in 2018 as
a result of their retirement on December 31, 2018 and the reversal
of share-based compensation accruals forfeited by retiring senior
executive officers in 2017.
The $47.1 million increase in self-storage net operating income
is a result of a $15.6 million increase in our Same Store
Facilities and $31.5 million increase in our Non Same Store
Facilities. Revenues for the Same Store Facilities increased 1.5%
or $33.3 million in 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 3.2% or $17.7
million in 2018 as compared to 2017, due primarily to increased
property taxes. The increase in net operating income of $31.5
million for the Non Same Store Facilities is due primarily to the
impact of 164 self-storage facilities acquired and developed since
January 2016.
Funds from Operations
For the three months ended December 31, 2018, funds from
operations (“FFO”) was $2.77 per diluted common share, as compared
to $2.70 in 2017, representing an increase of 2.6%. 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.
For the year ended December 31, 2018, FFO was $10.45 per diluted
common share, as compared to $9.70 in 2017, representing an
increase of 7.7%.
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
reversals of accruals with respect to share-based awards forfeited
by retiring senior executive officers 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 December 31,
Year Ended December 31,
2018
2017
PercentageChange
2018
2017
PercentageChange
FFO per share
$
2.77
$
2.70
2.6 %
$
10.45
$
9.70
7.7 % Eliminate the per share impact of items excluded from Core
FFO, including our equity share from investments: Foreign currency
exchange (gain) loss (0.03 ) 0.03 (0.10 ) 0.29 Application of EITF
D-42 - 0.01 - 0.19 Casualty losses and tenant claims due to
hurricanes - - - 0.07
Shurgard Europe - IPO costs and
casualty
loss 0.02 - 0.03 - Acceleration (reversal) of share-based
compensation expense due to executive officer retirement 0.05 -
0.18 (0.03 ) Other items - 0.01 -
0.01 Core FFO per share
$
2.81
$
2.75
2.2 %
$
10.56
$
10.23
3.2 %
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, 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 following table summarizes the
historical operating results of these 2,046 facilities (131.2
million net rentable square feet) that represent approximately 81%
of the aggregate net rentable square feet of our U.S. consolidated
self-storage portfolio at December 31, 2018.
Selected
Operating Data for the Same
Store Facilities
(2,046 facilities)
(unaudited):
Three Months Ended December 31, Year
Ended December 31,
Percentage
Percentage 2018 2017 Change 2018 2017 Change
(Dollar amounts in thousands, except for per square foot amounts)
Revenues: Rental income $ 537,032 $ 530,276 1.3 % $ 2,144,330 $
2,111,164 1.6 % Late charges and administrative fees 24,868
24,888 (0.1 )% 98,425
98,263 0.2 % Total revenues (a) 561,900
555,164 1.2 % 2,242,755 2,209,427
1.5 % Cost of operations: Property taxes 34,136
32,320 5.6 % 210,637 200,005 5.3 % On-site property manager payroll
24,647 24,936 (1.2 )% 109,713 108,477 1.1 % Supervisory payroll
7,473 8,547 (12.6 )% 35,275 38,175 (7.6 )% Repairs and maintenance
11,150 11,203 (0.5 )% 42,730 43,465 (1.7 )% Snow removal 683 766
(10.8 )% 3,470 2,982 16.4 % Utilities 9,837 9,239 6.5 % 41,075
39,477 4.0 % Marketing 8,744 6,794 28.7 % 30,771 28,679 7.3 % Other
direct property costs 14,746 14,305 3.1 % 59,096 56,975 3.7 %
Allocated overhead 11,678 10,151 15.0 %
46,753 43,539 7.4 % Total cost of
operations (a) 123,094 118,261 4.1 %
579,520 561,774 3.2 % Net operating
income (b) $ 438,806 $ 436,903 0.4 % $ 1,663,235
$ 1,647,653 0.9 % Gross margin 78.1 % 78.7 %
(0.8 )% 74.2 % 74.6 % (0.5 )% Weighted average for the
period: Square foot occupancy 92.6 % 93.1 % (0.5 )% 93.2 % 93.8 %
(0.6 )% Realized annual rental income per (c): Occupied square foot
$ 17.68 $ 17.37 1.8 % $ 17.54 $ 17.15 2.3 % Available square foot
(“REVPAF”) $ 16.38 $ 16.17 1.3 % $ 16.35 $ 16.09 1.6 % At December
31: Square foot occupancy 91.4 % 91.2 % 0.2 % Annual contract rent
per occupied square foot (d) $ 18.17 $ 17.94 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) 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
$ 548,116 $ 558,216 $ 574,523 $ 561,900 $ 2,242,755
2017
$ 536,618 $ 549,676 $ 567,969 $ 555,164 $ 2,209,427 Total
cost of operations:
2018
$ 153,532 $ 150,688 $ 152,206 $ 123,094 $ 579,520
2017
$ 148,577 $ 146,857 $ 148,079 $ 118,261 $ 561,774 Property
taxes:
2018
$ 58,359 $ 59,138 $ 59,004 $ 34,136 $ 210,637
2017
$ 55,831 $ 56,032 $ 55,822 $ 32,320 $ 200,005 Repairs and
maintenance, including
snow removal expenses:
2018
$ 11,523 $ 11,593 $ 11,251 $ 11,833 $ 46,200
2017
$ 11,684 $ 11,387 $ 11,407 $ 11,969 $ 46,447 Marketing:
2018
$ 6,516 $ 7,697 $ 7,814 $ 8,744 $ 30,771
2017
$ 6,792 $ 8,127 $ 6,966 $ 6,794 $ 28,679 REVPAF:
2018
$ 15.97 $ 16.31 $ 16.75 $ 16.38 $ 16.35
2017
$ 15.63 $ 16.03 $ 16.54 $ 16.17 $ 16.09 Weighted average
realized annual rent per occupied square foot:
2018
$ 17.30 $ 17.35 $ 17.83 $ 17.68 $ 17.54
2017
$ 16.79 $ 16.95 $ 17.49 $ 17.37 $ 17.15 Weighted average
occupancy levels for the period:
2018
92.3 % 94.0 % 94.0 % 92.6 % 93.2 %
2017
93.1 % 94.6 % 94.6 % 93.1 % 93.8 %
The following table sets forth selected market trends in our
Same Store Facilities:
Same Store Facilities Operating Trends by Market
(Unaudited) Three Months Ended
December 31, Year Ended December 31, 2018 2017
Change 2018 2017 Change (Amounts in thousands, except
for weighted average data) Revenues: Los Angeles $ 85,617 $
82,881 3.3 % $ 339,037 $ 327,326 3.6 % San Francisco 48,214 47,479
1.5 % 192,620 188,139 2.4 % New York 35,416 34,517 2.6 % 140,463
136,654 2.8 % Seattle-Tacoma 26,139 25,964 0.7 % 104,659 102,810
1.8 % Washington DC 26,566 26,173 1.5 % 105,339 105,228 0.1 % Miami
24,062 24,130 (0.3 )% 96,900 95,726 1.2 % Chicago 29,230 29,766
(1.8 )% 117,715 120,500 (2.3 )% Atlanta 21,250 20,877 1.8 % 84,275
82,534 2.1 % Dallas-Ft. Worth 15,711 16,130 (2.6 )% 63,393 65,070
(2.6 )% Houston 16,006 16,409 (2.5 )% 65,155 64,639 0.8 %
Philadelphia 14,599 13,994 4.3 % 57,469 55,759 3.1 %
Orlando-Daytona 13,643 13,461 1.4 % 54,635 52,700 3.7 % West Palm
Beach 11,674 11,628 0.4 % 46,614 45,650 2.1 % Tampa 10,951 10,991
(0.4 )% 44,004 43,484 1.2 % Portland 9,815 9,917 (1.0 )% 39,603
39,997 (1.0 )% All other markets 173,007 170,847 1.3
% 690,874 683,211 1.1 % Total revenues $ 561,900 $
555,164 1.2 % $ 2,242,755 $ 2,209,427 1.5 % Net operating
income: Los Angeles $ 72,351 $ 70,364 2.8 % $ 280,907 $ 272,106 3.2
% San Francisco 39,909 39,742 0.4 % 156,691 153,787 1.9 % New York
28,664 27,814 3.1 % 101,662 99,143 2.5 % Seattle-Tacoma 20,988
21,110 (0.6 )% 82,007 81,271 0.9 % Washington DC 20,806 20,370 2.1
% 78,780 79,292 (0.6 )% Miami 21,976 22,003 (0.1 )% 72,881 72,307
0.8 % Chicago 18,791 20,164 (6.8 )% 65,155 70,445 (7.5 )% Atlanta
16,606 16,222 2.4 % 62,500 61,110 2.3 % Dallas-Ft. Worth 12,906
13,754 (6.2 )% 44,642 46,572 (4.1 )% Houston 10,650 10,453 1.9 %
43,039 42,546 1.2 % Philadelphia 10,553 9,869 6.9 % 40,456 39,485
2.5 % Orlando-Daytona 10,859 10,827 0.3 % 40,240 38,951 3.3 % West
Palm Beach 8,986 8,873 1.3 % 34,806 33,868 2.8 % Tampa 8,552 8,744
(2.2 )% 31,796 31,591 0.6 % Portland 7,864 8,021 (2.0 )% 30,767
31,304 (1.7 )% All other markets 128,345 128,573 (0.2
)% 496,906 493,875 0.6 % Total net operating income $
438,806 $ 436,903 0.4 % $ 1,663,235 $ 1,647,653 0.9 %
Same Store Facilities Operating Trends
by Market
Three Months Ended December 31,
Year Ended December 31, 2018 2017
Change 2018 2017 Change Weighted average square foot
occupancy: Los Angeles 94.8 % 95.2 % (0.4 )% 95.2 % 95.7 % (0.5 )%
San Francisco 93.6 % 94.5 % (1.0 )% 94.5 % 95.2 % (0.7 )% New York
93.8 % 94.1 % (0.3 )% 94.3 % 94.3 % 0.0 % Seattle-Tacoma 92.0 %
93.2 % (1.3 )% 93.2 % 94.5 % (1.4 )% Washington DC 91.9 % 91.3 %
0.7 % 92.4 % 92.7 % (0.3 )% Miami 92.1 % 93.5 % (1.5 )% 92.7 % 93.5
% (0.9 )% Chicago 90.1 % 89.8 % 0.3 % 90.3 % 91.2 % (1.0 )% Atlanta
93.1 % 93.0 % 0.1 % 93.2 % 93.5 % (0.3 )% Dallas-Ft. Worth 91.5 %
92.0 % (0.5 )% 91.7 % 93.3 % (1.7 )% Houston 89.7 % 94.2 % (4.8 )%
90.8 % 91.8 % (1.1 )% Philadelphia 94.6 % 93.6 % 1.1 % 94.8 % 94.6
% 0.2 % Orlando-Daytona 93.0 % 94.5 % (1.6 )% 94.4 % 95.0 % (0.6 )%
West Palm Beach 93.7 % 95.2 % (1.6 )% 94.1 % 94.9 % (0.8 )% Tampa
91.8 % 93.8 % (2.1 )% 93.0 % 94.3 % (1.4 )% Portland 92.9 % 94.1 %
(1.3 )% 94.1 % 95.3 % (1.3 )% All other markets 92.5 %
92.5 % 0.0 % 93.1 % 93.6 % (0.5 )% Total
weighted average square foot occupancy 92.6 % 93.1 %
(0.5 )% 93.2 % 93.8 % (0.6 )% Realized annual
rent per occupied square foot: Los Angeles $ 26.08 $ 25.12 3.8 % $
25.72 $ 24.67 4.3 % San Francisco 26.43 25.71 2.8 % 26.15 25.30 3.4
% New York 25.49 24.80 2.8 % 25.17 24.50 2.7 % Seattle-Tacoma 20.28
19.87 2.1 % 20.03 19.39 3.3 % Washington DC 21.65 21.44 1.0 % 21.41
21.16 1.2 % Miami 19.73 19.47 1.3 % 19.77 19.36 2.1 % Chicago 15.24
15.61 (2.4 )% 15.33 15.56 (1.5 )% Atlanta 13.32 13.13 1.4 % 13.19
12.89 2.3 % Dallas-Ft. Worth 13.23 13.53 (2.2 )% 13.34 13.46 (0.9
)% Houston 14.23 13.85 2.7 % 14.32 14.06 1.8 % Philadelphia 16.39
15.86 3.3 % 16.10 15.66 2.8 % Orlando-Daytona 14.06 13.64 3.1 %
13.88 13.31 4.3 % West Palm Beach 18.71 18.31 2.2 % 18.59 18.08 2.8
% Tampa 14.36 14.09 1.9 % 14.25 13.90 2.5 % Portland 18.76 18.72
0.2 % 18.70 18.61 0.5 % All other markets 14.37
14.20 1.2 % 14.27 14.03
1.7 % Total realized rent per occupied square foot $ 17.68 $
17.37 1.8 % $ 17.54 $ 17.15 2.3 %
Same Store Facilities Operating Trends
by Market
Three Months Ended December 31,
Year Ended December 31, 2018 2017 Change 2018
2017 Change REVPAF: Los Angeles $ 24.72 $ 23.91 3.4 % $
24.48 $ 23.60 3.7 % San Francisco 24.75 24.30 1.9 % 24.71 24.10 2.5
% New York 23.91 23.33 2.5 % 23.74 23.10 2.8 % Seattle-Tacoma 18.66
18.53 0.7 % 18.67 18.31 2.0 % Washington DC 19.89 19.57 1.6 % 19.78
19.62 0.8 % Miami 18.18 18.20 (0.1 )% 18.32 18.10 1.2 % Chicago
13.73 14.02 (2.1 )% 13.84 14.19 (2.5 )% Atlanta 12.40 12.21 1.6 %
12.30 12.06 2.0 % Dallas-Ft. Worth 12.10 12.45 (2.8 )% 12.23 12.57
(2.7 )% Houston 12.76 13.04 (2.1 )% 13.00 12.91 0.7 % Philadelphia
15.51 14.85 4.4 % 15.26 14.81 3.0 % Orlando-Daytona 13.08 12.89 1.5
% 13.10 12.65 3.6 % West Palm Beach 17.52 17.43 0.5 % 17.50 17.16
2.0 % Tampa 13.19 13.22 (0.2 )% 13.26 13.11 1.1 % Portland 17.43
17.61 (1.0 )% 17.59 17.74 (0.8 )% All other markets 13.30
13.13 1.3 % 13.28 13.13 1.1 % Total REVPAF $
16.38 $ 16.17 1.3 % $ 16.35 $ 16.09 1.6 %
Property Operations – Non Same Store
Facilities
The Non Same Store Facilities at December 31, 2018 represent 383
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). Additional
data and metrics with respect to these facilities is included in
the MD&A in our December 31, 2018 Form 10-K.
NON SAME STORE Three Months
Ended December 31, Year Ended December 31,
FACILITIES
2018 2017 Change 2018 2017 Change
(Dollar amounts in thousands, except for per square foot
amounts)
Revenues: 2018 acquisitions $ 2,879 $ - $ 2,879 $
5,167 $ - $ 5,167 2017 acquisitions 7,319 2,704 4,615 28,704 5,577
23,127 2016 acquisitions 9,945 9,427 518 39,166 36,336 2,830 2016 -
2018 new developments 11,460 6,310 5,150 37,625 17,391 20,234 2013
- 2015 new developments 6,842 6,470 372 26,725 24,910 1,815 Other
facilities 53,903 54,143 (240 ) 217,465
218,792 (1,327 ) Total revenues 92,348
79,054 13,294 354,852 303,006
51,846
Cost of operations before
depreciation and amortization
expense:
2018 acquisitions 1,276 - 1,276 2,141 - 2,141 2017 acquisitions
2,225 993 1,232 9,669 2,006 7,663 2016 acquisitions 2,886 3,345
(459 ) 13,523 13,693 (170 ) 2016 - 2018 new developments 6,737
3,028 3,709 22,120 11,433 10,687 2013 - 2015 new developments 1,714
2,038 (324 ) 8,031 8,093 (62 ) Other facilities 12,099
13,480 (1,381 ) 60,727 60,634 93
Total cost of operations 26,937 22,884
4,053 116,211 95,859 20,352
Net operating income: 2018 acquisitions 1,603 - 1,603
3,026 - 3,026 2017 acquisitions 5,094 1,711 3,383 19,035 3,571
15,464 2016 acquisitions 7,059 6,082 977 25,643 22,643 3,000 2016 -
2018 new developments 4,723 3,282 1,441 15,505 5,958 9,547 2013 -
2015 new developments 5,128 4,432 696 18,694 16,817 1,877 Other
facilities 41,804 40,663 1,141
156,738 158,158 (1,420 ) Net operating income (a) $
65,411 $ 56,170 $ 9,241 $ 238,641 $ 207,147 $ 31,494
(a) See attached reconciliation of self-storage net
operating income (“NOI”) to net income.
Investing and Capital
Activities
During the three months ended December 31, 2018, we acquired
nine self-storage facilities (two each in Georgia and Nebraska and
one each in Colorado, Indiana, Ohio, Oklahoma and Washington) with
0.6 million net rentable square feet for $73.2 million. During
2018, we acquired 25 self-storage facilities (six in Minnesota,
three in Nebraska, two each in Georgia, Indiana, Ohio, South
Carolina, Tennessee and Texas, and one each in Colorado, Kentucky,
Oklahoma and Washington) with 1.6 million net rentable square feet
for $181.0 million. Subsequent to December 31, 2018, we acquired or
were under contract to acquire 14 self-storage facilities (nine in
Virginia and one each in Colorado, Florida, Georgia, Kentucky and
Michigan) with 0.9 million net rentable square feet for $102.4
million.
During the three months ended December 31, 2018, we opened two
newly developed facilities and various expansion projects (0.6
million net rentable square feet – 0.2 million in Texas, 0.1
million each in Florida and Virginia and 0.2 million in other
states) costing $70 million. During 2018, we completed 18 newly
developed facilities and various expansion projects (3.0 million
net rentable square feet – 1.2 million in Texas, 0.6 million in
Colorado and 1.2 million in other states) costing an aggregate of
$348 million. At December 31, 2018, we had various facilities in
development (1.7 million net rentable square feet) estimated to
cost $253 million and various expansion projects (3.5 million net
rentable square feet) estimated to cost $354 million. Our aggregate
5.2 million net rentable square foot pipeline of development and
expansion facilities includes 1.4 million in Texas, 1.0 million in
Florida, 0.8 million in Minnesota, 0.4 million in Colorado, 0.3
million each in California and North Carolina and 1.0 million in
other states. The remaining $322 million of development costs for
these projects is expected to be incurred primarily in the next 18
months.
On October 15, 2018, Shurgard Europe completed an initial global
offering (the “Offering”), and its shares commenced trading on
Euronext Brussels under the “SHUR” symbol. In the Offering,
Shurgard Europe issued 25.0 million of its common shares to third
parties at a price of €23 per share. Our equity interest, comprised
of a direct and indirect pro-rata ownership interest in 31.3
million shares, decreased from 49% to 35.2% as a result of the
Offering. While we did not sell any shares in the Offering, and we
have no current plans to do so, we recorded a gain on disposition
of $151.6 million in the three months ending December 31, 2018, as
if we had sold a proportionate share of our investment in Shurgard
Europe. Shurgard Europe’s publicly reported information can be
obtained on its website, https://corporate.shurgard.eu and on the
website of the Luxembourg Stock Exchange, http://www.bourse.lu.
On October 18, 2018, we sold our property in West London to
Shurgard Europe for $42.1 million in cash and recorded a gain on
disposition of $31.5 million in the three months ended December 31,
2018.
On February 22, 2019, we called for redemption, and on March 28,
2019, we will redeem, our 6.375% Series Y Preferred Shares for $285
million.
Distributions Declared
On February 19, 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 March 28, 2019 to
shareholders of record as of March 13, 2019.
Fourth Quarter Conference
Call
A conference call is scheduled for February 27, 2019 at 10:00
a.m. (PST) to discuss the fourth 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 3294554). 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
March 13, 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, Events
Calendar.” All forms of replay utilize conference ID number
3294554.
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 December 31, 2018, we had interests in
2,429 self-storage facilities located in 38 states with
approximately 162 million net rentable square feet in the United
States and we owned a 35.2% common equity interest in Shurgard Self
Storage SA (Euronext Brussels:SHUR), which owned 232 self-storage
facilities located in seven Western European nations with
approximately 13 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 December 31, 2018.
Additional information about Public Storage is available on our
website, www.publicstorage.com.
We expect to release our 2018 Annual Report on Form I0-K within
approximately one business day.
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 Year Ended
December 31, December 31, 2018 2017 2018 2017
Revenues: Self-storage facilities $ 654,248 $ 634,218 $
2,597,607 $ 2,512,433 Ancillary operations 38,212
38,090 156,673 156,095
692,460 672,308 2,754,280
2,668,528
Expenses: Self-storage cost
of operations 150,031 141,145 695,731 657,633 Ancillary cost of
operations 10,343 10,734 43,991 50,345 Depreciation and
amortization 121,374 120,100 483,646 454,526 General and
administrative 28,442 20,551 118,720 82,882 Interest expense
7,953 8,137 32,542 12,690
318,143 300,667 1,374,630
1,258,076
Other increase (decrease)
to net income: Interest and other income 7,550 6,049 26,442
18,771 Equity in earnings of unconsolidated real estate entities
(a) 12,966 18,420 103,495 75,655 Gain on sale of real estate 36,078
446 37,903 1,421 Gain due to Shurgard Europe public offering
151,616 - 151,616 - Foreign currency exchange gain (loss) 5,379
(5,593 ) 18,117 (50,045 ) Casualty loss - -
- (7,789 ) Net income 587,906 390,963
1,717,223 1,448,465 Allocation to noncontrolling interests
(1,701 ) (1,564 ) (6,192 ) (6,248 ) Net income
allocable to Public Storage shareholders 586,205 389,399 1,711,031
1,442,217 Allocation of net income to: Preferred shareholders –
distributions (54,078 ) (54,078 ) (216,316 ) (236,535 ) Preferred
shareholders – redemptions - - - (29,330 ) Restricted share units
(2,025 ) (1,241 ) (5,815 ) (4,743 ) Net
income allocable to common shareholders $ 530,102 $ 334,080
$ 1,488,900 $ 1,171,609
Per common
share:
Net income per common share – Basic $ 3.05 $ 1.92 $
8.56 $ 6.75 Net income per common share – Diluted $
3.04 $ 1.92 $ 8.54 $ 6.73 Weighted
average common shares – Basic 174,075 173,771
173,969 173,613 Weighted average
common shares – Diluted 174,466 174,218
174,297 174,151 (a)
Equity in earnings reflects an aggregate reduction of $3.8 million
for the three months ended December 31, 2018 and $5.2 million for
the year ended December 31, 2018 with respect to Shurgard Europe
due to a casualty loss due to a fire at one of Shurgard Europe’s
facilities and costs associated with the Offering.
PUBLIC STORAGE
SELECTED BALANCE SHEET DATA
(Amounts in thousands, except share and
per share data)
December 31, 2018 December 31,
2017
ASSETS (Unaudited) Cash and equivalents $
361,218 $ 433,376 Operating real estate facilities: Land and
buildings, at cost 15,296,844 14,665,989 Accumulated depreciation
(6,140,072 ) (5,700,331 ) 9,156,772 8,965,658
Construction in process 285,339 264,441 Investments in
unconsolidated real estate entities 783,988 724,173 Goodwill and
other intangible assets, net 209,856 214,957 Other assets
131,097 130,287 Total assets $ 10,928,270
$ 10,732,892
LIABILITIES AND
EQUITY Senior unsecured notes $ 1,384,880 $ 1,402,109
Mortgage notes 27,403 29,213 Accrued and other liabilities
371,259 337,201 Total liabilities 1,783,542
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, 174,130,881 shares issued and outstanding, (173,853,370
shares at December 31, 2017) 17,413 17,385 Paid-in capital
5,718,485 5,648,399 Accumulated deficit (577,360 ) (675,711 )
Accumulated other comprehensive loss (64,060 )
(75,064 ) Total Public Storage shareholders’ equity 9,119,478
8,940,009 Noncontrolling interests 25,250
24,360 Total equity 9,144,728 8,964,369
Total liabilities and equity $ 10,928,270 $
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 Year Ended
December 31, December 31, 2018 2017 2018 2017
Computation of
FFO per Share:
Net income allocable to common shareholders $ 530,102 $
334,080 $ 1,488,900 $ 1,171,609 Eliminate items excluded from FFO:
Depreciation and amortization 121,374 120,100 483,646 454,526
Depreciation from unconsolidated real estate investments 21,630
19,296 79,868 71,931 Depreciation allocated to noncontrolling
interests and restricted share unitholders (822 ) (910 ) (3,646 )
(3,567 ) Gains on sale of real estate and Shurgard Europe IPO,
including our equity share from investments (189,802 )
(1,831 ) (227,332 ) (4,908 ) FFO allocable to
common shares (a) $ 482,482 $ 470,735 $ 1,821,436
$ 1,689,591 Diluted weighted average common shares
174,466 174,218 174,297
174,151 FFO per share (a) $ 2.77 $ 2.70
$ 10.45 $ 9.70
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share—Diluted $ 3.04 $ 1.92 $ 8.54 $ 6.73
Eliminate per share amounts excluded from FFO: Depreciation and
amortization allocable to common shareholders 0.81 0.79 3.21 3.00
Gains on sale of real estate and Shurgard Europe IPO, including our
equity share from investments (1.08 ) (0.01 )
(1.30 ) (0.03 ) FFO per share (a) $ 2.77 $ 2.70
$ 10.45 $ 9.70
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares $ 482,482 $ 470,735 $
1,821,436 $ 1,689,591 Eliminate effect of items included in FFO but
not FAD: Share-based compensation expense in excess of cash paid
16,602 9,615 57,589 22,711 Foreign currency exchange (gain) loss
(5,379 ) 5,593 (18,117 ) 50,045 Application of EITF D-42, including
our equity share from investments - 1,689 - 33,879 Less: Capital
expenditures to maintain real estate facilities (45,990 )
(42,255 ) (139,397 ) (124,780 ) FAD (a)
$ 447,715 $ 445,377 $ 1,721,511 $ 1,671,446
Distributions paid to common shareholders and
restricted share units $ 349,203 $ 348,672 $
1,396,364 $ 1,393,812 Distribution payout
ratio 78.0 % 78.3 % 81.1 % 83.4 %
Distributions per common share $ 2.00 $ 2.00 $
8.00 $ 8.00 (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 Year Ended
December 31, December 31, 2018 2017 2018 2017
Self-storage revenues for: Same Store Facilities $ 561,900 $
555,164 $ 2,242,755 $ 2,209,427 Non Same Store Facilities
92,348 79,054 354,852
303,006 Self-storage revenues 654,248 634,218 2,597,607
2,512,433 Self-storage cost of operations for: Same Store
Facilities 123,094 118,261 579,520 561,774 Non Same Store
Facilities 26,937 22,884 116,211
95,859 Self-storage cost of operations 150,031
141,145 695,731 657,633 Self-storage NOI for: Same Store
Facilities 438,806 436,903 1,663,235 1,647,653 Non Same Store
Facilities 65,411 56,170 238,641
207,147 Self-storage NOI (a) 504,217 493,073
1,901,876 1,854,800 Ancillary revenues 38,212 38,090 156,673
156,095 Ancillary cost of operations (10,343 ) (10,734 ) (43,991 )
(50,345 ) Depreciation and amortization (121,374 ) (120,100 )
(483,646 ) (454,526 ) General and administrative expense (28,442 )
(20,551 ) (118,720 ) (82,882 ) Interest and other income 7,550
6,049 26,442 18,771 Interest expense (7,953 ) (8,137 ) (32,542 )
(12,690 ) Equity in earnings of unconsolidated real estate entities
12,966 18,420 103,495 75,655 Gain on sale of real estate 36,078 446
37,903 1,421 Gain due to Shurgard Europe public offering 151,616 -
151,616 - Foreign currency exchange gain (loss) 5,379 (5,593 )
18,117 (50,045 ) Casualty loss - -
- (7,789 ) Net income on our income statement
$ 587,906 $ 390,963 $ 1,717,223 $ 1,448,465
(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, 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 net income presented on our income
statement.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190226006215/en/
Ryan Burke(818) 244-8080, Ext. 1141
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