Public Storage (NYSE:PSA) announced today operating results for
the three and nine months ended September 30, 2022.
“Public Storage’s performance and improved outlook reflect the
strength and quality of our assets and management team, backed by
several industry-leading platforms,” said Joe Russell, President
and Chief Executive Officer. “Our digital innovation centers on
enhanced customer service, which has contributed to direct
operating margins in excess of 80%, the highest in the self-storage
industry. The recent acquisition, development, and redevelopment
properties comprise more than 50 million square feet, or 25% of the
portfolio, and are generating significant growth. And our
long-standing focus on utilizing a disciplined balance sheet
provides exceptional capital access to execute on a wide set of
potential opportunities in the evolving macro environment. We are
well-positioned heading into 2023.”
Highlights for the Three Months Ended
September 30, 2022
- Reported net income allocable to common shareholders of $15.38
per diluted share.
- Reported core FFO allocable to common shareholders (“Core FFO”)
of $4.13 per diluted share, an increase of 20.8% relative to the
same period in 2021.
- Increased Same Store (as defined below) direct net operating
income by 16.5%, resulting from a 14.7% increase in Same Store
revenues.
- Achieved 80.3% Same Store direct net operating income margin,
an increase of 1.6% relative to the same period in 2021.
- Acquired 24 self-storage facilities with 1.7 million net
rentable square feet for $250.6 million. Subsequent to September
30, 2022, we acquired or were under contract to acquire 33
self-storage facilities with 1.7 million net rentable square feet,
for $262.6 million.
- Opened five newly developed facilities and completed various
expansion projects with 0.5 million net rentable square feet
costing $69.7 million. At September 30, 2022, we had various
facilities in development and expansion with 5.1 million net
rentable square feet estimated to cost $1.0 billion.
- Distributed a one-time dividend of $13.15 per common share
totaling $2.3 billion in August 2022, in connection with the sale
of our equity investment of PS Business Park, Inc. (“PSB”), upon
completion of its merger transaction with the affiliates of
Blackstone Real Estate (“Blackstone”) on July 20, 2022.
Operating Results for the Three Months
Ended September 30, 2022
For the three months ended September 30, 2022, net income
allocable to our common shareholders was $2,712.2 million or $15.38
per diluted common share, compared to $442.3 million or $2.52 per
diluted common share in 2021, representing an increase of $2,269.9
million or $12.86 per diluted common share. The increase is due
primarily to (i) a $2.1 billion gain on sale of our equity
investment in PSB, (ii) a $148.4 million increase in self-storage
net operating income, and (iii) a $59.3 million increase in foreign
currency exchange gains primarily associated with our Euro
denominated notes payable, partially offset by (iv) a $32.2 million
increase in depreciation and amortization expense, (v) a $24.7
million decrease in equity in earnings of unconsolidated real
estate entities due to the sale of our equity investment in PSB,
and (vi) a $10.4 million increase in interest expense.
The $148.4 million increase in self-storage net operating income
in the three months ended September 30, 2022 as compared to the
same period in 2021 is a result of a $91.9 million increase
attributable to our Same Store Facilities and a $56.5 million
increase attributable to our Non-Same Store Facilities (as defined
below). Revenues for the Same Store Facilities increased 14.7% or
$105.4 million in the three months ended September 30, 2022 as
compared to the same period in 2021, due primarily to higher
realized annual rent per occupied square foot, partially offset by
decline in occupancy. Cost of operations for the Same Store
Facilities increased by 7.7% or $13.5 million in the three months
ended September 30, 2022 as compared to the same period in 2021,
due primarily to increased property tax expense, marketing expense,
other direct property costs, and centralized management costs. The
increase in net operating income of $56.5 million for the Non-Same
Store Facilities is due primarily to the impact of facilities
acquired in 2021 and the fill-up of recently developed and expanded
facilities.
Operating Results for the Nine Months
Ended September 30, 2022
For the nine months ended September 30, 2022, net income
allocable to our common shareholders was $3,779.7 million or $21.44
per diluted common share, compared to $1,174.4 million or $6.70 per
diluted common share in 2021, representing an increase of $2,605.3
million or $14.74 per diluted common share. The increase is due
primarily to (i) a $2.1 billion gain on sale of our equity
investment in PSB, (ii) a $476.6 million increase in self-storage
net operating income, and (iii) a $163.7 million increase in
foreign currency exchange gains primarily associated with our Euro
denominated notes payable, partially offset by (iv) a $153.5
million increase in depreciation and amortization expense, and (v)
a $39.2 million increase in interest expense.
The $476.6 million increase in self-storage net operating income
in the nine months ended September 30, 2022 as compared to the same
period in 2021 is a result of a $283.2 million increase
attributable to our Same Store Facilities and a $193.4 million
increase attributable to our Non-Same Store Facilities. Revenues
for the Same Store Facilities increased 15.4% or $315.9 million in
the nine months ended September 30, 2022 as compared to the same
period in 2021, due primarily to higher realized annual rent per
occupied square foot, partially offset by decline in occupancy.
Cost of operations for the Same Store Facilities increased by 6.2%
or $32.7 million in the nine months ended September 30, 2022 as
compared to the same period in 2021, due primarily to increased
property tax expense, on-site property manager payroll expense,
other direct property costs, and centralized management costs. The
increase in net operating income of $193.4 million for the Non-Same
Store Facilities is due primarily to the impact of facilities
acquired in 2021 and the fill-up of recently developed and expanded
facilities.
Funds from Operations
Funds from Operations (“FFO”) and FFO per share are non-GAAP
measures defined by the National Association of Real Estate
Investment Trusts and are considered helpful measures of REIT
performance by REITs and many REIT analysts. FFO represents net
income before depreciation and amortization, which is excluded
because it 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. FFO also excludes
gains or losses on sale of real estate assets and real estate
impairment charges, which are also based upon historical costs and
are impacted by historical depreciation. FFO and FFO per share are
not a substitute for net income or earnings per share. FFO is not a
substitute for net cash flow in evaluating our liquidity or ability
to pay dividends, because it excludes investing and financing
activities presented on our consolidated statements of cash flows.
In addition, other REITs may compute these measures differently, so
comparisons among REITs may not be helpful.
For the three months ended September 30, 2022, FFO was $4.66 per
diluted common share as compared to $3.61 in the same period in
2021, representing an increase of 29.1%.
For the nine months ended September 30, 2022, FFO was $13.08 per
diluted common share, as compared to $9.69 in the same period in
2021, representing an increase of 35.0%.
We also present “Core FFO” and “Core FFO per share,” non-GAAP
measures that represent FFO and FFO per share excluding the impact
of (i) foreign currency exchange gains and losses, (ii) charges
related to the redemption of preferred securities, and (iii)
certain other non-cash and/or nonrecurring income or expense items
primarily representing, with respect to the periods presented
below, the impact of loss contingency accruals and casualties,
unrealized gain on private equity investments and our equity share
of merger transaction costs, severance of a senior executive, and
casualties from our equity investees. We review Core FFO and Core
FFO per share to evaluate our ongoing operating performance, and we
believe they are used by investors and REIT analysts in a similar
manner. However, Core FFO and Core FFO per share are not
substitutes for net income and net income per share. Because other
REITs may not compute Core FFO or Core FFO per share in the same
manner as we do, may not use the same terminology, or may not
present such measures, Core FFO and Core FFO per share may not be
comparable among REITs.
The following table reconciles net income to FFO and Core FFO
and reconciles diluted earnings per share to FFO per share and Core
FFO per share (unaudited):
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Percentage Change
2022
2021
Percentage Change
(Amounts in thousands, except per
share data)
Reconciliation of Net Income to FFO and
Core FFO:
Net income allocable to common
shareholders
$
2,712,161
$
442,327
513.2
%
$
3,779,666
$
1,174,386
221.8
%
Eliminate items excluded from FFO:
Depreciation and
amortization
218,963
187,611
657,131
505,218
Depreciation from
unconsolidated real estate investments
10,599
19,209
44,985
54,485
Depreciation allocated to
noncontrolling interests and restricted share unitholders
(1,843
)
(1,318
)
(4,841
)
(3,413
)
Gains on sale of real estate
investments, including our equity share from investments
(1,219
)
(12,572
)
(54,403
)
(31,156
)
Gain on sale of equity
investment in PS Business Parks, Inc.
(2,116,839
)
—
(2,116,839
)
—
FFO allocable to common shares
$
821,822
$
635,257
29.4
%
$
2,305,699
$
1,699,520
35.7
%
Eliminate the impact of items excluded
from Core FFO, including our equity share from investments:
Foreign currency exchange
gain
(100,170
)
(40,906
)
(237,270
)
(73,584
)
Preferred share redemption
charge
—
—
—
16,989
Property losses and tenant
claims due to casualties (a)
6,118
4,909
6,118
4,909
Other items
(344
)
2,000
422
(543
)
Core FFO allocable to common shares
$
727,426
$
601,260
21.0
%
$
2,074,969
$
1,647,291
26.0
%
Reconciliation of Diluted Earnings per
Share to FFO per Share and Core FFO per Share:
Diluted Earnings per share
$
15.38
$
2.52
510.3
%
$
21.44
$
6.70
220.0
%
Eliminate amounts per share excluded from
FFO:
Depreciation and
amortization
1.29
1.17
3.95
3.17
Gains on sale of real estate
investments, including our equity share from investments
(0.01
)
(0.08
)
(0.31
)
(0.18
)
Gain on sale of equity
investment in PS Business Parks, Inc.
(12.00
)
—
(12.00
)
—
FFO per share
$
4.66
$
3.61
29.1
%
$
13.08
$
9.69
35.0
%
Eliminate the per share impact of items
excluded from Core FFO, including our equity share from
investments:
Foreign currency exchange
gain
(0.57
)
(0.23
)
(1.35
)
(0.42
)
Preferred share redemption
charge
—
—
—
0.10
Property losses and tenant
claims due to casualties (a)
0.04
0.03
0.04
0.03
Other items
—
0.01
—
(0.01
)
Core FFO per share
$
4.13
$
3.42
20.8
%
$
11.77
$
9.39
25.3
%
Diluted weighted average common shares
176,328
175,806
176,325
175,398
(a)
Property losses and tenant claims
due to casualties were related to Hurricane Ian for the three and
nine months ended September 30, 2022, and Hurricane Ida for the
same periods in 2021, and were included in general and
administrative expenses and ancillary cost of operations on the
Selected Consolidated Income Statement Data.
Property Operations – Same Store
Facilities
The Same Store Facilities consist of facilities that have been
owned and operated on a stabilized level of occupancy, revenues,
and cost of operations since January 1, 2020. The composition of
our Same Store Facilities allows us to more effectively evaluate
the ongoing performance of our self-storage portfolio in 2020,
2021, and 2022 and exclude the impact of fill-up of unstabilized
facilities, which can significantly affect operating trends. We
believe the Same Store information is used by investors and
analysts in a similar manner. However, because other REITs may not
compute Same Store Facilities in the same manner as we do, may not
use the same terminology, or may not present such a measure, Same
Store Facilities may not be comparable among REITs. The following
table summarizes the historical operating results of these 2,282
facilities (149.5 million net rentable square feet) that represent
approximately 74% of the aggregate net rentable square feet of our
U.S. consolidated self-storage portfolio at September 30, 2022
(unaudited):
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Percentage Change
2022
2021
Percentage Change
(Dollar amounts in thousands,
except for per square foot data)
Revenues (a):
Rental income
$
795,700
$
695,556
14.4
%
$
2,286,214
$
1,984,053
15.2
%
Late charges and administrative
fees
26,827
21,553
24.5
%
74,521
60,798
22.6
%
Total revenues
822,527
717,109
14.7
%
2,360,735
2,044,851
15.4
%
Direct cost of operations (a):
Property taxes
72,716
70,021
3.8
%
213,947
204,287
4.7
%
On-site property manager
payroll
29,538
28,189
4.8
%
89,769
82,583
8.7
%
Repairs and maintenance
14,605
13,121
11.3
%
43,350
39,249
10.4
%
Utilities
12,020
11,133
8.0
%
33,609
31,308
7.3
%
Marketing
12,492
9,180
36.1
%
32,380
30,653
5.6
%
Other direct property costs
20,890
18,894
10.6
%
61,209
55,569
10.1
%
Total direct cost of
operations
162,261
150,538
7.8
%
474,264
443,649
6.9
%
Direct net operating income (b)
660,266
566,571
16.5
%
1,886,471
1,601,202
17.8
%
Indirect cost of operations (a):
Supervisory payroll
(8,329
)
(8,362
)
(0.4
)%
(26,635
)
(27,906
)
(4.6
)%
Centralized management
costs
(16,058
)
(13,808
)
16.3
%
(46,382
)
(40,136
)
15.6
%
Share-based compensation
(3,309
)
(3,736
)
(11.4
)%
(10,936
)
(13,825
)
(20.9
)%
Net operating income (c)
$
632,570
$
540,665
17.0
%
$
1,802,518
$
1,519,335
18.6
%
Gross margin (before indirect costs,
depreciation and amortization expense)
80.3
%
79.0
%
1.6
%
79.9
%
78.3
%
2.0
%
Gross margin (before depreciation and
amortization expense)
76.9
%
75.4
%
2.0
%
76.4
%
74.3
%
2.8
%
Weighted average for the period:
Square foot occupancy
94.5
%
96.8
%
(2.4
)%
95.3
%
96.5
%
(1.2
)%
Realized annual rental income per (d):
Occupied square foot
$
22.52
$
19.22
17.2
%
$
21.39
$
18.34
16.6
%
Available square foot
$
21.28
$
18.60
14.4
%
$
20.39
$
17.69
15.3
%
At September 30:
Square foot occupancy
93.3
%
95.7
%
(2.5
)%
Annual contract rent per
occupied square foot (e)
$
22.94
$
19.49
17.7
%
(a)
Revenues and cost of operations
do not include tenant reinsurance and merchandise sales and
expenses generated at the facilities.
(b)
Direct net operating income
(“Direct NOI”), a subtotal within NOI, is a non-GAAP financial
measure that excludes the impact of supervisory payroll,
centralized management costs, and share-based compensation in
addition to depreciation and amortization expense. We utilize
direct net operating income in evaluating property performance and
in evaluating property operating trends as compared to our
competitors.
(c)
See attached reconciliation of
self-storage NOI to net income.
(d)
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.
(e)
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.
Property Operations – Non-Same Store
Facilities
In addition to the 2,282 Same Store Facilities, we have 554
facilities that were not stabilized with respect to occupancies,
revenues, or cost of operations since January 1, 2020 or that we
did not own as of January 1, 2020, including 338 facilities that
were acquired, 59 newly developed facilities, 91 facilities that
have been expanded or are targeted for expansion, and 66 facilities
that are unstabilized because they are undergoing fill-up or were
damaged in casualty events (collectively, the “Non-Same Store
Facilities”). Operating data, metrics, and further commentary with
respect to these facilities, including detail by vintage, are
included in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under “Analysis of Net Income
– Self-Storage Operations” in our September 30, 2022 Form 10-Q.
Investing and Capital
Activities
During the three months ended September 30, 2022, we acquired 24
self-storage facilities (ten in Oklahoma, three in South Carolina,
two each in Alabama and Texas, and one each in Arizona, Florida,
Iowa, Nevada, New Jersey, North Carolina and Ohio) with 1.7 million
net rentable square feet for $250.6 million. During the nine months
ended September 30, 2022, we acquired 44 self-storage facilities
(ten in Oklahoma, seven in Texas, four in North Carolina, three in
South Carolina, two each in Alabama, Arizona, Florida, Maryland and
Nevada, and one each in Colorado, Georgia, Indiana, Iowa,
Minnesota, New Jersey, Ohio, Oregon, Pennsylvania and Tennessee)
with 3.2 million net rentable square feet for $501.9 million.
Additionally, on July 8, 2022, we acquired from PSB the
commercial interests in five properties at three sites jointly
occupied with our self-storage facilities located in Maryland and
Virginia, for $47.3 million.
Subsequent to September 30, 2022, we acquired or were under
contract to acquire 33 self-storage facilities across six states
with 1.7 million net rentable square feet, for $262.6 million.
During 2021, we acquired a portfolio of 48 properties (4.1
million net rentable square feet) operated under the brand name of
ezStorage for $1.8 billion. These facilities generated revenues of
$74.7 million, NOI of $59.0 million (including Direct NOI of $61.1
million), and average square footage occupancy of 90.1% for the
nine months ended September 30, 2022.
During 2021, we acquired a portfolio of 56 properties (7.5
million net rentable square feet) operated under the brand name of
All Storage for $1.5 billion. These facilities generated revenues
of $57.3 million, NOI of $33.5 million (including Direct NOI of
$35.7 million), and average square footage occupancy of 79.3% for
the nine months ended September 30, 2022.
During the three months ended September 30, 2022, we opened five
newly developed facilities and completed various expansion projects
(0.5 million net rentable square feet – 0.1 million each in
Florida, Illinois, Kentucky, Michigan and Texas) costing $69.7
million. During nine months ended September 30, 2022, we opened
five newly developed facilities and completed various expansion
projects (0.9 million net rentable square feet – 0.2 million each
in Florida and Minnesota, and 0.1 million each in Illinois,
Kentucky, Michigan, New Jersey and Texas) costing $126.0 million.
At September 30, 2022, we had various facilities in development
(2.1 million net rentable square feet) estimated to cost $421.0
million and various expansion projects (3.0 million net rentable
square feet) estimated to cost $590.9 million. Our aggregate 5.1
million net rentable square foot pipeline of development and
expansion facilities includes 1.8 million in California, 0.6
million in Texas, 0.5 million in Florida, 0.4 million in Maryland,
0.3 million in Washington, 0.2 million each in Hawaii, Michigan,
Nevada, New Jersey and New York, and 0.5 million in other states.
The remaining $605.5 million of development costs for these
projects is expected to be incurred primarily in the next 18 to 24
months.
On April 24, 2022, PSB entered into an Agreement and Plan of
Merger whereby affiliates of Blackstone agreed to acquire all
outstanding shares of PSB’s common stock for $187.50 per share in
cash. On July 20, 2022, PSB announced that it completed the merger
transaction with Blackstone. Each share of PSB common stock and
each common unit of partnership interest we held in PSB were
converted into the right to receive the merger consideration of
$187.50 per share or unit, including a $5.25 closing cash dividend
per share or unit, and a $0.22 prorated quarterly cash dividend per
share or unit, for a total of $187.72 per share or unit. At the
close of the merger transaction, we received a total of $2.7
billion of cash proceeds and recognized a gain of $2.1 billion,
which was classified within gain on sale of our equity investment
in PS Business Parks, Inc. in the Consolidated Statement of
Income.
In connection with the sale of our equity investment in PSB, on
August 4, 2022, we paid a special cash dividend of $13.15 per
common share, totaling approximately $2.3 billion, to shareholders
of record as of August 1, 2022.
On August 15, 2022, the Company redeemed its 2.370% Senior Notes
due September 15, 2022, with an aggregate principal amount of
$500.0 million.
Distributions Declared
On October 26, 2022, 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 December 29, 2022 to
shareholders of record as of December 14, 2022.
Outlook for the Year Ending December
31, 2022
The following table outlines the Company’s Core FFO per share
estimate and certain underlying assumptions for the year ending
December 31, 2022, including the impact of the sale of our
investment in PSB to Blackstone on July 20, 2022:
Guidance Ranges for
2022
Low
High
(Amounts in thousands, except per
share data)
Same Store:
Revenue growth
13.50%
15.00%
Expense growth
6.00%
8.00%
Net operating income growth
15.40%
18.00%
Acquisitions
$800,000
Development openings
$250,000
Non-Same Store net operating income
$500,000
$510,000
Ancillary net operating income
$160,000
$165,000
General and administrative expense
$105,000
$111,000
Interest expense
$140,000
Preferred dividends
$195,000
Capital expenditures
$400,000
$450,000
Core FFO per share (before the impact of
the sale of PSB)
$15.57
$15.97
Impact of the sale of PSB
(0.22)
(0.22)
Core FFO per share
$15.35
$15.75
Incremental Non-Same Store NOI to
stabilization (2023 and beyond)
$157,000
Forward-looking Core FFO per share measures exclude estimates
for the impact of (i) foreign currency exchange gains and losses,
(ii) charges related to the redemption of preferred securities, and
(iii) certain other significant non-cash and/or nonrecurring income
or expense items such as loss contingency accruals, casualties,
transactional due diligence, and advisory costs. Public Storage is
unable to provide a reconciliation of Core FFO per share guidance
measures to corresponding U.S. GAAP measures on a forward-looking
basis without unreasonable effort due to the overall high
variability of most of the foregoing items that have been excluded.
The items that are being excluded are difficult to predict and a
reconciliation could result in disclosure that would be imprecise
or potentially misleading. Material changes to any one of these
items could have a significant effect on our guidance and future
U.S. GAAP results.
Third Quarter Conference
Call
A conference call is scheduled for November 2, 2022 at 9:00 a.m.
(PDT) to discuss the third quarter earnings results. The domestic
dial-in number is (800) 343-4849, and the international dial-in
number is (203) 518-9848 (conference ID number for either domestic
or international is PSAQ322). A simultaneous audio webcast may be
accessed by using the link at www.publicstorage.com under “About
Us, Investor Relations, News and Events, Event Calendar.” A replay
of the conference call may be accessed through November 9, 2022 by
calling (800) 727-1367 (domestic), (402) 220-2669 (international)
or by using the link at www.publicstorage.com under “About Us,
Investor Relations, News and Events, Event Calendar.”
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 September 30, 2022, we had: (i)
interests in 2,836 self-storage facilities located in 40 states
with approximately 202 million net rentable square feet in the
United States and (ii) a 35% common equity interest in Shurgard
Self-Storage SA (Euronext Brussels:SHUR), which owned 259
self-storage facilities located in seven Western European nations
with approximately 14 million net rentable square feet operated
under the Shurgard® brand. Our headquarters are located in
Glendale, California.
This press release, our Form 10-Q for the third quarter of 2022,
a financial supplement, and additional information about Public
Storage are 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. Such forward-looking statements include statements relating
to our 2022 outlook and all underlying assumptions, our expected
acquisition, disposition, development and redevelopment activity,
supply and demand for our self-storage facilities, information
relating to operating trends in our markets, expectations regarding
operating expenses, including property tax changes, expectations
regarding the impacts from inflation and a potential future
recession, our strategic priorities, expectations with respect to
financing activities, rental rates, cap rates and yields, leasing
expectations, our credit ratings, and all other statements other
than statements of historical fact. Such statements are based on
management’s beliefs and assumptions made based on information
currently available to management. All statements in this press
release, other than statements of historical fact, are
forward-looking statements that may be identified by the use of the
words “outlook,” “guidance,” “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 factors and risks 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 22,
2022 and in our other filings with the SEC. These include changes
in demand for our facilities, impacts of natural disasters, adverse
changes in laws and regulations including governing property tax,
evictions, rental rates, minimum wage levels, and insurance,
adverse economic effects from the COVID-19 pandemic, international
military conflicts, or similar events impacting public health
and/or economic activity, increases in the costs of our primary
customer acquisition channels, adverse impacts to us and our
customers from inflation, unfavorable foreign currency rate
fluctuations, changes in federal or state tax laws related to the
taxation of REITs, and security breaches, including ransomware, or
a failure of our networks, systems or technology.
PUBLIC STORAGE
SELECTED CONSOLIDATED INCOME
STATEMENT DATA
(Amounts in thousands, except per
share data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues:
Self-storage facilities
$
1,027,374
$
840,510
$
2,917,675
$
2,333,850
Ancillary operations
60,757
54,421
175,946
157,658
1,088,131
894,931
3,093,621
2,491,508
Expenses:
Self-storage cost of operations
255,470
216,999
738,953
631,699
Ancillary cost of operations
21,572
19,735
54,297
52,044
Depreciation and amortization
220,772
188,552
661,608
508,139
General and administrative
29,501
31,682
81,401
78,996
Interest expense
34,113
23,736
100,178
60,980
561,428
480,704
1,636,437
1,331,858
Other increases to net income:
Interest and other income
12,736
3,356
26,394
9,321
Equity in earnings of unconsolidated real
estate entities
8,180
32,860
100,129
81,382
Foreign currency exchange gain
100,170
40,906
237,270
73,584
Gain on sale of real estate
1,503
279
1,503
13,683
Gain on sale of equity investment in PS
Business Parks, Inc.
2,128,860
—
2,128,860
—
Net income
2,778,152
491,628
3,951,340
1,337,620
Allocation to noncontrolling interests
(9,158
)
(1,537
)
(14,553
)
(4,067
)
Net income allocable to Public Storage
shareholders
2,768,994
490,091
3,936,787
1,333,553
Allocation of net income to:
Preferred shareholders – distributions
(48,678
)
(46,237
)
(145,716
)
(138,500
)
Preferred shareholders – redemptions
—
—
—
(16,989
)
Restricted share units
(8,155
)
(1,527
)
(11,405
)
(3,678
)
Net income allocable to common
shareholders
$
2,712,161
$
442,327
$
3,779,666
$
1,174,386
Per common
share:
Net income per common share – Basic
$
15.47
$
2.53
$
21.57
$
6.72
Net income per common share – Diluted
$
15.38
$
2.52
$
21.44
$
6.70
Weighted average common shares – Basic
175,283
174,926
175,227
174,787
Weighted average common shares –
Diluted
176,328
175,806
176,325
175,398
PUBLIC STORAGE
SELECTED CONSOLIDATED BALANCE
SHEET DATA
(Amounts in thousands, except
share and per share data)
September 30, 2022
December 31, 2021
ASSETS
(Unaudited)
Cash and equivalents
$
883,787
$
734,599
Real estate facilities, at cost:
Land
5,240,841
5,134,060
Buildings
18,535,053
17,673,773
23,775,894
22,807,833
Accumulated depreciation
(8,346,598
)
(7,773,308
)
15,429,296
15,034,525
Construction in process
406,354
272,471
15,835,650
15,306,996
Investments in unconsolidated real estate
entities
252,648
828,763
Goodwill and other intangible assets,
net
239,811
302,894
Other assets
239,024
207,656
Total assets
$
17,450,920
$
17,380,908
LIABILITIES AND EQUITY
Notes payable
$
6,740,451
$
7,475,279
Accrued and other liabilities
589,712
482,091
Total liabilities
7,330,163
7,957,370
Redeemable noncontrolling interests
—
68,249
Equity:
Public Storage shareholders’ equity:
Preferred Shares, $0.01 par value,
100,000,000 shares authorized, 174,000 shares issued (in series)
and outstanding, (164,000 at December 31, 2021) at liquidation
preference
4,350,000
4,100,000
Common Shares, $0.10 par value,
650,000,000 shares authorized, 175,336,452 shares issued and
outstanding (175,134,455 shares at December 31, 2021)
17,534
17,513
Paid-in capital
5,878,739
5,821,667
Accumulated deficit
(122,631
)
(550,416
)
Accumulated other comprehensive loss
(96,470
)
(53,587
)
Total Public Storage shareholders’
equity
10,027,172
9,335,177
Noncontrolling interests
93,585
20,112
Total equity
10,120,757
9,355,289
Total liabilities, redeemable
noncontrolling interests and equity
$
17,450,920
$
17,380,908
PUBLIC STORAGE
SELECTED FINANCIAL
DATA
Computation of Funds Available
for Distribution
(Unaudited – amounts in thousands
except per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
FFO allocable to common shares
$
821,822
$
635,257
$
2,305,699
$
1,699,520
Eliminate effect of items included in FFO
but not FAD:
Share-based compensation expense in excess
of cash paid
12,962
13,171
31,608
37,247
Foreign currency exchange gain
(100,170
)
(40,906
)
(237,270
)
(73,584
)
Impact of preferred share redemption
charges, including equity investment share
—
—
—
16,989
Less: Capital expenditures to maintain
real estate facilities
(123,695
)
(83,025
)
(329,253
)
(177,641
)
FAD (a)
$
610,919
$
524,497
$
1,770,784
$
1,502,531
Distributions paid to common
shareholders:
Regular
$
350,348
$
349,834
$
1,050,742
$
1,048,266
Special (b)
2,302,414
—
2,302,414
—
Total distributions paid to common
shareholders
$
2,652,762
$
349,834
$
3,353,156
$
1,048,266
Distribution payout ratio
434.2
%
66.7
%
189.4
%
69.8
%
Distribution payout ratio (on regular
dividends only) (c)
57.3
%
66.7
%
59.3
%
69.8
%
Distributions per common share:
Regular
$
2.00
$
2.00
$
6.00
$
6.00
Special (b)
$
13.15
$
—
$
13.15
$
—
(a)
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.
FAD is not a substitute for GAAP net cash flow in evaluating our
liquidity or ability to pay dividends, because it excludes
investing and financing activities presented on our statements of
cash flows. In addition, other REITs may compute this measure
differently, so comparisons among REITs may not be helpful.
(b)
A special dividend of $13.15 per
common share was paid on August 4, 2022, in connection with the
gain on sale of our equity investment in PSB on July 20, 2022.
(c)
Supplemental payout ratio,
excluding the impact of the special dividend, which was due to the
gain on sale of our equity investment in PSB. This supplemental
measure is presented to portray regular dividends, because FAD
excludes the gain on sale of our equity investment in PSB.
PUBLIC STORAGE
SELECTED FINANCIAL
DATA
Reconciliation of Self-Storage
Net Operating Income to Net Income
(Unaudited – amounts in
thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Self-storage revenues for:
Same Store Facilities
$
822,527
$
717,109
$
2,360,735
$
2,044,851
Acquired facilities
108,989
51,007
290,858
94,502
Newly developed and expanded
facilities
71,362
52,806
197,337
140,497
Other non-same store facilities
24,496
19,588
68,745
54,000
Self-storage revenues
1,027,374
840,510
2,917,675
2,333,850
Self-storage cost of operations for:
Same Store Facilities
189,957
176,444
558,217
525,516
Acquired facilities
38,058
16,555
101,949
35,693
Newly developed and expanded
facilities
21,265
18,075
59,986
52,710
Other non-same store facilities
6,190
5,925
18,801
17,780
Self-storage cost of operations
255,470
216,999
738,953
631,699
Self-storage NOI for:
Same Store Facilities
632,570
540,665
1,802,518
1,519,335
Acquired facilities
70,931
34,452
188,909
58,809
Newly developed and expanded
facilities
50,097
34,731
137,351
87,787
Other non-same store facilities
18,306
13,663
49,944
36,220
Self-storage NOI (a)
771,904
623,511
2,178,722
1,702,151
Ancillary revenues
60,757
54,421
175,946
157,658
Ancillary cost of operations
(21,572
)
(19,735
)
(54,297
)
(52,044
)
Depreciation and amortization
(220,772
)
(188,552
)
(661,608
)
(508,139
)
General and administrative expense
(29,501
)
(31,682
)
(81,401
)
(78,996
)
Interest and other income
12,736
3,356
26,394
9,321
Interest expense
(34,113
)
(23,736
)
(100,178
)
(60,980
)
Equity in earnings of unconsolidated real
estate entities
8,180
32,860
100,129
81,382
Gain on sale of real estate
1,503
279
1,503
13,683
Gain on sale of equity investment in PS
Business Parks, Inc.
2,128,860
—
2,128,860
—
Foreign currency exchange gain
100,170
40,906
237,270
73,584
Net income on our income statement
$
2,778,152
$
491,628
$
3,951,340
$
1,337,620
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005861/en/
Ryan Burke (818) 244-8080, Ext. 1141
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