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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from
____________
to
____________.
Commission File Number:
001-33519
Public Storage
(Exact name of registrant as specified in its charter)
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Maryland |
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95-3551121 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification Number) |
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701 Western Avenue, Glendale, California
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91201-2349 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code:
(818) 244-8080.
Former name, former address and former fiscal, if changed since
last report: N/A
Securities registered pursuant to Section 12b of the
Act:
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Title of Class |
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Trading Symbol |
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Name of each exchange on which registered |
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Common Shares, $0.10 par value |
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PSA |
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New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 5.150% Cum Pref
Share, Series F, $0.01 par value |
|
PSAPrF |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 5.050% Cum Pref
Share, Series G, $0.01 par value |
|
PSAPrG |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 5.600% Cum Pref
Share, Series H, $0.01 par value |
|
PSAPrH |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref
Share, Series I, $0.01 par value |
|
PSAPrI |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.700% Cum Pref
Share, Series J, $0.01 par value |
|
PSAPrJ |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.750% Cum Pref
Share, Series K, $0.01 par value |
|
PSAPrK |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.625% Cum Pref
Share, Series L, $0.01 par value |
|
PSAPrL |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.125% Cum Pref
Share, Series M, $0.01 par value |
|
PSAPrM |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 3.875% Cum Pref
Share, Series N, $0.01 par value |
|
PSAPrN |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 3.900% Cum Pref
Share, Series O, $0.01 par value |
|
PSAPrO |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.000% Cum Pref
Share, Series P, $0.01 par value |
|
PSAPrP |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 3.950% Cum Pref
Share, Series Q, $0.01 par value |
|
PSAPrQ |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.000% Cum Pref
Share, Series R, $0.01 par value |
|
PSAPrR |
|
New York Stock Exchange |
|
Depositary Shares Each Representing 1/1,000 of a 4.100% Cum Pref
Share, Series S, $0.01 par value |
|
PSAPrS |
|
New York Stock Exchange |
|
0.875% Senior Notes due 2032 |
|
PSA32 |
|
New York Stock Exchange |
|
0.500% Senior Notes due 2030 |
|
PSA30 |
|
New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for at least the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated filer |
Accelerated
filer |
Non-accelerated filer |
Smaller reporting company |
Emerging growth company |
|
☒ |
☐ |
☐ |
☐ |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
Indicate the number of the registrant’s outstanding common shares
of beneficial interest, as of October 27, 2022:
Common Shares of beneficial interest, $0.10 par value per share –
175,638,388 shares
PUBLIC STORAGE
INDEX
|
|
|
|
|
|
|
|
|
|
PART I |
FINANCIAL INFORMATION |
Pages |
|
|
|
|
Item 1. |
Consolidated Financial Statements (Unaudited) |
|
|
|
|
|
|
Consolidated Balance Sheets |
|
|
|
|
|
|
Consolidated Statements of Income |
|
|
|
|
|
|
Consolidated Statements of Comprehensive Income |
|
|
|
|
|
|
Consolidated Statements of Equity and Redeemable Noncontrolling
Interests |
|
|
|
|
|
|
Consolidated Statements of Cash Flows |
|
|
|
|
|
|
Condensed Notes to Consolidated Financial Statements |
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
|
|
|
|
|
Item 3. |
Quantitative and Qualitative Disclosures About Market
Risk |
|
|
|
|
|
Item 4. |
Controls and Procedures |
|
|
|
|
|
PART II |
OTHER INFORMATION
(Items 3, 4 and 5 are not applicable)
|
|
|
|
|
|
Item 1. |
Legal Proceedings |
|
|
|
|
|
Item 1A. |
Risk Factors |
|
|
|
|
|
Item 2. |
Unregistered Sales of Equity Securities and Use of
Proceeds |
|
|
|
|
|
Item 6. |
Exhibits |
|
PUBLIC STORAGE
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
(Unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
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 |
|
See accompanying notes.
1
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(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 |
(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 |
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
15.47 |
|
|
$ |
2.53 |
|
|
$ |
21.57 |
|
|
$ |
6.72 |
|
|
|
|
Diluted |
$ |
15.38 |
|
|
$ |
2.52 |
|
|
$ |
21.44 |
|
|
$ |
6.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
175,283 |
|
174,926 |
|
175,227 |
|
174,787 |
|
|
|
Diluted weighted average common shares outstanding |
176,328 |
|
175,806 |
|
176,325 |
|
175,398 |
|
|
See accompanying notes.
2
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
2,778,152 |
|
|
$ |
491,628 |
|
|
$ |
3,951,340 |
|
|
$ |
1,337,620 |
|
|
|
|
Foreign currency exchange loss on investment in
Shurgard |
(17,253) |
|
|
(6,898) |
|
|
(42,883) |
|
|
(9,579) |
|
|
|
|
Total comprehensive income |
2,760,899 |
|
|
484,730 |
|
|
3,908,457 |
|
|
1,328,041 |
|
|
|
|
Allocation to noncontrolling interests |
(9,158) |
|
|
(1,537) |
|
|
(14,553) |
|
|
(4,067) |
|
|
|
|
Comprehensive income allocable to Public Storage
shareholders |
$ |
2,751,741 |
|
|
$ |
483,193 |
|
|
$ |
3,893,904 |
|
|
$ |
1,323,974 |
|
|
|
See accompanying notes.
3
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING
INTERESTS
Three Months Ended September 30, 2022
(Amounts in thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferred Shares |
|
Common Shares |
|
Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Public Storage Shareholders' Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
Redeemable Noncontrolling Interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2022
|
$ |
4,350,000 |
|
|
$ |
17,524 |
|
|
$ |
5,848,632 |
|
|
$ |
(182,213) |
|
|
$ |
(79,217) |
|
|
$ |
9,954,726 |
|
|
$ |
93,622 |
|
|
$ |
10,048,348 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in connection with share-based
compensation (97,189 shares)
|
— |
|
|
10 |
|
|
16,445 |
|
|
— |
|
|
— |
|
|
16,455 |
|
|
— |
|
|
16,455 |
|
|
— |
|
|
Taxes withheld upon net share settlement of restricted share
units |
— |
|
|
— |
|
|
(779) |
|
|
— |
|
|
— |
|
|
(779) |
|
|
— |
|
|
(779) |
|
|
— |
|
|
Share-based compensation expense |
— |
|
|
— |
|
|
14,441 |
|
|
— |
|
|
— |
|
|
14,441 |
|
|
— |
|
|
14,441 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
561 |
|
|
561 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
2,778,152 |
|
|
— |
|
|
2,778,152 |
|
|
— |
|
|
2,778,152 |
|
|
— |
|
|
Net income allocated to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(9,158) |
|
|
— |
|
|
(9,158) |
|
|
9,158 |
|
|
— |
|
|
— |
|
|
Distributions to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shareholders (Note 9) |
— |
|
|
— |
|
|
— |
|
|
(48,678) |
|
|
— |
|
|
(48,678) |
|
|
— |
|
|
(48,678) |
|
|
— |
|
|
Noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,756) |
|
|
(9,756) |
|
|
— |
|
|
Common shareholders and restricted share unitholders ($15.15 per
share) (Note 9)
|
— |
|
|
— |
|
|
— |
|
|
(2,660,734) |
|
|
— |
|
|
(2,660,734) |
|
|
— |
|
|
(2,660,734) |
|
|
— |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,253) |
|
|
(17,253) |
|
|
— |
|
|
(17,253) |
|
|
— |
|
|
Balances at September 30, 2022
|
$ |
4,350,000 |
|
|
$ |
17,534 |
|
|
$ |
5,878,739 |
|
|
$ |
(122,631) |
|
|
$ |
(96,470) |
|
|
$ |
10,027,172 |
|
|
$ |
93,585 |
|
|
$ |
10,120,757 |
|
|
$ |
— |
|
See accompanying notes.
4
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING
INTERESTS
Three Months Ended September 30, 2021
(Amounts in thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferred Shares |
|
Common Shares |
|
Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Public Storage Shareholders' Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
Redeemable Noncontrolling Interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2021
|
$ |
3,871,250 |
|
|
$ |
17,486 |
|
|
$ |
5,764,672 |
|
|
$ |
(863,742) |
|
|
$ |
(46,082) |
|
|
$ |
8,743,584 |
|
|
$ |
19,519 |
|
|
$ |
8,763,103 |
|
|
$ |
— |
|
|
Issuance of 5,750 preferred shares
|
143,750 |
|
|
— |
|
|
(4,777) |
|
|
— |
|
|
— |
|
|
138,973 |
|
|
— |
|
|
138,973 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in connection with share-based
compensation (183,823 shares)
|
— |
|
|
19 |
|
|
33,795 |
|
|
— |
|
|
— |
|
|
33,814 |
|
|
— |
|
|
33,814 |
|
|
— |
|
|
Share-based compensation expense, net of cash paid in lieu of
common shares |
— |
|
|
— |
|
|
15,253 |
|
|
— |
|
|
— |
|
|
15,253 |
|
|
— |
|
|
15,253 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
594 |
|
|
594 |
|
|
— |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
491,628 |
|
|
— |
|
|
491,628 |
|
|
— |
|
|
491,628 |
|
|
— |
|
|
Net income allocated to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(1,537) |
|
|
— |
|
|
(1,537) |
|
|
1,537 |
|
|
— |
|
|
— |
|
|
Distributions to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shareholders |
— |
|
|
— |
|
|
— |
|
|
(46,237) |
|
|
— |
|
|
(46,237) |
|
|
— |
|
|
(46,237) |
|
|
— |
|
|
Noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,706) |
|
|
(1,706) |
|
|
— |
|
|
Common shareholders and restricted share unitholders ($2.00 per
share)
|
— |
|
|
— |
|
|
— |
|
|
(351,226) |
|
|
— |
|
|
(351,226) |
|
|
— |
|
|
(351,226) |
|
|
— |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,898) |
|
|
(6,898) |
|
|
— |
|
|
(6,898) |
|
|
— |
|
|
Balances at September 30, 2021
|
$ |
4,015,000 |
|
|
$ |
17,505 |
|
|
$ |
5,808,943 |
|
|
$ |
(771,114) |
|
|
$ |
(52,980) |
|
|
$ |
9,017,354 |
|
|
$ |
19,944 |
|
|
$ |
9,037,298 |
|
|
$ |
— |
|
See accompanying notes.
5
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING
INTERESTS
Nine Months Ended September 30, 2022
(Amounts in thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferred Shares |
|
Common Shares |
|
Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Public Storage Shareholders' Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
Redeemable Noncontrolling Interests |
|
Balances at December 31, 2021
|
$ |
4,100,000 |
|
|
$ |
17,513 |
|
|
$ |
5,821,667 |
|
|
$ |
(550,416) |
|
|
$ |
(53,587) |
|
|
$ |
9,335,177 |
|
|
$ |
20,112 |
|
|
$ |
9,355,289 |
|
|
$ |
68,249 |
|
|
Issuance of 10,000 preferred shares (Note 9)
|
250,000 |
|
|
— |
|
|
(7,168) |
|
|
— |
|
|
— |
|
|
242,832 |
|
|
— |
|
|
242,832 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares in connection with share-based
compensation (201,997 shares) (Note 11)
|
— |
|
|
21 |
|
|
27,994 |
|
|
— |
|
|
— |
|
|
28,015 |
|
|
— |
|
|
28,015 |
|
|
— |
|
|
Taxes withheld upon net share settlement of restricted share units
(Note 11) |
— |
|
|
— |
|
|
(12,989) |
|
|
— |
|
|
— |
|
|
(12,989) |
|
|
— |
|
|
(12,989) |
|
|
— |
|
|
Share-based compensation expense (Note 11) |
— |
|
|
— |
|
|
49,235 |
|
|
— |
|
|
— |
|
|
49,235 |
|
|
— |
|
|
49,235 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,698 |
|
|
6,698 |
|
|
15,426 |
|
|
Reclassification from redeemable noncontrolling interests to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
83,826 |
|
|
83,826 |
|
|
(83,826) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
3,951,340 |
|
|
— |
|
|
3,951,340 |
|
|
— |
|
|
3,951,340 |
|
|
— |
|
|
Net income allocated to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(14,553) |
|
|
— |
|
|
(14,553) |
|
|
13,893 |
|
|
(660) |
|
|
660 |
|
|
Distributions to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shareholders (Note 9) |
— |
|
|
— |
|
|
— |
|
|
(145,716) |
|
|
— |
|
|
(145,716) |
|
|
— |
|
|
(145,716) |
|
|
— |
|
|
Noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(30,944) |
|
|
(30,944) |
|
|
(509) |
|
|
Common shareholders and restricted share unitholders ($19.15 per
share) (Note 9)
|
— |
|
|
— |
|
|
— |
|
|
(3,363,286) |
|
|
— |
|
|
(3,363,286) |
|
|
— |
|
|
(3,363,286) |
|
|
— |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(42,883) |
|
|
(42,883) |
|
|
— |
|
|
(42,883) |
|
|
— |
|
|
Balances at September 30, 2022
|
$ |
4,350,000 |
|
|
$ |
17,534 |
|
|
$ |
5,878,739 |
|
|
$ |
(122,631) |
|
|
$ |
(96,470) |
|
|
$ |
10,027,172 |
|
|
$ |
93,585 |
|
|
$ |
10,120,757 |
|
|
$ |
— |
|
See accompanying notes.
6
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING
INTERESTS
Nine Months Ended September 30, 2021
(Amounts in thousands, except share and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preferred Shares |
|
Common Shares |
|
Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated
Other Comprehensive Loss |
|
Total
Public Storage Shareholders' Equity |
|
Noncontrolling Interests |
|
Total Equity |
|
Redeemable Noncontrolling Interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2020
|
$ |
3,792,500 |
|
|
$ |
17,458 |
|
|
$ |
5,707,101 |
|
|
$ |
(914,791) |
|
|
$ |
(43,401) |
|
|
$ |
8,558,867 |
|
|
$ |
18,032 |
|
|
$ |
8,576,899 |
|
|
$ |
— |
|
|
Issuance of 29,900 preferred shares
|
747,500 |
|
|
— |
|
|
(22,189) |
|
|
— |
|
|
— |
|
|
725,311 |
|
|
— |
|
|
725,311 |
|
|
— |
|
|
Redemption and shares called for redemption of 21,000 preferred
shares
|
(525,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(525,000) |
|
|
— |
|
|
(525,000) |
|
|
— |
|
|
Issuance of common shares in connection with share-based
compensation (466,518 shares)
|
— |
|
|
47 |
|
|
81,365 |
|
|
— |
|
|
— |
|
|
81,412 |
|
|
— |
|
|
81,412 |
|
|
— |
|
|
Share-based compensation expense, net of cash paid in lieu of
common shares
|
— |
|
|
— |
|
|
42,698 |
|
|
— |
|
|
— |
|
|
42,698 |
|
|
— |
|
|
42,698 |
|
|
— |
|
|
Acquisition of noncontrolling interests |
— |
|
|
— |
|
|
(32) |
|
|
— |
|
|
— |
|
|
(32) |
|
|
(1) |
|
|
(33) |
|
|
— |
|
|
Contributions by noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,359 |
|
|
2,359 |
|
|
— |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
1,337,620 |
|
|
— |
|
|
1,337,620 |
|
|
— |
|
|
1,337,620 |
|
|
— |
|
|
Net income allocated to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(4,067) |
|
|
— |
|
|
(4,067) |
|
|
4,067 |
|
|
— |
|
|
— |
|
|
Distributions to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shareholders |
— |
|
|
— |
|
|
— |
|
|
(138,500) |
|
|
— |
|
|
(138,500) |
|
|
— |
|
|
(138,500) |
|
|
— |
|
|
Noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,513) |
|
|
(4,513) |
|
|
— |
|
|
Common shareholders and restricted share unitholders ($6.00 per
share)
|
— |
|
|
— |
|
|
— |
|
|
(1,051,376) |
|
|
— |
|
|
(1,051,376) |
|
|
— |
|
|
(1,051,376) |
|
|
— |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,579) |
|
|
(9,579) |
|
|
— |
|
|
(9,579) |
|
|
— |
|
|
Balances at September 30, 2021
|
$ |
4,015,000 |
|
|
$ |
17,505 |
|
|
$ |
5,808,943 |
|
|
$ |
(771,114) |
|
|
$ |
(52,980) |
|
|
$ |
9,017,354 |
|
|
$ |
19,944 |
|
|
$ |
9,037,298 |
|
|
$ |
— |
|
See accompanying notes.
7
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net income |
$ |
3,951,340 |
|
|
$ |
1,337,620 |
|
|
|
|
Adjustments to reconcile net income to net cash flows from
operating activities: |
|
|
|
|
|
|
Gain on sale of equity investment in PS Business Parks,
Inc. |
(2,128,860) |
|
|
— |
|
|
|
|
Gain on sale of real estate |
(1,503) |
|
|
(13,683) |
|
|
|
|
Depreciation and amortization |
661,608 |
|
|
508,139 |
|
|
|
|
Equity in earnings of unconsolidated real estate
entities |
(100,129) |
|
|
(81,382) |
|
|
|
|
Distributions from cumulative equity in earnings of unconsolidated
real estate entities |
134,460 |
|
|
59,251 |
|
|
|
|
Unrealized foreign currency exchange gain |
(236,698) |
|
|
(73,584) |
|
|
|
|
Share-based compensation expense |
44,597 |
|
|
47,647 |
|
|
|
|
Other |
55,975 |
|
|
30,712 |
|
|
|
|
Total adjustments |
(1,570,550) |
|
|
477,100 |
|
|
|
|
Net cash flows from operating activities |
2,380,790 |
|
|
1,814,720 |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Capital expenditures to maintain real estate facilities |
(337,896) |
|
|
(169,103) |
|
|
|
|
Development and expansion of real estate facilities |
(231,483) |
|
|
(201,527) |
|
|
|
|
Acquisition of real estate facilities and intangible
assets |
(529,357) |
|
|
(2,845,284) |
|
|
|
|
Distributions in excess of cumulative equity in earnings from
unconsolidated real estate entities |
13,670 |
|
|
8,765 |
|
|
|
|
Proceeds from sale of real estate investments |
1,543 |
|
|
16,070 |
|
|
|
|
Proceeds from sale of equity investment in PS Business Parks,
Inc. |
2,636,011 |
|
|
— |
|
|
|
|
Net cash flows from (used in) investing activities |
1,552,488 |
|
|
(3,191,079) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Repayments on notes payable |
(502,270) |
|
|
(1,585) |
|
|
|
|
Issuance of notes payable, net of issuance costs |
— |
|
|
3,300,160 |
|
|
|
|
Issuance of preferred shares |
242,832 |
|
|
725,311 |
|
|
|
|
Issuance of common shares in connection with share-based
compensation |
27,913 |
|
|
81,412 |
|
|
|
|
Redemption of preferred shares |
— |
|
|
(825,000) |
|
|
|
|
Taxes paid upon net share settlement of restricted share
units |
(12,989) |
|
|
(10,438) |
|
|
|
|
Acquisition of noncontrolling interests |
— |
|
|
(33) |
|
|
|
|
Contributions by noncontrolling interests |
1,659 |
|
|
2,359 |
|
|
|
|
Distributions paid to preferred shareholders, common shareholders
and restricted share unitholders |
(3,508,581) |
|
|
(1,189,876) |
|
|
|
|
Distributions paid to noncontrolling interests |
(31,453) |
|
|
(4,513) |
|
|
|
|
Net cash flows (used in) from financing activities |
(3,782,889) |
|
|
2,077,797 |
|
|
|
|
Net cash flows from operating, investing, and financing
activities |
150,389 |
|
|
701,438 |
|
|
|
|
Net effect of foreign exchange impact on cash and equivalents,
including restricted cash |
— |
|
|
313 |
|
|
|
|
Increase in cash and equivalents, including restricted
cash |
$ |
150,389 |
|
|
$ |
701,751 |
|
|
|
See accompanying notes.
8
PUBLIC STORAGE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
Cash and equivalents, including restricted cash at beginning of the
period: |
|
|
|
|
|
|
Cash and equivalents |
$ |
734,599 |
|
|
$ |
257,560 |
|
|
|
|
Restricted cash included in other assets |
26,691 |
|
|
25,040 |
|
|
|
|
$ |
761,290 |
|
|
$ |
282,600 |
|
|
|
|
|
|
|
|
|
|
Cash and equivalents, including restricted cash at end of the
period: |
|
|
|
|
|
|
Cash and equivalents |
$ |
883,787 |
|
|
$ |
958,247 |
|
|
|
|
Restricted cash included in other assets |
27,892 |
|
|
26,104 |
|
|
|
|
|
$ |
911,679 |
|
|
$ |
984,351 |
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred during the period remaining unpaid at period end
for: |
|
|
|
|
|
|
Capital expenditures to maintain real estate facilities |
$ |
(14,254) |
|
|
$ |
(18,243) |
|
|
|
|
Construction or expansion of real estate facilities |
(71,006) |
|
|
(39,305) |
|
|
|
|
|
|
|
|
|
|
Real estate acquired in exchange for noncontrolling
interests |
(19,865) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
9
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
1.Description
of the Business
Public Storage (referred to herein as “the Company,” “we,” “us,” or
“our”), a Maryland real estate investment trust (“REIT”), was
organized in 1980. Our principal business activities include the
ownership and operation of self-storage facilities that offer
storage spaces for lease, generally on a month-to-month basis, for
personal and business use, ancillary activities such as tenant
reinsurance, merchandise sales, and third party management, as well
as the acquisition and development of additional self-storage
space.
At September 30, 2022, we had direct and indirect equity
interests in 2,836 self-storage facilities (with approximately
202.2 million net rentable square feet) located in 40 states
in the United States (“U.S.”) operating under the Public Storage®
name, and 1.2 million net rentable square feet of commercial and
retail space.
At September 30, 2022, we owned a 35% common equity interest
in Shurgard Self Storage SA (“Shurgard”), a public company traded
on the Euronext Brussels under the “SHUR” symbol, which owned 259
self-storage facilities (with approximately 14 million net rentable
square feet) located in seven Western European countries, all
operating under the Shurgard® name.
On July 20, 2022, in connection with the closing of PS Business
Parks, Inc.’s (“PSB”) merger transaction with affiliates of
Blackstone Real Estate (“Blackstone”), we completed the sale of our
41% common equity interest in PSB in its entirety. Prior to the
merger transaction, PSB was a REIT traded on the New York Stock
Exchange under the “PSB” symbol, which owned commercial properties,
primarily multi-tenant industrial, flex, and office space. Refer to
Note 4. Investments in Unconsolidated Real Estate Entities for
transaction information and our accounting treatment of the
sale.
2.Basis
of Presentation and Summary of Significant Accounting
Policies
Basis of Presentation
We have prepared the accompanying interim consolidated financial
statements in accordance with U.S. generally accepted accounting
principles (“GAAP”) as set forth in the Accounting Standards
Codification of the Financial Accounting Standards Board (“FASB”),
and in conformity with the rules and regulations of the Securities
and Exchange Commission (“SEC”). In our opinion, the interim
consolidated financial statements presented herein reflect all
adjustments, primarily of a normal recurring nature, that are
necessary to present fairly the interim consolidated financial
statements. Because they do not include all of the disclosures
required by GAAP for complete annual financial statements, these
interim consolidated financial statements should be read together
with the audited Consolidated Financial Statements and related
Notes included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2021.
Disclosures of the number and square footage of facilities, as well
as the number and coverage of tenant reinsurance policies (Note 14)
are unaudited and outside the scope of our independent registered
public accounting firm’s review of our financial statements in
accordance with the standards of the Public Company Accounting
Oversight Board (U.S.).
Operating results for the three and nine months ended
September 30, 2022 are not necessarily indicative of the
results that may be expected for the year ending December 31,
2022.
Summary of Significant Accounting Policies
There have been no significant changes to the Company's significant
accounting policies described in Note 2,
Basis of Presentation and Summary of Significant Accounting
Policies,
in Notes to Consolidated Financial Statements included in Item 8 of
Part II of the Company's Annual Report on Form 10-K for the year
ended December 31, 2021.
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
3.Real
Estate Facilities
Activity in real estate facilities during the nine months ended
September 30, 2022 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
(Amounts in thousands) |
|
Operating facilities, at cost: |
|
|
|
|
|
|
Beginning balance |
$ |
22,807,833 |
|
|
|
|
|
|
Capital expenditures to maintain real estate facilities |
329,253 |
|
|
|
|
|
|
Acquisitions |
514,541 |
|
|
|
|
|
|
Dispositions |
(1,704) |
|
|
|
|
|
|
Developed or expanded facilities opened for operation |
125,971 |
|
|
|
|
|
|
Ending balance |
23,775,894 |
|
|
|
|
|
|
Accumulated depreciation: |
|
|
|
|
|
|
Beginning balance |
(7,773,308) |
|
|
|
|
|
|
Depreciation expense |
(574,374) |
|
|
|
|
|
|
Dispositions |
1,084 |
|
|
|
|
|
|
Ending balance |
(8,346,598) |
|
|
|
|
|
|
Construction in process: |
|
|
|
|
|
|
Beginning balance |
272,471 |
|
|
|
|
|
|
Costs incurred to develop and expand real estate
facilities |
259,854 |
|
|
|
|
|
|
Developed or expanded facilities opened for operation |
(125,971) |
|
|
|
|
|
|
Ending balance |
406,354 |
|
|
|
|
|
|
Total real estate facilities at September 30, 2022
|
$ |
15,835,650 |
|
|
|
|
|
During the nine months ended September 30, 2022, we acquired
44 self-storage facilities (3.2 million net rentable square feet of
storage space), for a total cost of $501.9 million, consisting
of $482.0 million in cash and $19.9 million in
partnership units in our subsidiary. Approximately
$14.4 million of the total cost was allocated to intangible
assets. We completed development and redevelopment activities
costing $126.0 million during the nine months ended
September 30, 2022, adding 0.9 million net rentable square
feet of self-storage space. Construction in process at
September 30, 2022 consisted of projects to develop new
self-storage facilities and expand existing self-storage
facilities.
Additionally, on July 8, 2022, we acquired from PSB the commercial
interests in five properties at three sites jointly occupied with
certain of our self-storage facilities located in Maryland and
Virginia, for $47.3 million. We recognized $27.0 million
of real estate assets and $0.7 million of intangibles for the
properties acquired, representing the cost of these commercial
properties that we did not have interest in through our equity
investment in PSB. We recognized the remaining $19.6 million
as an increase to our basis in our equity investment in PSB, which
represents the elimination of our portion of the gain recorded by
PSB.
During the nine months ended September 30, 2022, we sold
portions of real estate facilities in connection with eminent
domain proceedings for $1.5 million in cash proceeds and recorded a
related gain on sale of real estate of approximately $1.5
million.
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
4.Investments
in Unconsolidated Real Estate Entities
The following tables set forth our investments in, and equity in
earnings of, the Unconsolidated Real Estate Entities (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Unconsolidated Real Estate Entities at |
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSB |
$ |
— |
|
$ |
515,312 |
|
|
|
|
|
|
|
Shurgard |
252,648 |
|
313,451 |
|
|
|
|
|
|
|
Total |
$ |
252,648 |
|
$ |
828,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Earnings of Unconsolidated Real Estate Entities for
the |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
PSB |
$ |
3,586 |
|
$ |
27,110 |
|
$ |
80,596 |
|
$ |
62,494 |
|
Shurgard |
4,594 |
|
5,750 |
|
19,533 |
|
18,888 |
|
Total |
$ |
8,180 |
|
$ |
32,860 |
|
$ |
100,129 |
|
$ |
81,382 |
Investment in PSB
Prior to the sale of our equity investment in PSB in its entirety
on July 20, 2022, we owned 7,158,354 shares of PSB’s common stock
and 7,305,355 limited partnership units in an operating partnership
controlled by PSB, representing a 41% common equity interest in
PSB.
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 equity investment in PS Business Parks, Inc. in the
Consolidated Statement of Income.
We classified the proceeds from the merger consideration of
$2.6 billion or $182.25 per share or unit within cash flows
from investing activities in the Consolidated Statements of Cash
Flows for the nine months ended September 30, 2022. During the
nine months ended September 30, 2022 and 2021, we received cash
distributions from PSB totaling $109.5 million and
$45.6 million, respectively, which were classified within cash
flows from operating activities in the Consolidated Statements of
Cash Flows.
Investment in Shurgard
Throughout all periods presented, we effectively owned, directly
and indirectly 31,268,459 Shurgard common shares, representing a
35% equity interest in Shurgard.
Based upon the closing price at September 30, 2022 (€41.60 per
share of Shurgard common stock, at 0.980 exchange rate of U.S.
Dollars to the Euro), the shares we owned had a market value of
approximately $1.3 billion.
Our equity in earnings of Shurgard comprised our equity share of
Shurgard’s net income, less amortization of the Shurgard Basis
Differential (defined below). For each of the nine months ended
September 30, 2022 and 2021, we received $2.6 million of
trademark license fees that Shurgard pays to us for the use of the
Shurgard® trademark. We eliminated $0.9 million of intra-entity
profits and losses for each of the nine months ended
September 30, 2022 and
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
2021, representing our equity share of the trademark license fees.
We classify the remaining license fees we receive from Shurgard as
interest and other income on our income statement.
During the nine months ended September 30, 2022 and 2021, we
received cash dividends from Shurgard totaling $37.8 million and
$21.5 million, respectively. Approximately $13.7 million and $8.8
million of total cash distributions from Shurgard during the nine
months ended September 30, 2022 and 2021, respectively,
represented distributions in excess of cumulative equity in
earnings from Shurgard, which was classified within cash flows from
investing activities in the Consolidated Statements of Cash
Flows.
At September 30, 2022, our investment in Shurgard’s real
estate assets exceeded our pro-rata share of the underlying amounts
on Shurgard’s balance sheet by approximately $65.7 million
($74.7 million at December 31, 2021). This differential (the
“Shurgard Basis Differential”) includes our basis adjustments in
Shurgard’s real estate assets net of related deferred income taxes.
The Shurgard Basis Differential is being amortized as a reduction
to equity in earnings of the Unconsolidated Real Estate Entities.
Such amortization totaled approximately $9.0 million and $7.3
million during the nine months ended September 30, 2022 and
2021, respectively.
Shurgard is a publicly held entity trading on Euronext Brussels
under the symbol “SHUR”.
5.Goodwill
and Other Intangible Assets
Goodwill and other intangible assets consisted of the following
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2022 |
|
At December 31, 2021 |
|
Gross Book Value |
|
Accumulated Amortization |
|
Net Book Value |
|
Gross Book Value |
|
Accumulated Amortization |
|
Net Book Value |
|
Goodwill |
$ |
165,843 |
|
|
$ |
— |
|
|
$ |
165,843 |
|
|
$ |
165,843 |
|
|
$ |
— |
|
|
$ |
165,843 |
|
|
Shurgard® Trade Name |
18,824 |
|
|
— |
|
|
18,824 |
|
|
18,824 |
|
|
— |
|
|
18,824 |
|
|
Finite-lived intangible assets, subject to amortization |
196,617 |
|
|
(141,473) |
|
|
55,144 |
|
|
198,180 |
|
|
(79,953) |
|
|
118,227 |
|
|
Total goodwill and other intangible assets |
$ |
381,284 |
|
|
$ |
(141,473) |
|
|
$ |
239,811 |
|
|
$ |
382,847 |
|
|
$ |
(79,953) |
|
|
$ |
302,894 |
|
Finite-lived intangible assets consist primarily of acquired
customers in place. Amortization expense related to intangible
assets subject to amortization was $20.0 million and $78.2 million
for the three and nine months ended September 30, 2022,
respectively, and $23.3 million and $49.0 million for the same
periods in 2021. During the nine months ended September 30,
2022, intangibles increased $15.1 million in connection with the
acquisition of real estate facilities. (Note 3).
The estimated future amortization expense for our finite-lived
intangible assets at September 30, 2022 is as follows (amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
Year |
|
Amount |
|
Remainder of 2022 |
|
$ |
15,830 |
|
|
2023 |
|
30,074 |
|
|
Thereafter |
|
9,240 |
|
|
Total |
|
$ |
55,144 |
|
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
6.Credit
Facility
We have a revolving credit agreement (the “Credit Facility”) with a
$500 million borrowing limit that matures on April 19, 2024.
Amounts drawn on the Credit Facility bear annual interest at rates
ranging from LIBOR plus 0.7% to LIBOR plus 1.350% depending upon
the ratio of our Total Indebtedness to Gross Asset Value (as
defined in the Credit Facility) (LIBOR plus 0.75% at
September 30, 2022). We are also required to pay a quarterly
facility fee ranging from 0.07% per annum to 0.25% per annum
depending upon the ratio of our Total Indebtedness to our Gross
Asset Value (0.10% per annum at September 30, 2022). At
September 30, 2022 and November 1, 2022, we had no
outstanding borrowings under this Credit Facility. We had undrawn
standby letters of credit, which reduce our borrowing capacity,
totaling $18.6 million at September 30, 2022 ($21.2 million at
December 31, 2021). The Credit Facility has various customary
restrictive covenants, with which we were in compliance at
September 30, 2022.
7.Notes
Payable
Our notes payable are reflected net of issuance costs (including
original issue discounts), which are amortized as interest expense
on the effective interest method over the term of each respective
note. Our notes payable at September 30, 2022 and
December 31, 2021 are set forth in the tables
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts at September 30, 2022
|
|
|
Coupon Rate |
|
Effective Rate |
|
Principal |
|
Unamortized Costs |
Book
Value |
|
Fair
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ amounts in thousands) |
|
U.S. Dollar Denominated Unsecured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes due April 23, 2024
|
SOFR+0.47%
|
|
1.766% |
|
$ |
700,000 |
|
|
$ |
(1,101) |
|
|
$ |
698,899 |
|
|
$ |
685,550 |
|
|
Notes due February 15, 2026
|
0.875% |
|
1.030% |
|
500,000 |
|
|
(2,507) |
|
|
497,493 |
|
|
436,666 |
|
|
Notes due November 9, 2026 |
1.500% |
|
1.640% |
|
650,000 |
|
|
(3,574) |
|
|
646,426 |
|
|
573,097 |
|
|
Notes due September 15, 2027
|
3.094% |
|
3.218% |
|
500,000 |
|
|
(2,624) |
|
|
497,376 |
|
|
459,630 |
|
|
Notes due May 1, 2028
|
1.850% |
|
1.962% |
|
650,000 |
|
|
(3,768) |
|
|
646,232 |
|
|
543,338 |
|
|
Notes due November 9, 2028 |
1.950% |
|
2.044% |
|
550,000 |
|
|
(2,939) |
|
|
547,061 |
|
|
459,260 |
|
|
Notes due May 1, 2029
|
3.385% |
|
3.459% |
|
500,000 |
|
|
(2,024) |
|
|
497,976 |
|
|
450,179 |
|
|
Notes due May 1, 2031
|
2.300% |
|
2.419% |
|
650,000 |
|
|
(5,869) |
|
|
644,131 |
|
|
517,641 |
|
|
Notes due November 9, 2031 |
2.250% |
|
2.322% |
|
550,000 |
|
|
(3,224) |
|
|
546,776 |
|
|
430,706 |
|
|
|
|
|
|
|
5,250,000 |
|
|
(27,630) |
|
|
5,222,370 |
|
|
4,556,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro Denominated Unsecured Debt |
|
|
|
|
|
|
|
|
|
|
|
Notes due April 12, 2024
|
1.540% |
|
1.540% |
|
97,984 |
|
|
— |
|
|
97,984 |
|
|
94,290 |
|
|
Notes due November 3, 2025
|
2.175% |
|
2.175% |
|
237,135 |
|
|
— |
|
|
237,135 |
|
|
227,663 |
|
|
Notes due September 9, 2030 |
0.500% |
|
0.640% |
|
685,890 |
|
|
(8,890) |
|
|
677,000 |
|
|
513,593 |
|
|
Notes due January 24, 2032
|
0.875% |
|
0.978% |
|
489,921 |
|
|
(4,992) |
|
|
484,929 |
|
|
354,996 |
|
|
|
|
|
|
|
1,510,930 |
|
|
(13,882) |
|
|
1,497,048 |
|
|
1,190,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
Debt,
secured by 10 real estate facilities with a net book value of
$57.5 million
|
3.811% |
|
3.811% |
|
21,033 |
|
|
— |
|
|
21,033 |
|
|
20,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,781,963 |
|
|
$ |
(41,512) |
|
|
$ |
6,740,451 |
|
|
$ |
5,767,312 |
|
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts at |
|
|
December 31, 2021 |
|
|
Book Value |
|
Fair Value |
|
|
($ amounts in thousands) |
|
U.S. Dollar Denominated Unsecured Debt |
|
|
|
|
Notes due September 15, 2022 |
$ |
499,637 |
|
|
$ |
506,362 |
|
|
Notes due April 23, 2024 |
698,372 |
|
|
700,314 |
|
|
Notes due February 15, 2026 |
496,939 |
|
|
488,141 |
|
|
Notes due November 9, 2026 |
645,773 |
|
|
649,996 |
|
|
Notes due September 15, 2027 |
496,980 |
|
|
535,206 |
|
|
Notes due May 1, 2028 |
645,724 |
|
|
649,221 |
|
|
Notes due November 9, 2028 |
546,701 |
|
|
548,241 |
|
|
Notes due May 1, 2029 |
497,743 |
|
|
545,580 |
|
|
Notes due May 1, 2031 |
643,617 |
|
|
656,546 |
|
|
Notes due November 9, 2031 |
546,512 |
|
|
551,932 |
|
|
|
5,717,998 |
|
|
5,831,539 |
|
|
|
|
|
|
Euro Denominated Unsecured Debt |
|
|
|
|
Notes due April 12, 2024 |
113,431 |
|
|
117,526 |
|
|
Notes due November 3, 2025 |
274,518 |
|
|
295,256 |
|
|
Notes due September 9, 2030 |
784,287 |
|
|
769,561 |
|
|
Notes due January 24, 2032 |
561,761 |
|
|
551,842 |
|
|
|
1,733,997 |
|
|
1,734,185 |
|
|
|
|
|
|
Mortgage Debt |
23,284 |
|
|
24,208 |
|
|
|
|
|
|
|
$ |
7,475,279 |
|
|
$ |
7,589,932 |
|
U.S. Dollar Denominated Unsecured Notes
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.
The U.S. Dollar denominated unsecured notes (the “U.S. Dollar
Denominated Unsecured Notes”) have various financial covenants,
with which we were in compliance at September 30, 2022.
Included in these covenants are (a) a maximum Debt to Total Assets
of 65% (approximately 14% at September 30, 2022) and (b) a
minimum ratio of Adjusted EBITDA to Interest Expense of 1.5x
(approximately 25x for the twelve months ended September 30,
2022) as well as covenants limiting the amount we can encumber our
properties with mortgage debt.
Euro Denominated Unsecured Notes
Our Euro denominated unsecured notes (the “Euro Notes”) consist of
four tranches: (i) €242.0 million issued to institutional
investors on November 3, 2015, (ii) €100.0 million issued to
institutional investors on April 12, 2016, (iii) €500.0
million issued in a public offering on January 24, 2020, and
(iv) €700.0 million issued in a public offering on
September 9, 2021. The Euro Notes have financial covenants
similar to those of the U.S. Dollar Denominated Unsecured
Notes.
We reflect changes in the U.S. Dollar equivalent of the amount
payable including the associated interest, as a result of changes
in foreign exchange rates as “Foreign currency exchange gain” on
our income statement (gains of $100.9 million and
$239.2 million for the three and nine months ended
September 30, 2022, respectively, as compared to gains of
$40.9 million and $73.6 million for the three and nine
months ended September 30, 2021, respectively).
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Mortgage Notes
We assumed our non-recourse mortgage debt in connection with
property acquisitions, and we recorded such debt at fair value with
any premium or discount to the stated note balance amortized using
the effective interest method.
At September 30, 2022, the related contractual interest rates
of our mortgage notes are fixed, ranging between 3.2% and 7.1%, and
mature between February 1, 2023 and July 1,
2030.
At September 30, 2022, approximate principal maturities of our
Notes Payable are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Debt |
|
Mortgage Debt |
|
Total |
|
|
|
|
|
|
|
Remainder of 2022
|
$ |
— |
|
$ |
212 |
|
$ |
212 |
|
2023 |
— |
|
19,219 |
|
19,219 |
|
2024 |
797,984 |
|
124 |
|
798,108 |
|
2025 |
237,135 |
|
131 |
|
237,266 |
|
2026 |
1,150,000 |
|
138 |
|
1,150,138 |
|
Thereafter |
4,575,811 |
|
1,209 |
|
4,577,020 |
|
$ |
6,760,930 |
|
$ |
21,033 |
|
$ |
6,781,963 |
|
Weighted average effective rate |
1.9% |
|
3.8% |
|
1.9% |
Cash paid for interest totaled $87.6 million and
$49.8 million for the nine months ended September 30,
2022 and 2021, respectively. Interest capitalized as real estate
totaled $4.2 million and $2.6 million for the nine months
ended September 30, 2022 and 2021, respectively.
8.Noncontrolling
Interests
There are noncontrolling interests related to several subsidiaries
we consolidate of which we do not own 100% of the equity. At
September 30, 2022, certain of these subsidiaries have issued
499,966 partnership units to third-parties that are convertible on
a one-for-one basis (subject to certain limitations) into common
shares of the Company at the option of the unitholder. These
include a total of 54,137 partnership units of $19.9 million
issued to third-parties in connection with our acquisition of
self-storage properties in the nine months ended September 30,
2022.
At March 31, 2022, there were 254,833 partnership units of
$83.8 million classified as redeemable noncontrolling
interests outside of total equity in our consolidated balance
sheets, because the unitholders of these partnership units had the
right to require redemption of their partnership units in cash if
common shares of the Company were not publicly listed. In the
second quarter of 2022, the related partnership agreements were
amended with such cash redemption feature removed from these
partnership units. We therefore reclassified $83.8 million
from redeemable noncontrolling interests to noncontrolling
interests in total equity during the three months ended June 30,
2022.
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
9.Shareholders’
Equity
Preferred Shares
At September 30, 2022 and December 31, 2021, we had the
following series of Cumulative Preferred Shares (“Preferred
Shares”) outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2022
|
|
At December 31, 2021
|
|
Series |
|
Earliest Redemption Date |
|
Dividend Rate |
|
Shares Outstanding |
|
Liquidation Preference |
|
Shares Outstanding |
|
Liquidation Preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands) |
|
Series F |
|
6/2/2022 |
|
5.150 |
% |
|
11,200 |
|
|
$ |
280,000 |
|
|
11,200 |
|
|
$ |
280,000 |
|
|
Series G |
|
8/9/2022 |
|
5.050 |
% |
|
12,000 |
|
|
300,000 |
|
|
12,000 |
|
|
300,000 |
|
|
Series H |
|
3/11/2024 |
|
5.600 |
% |
|
11,400 |
|
|
285,000 |
|
|
11,400 |
|
|
285,000 |
|
|
Series I |
|
9/12/2024 |
|
4.875 |
% |
|
12,650 |
|
|
316,250 |
|
|
12,650 |
|
|
316,250 |
|
|
Series J |
|
11/15/2024 |
|
4.700 |
% |
|
10,350 |
|
|
258,750 |
|
|
10,350 |
|
|
258,750 |
|
|
Series K |
|
12/20/2024 |
|
4.750 |
% |
|
9,200 |
|
|
230,000 |
|
|
9,200 |
|
|
230,000 |
|
|
Series L |
|
6/17/2025 |
|
4.625 |
% |
|
22,600 |
|
|
565,000 |
|
|
22,600 |
|
|
565,000 |
|
|
Series M |
|
8/14/2025 |
|
4.125 |
% |
|
9,200 |
|
|
230,000 |
|
|
9,200 |
|
|
230,000 |
|
|
Series N |
|
10/6/2025 |
|
3.875 |
% |
|
11,300 |
|
|
282,500 |
|
|
11,300 |
|
|
282,500 |
|
|
Series O |
|
11/17/2025 |
|
3.900 |
% |
|
6,800 |
|
|
170,000 |
|
|
6,800 |
|
|
170,000 |
|
|
Series P |
|
6/16/2026 |
|
4.000 |
% |
|
24,150 |
|
|
603,750 |
|
|
24,150 |
|
|
603,750 |
|
|
Series Q |
|
8/17/2026 |
|
3.950 |
% |
|
5,750 |
|
|
143,750 |
|
|
5,750 |
|
|
143,750 |
|
|
Series R |
|
11/19/2026 |
|
4.000 |
% |
|
17,400 |
|
|
435,000 |
|
|
17,400 |
|
|
435,000 |
|
|
Series S |
|
1/13/2027 |
|
4.100 |
% |
|
10,000 |
|
|
250,000 |
|
|
— |
|
|
— |
|
|
Total Preferred Shares |
|
|
|
174,000 |
|
|
$ |
4,350,000 |
|
|
164,000 |
|
|
$ |
4,100,000 |
|
The holders of our Preferred Shares have general preference rights
with respect to liquidation, quarterly distributions, and any
accumulated unpaid distributions. Except as noted below, holders of
the Preferred Shares do not have voting rights. In the event of a
cumulative arrearage equal to six quarterly dividends, holders of
all outstanding series of preferred shares (voting as a single
class without regard to series) will have the right to elect two
additional members to serve on our Board of Trustees (our “Board”)
until the arrearage has been cured. At September 30, 2022,
there were no dividends in arrears. The affirmative vote of at
least 66.67% of the outstanding shares of a series of Preferred
Shares is required for any material and adverse amendment to the
terms of such series. The affirmative vote of at least 66.67% of
the outstanding shares of all of our Preferred Shares, voting as a
single class, is required to issue shares ranking senior to our
Preferred Shares.
Except under certain conditions relating to the Company’s
qualification as a REIT, the Preferred Shares are not redeemable
prior to the dates indicated on the table above. On or after the
respective dates, each of the series of Preferred Shares is
redeemable at our option, in whole or in part, at $25.00 per
depositary share, plus accrued and unpaid dividends. Holders of the
Preferred Shares cannot require us to redeem such
shares.
Upon issuance of our Preferred Shares, we classify the liquidation
value as preferred equity on our consolidated balance sheet with
any issuance costs recorded as a reduction to Paid-in
capital.
On January 13, 2022, we issued 10.0 million depositary shares,
each representing 0.001 of a share of our 4.100% Series S Preferred
Shares, at an issuance price of $25.00 per depositary share, for a
total of $250.0 million in gross proceeds, and we incurred $7.2
million in issuance costs.
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Dividends
Common share dividends paid, including amounts paid to our
restricted share unitholders, totaled $2.7 billion ($15.15 per
share) and $351.2 million ($2.00 per share) for the three months
ended September 30, 2022 and 2021, respectively, and $3.4
billion ($19.15 per share) and $1.05 billion ($6.00 per share) for
the nine months ended September 30, 2022 and 2021,
respectively. Included in common share dividends paid for the three
and nine months ended September 30, 2022 is $2.3 billion of a
special cash dividend (“Special Dividend”) of $13.15 per common
share paid on August 4, 2022 in connection with the sale of our
equity investment in PSB on July 20, 2022. Preferred share
dividends paid totaled $48.7 million and $46.2 million for the
three months ended September 30, 2022 and 2021, respectively,
and $145.7 million and $138.5 million for the nine months ended
September 30, 2022 and 2021, respectively.
10.Related
Party Transactions
At September 30, 2022, Tamara Hughes Gustavson, a current
member of our Board, held less than a 0.1% equity interest in, and
is a manager of, a limited liability company that owns 65
self-storage facilities in Canada. Two of Ms. Gustavson’s adult
children owned the remaining equity interest in the limited
liability company. These facilities operate under the Public
Storage® tradename, which we license to the owners of these
facilities for use in Canada on a royalty-free, non-exclusive
basis. We have no ownership interest in these facilities and we do
not own or operate any facilities in Canada. If we chose to acquire
or develop our own facilities in Canada, we would have to share the
use of the Public Storage® name in Canada. We have a right of first
refusal, subject to limitations, to acquire the stock or assets of
the corporation engaged in the operation of these facilities if
their owners agree to sell them. Our subsidiaries reinsure risks
relating to loss of goods stored by customers in these facilities,
and have received premium payments of approximately $1.7 million
and $1.5 million for the nine months ended September 30, 2022
and 2021, respectively.
On July 8, 2022, we acquired from PSB the commercial interests in
five properties at three sites jointly occupied with certain of our
self-storage facilities located in Maryland and Virginia, for
$47.3 million. We recognized $27.0 million of real estate
assets and $0.7 million of intangibles for the properties
acquired, representing the cost of these commercial properties that
we did not have interest in through our equity investment in PSB.
We recognized the remaining $19.6 million as an increase in
our basis in our equity investment in PSB, which represents the
elimination of our portion of the gain recorded by
PSB.
11.Share-Based
Compensation
Under various share-based compensation plans and under terms
established or modified by our Board or a committee thereof, we
grant equity awards to trustees, officers, and key employees,
including non-qualified options to purchase the Company’s common
shares, restricted share units (“RSUs”), deferred stock units
(“DSUs”), and unrestricted common stock issued in lieu of trustee
compensation.
We recorded share-based compensation expense associated with our
equity awards in the various expense categories in the Consolidated
Statements of Income as set forth in the following table. In
addition, $0.4 million and $2.4 million share-based compensation
cost was capitalized as real estate facilities for the three and
nine months ended September 30, 2022, respectively, as
compared to $0.8 million and $3.1 million for the same periods of
2021, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Self-storage cost of operations |
$ |
4,203 |
|
|
$ |
4,506 |
|
|
$ |
13,740 |
|
|
$ |
16,272 |
|
|
|
|
Ancillary cost of operations |
203 |
|
|
342 |
|
|
690 |
|
|
1,122 |
|
|
|
|
General and administrative |
9,335 |
|
|
9,747 |
|
|
30,167 |
|
|
30,291 |
|
|
|
|
Total |
$ |
13,741 |
|
|
$ |
14,595 |
|
|
$ |
44,597 |
|
|
$ |
47,685 |
|
|
|
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Included in share-based compensation is $2.9 million and $12.4
million during the three and nine months ended September 30,
2022, respectively, as compared to $4.8 million and $15.8 million
for the same periods in 2021, of retirement acceleration as
discussed in Note 2 to our Consolidated Financial Statements
included in our Annual Report on Form 10-K for the year ended
December 31, 2021.
As of September 30, 2022, there was $96.8 million of total
unrecognized compensation cost related to share-based compensation
arrangements. This cost is expected to be recognized over a
weighted-average period of three years.
Stock Options
We have service-based, performance-based and market-based stock
options outstanding, which generally vest over 3 to 5 years, expire
10 years after the grant date, and have an exercise price equal to
the closing trading price of our common shares on the grant date.
New shares are issued for options exercised. Employees cannot
require the Company to settle their award in cash.
On August 4, 2022, we paid a Special Dividend of $13.15 per common
share to shareholders of record as of August 1, 2022. Stock options
that were outstanding at the time of the Special Dividend were
adjusted pursuant to the anti-dilution provisions of the Company’s
equity and performance-based incentive compensation plans that
provide for equitable adjustments in the event of an extraordinary
cash dividend. The anti-dilution adjustments proportionately
increased the number of outstanding stock options and reduced the
exercise prices of outstanding stock options by a conversion rate
of 1.03275, resulting in an increase of 104,348 stock options
outstanding. The adjustments did not result in incremental
share-based compensation expense.
During the nine months ended September 30, 2022, 142,683 stock
options were granted, 146,608 options were exercised, and no
options were forfeited. In addition, we expect an incremental
61,250 stock options to be issued based on the estimated
achievement of performance targets on our multi-year
performance-based stock options granted during the nine months
ended September 30, 2021. A total of 3,201,624 stock options were
outstanding at September 30, 2022 (3,039,951 at
December 31, 2021).
During the nine months ended September 30, 2022, we granted
65,000 stock options in connection with non-management trustee
compensation. For the remaining 77,683 stock options granted during
the nine months ended September 30, 2022, vesting is dependent
upon meeting certain market conditions over the three-year period
from January 1, 2022 through December 31, 2024, with continued
service-based vesting through the first quarter of 2027. These
stock options require relative achievement of the Company’s total
shareholder return as compared to the weighted average total
shareholder return of specified peer groups and can result in
grantees earning up to 200% of the target options originally
granted.
For the three and nine months ended September 30, 2022, we
incurred share-based compensation cost for outstanding stock
options of $4.2 million and $15.8 million, respectively, as
compared to $5.5 million and $20.5 million for the same periods in
2021.
Restricted Share Units
We have service-based, performance-based and market-based RSUs
outstanding, which generally vest over 5 to 8 years from the grant
date. Upon vesting, the grantee receives new common shares equal to
the number of vested RSUs, less common shares withheld to satisfy
the grantee’s statutory tax liabilities arising from the vesting.
During the nine months ended September 30, 2022, 27,943 RSUs
were granted, 18,487 RSUs were forfeited and 76,818 RSUs vested.
The vesting resulted in the issuance of 55,079 common shares. A
total of 503,460 RSUs were outstanding at September 30, 2022
(570,822 at December 31, 2021).
Included in the RSUs granted during the nine months ended
September 30, 2022 are 21,985 RSUs where vesting is dependent
upon meeting certain market conditions over a three-year period
from January 1, 2022 through December 31, 2024, with continued
service-based vesting through the first quarter of 2027. The amount
of these RSUs that are earned and vested, if any, will be based, in
addition to continued employment requirements, on the
Company's
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
relative total shareholder return over the three-year period as
compared to the weighted average total shareholder return of the
specified peer groups and can result in grantees earning up to 200%
of the target RSUs originally granted.
Also included in the RSUs granted during the nine months ended
September 30, 2022 are 5,958 service-based RSUs.
For the three and nine months ended September 30, 2022, we
incurred share-based compensation cost for RSUs of $9.7 million and
$30.6 million, respectively, as compared to $9.6 million and $29.4
million for the same periods in 2021.
Trustee Deferral Program
Non-management trustees may elect to receive all or a portion of
their cash retainers in cash, shares of unrestricted common stock,
or fully-vested DSUs to be settled at a specified future date.
Shares of unrestricted stock and/or DSUs will be granted to the
non-management trustee on the last day of each calendar quarter
based on the cash retainer earned for that quarter and converted
into a number of shares or units based on the applicable closing
price of our common shares on such date. During the nine months
ended September 30, 2022, we granted 1,742 DSUs and 310 shares
of unrestricted common stock.
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
12.
Net Income per Common Share
We allocate net income to (i) noncontrolling interests based upon
their contractual rights in the respective subsidiaries or for
participating noncontrolling interests based upon their
participation in both distributed and undistributed earnings of the
Company, (ii) preferred shareholders, for distributions paid or
payable, (iii) preferred shareholders, to the extent redemption
cost exceeds the related original net issuance proceeds (an
“preferred share redemption charge”), and (iv) RSUs, for
non-forfeitable dividends paid and adjusted for participation
rights in undistributed earnings of the Company.
We calculate basic and diluted net income per common share based
upon net income allocable to common shareholders, divided by (i)
weighted average common shares for basic net income per common
share, and (ii) weighted average common shares adjusted for the
impact of dilutive stock options outstanding for diluted net income
per common share. Potentially dilutive stock options representing
147,344 shares of common stock were excluded from the computation
of diluted earnings per share for the three and nine months ended
September 30, 2022, because their effect would have been
antidilutive.
The following table reconciles the numerators and denominators of
the basic and diluted net income per common shares computation for
the three and nine months ended September 30, 2022 and 2021,
respectively (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
Numerator for basic and dilutive net income per common share – net
income allocable to common shareholders |
$ |
2,712,161 |
|
$ |
442,327 |
|
$ |
3,779,666 |
|
$ |
1,174,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per share - weighted average
common shares outstanding |
175,283 |
|
174,926 |
|
175,227 |
|
174,787 |
|
|
|
Net effect of dilutive stock options - based on treasury stock
method |
1,045 |
|
880 |
|
1,098 |
|
611 |
|
|
|
Denominator for dilutive net income per share - weighted average
common shares outstanding |
176,328 |
|
175,806 |
|
176,325 |
|
175,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
15.47 |
|
$ |
2.53 |
|
$ |
21.57 |
|
$ |
6.72 |
|
|
|
Dilutive |
$ |
15.38 |
|
$ |
2.52 |
|
$ |
21.44 |
|
$ |
6.70 |
|
|
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
13.Segment
Information
Our operating segments reflect the significant components of our
operations where discrete financial information is evaluated
separately by our chief operating decision maker.
Self-Storage Operations
The Self-Storage Operations reportable segment reflects the
aggregated rental operations from the self-storage facilities we
own from (i) Same Store Facilities, (ii) Acquired Facilities, (iii)
Developed and Expanded Facilities, and (iv) Other Non-Same Store
Facilities. The presentation in the table below sets forth the Net
Operating Income (“NOI”) of this reportable segment, as well as the
related depreciation expense. For all periods presented,
substantially all of our real estate facilities, goodwill and other
intangible assets, other assets, and accrued and other liabilities
are associated with the Self-Storage Operations reportable
segment.
Ancillary Operations
The Ancillary Operations reflects the combined operations of our
tenant reinsurance, merchandise sales, and third party property
management operating segments.
Presentation of Segment Information
The following table reconciles NOI and net income attributable to
our reportable segment to our consolidated net income:
|
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|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
Self-Storage Operations Reportable Segment |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
1,027,374 |
|
|
$ |
840,510 |
|
|
$ |
2,917,675 |
|
|
$ |
2,333,850 |
|
|
|
|
Cost of operations |
(255,470) |
|
|
(216,999) |
|
|
(738,953) |
|
|
(631,699) |
|
|
|
|
Net operating income |
771,904 |
|
|
623,511 |
|
|
2,178,722 |
|
|
1,702,151 |
|
|
|
|
Depreciation and amortization |
(220,772) |
|
|
(188,552) |
|
|
(661,608) |
|
|
(508,139) |
|
|
|
|
Net income |
551,132 |
|
|
434,959 |
|
|
1,517,114 |
|
|
1,194,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ancillary Operations |
|
|
|
|
|
|
|
|
|
|
Revenue |
60,757 |
|
|
54,421 |
|
|
175,946 |
|
|
157,658 |
|
|
|
|
Cost of operations |
(21,572) |
|
|
(19,735) |
|
|
(54,297) |
|
|
(52,044) |
|
|
|
|
Net operating income |
39,185 |
|
|
34,686 |
|
|
121,649 |
|
|
105,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income allocated to
segments |
590,317 |
|
|
469,645 |
|
|
1,638,763 |
|
|
1,299,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items not allocated to segments: |
|
|
|
|
|
|
|
|
|
|
General and administrative |
(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 |
|
|
|
|
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 |
|
|
|
PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
14.
Commitments and Contingencies
Contingent Losses
We are a party to various legal proceedings and subject to various
claims and complaints; however, we believe that the likelihood of
these contingencies resulting in a material loss to the Company,
either individually or in the aggregate, is remote.
Insurance and Loss Exposure
We carry property, earthquake, general liability, employee medical
insurance, and workers compensation coverage through
internationally recognized insurance carriers, subject to
deductibles. Our deductible for general liability is $2.0 million
per occurrence. Our annual deductible for property loss is $25.0
million per occurrence. This deductible decreases to $5.0 million
once we reach $35.0 million in aggregate losses for occurrences
that exceed $5.0 million. Insurance carriers’ aggregate limits on
these policies of $75.0 million for property losses and $102.0
million for general liability losses are higher than estimates of
maximum probable losses that could occur from individual
catastrophic events determined in recent engineering and actuarial
studies; however, in case of multiple catastrophic events, these
limits could be exceeded.
We reinsure a program that provides insurance to our customers from
an independent third-party insurer. This program covers customer
claims for losses to goods stored at our facilities as a result of
specific named perils (earthquakes are not covered by this
program), up to a maximum limit of $5,000 per storage unit. We
reinsure all risks in this program, but purchase insurance to cover
this exposure for a limit of $15.0 million for losses in excess of
$5.0 million per occurrence. We are subject to licensing
requirements and regulations in all states. Customers participate
in the program at their option. At September 30, 2022, there
were approximately 1.2 million certificates held by our
self-storage customers, representing aggregate coverage of
approximately $5.6 billion.
Commitments
We have construction commitments representing future expected
payments for construction under contract totaling $265.7 million at
September 30, 2022. We expect to pay approximately $71.4
million in the remainder of 2022, $185.8 million in 2023 and $8.5
million in 2024 for these construction commitments.
We have future contractual payments on land, equipment and office
space under various lease commitments totaling $64.1 million at
September 30, 2022. We expect to pay approximately $0.7
million in the remainder of 2022, $3.1 million in each of 2023 and
2024, $3.0 million in each of 2025 and 2026 and $51.2 million
thereafter for these commitments.
15. Subsequent
Events
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.
ITEM 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Cautionary Statement Regarding Forward Looking
Statements
This Quarterly Report on Form 10-Q 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 document, 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 for
the year ended December 31, 2021 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.
These forward-looking statements speak only as of the date of this
report or as of the dates indicated in the statements. All of our
forward-looking statements, including those in this report, are
qualified in their entirety by this cautionary statement. We
expressly disclaim any obligation to update publicly or otherwise
revise any forward-looking statements, whether because of new
information, new estimates, or other factors, events or
circumstances after the date of these forward-looking statements,
except when expressly required by law. Given these risks and
uncertainties, you should not rely on any forward-looking
statements in this report, or which management may make orally or
in writing from time to time, neither as predictions of future
events nor guarantees of future performance.
Critical Accounting Estimates
The preparation of consolidated financial statements and related
disclosures in conformity with U.S. generally accepted accounting
principles (“GAAP”) requires us to make judgments, assumptions, and
estimates that affect the amounts reported. On an ongoing basis, we
evaluate our estimates and assumptions. These estimates and
assumptions are based on current facts, historical experience, and
various other factors that we believe are reasonable under the
circumstances to determine reported amounts of assets, liabilities,
revenues, and expenses that are not readily apparent from other
sources.
During the nine months ended September 30, 2022, there were no
material changes to our critical accounting estimates as compared
to the critical accounting estimates disclosed in Management’s
Discussion and Analysis of Financial Condition and Results of
Operations contained in Part II, Item 7 of our Annual Report on
Form 10-K for the year ended December 31, 2021.
Overview
Our self-storage operations generate most of our net income and our
earnings growth is impacted by the levels of growth within our Same
Store Facilities (as defined below) as well as within our Acquired
Facilities and Newly Developed and Expanded Facilities (both as
defined below). Accordingly, a significant portion of management’s
time is devoted to maximizing cash flows from our existing
self-storage facility portfolio.
During the three and nine months ended September 30, 2022,
revenues generated by our Same Store Facilities increased by 14.7%
($105.4 million) and 15.4% ($315.9 million),
respectively, as compared to the same periods in 2021, while Same
Store cost of operations increased by 7.7% ($13.5 million) and
6.2% ($32.7 million), respectively. Demand and operating
trends remained strong, leading to increases in our self-storage
rental rates while maintaining high levels of
occupancy.
In addition to managing our existing facilities for organic growth,
we have grown and plan to continue to grow through the acquisition
and development of new facilities and expansion of our existing
self-storage facilities. Since the beginning of 2020, we acquired a
total of 338 facilities with 30.1 million net rentable square feet
for $6.4 billion. In our non-same store portfolio, we also
have developed and expanded self-storage facilities of
17.3 million net rentable square feet for a total cost of
$1.5 billion. During the three and nine months ended
September 30, 2022, net operating income generated by our
Acquired Facilities and Newly Developed and Expanded Facilities
increased 74.9% ($51.8 million) and 122.6% ($179.7 million),
respectively, as compared to the same periods in 2021.
We have experienced recent inflationary impacts on our cost of
operations, including labor, utilities and repairs and maintenance,
and costs of development and expansion activities, and we may
continue to experience such impacts in the future. We have
implemented various initiatives to manage the adverse impacts, such
as enhancements in operational processes and investments in
technology to reduce payroll hours, achievement of economies of
scale from recent acquisitions with supervisory payroll allocated
over a broader number of self-storage facilities, and investments
in solar power and LED lights to lower utility usage.
In order to enhance the competitive position of certain of our
facilities relative to local competitors (including newly developed
facilities), we have embarked on our multi-year Property of
Tomorrow program to (i) rebrand our properties with more
pronounced, attractive, and clearly identifiable color schemes and
signage, (ii) enhance the energy efficiency of our properties, and
(iii) upgrade the configuration and layout of the offices and other
customer zones to improve the customer experience. We expect to
complete the program by the end of 2025. We expect to spend
approximately $220 million over 2022 on this
effort.
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.
Results of Operations
Operating Results for the Three Months Ended September 30, 2022 and
2021
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. 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 and
2021
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 and Core 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 per diluted common
share for the same period in 2021, representing an increase of
29.1%, or $1.05 per diluted common share.
For the nine months ended September 30, 2022, FFO was $13.08
per diluted common share as compared to $9.69 per diluted common
share for the same period in 2021, representing an increase of
35.0%, or $3.39 per diluted common share.
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:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Consolidated Statements of
Income.
Analysis of Net Income - Self-Storage Operations
Our self-storage operations are analyzed in four groups: (i) the
2,282 facilities that we have owned and operated on a stabilized
basis since January 1, 2020 (the “Same Store Facilities”), (ii) 338
facilities we acquired since January 1, 2020 (the “Acquired
Facilities”), (iii) 150 facilities that have been newly developed
or expanded, or that will commence expansion by December 31,
2022 (the “Newly Developed and Expanded Facilities”), and (iv) 66
other facilities, which are otherwise not stabilized with respect
to occupancies or rental rates since January 1, 2020 (the “Other
Non-same Store Facilities”). See Note 13 to our September 30,
2022 consolidated financial statements “Segment Information,” for a
reconciliation of the amounts in the tables below to our total net
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-Storage Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2022 |
|
2021 |
|
Percentage Change |
|
2022 |
|
2021 |
|
Percentage Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts and square footage in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
$ |
822,527 |
|
|
$ |
717,109 |
|
|
14.7 |
% |
|
$ |
2,360,735 |
|
|
$ |
2,044,851 |
|
|
15.4 |
% |
|
|
|
|
|
|
|
Acquired Facilities |
108,989 |
|
|
51,007 |
|
|
113.7 |
% |
|
290,858 |
|
|
94,502 |
|
|
207.8 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
71,362 |
|
|
52,806 |
|
|
35.1 |
% |
|
197,337 |
|
|
140,497 |
|
|
40.5 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
24,496 |
|
|
19,588 |
|
|
25.1 |
% |
|
68,745 |
|
|
54,000 |
|
|
27.3 |
% |
|
|
|
|
|
|
|
1,027,374 |
|
|
840,510 |
|
|
22.2 |
% |
|
2,917,675 |
|
|
2,333,850 |
|
|
25.0 |
% |
|
|
|
|
|
|
|
Cost of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
189,957 |
|
|
176,444 |
|
|
7.7 |
% |
|
558,217 |
|
|
525,516 |
|
|
6.2 |
% |
|
|
|
|
|
|
|
Acquired Facilities |
38,058 |
|
|
16,555 |
|
|
129.9 |
% |
|
101,949 |
|
|
35,693 |
|
|
185.6 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
21,265 |
|
|
18,075 |
|
|
17.6 |
% |
|
59,986 |
|
|
52,710 |
|
|
13.8 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
6,190 |
|
|
5,925 |
|
|
4.5 |
% |
|
18,801 |
|
|
17,780 |
|
|
5.7 |
% |
|
|
|
|
|
|
|
255,470 |
|
|
216,999 |
|
|
17.7 |
% |
|
738,953 |
|
|
631,699 |
|
|
17.0 |
% |
|
|
|
|
|
|
|
Net operating income (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
632,570 |
|
|
540,665 |
|
|
17.0 |
% |
|
1,802,518 |
|
|
1,519,335 |
|
|
18.6 |
% |
|
|
|
|
|
|
|
Acquired Facilities |
70,931 |
|
|
34,452 |
|
|
105.9 |
% |
|
188,909 |
|
|
58,809 |
|
|
221.2 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
50,097 |
|
|
34,731 |
|
|
44.2 |
% |
|
137,351 |
|
|
87,787 |
|
|
56.5 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
18,306 |
|
|
13,663 |
|
|
34.0 |
% |
|
49,944 |
|
|
36,220 |
|
|
37.9 |
% |
|
|
|
|
|
|
|
Total net operating income |
771,904 |
|
|
623,511 |
|
|
23.8 |
% |
|
2,178,722 |
|
|
1,702,151 |
|
|
28.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
(119,154) |
|
|
(113,815) |
|
|
4.7 |
% |
|
(349,185) |
|
|
(335,958) |
|
|
3.9 |
% |
|
|
|
|
|
|
|
Acquired Facilities |
(74,564) |
|
|
(52,090) |
|
|
43.1 |
% |
|
(235,284) |
|
|
(102,154) |
|
|
130.3 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
(15,326) |
|
|
(13,668) |
|
|
12.1 |
% |
|
(44,730) |
|
|
(42,179) |
|
|
6.0 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
(11,728) |
|
|
(8,979) |
|
|
30.6 |
% |
|
(32,409) |
|
|
(27,848) |
|
|
16.4 |
% |
|
|
|
|
|
|
|
Total depreciation and amortization expense |
(220,772) |
|
|
(188,552) |
|
|
17.1 |
% |
|
(661,608) |
|
|
(508,139) |
|
|
30.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
513,416 |
|
|
426,850 |
|
|
20.3 |
% |
|
1,453,333 |
|
|
1,183,377 |
|
|
22.8 |
% |
|
|
|
|
|
|
|
Acquired Facilities |
(3,633) |
|
|
(17,638) |
|
|
(79.4) |
% |
|
(46,375) |
|
|
(43,345) |
|
|
7.0 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
34,771 |
|
|
21,063 |
|
|
65.1 |
% |
|
92,621 |
|
|
45,608 |
|
|
103.1 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
6,578 |
|
|
4,684 |
|
|
40.4 |
% |
|
17,535 |
|
|
8,372 |
|
|
109.4 |
% |
|
|
|
|
|
|
|
Total net income |
$ |
551,132 |
|
|
$ |
434,959 |
|
|
26.7 |
% |
|
$ |
1,517,114 |
|
|
$ |
1,194,012 |
|
|
27.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of facilities at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Facilities |
|
|
|
|
|
|
2,282 |
|
|
2,282 |
|
|
— |
|
|
|
|
|
|
|
Acquired Facilities |
|
|
|
|
|
|
338 |
|
|
188 |
|
|
79.8 |
% |
|
|
|
|
|
|
|
Newly Developed and Expanded Facilities |
|
|
|
|
|
|
150 |
|
|
142 |
|
|
5.6 |
% |
|
|
|
|
|
|
|
Other Non-Same Store Facilities |
|
|
|
|
|
|
66 |
|
|
66 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,836 |
|
|
2,678 |
|
|
5.9 |
% |
|
|
|
|
|
|
|
Net rentable square footage at period end: |
|
|
|
|
|
|