Public Storage (NYSE:PSA) announced today operating results for
the fourth quarter and year ended December 31, 2019.
Operating Results for the Three Months
Ended December 31, 2019
For the three months ended December 31, 2019, net income
allocable to our common shareholders was $327.3 million or $1.87
per diluted common share, compared to $530.1 million or $3.04 per
diluted common share in 2018 representing a decrease of $202.8
million or $1.17 per diluted common share. The decrease is due
primarily to (i) $183.1 million in aggregate gains due to Shurgard
Self Storage SA’s (“Shurgard’s”) initial public offering and the
sale of our facility in West London to Shurgard in October 2018,
(ii) a $15.7 million decrease due to the impact of foreign currency
exchange gains and losses associated with our euro denominated debt
and (iii) a $6.2 million allocation to our preferred shareholders
associated with our preferred share redemption activities in the
three months ended December 31, 2019, offset partially by (iv) a
$10.3 million increase in self-storage net operating income
(described below) and (v) a reduction in general and administrative
expense attributable to $8.1 million in incremental share-based
compensation expense in the three months ended December 31, 2018
for the planned retirement of our former CEO and CFO.
The $10.3 million increase in self-storage net operating income
is a result of a $0.7 million increase in our Same Store Facilities
(as defined below) and a $9.6 million increase in our non-Same
Store Facilities (as defined below). Revenues for the Same Store
Facilities increased 1.1% or $6.6 million in the three months ended
December 31, 2019 as compared to 2018, due primarily to higher
realized annual rent per occupied square foot. Cost of operations
for the Same Store Facilities increased by 4.6% or $5.9 million in
the three months ended December 31, 2019 as compared to 2018, due
primarily to a 40% ($3.7 million) increase in marketing expenses,
increased property manager payroll and increased property tax
expense. The increase in net operating income of $9.6 million for
the non-Same Store Facilities is due primarily to the impact of
facilities acquired in 2018 and 2019 and the fill-up of recently
developed and expanded facilities.
Operating Results for the Year Ended
December 31, 2019
In 2019, net income allocable to our common shareholders was
$1,272.8 million or $7.29 per diluted common share, compared to
$1,488.9 million or $8.54 per diluted common share in 2018
representing a decrease of $216.1 million or $1.25 per diluted
common share. The decrease is due primarily to (i) $183.1 million
in aggregate gains due to Shurgard’s initial public offering and
the sale of our facility in West London to Shurgard in October
2018, (ii) our $37.7 million equity share of gains recorded by PS
Business Parks during 2018, (iii) a $10.3 million decrease due to
the impact of foreign currency exchange gains associated with our
euro denominated debt and (iv) a $32.7 million allocation to our
preferred shareholders associated with our preferred share
redemption activities in 2019. These impacts were offset partially
by a $30.1 million increase in self-storage net operating income
(described below) and a reduction in general and administrative
expense attributable to $30.7 million in incremental share-based
compensation expense in 2018 for the planned retirement of our
former CEO and CFO.
The $30.1 million increase in self-storage net operating income
is a result of a $2.6 million increase in our Same Store Facilities
and $27.5 million increase in our non-Same Store Facilities.
Revenues for the Same Store Facilities increased 1.4% or $33.3
million in 2019 as compared to 2018, due primarily to higher
realized annual rent per occupied square foot. Cost of operations
for the Same Store Facilities increased by 5.0% or $30.6 million in
2019 as compared to 2018, due primarily to a 47.2% ($15.3 million)
increase in marketing expenses and increased property taxes. The
increase in net operating income of $27.5 million for the non-Same
Store Facilities is due primarily to the impact of facilities
acquired in 2018 and 2019 and the fill-up of recently developed and
expanded facilities.
Funds from Operations
For the three months ended December 31, 2019, funds from
operations (“FFO”) was $2.72 per diluted common share, as compared
to $2.77 in 2018, representing a decrease of 1.8%. FFO is a
non-GAAP measure defined by the National Association of Real Estate
Investment Trusts and generally represents net income before
depreciation and amortization expense, gains and losses and
impairment charges with respect to real estate assets. A
reconciliation of GAAP diluted net income per share to FFO per
share, and additional descriptive information regarding this
non-GAAP measure, is attached.
For the year ended December 31, 2019, FFO was $10.58 per diluted
common share, as compared to $10.45 in 2018, representing an
increase of 1.2%.
We also present “Core FFO per share,” a non-GAAP measure that
represents FFO per share excluding the impact of (i) foreign
currency exchange gains and losses, (ii) EITF D-42 charges related
to the redemption of preferred securities, (iii) accelerations of
accruals or reductions in accruals due to the departure of senior
executives and (iv) certain other non-cash and/or nonrecurring
income or expense items. We review Core FFO per share to evaluate
our ongoing operating performance, and we believe it is used by
investors and REIT analysts in a similar manner. However, Core FFO
per share is not a substitute for net income per share. Because
other REITs may not compute Core FFO per share in the same manner
as we do, may not use the same terminology or may not present such
a measure, Core FFO per share may not be comparable among
REITs.
The following table reconciles from FFO per share to Core FFO
per share (unaudited):
Three Months Ended December
31,
Year ended December 31,
Percentage
Percentage
2019
2018
Change
2019
2018
Change
FFO per share
$
2.72
$
2.77
(1.8)%
$
10.58
$
10.45
1.2%
Eliminate the per share impact of
items excluded from Core FFO,
including
our equity share from investments:
Foreign currency exchange loss (gain)
0.06
(0.03)
(0.04)
(0.10)
Application of EITF D-42
0.06
-
0.21
-
Shurgard - IPO costs and casualty loss
-
0.02
-
0.03
Acceleration/(Forfeiture) of
share-based
compensation expense due to the
departure of senior executives
-
0.05
(0.01)
0.18
Other items
-
-
0.01
-
Core FFO per share
$
2.84
$
2.81
1.1%
$
10.75
$
10.56
1.8%
Property Operations – Same Store
Facilities
The Same Store Facilities represent those facilities that have
been owned and operated on a stabilized level of occupancy,
revenues and cost of operations since January 1, 2017. We review
the operations of our Same Store Facilities, which excludes
facilities whose operating trends are significantly affected by
factors such as casualty events, as well as recently developed or
acquired facilities, to more effectively evaluate the ongoing
performance of our self-storage portfolio in 2017, 2018 and 2019.
We believe the Same Store information is used by investors and REIT
analysts in a similar manner. The following table summarizes the
historical operating results of these 2,159 facilities (139.3
million net rentable square feet) that represent approximately 82%
of the aggregate net rentable square feet of our U.S. consolidated
self-storage portfolio at December 31, 2019.
Selected
Operating Data for the Same
Store Facilities
(2,159 facilities)
(unaudited):
Three Months Ended December
31,
Year ended December 31,
Percentage
Percentage
2019
2018
Change
2019
2018
Change
(Dollar amounts in thousands,
except for per square foot data)
Revenues:
Rental income
$
572,192
$
565,417
1.2%
$
2,290,721
$
2,258,099
1.4%
Late charges and administrative fees
25,905
26,073
(0.6)%
103,851
103,199
0.6%
Total revenues (a)
598,097
591,490
1.1%
2,394,572
2,361,298
1.4%
Cost of operations:
Property taxes
37,387
36,286
3.0%
233,453
223,088
4.6%
On-site property manager payroll
27,562
25,943
6.2%
118,450
115,531
2.5%
Supervisory payroll
8,377
7,887
6.2%
37,771
37,179
1.6%
Repairs and maintenance
11,330
11,709
(3.2)%
46,078
44,896
2.6%
Snow removal
861
719
19.7%
3,954
3,592
10.1%
Utilities
10,031
10,404
(3.6)%
42,209
43,457
(2.9)%
Marketing
12,853
9,178
40.0%
47,622
32,344
47.2%
Other direct property costs
15,709
15,459
1.6%
63,572
62,042
2.5%
Allocated overhead
11,671
12,254
(4.8)%
48,809
49,144
(0.7)%
Total cost of operations (a)
135,781
129,839
4.6%
641,918
611,273
5.0%
Net operating income (b)
$
462,316
$
461,651
0.1%
$
1,752,654
$
1,750,025
0.2%
Gross margin
77.3%
78.0%
(0.9)%
73.2%
74.1%
(1.2)%
Weighted average for the period:
Square foot occupancy
93.1%
92.5%
0.6%
93.5%
93.1%
0.4%
Realized annual rental income per (c):
Occupied square foot
$
17.66
$
17.55
0.6%
$
17.60
$
17.41
1.1%
Available square foot (“REVPAF”)
$
16.44
$
16.23
1.3%
$
16.45
$
16.21
1.5%
At December 31:
Square foot occupancy
91.8%
91.3%
0.5%
Annual contract rent per occupied
square foot (d)
$
18.12
$
18.03
0.5%
(a)
Revenues and cost of operations do not
include ancillary revenues and expenses generated at the facilities
with respect to tenant reinsurance and retail sales.
(b)
See attached reconciliation of
self-storage net operating income (“NOI”) to net income.
(c)
Realized annual rent per occupied square
foot is computed by dividing annualized rental income, before late
charges and administrative fees, by the weighted average occupied
square feet for the period. Realized annual rent per available
square foot (“REVPAF”) is computed by dividing annualized rental
income, before late charges and administrative fees, by the total
available rentable square feet for the period. These measures
exclude late charges and administrative fees in order to provide a
better measure of our ongoing level of revenue. Late charges are
dependent upon the level of delinquency, and administrative fees
are dependent upon the level of move-ins. In addition, the rates
charged for late charges and administrative fees can vary
independently from rental rates. These measures take into
consideration promotional discounts, which reduce rental
income.
(d)
Annual contract rent represents the agreed
upon monthly rate that is paid by our tenants in place at the time
of measurement. Contract rates are initially set in the lease
agreement upon move-in and we adjust them from time to time with
notice. Contract rent excludes other fees that are charged on a
per-item basis, such as late charges and administrative fees, does
not reflect the impact of promotional discounts, and does not
reflect the impact of rents that are written off as
uncollectible.
The following table summarizes selected quarterly financial data
with respect to the Same Store Facilities (unaudited):
For the Quarter Ended
March 31
June 30
September 30
December 31
Entire Year
(Amounts in thousands, except for
per square foot data)
Total revenues:
2019
$
586,004
$
599,244
$
611,227
$
598,097
$
2,394,572
2018
$
577,310
$
587,793
$
604,705
$
591,490
$
2,361,298
Total cost of operations:
2019
$
168,359
$
166,913
$
170,865
$
135,781
$
641,918
2018
$
162,034
$
158,857
$
160,543
$
129,839
$
611,273
Property taxes:
2019
$
64,945
$
65,671
$
65,450
$
37,387
$
233,453
2018
$
61,858
$
62,571
$
62,373
$
36,286
$
223,088
Repairs and maintenance, including
snow removal expenses:
2019
$
13,369
$
11,687
$
12,785
$
12,191
$
50,032
2018
$
12,124
$
12,081
$
11,855
$
12,428
$
48,488
Marketing:
2019
$
8,751
$
12,084
$
13,934
$
12,853
$
47,622
2018
$
6,855
$
8,090
$
8,221
$
9,178
$
32,344
REVPAF:
2019
$
16.08
$
16.48
$
16.79
$
16.44
$
16.45
2018
$
15.84
$
16.17
$
16.60
$
16.23
$
16.21
Weighted average realized annual
rent per occupied square foot:
2019
$
17.38
$
17.53
$
17.82
$
17.66
$
17.60
2018
$
17.19
$
17.23
$
17.69
$
17.55
$
17.41
Weighted average occupancy levels
for the period:
2019
92.5%
94.0%
94.2%
93.1%
93.5%
2018
92.1%
93.8%
93.8%
92.5%
93.1%
The following table sets forth selected market trends in our
Same Store Facilities:
Same Store Facilities Operating Trends
by Market (Unaudited)
Three Months Ended December
31,
Year Ended December 31,
2019
2018
Change
2019
2018
Change
(Amounts in thousands, except for
per square foot data)
Revenues:
Los Angeles
$
91,070
$
89,024
2.3%
$
362,057
$
352,672
2.7%
San Francisco
50,904
49,847
2.1%
203,195
199,162
2.0%
New York
37,861
37,482
1.0%
151,526
148,676
1.9%
Washington DC
28,495
27,907
2.1%
113,607
110,642
2.7%
Seattle-Tacoma
26,914
26,566
1.3%
107,639
106,261
1.3%
Miami
28,016
28,433
(1.5)%
112,734
114,428
(1.5)%
Atlanta
21,205
21,293
(0.4)%
85,885
84,450
1.7%
Chicago
29,760
29,075
2.4%
118,293
117,094
1.0%
Dallas-Ft. Worth
20,463
20,610
(0.7)%
82,281
83,155
(1.1)%
Orlando-Daytona
15,131
14,996
0.9%
60,640
59,901
1.2%
Houston
16,701
17,510
(4.6)%
67,962
71,266
(4.6)%
Philadelphia
14,858
14,417
3.1%
59,120
56,747
4.2%
Tampa
11,426
11,543
(1.0)%
46,083
46,377
(0.6)%
West Palm Beach
10,990
10,923
0.6%
43,959
43,630
0.8%
Portland
9,909
10,052
(1.4)%
40,163
40,622
(1.1)%
All other markets
184,394
181,812
1.4%
739,428
726,215
1.8%
Total revenues
$
598,097
$
591,490
1.1%
$
2,394,572
$
2,361,298
1.4%
Net operating income:
Los Angeles
$
77,281
$
75,221
2.7%
$
298,725
$
292,281
2.2%
San Francisco
41,652
41,192
1.1%
163,878
162,202
1.0%
New York
29,970
30,097
(0.4)%
107,992
107,351
0.6%
Washington DC
22,314
21,802
2.3%
84,329
82,745
1.9%
Seattle-Tacoma
22,449
21,357
5.1%
84,315
83,375
1.1%
Miami
24,781
26,164
(5.3)%
84,269
87,277
(3.4)%
Atlanta
16,671
16,643
0.2%
63,630
62,519
1.8%
Chicago
18,906
18,801
0.6%
63,228
64,906
(2.6)%
Dallas-Ft. Worth
16,315
16,628
(1.9)%
56,623
58,461
(3.1)%
Orlando-Daytona
11,855
11,879
(0.2)%
44,116
44,066
0.1%
Houston
10,280
11,753
(12.5)%
42,380
47,071
(10.0)%
Philadelphia
10,712
10,430
2.7%
41,773
40,097
4.2%
Tampa
8,803
8,947
(1.6)%
32,416
33,378
(2.9)%
West Palm Beach
8,215
8,446
(2.7)%
32,192
32,397
(0.6)%
Portland
7,927
8,034
(1.3)%
30,511
31,548
(3.3)%
All other markets
134,185
134,257
(0.1)%
522,277
520,351
0.4%
Total net operating income
$
462,316
$
461,651
0.1%
$
1,752,654
$
1,750,025
0.2%
Three Months Ended December
31,
Year Ended December 31,
2019
2018
Change
2019
2018
Change
Weighted average square foot
occupancy:
Los Angeles
95.4%
94.6%
0.8%
95.2%
95.0%
0.2%
San Francisco
93.8%
93.5%
0.3%
94.3%
94.4%
(0.1)%
New York
93.7%
93.8%
(0.1)%
94.1%
94.3%
(0.2)%
Washington DC
92.5%
91.8%
0.8%
93.4%
92.4%
1.1%
Seattle-Tacoma
92.3%
92.0%
0.3%
93.1%
93.2%
(0.1)%
Miami
93.1%
92.4%
0.8%
93.0%
92.9%
0.1%
Atlanta
92.2%
93.0%
(0.9)%
93.0%
93.2%
(0.2)%
Chicago
92.4%
90.1%
2.6%
92.1%
90.3%
2.0%
Dallas-Ft. Worth
91.9%
91.2%
0.8%
92.0%
91.4%
0.7%
Orlando-Daytona
93.3%
93.2%
0.1%
94.1%
94.5%
(0.4)%
Houston
90.9%
89.8%
1.2%
89.7%
90.9%
(1.3)%
Philadelphia
94.6%
94.7%
(0.1)%
95.3%
94.9%
0.4%
Tampa
92.3%
91.7%
0.7%
92.6%
92.9%
(0.3)%
West Palm Beach
93.9%
93.4%
0.5%
93.9%
93.8%
0.1%
Portland
92.6%
92.8%
(0.2)%
94.0%
94.0%
0.0%
All other markets
92.9%
92.3%
0.7%
93.5%
92.9%
0.6%
Total weighted average
square foot occupancy
93.1%
92.5%
0.6%
93.5%
93.1%
0.4%
Realized annual rent per
occupied square foot:
Los Angeles
$
26.25
$
25.83
1.6%
$
26.11
$
25.47
2.5%
San Francisco
26.96
26.42
2.0%
26.73
26.14
2.3%
New York
26.16
25.84
1.2%
26.05
25.51
2.1%
Washington DC
21.79
21.51
1.3%
21.51
21.27
1.1%
Seattle-Tacoma
20.41
20.19
1.1%
20.20
19.94
1.3%
Miami
20.13
20.60
(2.3)%
20.31
20.63
(1.6)%
Atlanta
13.43
13.28
1.1%
13.44
13.15
2.2%
Chicago
15.22
15.24
(0.1)%
15.17
15.33
(1.0)%
Dallas-Ft. Worth
13.57
13.76
(1.4)%
13.63
13.88
(1.8)%
Orlando-Daytona
14.19
14.10
0.6%
14.12
13.90
1.6%
Houston
13.09
13.91
(5.9)%
13.52
14.01
(3.5)%
Philadelphia
16.84
16.33
3.1%
16.65
16.04
3.8%
Tampa
14.04
14.23
(1.3)%
14.12
14.13
(0.1)%
West Palm Beach
18.49
18.48
0.1%
18.50
18.37
0.7%
Portland
18.56
18.75
(1.0)%
18.52
18.71
(1.0)%
All other markets
14.25
14.13
0.8%
14.20
14.03
1.2%
Total realized rent per
occupied square foot
$
17.66
$
17.55
0.6%
$
17.60
$
17.41
1.1%
Three Months Ended December
31,
Year Ended December 31,
2019
2018
Change
2019
2018
Change
REVPAF:
Los Angeles
$
25.04
$
24.43
2.5%
$
24.87
$
24.20
2.8%
San Francisco
25.27
24.70
2.3%
25.20
24.67
2.1%
New York
24.50
24.23
1.1%
24.50
24.05
1.9%
Washington DC
20.16
19.75
2.1%
20.09
19.65
2.2%
Seattle-Tacoma
18.84
18.58
1.4%
18.81
18.57
1.3%
Miami
18.75
19.03
(1.5)%
18.88
19.16
(1.5)%
Atlanta
12.38
12.36
0.2%
12.50
12.25
2.0%
Chicago
14.07
13.73
2.5%
13.97
13.84
0.9%
Dallas-Ft. Worth
12.47
12.55
(0.6)%
12.54
12.68
(1.1)%
Orlando-Daytona
13.24
13.15
0.7%
13.29
13.14
1.1%
Houston
11.90
12.50
(4.8)%
12.13
12.73
(4.7)%
Philadelphia
15.94
15.47
3.0%
15.86
15.22
4.2%
Tampa
12.96
13.05
(0.7)%
13.08
13.13
(0.4)%
West Palm Beach
17.35
17.26
0.5%
17.37
17.23
0.8%
Portland
17.18
17.40
(1.3)%
17.40
17.58
(1.0)%
All other markets
13.25
13.04
1.6%
13.28
13.03
1.9%
Total REVPAF
$
16.44
$
16.23
1.3%
$
16.45
$
16.21
1.5%
Property Operations – Non-Same Store
Facilities
In addition to our Same Store Facilities, at December 31, 2019
we had 324 facilities that were not stabilized with respect to
occupancies or rental rates since January 1, 2017 or that we did
not own as of January 1, 2017. The following table summarizes
operating data with respect to these 324 facilities (unaudited).
Additional data and metrics with respect to these facilities is
included in the MD&A in our December 31, 2019 Form 10-K.
NON-SAME STORE
Three Months Ended December
31,
Year ended December 31,
FACILITIES
2019
2018
Change
2019
2018
Change
(Dollar amounts in thousands,
except for per square foot data)
Revenues:
Acquired Facilities:
2017 Acquisitions
$
7,773
$
7,319
$
454
$
30,473
$
28,704
$
1,769
2018 Acquisitions
4,143
2,879
1,264
16,029
5,167
10,862
2019 Acquisitions
5,861
-
5,861
12,704
-
12,704
17,777
10,198
7,579
59,206
33,871
25,335
Developed and expanded facilities:
Developed in 2013 - 2015
7,288
6,842
446
28,331
26,725
1,606
Developed in 2016 and 2017
11,633
9,655
1,978
43,358
34,233
9,125
Developed in 2018 and 2019
5,089
1,805
3,284
15,230
3,392
11,838
Completed Expansions
13,649
10,653
2,996
49,214
41,879
7,335
Expansions in process
3,508
3,811
(303
)
14,438
15,465
(1,027
)
41,167
32,766
8,401
150,571
121,694
28,877
Other non-same store facilities
19,986
19,794
192
80,203
80,744
(541
)
Total revenues
78,930
62,758
16,172
289,980
236,309
53,671
Cost of operations before
depreciation and amortization:
Acquired Facilities:
2017 Acquisitions
2,571
2,225
346
10,203
9,669
534
2018 Acquisitions
1,632
1,276
356
7,197
2,141
5,056
2019 Acquisitions
2,242
-
2,242
5,072
-
5,072
6,445
3,501
2,944
22,472
11,810
10,662
Developed and expanded facilities:
Developed in 2013 - 2015
1,772
1,714
58
8,284
8,031
253
Developed in 2016 and 2017
3,714
5,015
(1,301
)
18,188
17,984
204
Developed in 2018 and 2019
2,765
1,722
1,043
11,195
4,136
7,059
Completed Expansions
5,387
2,823
2,564
21,579
13,756
7,823
Expansions in process
913
733
180
4,114
3,963
151
14,551
12,007
2,544
63,360
47,870
15,490
Other non-same store facilities
5,694
4,684
1,010
24,829
24,778
51
Total cost of operations
26,690
20,192
6,498
110,661
84,458
26,203
Net operating income:
Acquired Facilities:
2017 Acquisitions
5,202
5,094
108
20,270
19,035
1,235
2018 Acquisitions
2,511
1,603
908
8,832
3,026
5,806
2019 Acquisitions
3,619
-
3,619
7,632
-
7,632
11,332
6,697
4,635
36,734
22,061
14,673
Developed and expanded facilities:
Developed in 2013 - 2015
5,516
5,128
388
20,047
18,694
1,353
Developed in 2016 and 2017
7,919
4,640
3,279
25,170
16,249
8,921
Developed in 2018 and 2019
2,324
83
2,241
4,035
(744
)
4,779
Completed Expansions
8,262
7,830
432
27,635
28,123
(488
)
Expansions in process
2,595
3,078
(483
)
10,324
11,502
(1,178
)
26,616
20,759
5,857
87,211
73,824
13,387
Other non-same store facilities
14,292
15,110
(818
)
55,374
55,966
(592
)
Net operating income (a)
$
52,240
$
42,566
$
9,674
$
179,319
$
151,851
$
27,468
(a)
See attached reconciliation of
self-storage NOI to net income.
Investing and Capital
Activities
During the three months ended December 31, 2019, we acquired
twelve self-storage facilities (three in South Carolina, two each
in Indiana, North Carolina and Washington and one each in Arizona,
Texas and Virginia) with 0.9 million net rentable square feet for
$121.1 million. During 2019, we acquired 44 self-storage facilities
(twelve in Virginia, six in Florida, three each in Georgia,
Indiana, North Carolina, South Carolina and Texas, two each in
Arizona, Massachusetts and Washington, and one each in Colorado,
Kentucky, Michigan, Minnesota and Tennessee) with 3.1 million net
rentable square feet for $429.9 million. Subsequent to December 31,
2019, we acquired or were under contract to acquire 14 self-storage
facilities (four in Ohio, three in California, two each in New York
and Tennessee, and one each in Indiana, Massachusetts and Nebraska)
with 1.1 million net rentable square feet for $245.3 million.
During the three months ended December 31, 2019, we opened three
newly developed facilities and various expansion projects (0.5
million net rentable square feet – 0.2 million each in Florida and
Minnesota, and 0.1 million in Washington) costing $83.6 million.
During 2019, we opened eleven newly developed facilities and
various expansion projects (3.7 million net rentable square feet –
1.5 million in Texas, 0.5 million in Minnesota, 0.3 million each in
Colorado, Florida and North Carolina, 0.2 million each in Georgia,
Tennessee and Washington, and 0.1 million each in California and
Michigan) costing $379.1 million. At December 31, 2019, we had
various facilities in development (1.3 million net rentable square
feet) estimated to cost $209 million and various expansion projects
(3.1 million net rentable square feet) estimated to cost $410
million. Our aggregate 4.4 million net rentable square foot
pipeline of development and expansion facilities includes 1.4
million in California, 1.2 million in Florida, 0.4 million in
Minnesota, 0.3 million in Texas, 0.2 million each in Missouri,
Virginia and Washington, and 0.5 million in other states. The
remaining $477 million of development costs for these projects is
expected to be incurred primarily in the next 18 months.
On November 15, 2019, we issued our 4.7% Series J Preferred
Shares for gross proceeds of $258.8 million.
On November 26, 2019, we called our 5.875% Series A Preferred
Shares for redemption. The shares were redeemed on December 30,
2019.
On December 20, 2019, we issued our 4.75% Series K Preferred
Shares for gross proceeds of $230 million.
On January 24, 2020, we completed a public offering of €500
million ($552 million) of Euro denominated Senior Unsecured Notes,
bearing interest at a fixed rate of 0.875% and maturing on January
24, 2032.
As we reported in an SEC form 8-K on February 14, 2020, we
submitted a non-binding proposal to acquire 100% of the issued
stapled securities of National Storage REIT (“NSR”), an
Australia-based publicly-traded REIT (ASX:NSR) that owns and
operates 167 self-storage facilities in Australia and New Zealand,
for a cash purchase price of A$2.40 per share. Our proposal was
subject to a number of conditions, including due diligence. Any
transaction would be subject to processes for acquisition of widely
held entities under Australian law, including securityholder
approval. There is no assurance that Public Storage will reach a
definitive agreement or consummate a transaction with NSR or that
if such an agreement is reached, it will be on terms consistent
with our non-binding proposal.
Distributions Declared
On February 21, 2020, our Board of Trustees declared a regular
common quarterly dividend of $2.00 per common share. The Board also
declared dividends with respect to our various series of preferred
shares. All the dividends are payable on March 31, 2020 to
shareholders of record as of March 16, 2020.
Fourth Quarter Conference
Call
A conference call is scheduled for February 26, 2020 at 9:00
a.m. (PST) to discuss the fourth quarter earnings results. The
domestic dial-in number is (866) 406-5408, and the international
dial-in number is (973) 582-2770 (conference ID number for either
domestic or international is 1995740). A simultaneous audio webcast
may be accessed by using the link at www.publicstorage.com under
“About Us, Investor Relations, News and Events, Events Calendar.” A
replay of the conference call may be accessed through March 11,
2020 by calling (800) 585-8367 (domestic), (404) 537-3406
(international) or by using the link at www.publicstorage.com under
“About Us, Investor Relations, News and Events, Events Calendar.”
All forms of replay utilize conference ID number 1995740.
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500,
is a REIT that primarily acquires, develops, owns and operates
self-storage facilities. At December 31, 2019, we had: (i)
interests in 2,483 self-storage facilities located in 38 states
with approximately 169 million net rentable square feet in the
United States, (ii) an approximate 35% common equity interest in
Shurgard Self Storage SA (Euronext Brussels:SHUR) which owned 234
self-storage facilities located in seven Western European nations
with approximately 13 million net rentable square feet operated
under the “Shurgard” brand and (iii) an approximate 42% common
equity interest in PS Business Parks, Inc. (NYSE:PSB) which owned
and operated approximately 28 million rentable square feet of
commercial space at December 31, 2019. Our headquarters are located
in Glendale, California.
Additional information about Public Storage is available on our
website, www.publicstorage.com.
We expect to release our 2019 Annual Report on Form 10-K within
approximately one business day.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements in this press release, other than statements
of historical fact, are forward-looking statements which may be
identified by the use of the words “expects,” “believes,”
“anticipates,” “should,” “estimates” and similar expressions. These
forward-looking statements involve known and unknown risks and
uncertainties, which may cause our actual results and performance
to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact
future results and performance include, but are not limited to,
those described in Part 1, Item 1A, “Risk Factors” in our most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the “SEC”) on February 27, 2019 and in our
other filings with the SEC and the following: general risks
associated with the ownership and operation of real estate,
including changes in demand, risk related to development,
acquisition and expansion of self-storage facilities, potential
liability for environmental contamination, natural disasters and
adverse changes in laws and regulations governing property tax,
real estate and zoning; risks associated with downturns in the
national and local economies in the markets in which we operate,
including risks related to current economic conditions and the
economic health of our customers; the impact of competition from
new and existing self-storage and commercial facilities and other
storage alternatives; the risk that our existing self-storage
facilities may be at a disadvantage in competing with newly
developed facilities with more visual and customer appeal;
difficulties in our ability to successfully evaluate, finance,
integrate into our existing operations and manage properties that
we acquire directly or through the acquisition of entities that own
and operate self-storage facilities; increased reliance on Google
as a customer acquisition channel; risks associated with
international operations including, but not limited to, unfavorable
foreign currency rate fluctuations, changes in tax laws and local
and global economic uncertainty that could adversely affect our
earnings and cash flows; risks related to our participation in
joint ventures; the impact of the legal and regulatory environment,
including changes in federal, state and local laws and regulations
governing environmental issues, taxes, our tenant reinsurance
business, pricing of our self-storage space and labor; risks of
increased tax expense associated either with a possible failure by
us to qualify as a REIT, or with challenges to the determination of
taxable income for our taxable REIT subsidiaries; risks due to a
potential November 2020 California ballot initiative (or other
equivalent actions) that could remove the property tax protections
of Proposition 13 with respect to our California real estate and
result in substantial increases in our California property tax
expense; changes in U.S. federal or state tax laws related to the
taxation of REITs and other corporations; security breaches or a
failure of our networks, systems or technology could adversely
impact our operations or our business, customer and employee
relationships or result in fraudulent payments; risks associated
with the self-insurance of certain business risks, including
property and casualty insurance, employee health insurance and
workers compensation liabilities; difficulties in raising capital
at a reasonable cost; delays and cost overruns on our projects to
develop or expand our facilities; ongoing litigation and other
legal and regulatory actions that may divert management’s time and
attention, require us to pay damages and expenses or restrict the
operation of our business; and economic uncertainty due to the
impact of war or terrorism. These forward-looking statements speak
only as of the date of this press release. All of our
forward-looking statements, including those in this press release,
are qualified in their entirety by this statement. We expressly
disclaim any obligation to update publicly or otherwise revise any
forward-looking statements, whether as a result of new information,
new estimates, or other factors, events or circumstances after the
date of this press release, except where expressly required by law.
Given these risks and uncertainties, you should not rely on any
forward-looking statements in this press release, or which
management may make orally or in writing from time to time, as
predictions of future events nor guarantees of future
performance.
PUBLIC STORAGE
SELECTED INCOME STATEMENT
DATA
(Amounts in thousands, except per
share data)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenues:
Self-storage facilities
$
677,027
$
654,248
$
2,684,552
$
2,597,607
Ancillary operations
40,472
38,212
162,271
156,673
717,499
692,460
2,846,823
2,754,280
Expenses:
Self-storage cost of operations
162,471
150,031
752,579
695,731
Ancillary cost of operations
10,113
10,343
44,204
43,991
Depreciation and amortization
134,885
121,374
512,918
483,646
General and administrative
20,308
28,442
71,983
118,720
Interest expense
12,647
7,953
45,641
32,542
340,424
318,143
1,427,325
1,374,630
Other increase (decrease) to net
income:
Interest and other income
6,424
7,550
28,436
26,442
Equity in earnings of unconsolidated real
estate entities (a)
13,916
12,966
69,547
103,495
Gain on sale of real estate
-
36,078
341
37,903
Gain due to Shurgard public offering
-
151,616
-
151,616
Foreign currency exchange (loss) gain
(10,318
)
5,379
7,829
18,117
Net income
387,097
587,906
1,525,651
1,717,223
Allocation to noncontrolling interests
(1,082
)
(1,701
)
(5,117
)
(6,192
)
Net income allocable to Public Storage
shareholders
386,015
586,205
1,520,534
1,711,031
Allocation of net income to:
Preferred shareholders – distributions
(51,614
)
(54,078
)
(210,179
)
(216,316
)
Preferred shareholders – redemptions
(6,153
)
-
(32,693
)
-
Restricted share units
(997
)
(2,025
)
(4,895
)
(5,815
)
Net income allocable to common
shareholders
$
327,251
$
530,102
$
1,272,767
$
1,488,900
Per common
share:
Net income per common share – Basic
$
1.88
$
3.05
$
7.30
$
8.56
Net income per common share – Diluted
$
1.87
$
3.04
$
7.29
$
8.54
Weighted average common shares – Basic
174,383
174,075
174,287
173,969
Weighted average common shares –
Diluted
174,590
174,466
174,530
174,297
(a)
The reduction in equity in earnings for
the year ended December 31, 2019 reflects a $35.3 million reduction
in our equity earnings from PSB due primarily to a reduction in our
equity share of PSB’s gains on sale, offset partially by a $1.3
million increase in equity in earnings from Shurgard. The increase
in equity in earnings for Shurgard reflects i) our $5.2 million
equity share of costs of the IPO and casualty losses incurred by
Shurgard in 2018 and ii) a $10.1 million reduction in our equity
share of depreciation, offset partially by iii) an approximate
$14.0 million reduction in our equity share of core FFO from
Shurgard. The reductions in our equity share of Core FFO and
depreciation from Shurgard is due primarily to Shurgard’s IPO on
October 15, 2018, which reduced our equity interest from 49% to
approximately 35%, and resulted in dilution from approximately €199
million in Shurgard’s IPO proceeds that remained uninvested in real
estate at December 31, 2019.
PUBLIC STORAGE
SELECTED BALANCE SHEET
DATA
(Amounts in thousands, except
share and per share data)
December 31, 2019
December 31, 2018
ASSETS
(Unaudited)
Cash and equivalents
$
409,743
$
361,218
Operating real estate facilities:
Land and buildings, at cost
16,289,146
15,296,844
Accumulated depreciation
(6,623,475
)
(6,140,072
)
9,665,671
9,156,772
Construction in process
141,934
285,339
Investments in unconsolidated real estate
entities
767,816
783,988
Goodwill and other intangible assets,
net
205,936
209,856
Other assets
174,344
131,097
Total assets
$
11,365,444
$
10,928,270
LIABILITIES AND EQUITY
Senior unsecured notes
$
1,875,218
$
1,384,880
Mortgage notes
27,275
27,403
Accrued and other liabilities
383,284
371,259
Total liabilities
2,285,777
1,783,542
Equity:
Public Storage shareholders’ equity:
Cumulative Preferred Shares, $0.01 par
value, 100,000,000 shares
authorized, 162,600 shares issued (in
series) and outstanding,
(161,000 at December 31, 2018) at
liquidation preference
4,065,000
4,025,000
Common Shares, $0.10 par value,
650,000,000 shares authorized,
174,418,615 shares issued and outstanding,
(174,130,881 shares
at December 31, 2018)
17,442
17,413
Paid-in capital
5,710,934
5,718,485
Accumulated deficit
(665,575
)
(577,360
)
Accumulated other comprehensive loss
(64,890
)
(64,060
)
Total Public Storage shareholders’
equity
9,062,911
9,119,478
Noncontrolling interests
16,756
25,250
Total equity
9,079,667
9,144,728
Total liabilities and equity
$
11,365,444
$
10,928,270
PUBLIC STORAGE
SELECTED FINANCIAL
DATA
Computation of Funds from
Operations and Funds Available for Distribution
(Unaudited – amounts in thousands
except per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Computation of
FFO per Share:
Net income allocable to common
shareholders
$
327,251
$
530,102
$
1,272,767
$
1,488,900
Eliminate items excluded from FFO:
Depreciation and amortization
133,897
121,374
511,413
483,646
Depreciation from unconsolidated real
estate investments
19,161
21,630
71,725
79,868
Depreciation allocated to noncontrolling
interests
and restricted share unitholders
(903
)
(822
)
(4,208
)
(3,646
)
Gains on sale of real estate, including
equity
investment share
(4,516
)
(189,802
)
(5,896
)
(227,332
)
FFO allocable to common shares (a)
$
474,890
$
482,482
$
1,845,801
$
1,821,436
Diluted weighted average common shares
174,590
174,466
174,530
174,297
FFO per share (a)
$
2.72
$
2.77
$
10.58
$
10.45
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share—Diluted
$
1.87
$
3.04
$
7.29
$
8.54
Eliminate per share amounts excluded from
FFO per share:
Depreciation and amortization
0.87
0.81
3.32
3.21
Gains on sale of real estate and Shurgard
IPO
(0.02
)
(1.08
)
(0.03
)
(1.30
)
FFO per share (a)
$
2.72
$
2.77
$
10.58
$
10.45
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares
$
474,890
$
482,482
$
1,845,801
$
1,821,436
Eliminate effect of items included in FFO
but not FAD:
Share-based compensation expense in
excess
of cash paid
4,866
16,602
13,671
57,589
Foreign currency exchange loss (gain)
10,318
(5,379
)
(7,829
)
(18,117
)
Impact of EITF D-42, including equity
investment share
10,706
-
37,246
-
Less: Capital expenditures to maintain
real estate facilities (b)
(57,140
)
(45,990
)
(192,539
)
(139,397
)
FAD (a)
$
443,640
$
447,715
$
1,696,350
$
1,721,511
Distributions paid to common shareholders
and restricted
share units
$
349,754
$
349,203
$
1,398,570
$
1,396,364
Distribution payout ratio
78.8
%
78.0
%
82.4
%
81.1
%
Distributions per common share
$
2.00
$
2.00
$
8.00
$
8.00
(a)
FFO and FFO per share are non-GAAP
measures defined by the National Association of Real Estate
Investment Trusts and, along with the non-GAAP measure FAD, are
considered helpful measures of REIT performance by REITs and many
REIT analysts. FFO represents GAAP net income before depreciation
and amortization, real estate gains or losses and impairment
charges, which are excluded because they are based upon historical
costs and assume that building values diminish ratably over time,
while we believe that real estate values fluctuate due to market
conditions. FAD represents FFO adjusted to exclude certain non-cash
charges and to deduct capital expenditures. We utilize FAD in
evaluating our ongoing cash flow available for investment, debt
repayment and common distributions. We believe investors and
analysts utilize FAD in a similar manner. FFO and FFO per share are
not a substitute for net income or earnings per share. FFO and FAD
are not substitutes for GAAP net cash flow in evaluating our
liquidity or ability to pay dividends, because they exclude
investing and financing activities presented on our statements of
cash flows. In addition, other REITs may compute these measures
differently, so comparisons among REITs may not be helpful.
(b) Capital expenditures for 2019 include certain projects that are
not traditional like-for-like replacements of existing components,
and in certain circumstances upgrade existing components before the
end of their functional lives. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” under
“Overview” and “Liquidity and Capital Resources – Capital
Expenditure Requirements” in our December 31, 2019 Form 10-K for
further information.
PUBLIC STORAGE
SELECTED FINANCIAL
DATA
Reconciliation of Self-Storage
Net Operating Income to
Net Income
(Unaudited – amounts in
thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Self-storage revenues for:
Same Store Facilities
$
598,097
$
591,490
$
2,394,572
$
2,361,298
Acquired facilities
17,777
10,198
59,206
33,871
Developed and expanded facilities
41,167
32,766
150,571
121,694
Other non-same store facilities
19,986
19,794
80,203
80,744
Self-storage revenues
677,027
654,248
2,684,552
2,597,607
Self-storage cost of operations for:
Same Store Facilities
135,781
129,839
641,918
611,273
Acquired facilities
6,445
3,501
22,472
11,810
Developed and expanded facilities
14,551
12,007
63,360
47,870
Other non-same store facilities
5,694
4,684
24,829
24,778
Self-storage cost of operations
162,471
150,031
752,579
695,731
Self-storage NOI for:
Same Store Facilities
462,316
461,651
1,752,654
1,750,025
Acquired facilities
11,332
6,697
36,734
22,061
Developed and expanded facilities
26,616
20,759
87,211
73,824
Other non-same store facilities
14,292
15,110
55,374
55,966
Self-storage NOI (a)
514,556
504,217
1,931,973
1,901,876
Ancillary revenues
40,472
38,212
162,271
156,673
Ancillary cost of operations
(10,113
)
(10,343
)
(44,204
)
(43,991
)
Depreciation and amortization
(134,885
)
(121,374
)
(512,918
)
(483,646
)
General and administrative expense
(20,308
)
(28,442
)
(71,983
)
(118,720
)
Interest and other income
6,424
7,550
28,436
26,442
Interest expense
(12,647
)
(7,953
)
(45,641
)
(32,542
)
Equity in earnings of unconsolidated real
estate entities
13,916
12,966
69,547
103,495
Gain on sale of real estate
-
36,078
341
37,903
Gain due to Shurgard public offering
-
151,616
-
151,616
Foreign currency exchange (loss) gain
(10,318
)
5,379
7,829
18,117
Net income on our income statement
$
387,097
$
587,906
$
1,525,651
$
1,717,223
(a)
Net operating income or “NOI” is a
non-GAAP financial measure that excludes the impact of depreciation
and amortization expense, which is based upon historical costs and
assumes that building values diminish ratably over time, while we
believe that real estate values fluctuate due to market conditions.
We utilize NOI in determining current property values, evaluating
property performance, and in evaluating operating trends. We
believe that investors and analysts utilize NOI in a similar
manner. NOI is not a substitute for net income, operating cash
flow, or other related GAAP financial measures, in evaluating our
operating results. This table reconciles from NOI for our
self-storage facilities to the net income presented on our income
statement.
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Ryan Burke (818) 244-8080, Ext. 1141
Public Storage (NYSE:PSA)
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