Public Storage (NYSE:PSA) announced today operating results for
the three months ended March 31, 2020.
Operating Results for the Three Months
Ended March 31, 2020
For the three months ended March 31, 2020, net income allocable
to our common shareholders was $313.1 million or $1.79 per diluted
common share, compared to $301.7 million or $1.73 per diluted
common share in 2019 representing an increase of $11.4 million or
$0.06 per diluted common share. The increase is due primarily to
(i) a $9.5 million increase in self-storage net operating income
(described below), (ii) a $8.5 million allocation to our preferred
shareholders associated with our preferred share redemption
activities in the three months ended March 31, 2019, and (iii) our
$8.1 million equity share of a gain on sale of real estate recorded
by PS Business Parks, in the three months ended March 31, 2020,
offset partially by (iv) a $14.0 million increase in depreciation
and amortization expense.
The $9.5 million increase in self-storage net operating income
is a result of a $0.3 million increase in our Same Store Facilities
(as defined below) and a $9.2 million increase in our non-Same
Store Facilities (as defined below). Revenues for the Same Store
Facilities increased 1.2% or $7.2 million in the three months ended
March 31, 2020 as compared to 2019, due primarily to higher
realized annual rent per occupied square foot. Cost of operations
for the Same Store Facilities increased by 4.0% or $7.0 million in
the three months ended March 31, 2020 as compared to 2019, due
primarily to a 58.8% ($5.3 million) increase in marketing expenses
and increased property tax expense. The increase in net operating
income of $9.2 million for the non-Same Store Facilities is due
primarily to the impact of facilities acquired in 2019 and 2020 and
the fill-up of recently developed and expanded facilities.
Funds from Operations
For the three months ended March 31, 2020, funds from operations
(“FFO”) was $2.61 per diluted common share, as compared to $2.52 in
the same period in 2019, representing an increase of 3.6%. FFO is a
non-GAAP measure defined by the National Association of Real Estate
Investment Trusts and generally represents net income before
depreciation and amortization expense, gains and losses and
impairment charges with respect to real estate assets. A
reconciliation of GAAP diluted net income per share to FFO per
share, and additional descriptive information regarding this
non-GAAP measure, is attached.
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, and (iii) certain other
non-cash and/or nonrecurring income or expense items primarily
representing, with respect to the periods presented below, casualty
losses, due diligence costs incurred in strategic transactions, and
contingency resolutions. We review Core FFO per share to evaluate
our ongoing operating performance, and we believe it is used by
investors and REIT analysts in a similar manner. However, Core FFO
per share is not a substitute for net income per share. Because
other REITs may not compute Core FFO per share in the same manner
as we do, may not use the same terminology or may not present such
a measure, Core FFO per share may not be comparable among
REITs.
The following table reconciles from FFO per share to Core FFO
per share (unaudited):
Three Months Ended March 31,
Percentage
2020
2019
Change
FFO per share
$
2.61
$
2.52
3.6
%
Eliminate the per share impact of
items excluded from Core FFO,
including
our equity share from investments:
Foreign currency exchange gain
(0.05
)
(0.04
)
Application of EITF D-42
-
0.05
Other items
0.02
-
Core FFO per share
$
2.58
$
2.53
2.0
%
Property Operations – Same Store
Facilities
The Same Store Facilities consist of facilities that have been
owned and operated on a stabilized level of occupancy, revenues and
cost of operations since January 1, 2018. Our Same Store Facilities
increased from 2,159 facilities at December 31, 2019 to 2,224 at
March 31, 2020. The composition of our Same Store Facilities allows
us to more effectively evaluate the ongoing performance of our
self-storage portfolio in 2018, 2019, and 2020 and exclude the
impact of fill-up of unstabilized facilities, which can
significantly affect operating trends. We believe the Same Store
information is used by investors and REIT analysts in a similar
manner. The following table summarizes the historical operating
results of these 2,224 facilities (143.9 million net rentable
square feet) that represent approximately 85% of the aggregate net
rentable square feet of our U.S. consolidated self-storage
portfolio at March 31, 2020.
Selected
Operating Data for the Same
Store Facilities
(2,224 facilities)
(unaudited):
Three Months Ended March 31,
Percentage
2020
2019
Change
(Dollar amounts in thousands,
except for per square foot data)
Revenues:
Rental income
$
583,732
$
575,562
1.4
%
Late charges and administrative fees
25,803
26,735
(3.5
)%
Total revenues (a)
609,535
602,297
1.2
%
Cost of operations:
Property taxes
70,187
66,827
5.0
%
On-site property manager payroll
32,054
31,035
3.3
%
Supervisory payroll
10,813
10,051
7.6
%
Repairs and maintenance
10,482
10,901
(3.8
)%
Snow removal
1,913
2,857
(33.0
)%
Utilities
10,430
11,296
(7.7
)%
Marketing
14,296
9,001
58.8
%
Other direct property costs
16,452
16,844
(2.3
)%
Allocated overhead
13,654
14,512
(5.9
)%
Total cost of operations (a)
180,281
173,324
4.0
%
Net operating income (b)
$
429,254
$
428,973
0.1
%
Gross margin
70.4
%
71.2
%
(1.1
)%
Weighted average for the period:
Square foot occupancy
93.1
%
92.5
%
0.6
%
Realized annual rental income per (c):
Occupied square foot
$
17.43
$
17.30
0.8
%
Available square foot (“REVPAF”)
$
16.23
$
16.00
1.4
%
At March 31:
Square foot occupancy (d)
92.7
%
92.1
%
0.7
%
Annual contract rent per occupied
square foot (e)
$
17.99
$
17.83
0.9
%
(a)
Revenues and cost of operations do not
include ancillary revenues and expenses generated at the facilities
with respect to tenant reinsurance and retail sales.
(b)
See attached reconciliation of
self-storage NOI to net income.
(c)
Realized annual rent per occupied square
foot is computed by dividing annualized rental income, before late
charges and administrative fees, by the weighted average occupied
square feet for the period. Realized annual rent per available
square foot (“REVPAF”) is computed by dividing annualized rental
income, before late charges and administrative fees, by the total
available rentable square feet for the period. These measures
exclude late charges and administrative fees in order to provide a
better measure of our ongoing level of revenue. Late charges are
dependent upon the level of delinquency, and administrative fees
are dependent upon the level of move-ins. In addition, the rates
charged for late charges and administrative fees can vary
independently from rental rates. These measures take into
consideration promotional discounts, which reduce rental
income.
(d)
Occupancy levels at March 31, 2020 include
delinquent tenants for whom an auction was delayed, as noted below
under “COVID-19 Pandemic.” Had customary auction timelines been
followed, these tenants would have been evicted by March 31, 2020,
and our square foot occupancy at March 31, 2020 would have been
92.4% rather than 92.7%.
(e)
Annual contract rent represents the agreed
upon monthly rate that is paid by our tenants in place at the time
of measurement. Contract rates are initially set in the lease
agreement upon move-in and we adjust them from time to time with
notice. Contract rent excludes other fees that are charged on a
per-item basis, such as late charges and administrative fees, does
not reflect the impact of promotional discounts, and does not
reflect the impact of rents that are written off as
uncollectible.
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:
2020
$
609,535
2019
$
602,297
$
616,055
$
628,573
$
615,268
$
2,462,193
Total cost of operations:
2020
$
180,281
2019
$
173,324
$
171,881
$
175,983
$
140,306
$
661,494
Property taxes:
2020
$
70,187
2019
$
66,827
$
67,550
$
67,353
$
38,904
$
240,634
Repairs and maintenance, including
snow removal expenses:
2020
$
12,395
2019
$
13,758
$
12,068
$
13,166
$
12,572
$
51,564
Marketing:
2020
$
14,296
2019
$
9,001
$
12,426
$
14,345
$
13,230
$
49,002
REVPAF:
2020
$
16.23
2019
$
16.00
$
16.40
$
16.71
$
16.37
$
16.37
Weighted average realized annual
rent per occupied square foot:
2020
$
17.43
2019
$
17.30
$
17.45
$
17.74
$
17.59
$
17.52
Weighted average occupancy levels
for the period:
2020
93.1
%
2019
92.5
%
94.0
%
94.2
%
93.1
%
93.4
%
Property Operations – Non-Same Store
Facilities
In addition to the 2,224 Same Store Facilities, we have 268
facilities that were not stabilized with respect to occupancies,
revenues or cost of operations since January 1, 2018 or that we did
not own as of January 1, 2018, including 78 facilities that were
acquired from third parties, 74 newly developed facilities, 71
facilities that have been expanded or are targeted for expansion,
and 45 facilities that are unstabilized due to the impact of
casualties and other factors (collectively, the “Non-Same Store
Facilities”). Operating data, metrics, and further commentary with
respect to these facilities, including detail by vintage, is
included in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under “Self-Storage
Operations” in our March 31, 2020 Form 10-Q.
Investing and Capital
Activities
During the three months ended March 31, 2020, we acquired nine
self-storage facilities (two each in California, New York and
Tennessee and one each in Indiana, Massachusetts and Nebraska) with
0.7 million net rentable square feet for $186.2 million. Subsequent
to March 31, 2020, we acquired or were under contract to acquire
six self-storage facilities (four in Ohio and one each in
California and Florida) with 0.4 million net rentable square feet
for $66.8 million.
During the three months ended March 31, 2020, we opened various
expansion projects (0.1 million net rentable square feet in
Minnesota) costing $25.3 million. At March 31, 2020, we had various
facilities in development (1.4 million net rentable square feet)
estimated to cost $229 million and various expansion projects (2.9
million net rentable square feet) estimated to cost $406 million.
Our aggregate 4.3 million net rentable square foot pipeline of
development and expansion facilities includes 1.5 million in
California, 1.3 million in Florida, 0.3 million in Texas, 0.2
million each in Missouri, Virginia and Washington and 0.6 million
in other states. The remaining $473 million of development costs
for these projects is expected to be incurred primarily in the next
18 to 24 months.
As previously reported, 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 previously reported, on February 14, 2020, we disclosed that
we had 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). On March 17, 2020,
we notified NSR that in light of the current environment, Public
Storage would not be proceeding with a binding agreement.
COVID-19 Pandemic
The COVID-19 Pandemic (the “COVID Pandemic”) has and will
continue to impact our operations, revenues, cost of operations, as
well as our investments and capital availability and cost, as
described below, and in more detail in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in our
March 31, 2020 Form 10-Q.
COVID Pandemic’s impact on our operations,
and our related mitigation measures
The COVID Pandemic has resulted in cessation, severe
curtailment, or impairment of business activities in most sectors
of the economy in virtually all markets we operate in, due to
governmental “stay at home” orders, risk mitigation procedures,
closure of businesses not considered to be “essential,” as well as
other direct and indirect impacts, including those that may not yet
be identified. This has already resulted in a rapid and dramatic
increase in unemployment in the U.S. We cannot estimate the extent
of the COVID Pandemic’s future negative impacts or how long the
negative impacts of the COVID Pandemic will persist. In addition,
it is possible that, even after the initial restrictions due to the
COVID Pandemic ease, they could be reinstituted in case of future
waves of infection or if additional pandemics occur.
Our self-storage facilities qualify as “essential” businesses
under all applicable business closure orders, and thus remain open
to allow customers to move-in, move-out, pay rent, and access their
storage units as they would have before the COVID Pandemic.
However, the COVID Pandemic has negatively impacted our operations
due to (i) stay at home orders which have discouraged customer
activity, in particular move-ins, (ii) increased absentee rates for
on-site property managers as a result of childcare issues, illness,
or other issues, resulting in properties not opening on time or at
all on certain days, (iii) delays in the timing of our standard in
person “auction” process under lien sale statutes for delinquent
tenants due to logistical issues associated with social distancing
and other considerations in the current environment, and (iv)
remote working at home by most corporate and call center employees
in our Glendale, California and Gilbert, Arizona offices,
potentially hampering efficiency and effectiveness, including
negative effects to communications and coordination among and
across teams.
To mitigate these operational issues, effective from April 1,
2020 to June 30, 2020, we have instituted a temporary $3.00 hourly
wage increase and enhancements of paid time off benefits to
virtually all of our property managers, and will provide additional
financial support to selected employees (principally, property
managers) to enable them to continue working. We have also
instituted the use of masks, gloves, and social distancing by
property managers to ensure the safety of our personnel and
customers. These measures will increase our operating expenses.
COVID Pandemic’s Impact on
Revenues
Since late March 2020, we have seen significant reductions in
demand for self-storage space, and as a result, our move-in
volumes, despite lower move-in rental rates, have also declined
significantly, offset partially by lower move-out volumes. The
reduction in move-out volumes may be temporary or even reverse, to
the extent they are driven by short-term factors such as stay at
home orders and delays in our auction process. We have also
temporarily curtailed our existing tenant rate increase program.
Because existing tenant rate increases have contributed the
majority of our increase in rental income in recent years,
curtailment of these increases will have a material adverse impact
on our revenue growth. These curtailments will impact our revenue
subsequent to March 31, 2020. It is possible that the COVID
Pandemic could change consumer behavior, either due to economic
recession, uncertainty, or dislocation, as well as other factors,
which could increase customer sensitivity and propensity to
move-out in response to rate increases, either in the short or
longer term.
To date, we have observed no material degradation in rent
collections. However, we believe that our bad debt losses (which
are reflected as a reduction in revenues) could increase from
historical levels of approximately 2% of rent, due to (i)
cumulative stress on our customers’ financial capacity, (ii)
reduced rent recoveries from auctioned units, due to the closure of
venues that bidders typically use to resell the goods, and (iii)
the continued delay of auctions, which began in March 2020, noted
above. We are taking certain steps in order to augment our
collection efforts, in anticipation of potential challenges in the
near term in collecting rent, though there can be no assurance that
such efforts will be successful in mitigating collection
losses.
We may experience a change in the move-out patterns of our
long-term customers due to economic uncertainty and the significant
increase in unemployment in the last 30 days. This could lead to
lower occupancies and rent “roll down” as long-term customers are
replaced with new customers at lower rates. We observed such a
trend during the recessionary circumstances of 2009; however, to
date we have not seen any material change in the move-out patterns
of long-term customers.
As a result of these actual and anticipated impacts of the COVID
Pandemic and our responses, we believe it is likely that we will
experience reductions in year-over-year same-store rental income
and net operating income in the remainder of 2020.
COVID Pandemic’s Impact on Investing and
Capital Activities
The COVID Pandemic could delay the estimated timing of
completion of our existing pipeline of development and expansion
projects, because many jurisdictions have shut down or delayed
entitlement activities, and “stay at home” orders could potentially
delay construction activities. In addition, the COVID Pandemic
could extend the timeframe for a newly developed facility to reach
stabilized occupancies and cash flows. We continue to monitor our
projects to ensure that they still meet our risk-adjusted yield
expectations, and reduced project yield estimates due to the COVID
Pandemic or other factors could result in the cancellation of
existing projects in the future, or we may not pursue certain new
projects that we would have otherwise sought.
We continue to seek to acquire additional self-storage
facilities from third parties. Our acquisition volume was robust in
the early part of 2020, with $253.0 million in acquisitions during
2020 thus far including facilities currently under contract.
However, we believe that in the short-term, acquisition volume may
decline due to economic uncertainty resulting from the COVID
Pandemic, resulting in some third party sellers delaying the sale
of their properties. Volume in the latter part of 2020 could
increase as the economy stabilizes and seller confidence returns,
or leveraged owners of recently developed facilities are forced to
sell. There can be no assurance as to the level of future
acquisitions of facilities.
The COVID Pandemic has had negative impacts on the cost of debt
and equity capital, and may continue to do so or such negative
impacts may intensify. Based upon our substantial current liquidity
relative to our capital requirements noted below, and our strong
financial profile and credit ratings, we do not expect such capital
market dislocations to have a material impact upon our expected
capital and growth plans over the next 12 months. However, there
can be no assurance that they would not in the future, if they were
to persist for a long period or intensify. In addition, there can
be no assurance, if significant additional opportunities to acquire
facilities were to arise as a result of the COVID Pandemic or for
other reasons, whether we would be able to raise capital at a
reasonable cost to allow us to be able to take advantage of such
opportunities.
Distributions Declared
On April 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 June 30, 2020 to
shareholders of record as of June 15, 2020.
First Quarter Conference
Call
A conference call is scheduled for May 1, 2020 at 9:00 a.m.
(PDT) to discuss the first quarter earnings results. The domestic
dial-in number is (866) 406-5408, and the international dial-in
number is (973) 582-2770 (conference ID number for either domestic
or international is 2058829). A simultaneous audio webcast may be
accessed by using the link at www.publicstorage.com under “About
Us, Investor Relations, News and Events, Event Calendar.” A replay
of the conference call may be accessed through May 15, 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, Event Calendar.” All forms of
replay utilize conference ID number 2058829.
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 March 31, 2020, we had: (i) interests
in 2,492 self-storage facilities located in 38 states with
approximately 170 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 March 31, 2020. Our headquarters are located in
Glendale, California.
Additional information about Public Storage is available on our
website, www.publicstorage.com.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements in this press release, other than statements
of historical fact, are forward-looking statements which may be
identified by the use of the words “expects,” “believes,”
“anticipates,” “should,” “estimates” and similar expressions. These
forward-looking statements involve known and unknown risks and
uncertainties, which may cause our actual results and performance
to be materially different from those expressed or implied in the
forward-looking statements. Factors and risks that may impact
future results and performance include, but are not limited to,
those described in Part 1, Item 1A, “Risk Factors” in our most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the “SEC”) on February 25, 2020 and in our
other filings with the SEC including: general risks associated with
the ownership and operation of real estate, including changes in
demand, risk related to development, expansion and acquisition 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; risks
associated with the COVID Pandemic or similar events, including but
not limited to illness or death of our employees or customers,
negative impacts to the economic environment and to self-storage
customers which could reduce the demand for self-storage or reduce
our ability to collect rent, and/or potential regulatory actions to
(i) close our facilities if we were determined not to be an
“essential business” or for other reasons, (ii) limit our ability
to increase rent or otherwise limit the rent we can charge or (iii)
limit our ability to collect rent or evict delinquent tenants; risk
that even after the initial restrictions due to the COVID Pandemic
ease, they could be reinstituted in case of future waves of
infection or if additional pandemics occur; risk that we could
experience a change in the move-out patterns of our long-term
customers due to economic uncertainty and the significant increase
in unemployment in the last 30 days. This could lead to lower
occupancies and rent “roll down” as long-term customers are
replaced with new customers at lower rates. We observed such a
trend during the recessionary circumstances of 2009; however, to
date we have not seen any material change in the move-out patterns
of long-term customers; risk of negative impacts on the cost and
availability of debt and equity capital as a result of the COVID
Pandemic, which could have a material impact upon our capital and
growth plans; 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; risk related to
increased reliance on Google as a customer acquisition channel;
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; 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,
as well as national, state and local laws and regulations
including, without limitation, those governing environmental
issues, taxes, our tenant reinsurance business, and labor,
including risks related to the impact of new laws and regulations;
risks of increased tax expense associated either with a possible
failure by us to qualify as a REIT, or with challenges to the
determination of taxable income for our taxable REIT subsidiaries;
risks due to a November 2020 California ballot initiative (or other
equivalent actions) that could remove the protections of
Proposition 13 with respect to our real estate and result in
substantial increases in our assessed values and property tax bills
in California; changes in United States 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 new facilities or expand our existing
facilities; ongoing litigation and other legal and regulatory
actions which may divert management’s time and attention, require
us to pay damages and expenses or restrict the operation of our
business; and economic uncertainty due to the impact of war or
terrorism. These forward-looking statements speak only as of the
date of this press release. All of our forward-looking statements,
including those in this press release, are qualified in their
entirety by this statement. We expressly disclaim any obligation to
update publicly or otherwise revise any forward-looking statements,
whether 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 press release, or which
management may make orally or in writing from time to time, neither
as predictions of future events nor guarantees of future
performance.
PUBLIC STORAGE SELECTED INCOME
STATEMENT DATA (Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2020
2019
Revenues:
Self-storage facilities
$
674,201
$
650,408
Ancillary operations
41,881
38,630
716,082
689,038
Expenses:
Self-storage cost of operations
207,925
193,656
Ancillary cost of operations
10,945
10,545
Depreciation and amortization
135,900
121,941
General and administrative
21,064
19,503
Interest expense
13,621
8,143
389,455
353,788
Other increase to net income:
Interest and other income
6,479
6,965
Equity in earnings of unconsolidated real
estate entities (a)
23,968
17,672
Gain on sale of real estate
1,117
-
Foreign currency exchange gain
8,945
7,791
Net income
367,136
367,678
Allocation to noncontrolling interests
(980
)
(1,157
)
Net income allocable to Public Storage
shareholders
366,156
366,521
Allocation of net income to:
Preferred shareholders – distributions
(52,005
)
(55,012
)
Preferred shareholders – redemptions
-
(8,533
)
Restricted share units
(1,017
)
(1,233
)
Net income allocable to common
shareholders
$
313,134
$
301,743
Per common
share:
Net income per common share – Basic
$
1.80
$
1.73
Net income per common share – Diluted
$
1.79
$
1.73
Weighted average common shares – Basic
174,446
174,177
Weighted average common shares –
Diluted
174,616
174,376
(a)
Equity in earnings of unconsolidated real
estate entities increased in the three months ended March 31, 2020
as compared to the same period in 2019, due to the following items
included in our equity in earnings of unconsolidated real estate
entities in the quarter ended March 31, 2020: (i) our $8.1 million
equity share of gains on sale recorded by PSB, (ii) our $3.5
million equity share of a casualty loss recorded by Shurgard Europe
due to a fire at one of its facilities, and (iii) our $1.4 million
equity share of an increase in income due to Shurgard’s resolution
of a contingency.
PUBLIC STORAGE SELECTED
BALANCE SHEET DATA (Amounts in thousands, except share and per
share data)
March 31, 2020
December 31, 2019
ASSETS
(Unaudited)
Cash and equivalents
$
718,427
$
409,743
Operating real estate facilities:
Land and buildings, at cost
16,548,981
16,289,146
Accumulated depreciation
(6,751,150
)
(6,623,475
)
9,797,831
9,665,671
Construction in process
161,699
141,934
Investments in unconsolidated real estate
entities
763,226
767,816
Goodwill and other intangible assets,
net
209,440
205,936
Other assets
175,298
174,344
Total assets
$
11,825,921
$
11,365,444
LIABILITIES AND EQUITY
Senior unsecured notes
$
2,411,896
$
1,875,218
Mortgage notes
26,772
27,275
Accrued and other liabilities
357,045
383,284
Total liabilities
2,795,713
2,285,777
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,
(162,600 at December 31, 2019) at
liquidation preference
4,065,000
4,065,000
Common Shares, $0.10 par value,
650,000,000 shares authorized,
174,475,022 shares issued and outstanding,
(174,418,615 shares
at December 31, 2019)
17,448
17,442
Paid-in capital
5,709,861
5,710,934
Accumulated deficit
(701,226
)
(665,575
)
Accumulated other comprehensive loss
(78,005
)
(64,890
)
Total Public Storage shareholders’
equity
9,013,078
9,062,911
Noncontrolling interests
17,130
16,756
Total equity
9,030,208
9,079,667
Total liabilities and equity
$
11,825,921
$
11,365,444
PUBLIC STORAGE SELECTED
FINANCIAL DATA
Computation of Funds from
Operations and Funds Available for Distribution
(Unaudited - amounts in thousands
except per share data)
Three Months Ended
March 31,
2020
2019
Computation of
FFO per Share:
Net income allocable to common
shareholders
$
313,134
$
301,743
Eliminate items excluded from FFO:
Depreciation and amortization
135,137
121,941
Depreciation from unconsolidated real
estate investments
18,243
17,514
Depreciation allocated to noncontrolling
interests
and restricted share unitholders
(961
)
(1,198
)
Gains on sale of real estate, including
equity
investment share
(9,241
)
-
FFO allocable to common shares (a)
$
456,312
$
440,000
Diluted weighted average common shares
174,616
174,376
FFO per share (a)
$
2.61
$
2.52
Reconciliation of
Earnings per Share to FFO per Share:
Earnings per share—Diluted
$
1.79
$
1.73
Eliminate per share amounts excluded from
FFO per share:
Depreciation and amortization
0.87
0.79
Gains on sale of real estate
(0.05
)
-
FFO per share (a)
$
2.61
$
2.52
Computation of
Funds Available for Distribution ("FAD"):
FFO allocable to common shares
$
456,312
$
440,000
Eliminate effect of items included in FFO
but not FAD:
Cash paid for share-based compensation in
excess of
expensed amount
(2,830
)
(3,093
)
Foreign currency exchange gain
(8,945
)
(7,791
)
Impact of EITF D-42, including equity
investment share
-
8,533
Less: Capital expenditures to maintain
real estate facilities (b)
(56,857
)
(30,205
)
FAD (a)
$
387,680
$
407,444
Distributions paid to common shareholders
and restricted
share units
$
349,802
$
349,478
Distribution payout ratio
90.2
%
85.8
%
Distributions per common share
$
2.00
$
2.00
(a)
FFO and FFO per share are non-GAAP
measures defined by the National Association of Real Estate
Investment Trusts and, along with the non-GAAP measure FAD, are
considered helpful measures of REIT performance by REITs and many
REIT analysts. FFO represents 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 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 March 31, 2020
Form 10-Q 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
March 31,
2020
2019
Self-storage revenues for:
Same Store Facilities
$
609,535
$
602,297
Acquired facilities
11,869
3,921
Developed and expanded facilities
42,285
33,715
Other non-same store facilities
10,512
10,475
Self-storage revenues
674,201
650,408
Self-storage cost of operations for:
Same Store Facilities
180,281
173,324
Acquired facilities
5,512
2,114
Developed and expanded facilities
18,348
14,446
Other non-same store facilities
3,784
3,772
Self-storage cost of operations
207,925
193,656
Self-storage NOI for:
Same Store Facilities
429,254
428,973
Acquired facilities
6,357
1,807
Developed and expanded facilities
23,937
19,269
Other non-same store facilities
6,728
6,703
Self-storage NOI (a)
466,276
456,752
Ancillary revenues
41,881
38,630
Ancillary cost of operations
(10,945
)
(10,545
)
Depreciation and amortization
(135,900
)
(121,941
)
General and administrative expense
(21,064
)
(19,503
)
Interest and other income
6,479
6,965
Interest expense
(13,621
)
(8,143
)
Equity in earnings of unconsolidated real
estate entities
23,968
17,672
Gain on sale of real estate
1,117
-
Foreign currency exchange gain
8,945
7,791
Net income on our income statement
$
367,136
$
367,678
(a)
Net operating income or “NOI” is a
non-GAAP financial measure that excludes the impact of depreciation
and amortization expense, which is based upon historical costs and
assumes that building values diminish ratably over time, while we
believe that real estate values fluctuate due to market conditions.
We utilize NOI in determining current property values, evaluating
property performance, and in evaluating operating trends. We
believe that investors and analysts utilize NOI in a similar
manner. NOI is not a substitute for net income, operating cash
flow, or other related GAAP financial measures, in evaluating our
operating results. This table reconciles from NOI for our
self-storage facilities to the net income presented on our income
statement.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005944/en/
Ryan Burke (818) 244-8080, Ext. 1141
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