Public Storage (NYSE:PSA) announced today operating results for the
three and six months ended June 30, 2018.
Operating Results for the Three Months Ended
June 30, 2018
For the three months ended June 30, 2018, net income allocable to our
common shareholders was $348.3 million or $2.00 per diluted common
share, compared to $276.7 million or $1.59 per diluted common share in
2017 representing an increase of $71.6 million or $0.41 per diluted
common share. The increase is due primarily to (i) a $12.3 million
increase in self-storage net operating income (described below), (ii)
our $24.0 million equity share of a gain on sale of assets recorded by
PS Business Parks in the three months ended June 30, 2018, (iii) a $47.4
million increase due to the impact of foreign currency exchange gains
and losses associated with our euro denominated debt and (iv) a $14.6
million allocation to preferred shareholders associated with preferred
share redemptions in the three months ended June 30, 2017. These
increases were offset partially by a $13.0 million increase in general
and administrative expense due to the acceleration of share-based
compensation expense accruals for our CEO and CFO in 2018 as a result of
their upcoming retirement and the reversal of share-based compensation
accruals forfeited by retiring executives in 2017.
The $12.3 million increase in self-storage net operating income is a
result of a $4.7 million increase in our Same Store Facilities (as
defined below) and a $7.6 million increase in our Non Same Store
Facilities (as defined below). Revenues for the Same Store Facilities
increased 1.5% or $8.5 million in the three months ended June 30, 2018
as compared to 2017, due primarily to higher realized annual rent per
occupied square foot. Cost of operations for the Same Store Facilities
increased by 2.6% or $3.8 million in the three months ended June 30,
2018 as compared to 2017, due primarily to increased property taxes. The
increase in net operating income of $7.6 million for the Non Same Store
Facilities is due primarily to the impact of 137 self-storage facilities
acquired and developed since January 2016.
Operating Results for the Six Months Ended June
30, 2018
For the six months ended June 30, 2018, net income allocable to our
common shareholders was $636.1 million or $3.65 per diluted common
share, compared to $557.8 million or $3.20 in 2017 representing an
increase of $78.3 million or $0.45 per diluted common share. The
increase is due primarily to (i) a $25.9 million increase in
self-storage net operating income, (ii) our $34.9 million equity share
of gains recorded by PS Business Parks in the six months ended June 30,
2018, (iii) a $41.1 million increase due to the impact of foreign
currency exchange gains and losses associated with our euro denominated
debt and (iv) a $14.6 million allocation to preferred shareholders
associated with preferred share redemptions in the six months ended June
30, 2017. These increases were offset partially by a $21.0 million
increase in general and administrative expense due to the acceleration
of share-based compensation expense accruals for our CEO and CFO in 2018
as a result of their upcoming retirement and the reversal of share-based
compensation accruals forfeited by retiring executives in 2017.
The $25.9 million increase in self-storage net operating income is a
result of an $11.2 million increase in our Same Store Facilities and
$14.7 million increase in our Non Same Store Facilities. Revenues for
the Same Store Facilities increased 1.8% or $20.0 million in the six
months ended June 30, 2018 as compared to 2017, due primarily to higher
realized annual rent per occupied square foot. Cost of operations for
the Same Store Facilities increased by 3.0% or $8.8 million in the six
months ended June 30, 2018 as compared to 2017, due primarily to
increased property taxes, property manager payroll, and allocated
overhead. The increase in net operating income of $14.7 million for the
Non Same Store Facilities is due primarily to the impact of 137
self-storage facilities acquired and developed since January 2016.
Funds from Operations
For the three months ended June 30, 2018, funds from operations (“FFO”)
was $2.65 per diluted common share, as compared to $2.31 in 2017,
representing an increase of 14.7%. FFO is a non-GAAP (generally accepted
accounting principles) term defined by the National Association of Real
Estate Investment Trusts and generally represents net income before
depreciation, gains and losses and impairment charges with respect to
real estate assets.
For the six months ended June 30, 2018, FFO was $5.02 per diluted common
share, as compared to $4.65 in 2017, representing an increase of 8.0%.
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) accelerations of accruals due to the
upcoming retirement of our CEO and CFO and reversals of accruals with
respect to share-based awards forfeited by retiring senior executive
officers. 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):
items excluded from Core FFO, including our equity share from
investments:
Acceleration (reversal) of share-based compensation expense due to
executive officer retirement
Property Operations – Same Store Facilities
The Same Store Facilities represent those facilities that have been
owned and operated on a stabilized level of occupancy, revenues and cost
of operations since January 1, 2016. We review the operations of our
Same Store Facilities, which excludes facilities whose operating trends
are significantly affected by factors such as casualty events, as well
as recently developed or acquired facilities, to more effectively
evaluate the ongoing performance of our self-storage portfolio in 2016,
2017 and 2018. We believe the Same Store information is used by
investors and REIT analysts in a similar manner. The Same Store pool
decreased from 2,052 facilities at March 31, 2018 to 2,048 facilities at
June 30, 2018. The following table summarizes the historical operating
results of these 2,048 facilities (131.3 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 June 30,
2018.
Selected Operating Data for the Same
Store Facilities (2,048 facilities)
(unaudited):
$
Annual contract rent per occupied square foot (d)
The following table summarizes selected quarterly financial data with
respect to the Same Store Facilities (unaudited):
Repairs and maintenance, including snow removal expenses:
Weighted average realized annual rent per occupied square foot:
Weighted average occupancy levels for the period:
Property Operations – Non Same Store Facilities
The Non Same Store Facilities at June 30, 2018 represent 355 facilities
that were not stabilized with respect to occupancies or rental rates
since January 1, 2016 or that we did not own as of January 1, 2016. The
following table summarizes operating data with respect to the Non Same
Store Facilities (unaudited). Additional data and metrics with respect
to these facilities is included in the MD&A in our June 30, 2018 Form
10-Q.
Cost of operations before depreciation and amortization expense:
Investing and Capital Activities
During the three months ended June 30, 2018, we acquired three
self-storage facilities (one each in Indiana, Kentucky and South
Carolina) with 0.2 million net rentable square feet for $16.0 million.
For the six months ended June 30, 2018, we acquired five self-storage
facilities (one each in Indiana, Kentucky, Nebraska, South Carolina and
Tennessee) with 0.4 million net rentable square feet for $33.9 million.
Subsequent to June 30, 2018, we acquired or were under contract to
acquire fourteen self-storage facilities (six in Minnesota, two in
Texas, one each in Colorado, Florida, Kentucky, Ohio, South Carolina and
Tennessee) with 0.8 million net rentable square feet for $95.2 million.
During the three months ended June 30, 2018, we completed seven newly
developed facilities and various expansion projects (1.2 million net
rentable square feet) costing $135 million. For the six months ended
June 30, 2018, we completed eleven newly developed facilities and
various expansion projects (1.7 million net rentable square feet)
costing an aggregate of $195 million. At June 30, 2018, we had various
facilities in development (2.2 million net rentable square feet)
estimated to cost $315 million and various expansion projects (3.9
million net rentable square feet) estimated to cost $364 million. The
remaining $445 million of development costs for these projects is
expected to be incurred primarily in the next 18 months.
As previously reported, Shurgard Europe is considering an initial public
offering. On July 13, 2018, we received a cash distribution from
Shurgard Europe totaling $145.4 million, representing our 49% share of
an aggregate dividend totaling $296.8 million. The dividend was funded
by Shurgard Europe in part through proceeds from a bank loan. During the
three months ended June 30, 2018, Shurgard Europe acquired five
self-storage facilities in Sweden (0.3 million net rentable square feet)
for an aggregate of $46 million.
Distributions Declared
On July 25, 2018, 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 September 27, 2018 to shareholders of
record as of September 12, 2018.
Second Quarter Conference Call
A conference call is scheduled for August 2, 2018 at 11:00 a.m. (PDT) to
discuss the second 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
5787104). A simultaneous audio webcast may be accessed by using the link
at www.publicstorage.com
under “Company Info, Investor Relations, News and Events, Events
Calendar.” A replay of the conference call may be accessed through
August 15, 2018 by calling (800) 585-8367 (domestic), (404) 537-3406
(international) or by using the link at www.publicstorage.com
under “Company Info, Investor Relations, News and Events, Events
Calendar.” All forms of replay utilize conference ID number 5787104.
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500, is a REIT
that primarily acquires, develops, owns and operates self-storage
facilities. The Company’s headquarters are located in Glendale,
California. At June 30, 2018, we had interests in 2,402 self-storage
facilities located in 38 states with approximately 160 million net
rentable square feet in the United States and 228 storage facilities
located in seven Western European nations with approximately 12 million
net rentable square feet operated under the “Shurgard” brand. We also
own a 42% common equity interest in PS Business Parks, Inc. (NYSE:PSB)
which owned and operated approximately 28 million rentable square feet
of commercial space at June 30, 2018.
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 March 1, 2018 and in our other filings with
the SEC and the following: general risks associated with the ownership
and operation of real estate, including changes in demand, risk related
to development of self-storage facilities, potential liability for
environmental contamination, natural disasters and adverse changes in
laws and regulations governing property tax, real estate and zoning;
risks associated with downturns in the national and local economies in
the markets in which we operate, including risks related to current
economic conditions and the economic health of our customers; the impact
of competition from new and existing self-storage and commercial
facilities and other storage alternatives; difficulties in our ability
to successfully evaluate, finance, integrate into our existing
operations and manage acquired and developed properties; risks
associated with international operations including, but not limited to,
unfavorable foreign currency rate fluctuations, changes in tax laws, and
local and global economic uncertainty that could adversely affect our
earnings and cash flows; risks related to our participation in joint
ventures; the impact of the regulatory environment as well as national,
state and local laws and regulations including, without limitation,
those governing environmental, taxes, our tenant reinsurance business
and labor, and risks related to the impact of new laws and regulations;
risks of increased tax expense associated either with a possible failure
by us to qualify as a REIT, or with challenges to the determination of
taxable income for our taxable REIT subsidiaries; changes in federal or
state tax laws related to the taxation of REITs and other corporations;
security breaches or a failure of our networks, systems or technology
could adversely impact our business, customer and employee
relationships; risks associated with the self-insurance of certain
business risks, including property and casualty insurance, employee
health insurance and workers compensation liabilities; difficulties in
raising capital at a reasonable cost; delays in the development process;
ongoing litigation and other legal and regulatory actions which may
divert management’s time and attention, require us to pay damages and
expenses or restrict the operation of our business; and economic
uncertainty due to the impact of war or terrorism. These forward-looking
statements speak only as of the date of this press release. All of our
forward-looking statements, including those in this press release, are
qualified in their entirety by this statement. We expressly disclaim any
obligation to update publicly or otherwise revise any forward-looking
statements, whether as a result of new information, new estimates, or
other factors, events or circumstances after the date of this press
release, except where expressly required by law. Given these risks and
uncertainties, you should not rely on any forward-looking statements in
this press release, or which management may make orally or in writing
from time to time, as predictions of future events nor guarantees of
future performance.
PUBLIC STORAGE
SELECTED INCOME STATEMENT DATA
(Amounts in thousands, except per share data)
(Unaudited)
Per common share:
PUBLIC STORAGE
SELECTED BALANCE SHEET DATA
(Amounts in thousands, except share and per share data)
Cumulative Preferred Shares, $0.01 par value, 100,000,000 shares
authorized, 161,000 shares issued (in series) and outstanding,
(161,000 at December 31, 2017) at liquidation preference
Common Shares, $0.10 par value, 650,000,000 shares authorized,
173,937,035 shares issued and outstanding, (173,853,370 shares at
December 31, 2017)
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Computation of Funds from Operations and Funds Available for
Distribution
(Unaudited – amounts in thousands)
Computation of FFO per Share:
Depreciation allocated to noncontrolling interests and restricted
share unitholders
Gains on sale of real estate investments, including our equity
share from investments
Reconciliation of Earnings per Share to
FFO per Share:
Depreciation and amortization allocable to common shareholders
Gains on sale of real estate investments, including our equity
share from investments and other
Computation of Funds Available for
Distribution (“FAD”):
Share-based compensation expense in excess of cash paid
Application of EITF D-42, including our equity share from
investments
Distributions paid to common shareholders and restricted share
units
PUBLIC STORAGE
SELECTED FINANCIAL DATA
Reconciliation of Self-Storage Net Operating Income to
Operating Income
(Unaudited – amounts in thousands)
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