Public Storage Doing Good Biz

Operationally, Public Storage’s (PSA) properties continue to perform relatively well; same-store NOI [net operating income] and rental rates increased in most of the company’s US and European markets.

We expect moderate same-store growth to continue throughout the year. In 2Q08, PSA sold 51% of its stake in Shurgard Europe to the New York Common Fund, which will have a negative impact on near-term FFO [funds from operations]. Although, the company has plenty of cash to be an active acquirer in a market where pricing for self storage facilities are more attractive.

The overall national economy is weakening, and we expect rental rate increases to moderate in the remaining two quarters of this year. PSA is the dominant player in its sector with a large diversified portfolio spread across the US and now parts of Europe. The company is attractively valued relative to long term growth prospects and underlying NAV [net asset valuation].

Currently the company trades at 16.9x our 2008 FFO estimates, an 8% premium to office, and a 13% premium to self storage REITs in our coverage universe. We still think PSA is the best positioned self storage operator and maintain our Buy rating. We are setting our price target at 18x 2008 estimates or $93.00 per share.

Read the full analyst report on PSA

Read the full analyst report on PSA