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Public Storage (PSA - Analyst Report), a leading real estate investment trust (REIT) operating self-storage facilities, reported first quarter 2012 FFO (funds from operations) of $1.35 per share, compared with $1.48 in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding several non-recurring items, FFO for first quarter 2012 was $1.44 per share compared with $1.28 in the year-ago quarter. Recurring FFO for first quarter 2012 beat the Zacks Consensus Estimate by 2 cents.

During the reported quarter, Public Storage recorded an increase in total revenues to $442.6 million from $419.7 million in the year-earlier quarter. Total revenues for the reported quarter were well ahead of the Zacks Consensus Estimate of $424 million.

Same-store revenues increased 4.8% year-over-year to $383.9 million during the quarter, while net operating income climbed 6.3% to $253.2 million. The increase in same-store revenues was primarily due to a 0.6% increase in average occupancy and a 4.1% rise in realized annual rent per occupied square foot.

Occupancy in the same-store portfolio was 90.3% at quarter-end versus 89.8% in the prior-year period. Realized annual rent per occupied square foot increased from $12.65 in the year-earlier quarter to $13.17 in the reported quarter.

Public Storage currently has a 49% stake in Shurgard Europe, which has interests in 189 facilities (10 million net rentable square feet) located in 7 Western European countries. Public Storage is also the managing member of the JV that owns Shurgard Europe.

During the reported quarter, Public Storage acquired 6 self-storage facilities spanning 532,000 square feet of net rentable space for $42 million. The properties were located in California, Florida, Massachusetts, New Jersey and Pennsylvania. In addition, Public Storage acquired the remaining ownership interests in 3 consolidated partnerships for approximately $19.9 million in cash and assumed an existing debt of $4.8 million. The company is also currently under negotiations to acquire 4 facilities (316,000 net rentable square feet, 2 in California and 1 each in New York and Florida) for approximately $46 million in cash.

During first quarter 2012, the company replaced its erstwhile credit facility with a new credit facility with a borrowing capacity of $300 million and scheduled to mature in March 2017. At quarter-end, Public Storage had $620.1 million of cash and cash equivalents. The company maintained its quarterly dividend at $1.10 per share. Funds from operations available for distribution (FAD) among common shareholders exceeded the regular common distributions by about $49.3 million during the quarter.

We maintain our ‘Neutral’ rating on the stock, which presently has a Zacks #3 Rank, translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Sovran Self Storage Inc. (SSS - Snapshot Report), one of the competitors of Public Storage.

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