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Public Storage Recurring FFO Zooms

PSA SSS

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Public Storage (PSA - Analyst Report), a leading real estate investment trust (REIT) operating self-storage facilities, reported second quarter 2012 FFO (funds from operations) of $1.38 per share, compared with $1.39 in the year-earlier quarter. The marginal decrease in reported FFO despite improved property operations was primarily due to the adverse impact of foreign currency translations.  

Excluding several non-recurring items, FFO for second quarter 2012 was $1.62 per share compared with $1.43 in the year-ago quarter reflected in a year-over-year increase of 13.3%. Recurring FFO for the second quarter of 2012 beat the Zacks Consensus Estimate by 9 cents.

During the reported quarter, Public Storage recorded a 5.4% increase in total revenues to $457.7 million from $434.4 million in the year-earlier quarter. Total revenues for the reported quarter were well ahead of the Zacks Consensus Estimate of $430 million.

Same-store revenues increased 5.1% year over year to $394.7 million during the quarter, while net operating income (NOI) climbed 8.3% to $273.7 million. The increase in same-store revenues was primarily due to a 4.9% rise in realized annual rent per occupied square foot to $13.23. Occupancy in the same-store portfolio was 92.6% at quarter-end versus 92.3% in the prior-year period.

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

During the reported quarter, same-store revenue in Shurgard Europe increased 0.4% to $47.0 million. Same-store NOI for Shurgard Europe increased 2.2% year over year to $26.8 million, driven by a 2.7% rise in realized annual rent per occupied square foot to $25.52.

During second quarter 2012, the company acquired four self-storage properties for $46 million cash. Spanning 316,000 net rentable square feet, two of the acquired properties are located in California, and one each in Florida and New York. Subsequent to the quarter-end, Public Storage acquired one self-storage facility (61,000 net rentable square feet) in California for $6 million in cash. The company is currently under contract to acquire two additional properties for $31 million.

At quarter-end, Public Storage had $438.5 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 $70.2 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 #2 Rank (short-term Buy rating) for Sovran Self Storage Inc. (SSS - Snapshot Report), one of the competitors of Public Storage.

Note: FFO, 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.

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