Public Storage's (PSA Quick QuotePSA - Free Report) third-quarter 2022 core funds from operations (FFO) per share of $4.13 surpassed the Zacks Consensus Estimate of $4.05. The figure also increased 20.8% year over year.

Quarterly revenues of $1.09 billion exceeded the Zacks Consensus Estimate of $1.07 billion. Moreover, revenues increased 21.6% year over year.

Results reflect better-than-anticipated top-line growth alongside an improvement in the realized annual rent per occupied square foot. The company also benefited from its expansion efforts through acquisitions, developments and extensions. It raised its guidance for 2022 FFO per share.
 
After PS Business Parks’ (“PSB”) merger with Blackstone on Jul 20, 2022, PSA received a total of $2.7 billion of cash proceeds from the sale of its equity investment in PSB. The transaction resulted in a gain of $2.1 billion.

Behind the Headlines

Public Storage’s same-store revenues increased 14.7% year over year to $822.5 million in the third quarter, highlighting the higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This REIT experienced a 17.2% increase in the realized annual rental income per occupied square foot to $22.52. However, the weighted-average square foot occupancy of 94.5% was down 2.4% year over year.

The same-store cost of operations increased 7.7% year over year, mainly reflecting a rise in property tax expense, marketing expense, other direct property costs and centralized management costs.

Consequently, PSA’s same-store net operating income (NOI) increased 17% to $632.6 million. Also, this REIT’s NOI growth from non-same-store facilities was $56.5 million due to the facilities acquired in 2021 and the fill-up of recently developed and expanded facilities.

Public Storage achieved an 80.3% same-store direct NOI margin in the quarter, reflecting an increase of 1.6% year over year.

Portfolio Activity

In the September quarter, Public Storage acquired 24 self-storage facilities comprising 1.7 million net rentable square feet of area for $250.6 million. Following Sep 30, 2022, the company acquired or was under contract to buy 33 self-storage facilities spanning 1.7 million net rentable square feet of space across six states for $262.6 million.

In the third quarter, this REIT opened five newly developed facilities and completed several expansion projects with 0.5 million net rentable square feet costing $69.7 million.

As of Sep 30, 2022, PSA had several facilities in development (2.1 million net rentable square feet) with an estimated cost of $421 million and several expansion projects (3.0 million net rentable square feet) worth $590.9 million. It expects to incur the remaining $605.5 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited third-quarter 2022 with $883.8 of cash and equivalents, down from $1.01 billion as of Jun 30, 2022.

Dividend Update

On Oct 26, 2022, the company’s board announced a regular quarterly dividend of $2 per common share. The dividend will be paid out on Dec 29 to shareholders on record as of Dec 14, 2022.

On Aug 4, 2022, in relation to the sale of PSA’s equity investment in PSB, it paid out a special cash dividend of $13.15 per common share, aggregating around $2.3 billion, to shareholders on record as of Aug 1, 2022.

2022 Guidance Up

Public Storage increased its guidance for 2022 core FFO per share after including the impact of the sale of its investment in PSB.

It now projects the same in the range of $15.35-$15.75, up from the prior guidance of $15.00-$15.70. The Zacks Consensus Estimate for the same stands at $15.73, which lies in the guided range.

The company’s full-year assumption is backed by 13.5-15% growth in same-store revenues, a 6% to 8% rise in same-store expenses and a 15.4% to 18.0% expansion in same-store NOI. Further, the company expects $800 million in acquisitions and $250 million in development openings.

Public Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Prologis, Inc. (PLD Quick QuotePLD - Free Report) reported third-quarter 2022 core FFO per share of $1.73, beating the Zacks Consensus Estimate of $1.71. The figure jumped a whopping 66.3% from the year-ago quarter’s $1.04.

PLD’s results reflect healthy leasing activity with solid rent growth. The bottom line, too, improved.

Highwoods Properties Inc.’s (HIW Quick QuoteHIW - Free Report) third-quarter 2022 FFO per share of $1.04 surpassed the Zacks Consensus Estimate of 97 cents. The figure climbed 8.3% year over year.

HIW’s quarterly results reflect robust leasing activity and improvement in rents. The top line grew year over year. However, the same-property cash NOI took a slight dip from the year-ago quarter’s figure.

Boston Properties Inc.’s (BXP Quick QuoteBXP - Free Report) third-quarter 2022 FFO per share of $1.91 outpaced the Zacks Consensus Estimate of $1.87. The figure increased 10.4% year over year.

BXP’s quarterly results reflect healthy leasing activity alongside year-over-year growth in the top line. It also carried out strategic acquisitions, redevelopments and dispositions during the quarter. The company revised its 2022 outlook for FFO.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.