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Public Storage (PSA) Q2 FFO Beat Estimates, View Raised
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Public Storage (PSA - Free Report) reported second-quarter 2023 core funds from operations (FFO) per share of $4.28, which increased 7.3% year over year. The core FFO per share, excluding the contribution from the company’s equity investment in PS Business Parks, Inc., was also $4.28, which rose 11.5% from the year-ago quarter’s tally. Both figures surpassed the Zacks Consensus Estimate of $4.20. PSA shares rallied 1.2% in the after-market trading, followed by the release of its second-quarter 2023 results.
Results showed a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions. It also revised its 2023 outlook.
Quarterly revenues of $1.12 billion were almost in line with the Zacks Consensus Estimate. Moreover, revenues increased 8.5% year over year.
On Jul 24, 2023, the company entered into a definitive agreement to buy BREIT Simply Storage LLC for a cash acquisition price of $2.2 billion.
Behind the Headlines
Public Storage’s same-store revenues increased 6.3% year over year to $864.5 million in the second quarter, highlighting higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This storage REIT witnessed an 8.3% increase in realized annual rental income per occupied square foot to $22.99. However, the weighted-average square foot occupancy of 93.7% was down 2.1% year over year.
Cost of operations for the same store facilities increased 5.2% year over year, mainly due to a rise in property tax expense and marketing expenses.
Consequently, PSA’s same-store net operating income (NOI) increased 6.6% to $668.1 million. Also, this REIT’s NOI growth from non-same-store facilities was $21.7 million, mainly due to the impact of facilities acquired in 2021 and 2022, and the fill-up of recently developed and expanded facilities.
The company achieved an 80.3% same-store direct NOI margin in the quarter, down from 80.4% in the prior-year quarter.
Portfolio Activity
In the second quarter, Public Storage acquired 11 self-storage facilities, comprising 0.9 million net rentable square feet of area, for $144 million.
It opened three newly developed facilities and completed several expansion projects with 0.6 million net rentable square feet, costing $84.4 million.
As of Jun 30, 2023, PSA concluded various expansion projects costing $19.1 million. The company also had several facilities in development (2.5 million net rentable square feet) with an estimated cost of $554 million and several expansion projects (2.3 million net rentable square feet) worth $473 million. It expects to incur the remaining $577 million of development costs related to these projects, mainly over the next 18 to 24 months.
Balance Sheet Position
Public Storage exited the second quarter of 2023 with $651.7 of cash and equivalents, down from $695.4 million as of Mar 31, 2023.
2023 Guidance Revised
The company revised its guidance for 2023.
It now projects 2023 core FFO per share in the range of $16.40-$16.80, revised from the prior-guided range of $16.15-$16.80. The Zacks Consensus Estimate for the same is currently pegged at $16.78, which lies within the guided range.
The company also revised its expectations for same-store revenue growth to 3.25-5% from the prior guidance of 2.75-5%. Same-store expenses are expected in the prior guided range of 4.75-6.75%.
Consequently, same-store NOI was revised to 2.2-5.1% from 1.5-5.1% estimated previously.
PSA retained its guidance for acquisitions and development openings at $2.6 billion and $375 million, respectively.
Dividend Update
On Aug 2, the company’s board announced a regular quarterly dividend of $3 per common share. The dividend will be paid out on Sep 28, to shareholders of record as of Sep 13, 2023.
SBA Communications Corporation (SBAC - Free Report) reported second-quarter 2023 adjusted funds from operations per share of $3.24, beating the Zacks Consensus Estimate of $3.14. Moreover, the figure reflects a rise of 5.5% from the prior-year quarter.
SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio.
Digital Realty Trust’s (DLR - Free Report) second-quarter 2023 core FFO per share of $1.68 beat the Zacks Consensus Estimate of $1.65. The figure, however, declined 2.3% on a year-over-year basis.
Results reflect better-than-anticipated revenues, aided by strong enterprise leasing activity, robust renewal spreads and healthy organic growth.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Public Storage (PSA) Q2 FFO Beat Estimates, View Raised
Public Storage (PSA - Free Report) reported second-quarter 2023 core funds from operations (FFO) per share of $4.28, which increased 7.3% year over year. The core FFO per share, excluding the contribution from the company’s equity investment in PS Business Parks, Inc., was also $4.28, which rose 11.5% from the year-ago quarter’s tally. Both figures surpassed the Zacks Consensus Estimate of $4.20. PSA shares rallied 1.2% in the after-market trading, followed by the release of its second-quarter 2023 results.
Results showed a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions. It also revised its 2023 outlook.
Quarterly revenues of $1.12 billion were almost in line with the Zacks Consensus Estimate. Moreover, revenues increased 8.5% year over year.
On Jul 24, 2023, the company entered into a definitive agreement to buy BREIT Simply Storage LLC for a cash acquisition price of $2.2 billion.
Behind the Headlines
Public Storage’s same-store revenues increased 6.3% year over year to $864.5 million in the second quarter, highlighting higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This storage REIT witnessed an 8.3% increase in realized annual rental income per occupied square foot to $22.99. However, the weighted-average square foot occupancy of 93.7% was down 2.1% year over year.
Cost of operations for the same store facilities increased 5.2% year over year, mainly due to a rise in property tax expense and marketing expenses.
Consequently, PSA’s same-store net operating income (NOI) increased 6.6% to $668.1 million. Also, this REIT’s NOI growth from non-same-store facilities was $21.7 million, mainly due to the impact of facilities acquired in 2021 and 2022, and the fill-up of recently developed and expanded facilities.
The company achieved an 80.3% same-store direct NOI margin in the quarter, down from 80.4% in the prior-year quarter.
Portfolio Activity
In the second quarter, Public Storage acquired 11 self-storage facilities, comprising 0.9 million net rentable square feet of area, for $144 million.
It opened three newly developed facilities and completed several expansion projects with 0.6 million net rentable square feet, costing $84.4 million.
As of Jun 30, 2023, PSA concluded various expansion projects costing $19.1 million. The company also had several facilities in development (2.5 million net rentable square feet) with an estimated cost of $554 million and several expansion projects (2.3 million net rentable square feet) worth $473 million. It expects to incur the remaining $577 million of development costs related to these projects, mainly over the next 18 to 24 months.
Balance Sheet Position
Public Storage exited the second quarter of 2023 with $651.7 of cash and equivalents, down from $695.4 million as of Mar 31, 2023.
2023 Guidance Revised
The company revised its guidance for 2023.
It now projects 2023 core FFO per share in the range of $16.40-$16.80, revised from the prior-guided range of $16.15-$16.80. The Zacks Consensus Estimate for the same is currently pegged at $16.78, which lies within the guided range.
The company also revised its expectations for same-store revenue growth to 3.25-5% from the prior guidance of 2.75-5%. Same-store expenses are expected in the prior guided range of 4.75-6.75%.
Consequently, same-store NOI was revised to 2.2-5.1% from 1.5-5.1% estimated previously.
PSA retained its guidance for acquisitions and development openings at $2.6 billion and $375 million, respectively.
Dividend Update
On Aug 2, the company’s board announced a regular quarterly dividend of $3 per common share. The dividend will be paid out on Sep 28, to shareholders of record as of Sep 13, 2023.
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.
Public Storage Price, Consensus and EPS Surprise
Public Storage price-consensus-eps-surprise-chart | Public Storage Quote
Performance of Other REITs
SBA Communications Corporation (SBAC - Free Report) reported second-quarter 2023 adjusted funds from operations per share of $3.24, beating the Zacks Consensus Estimate of $3.14. Moreover, the figure reflects a rise of 5.5% from the prior-year quarter.
SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio.
Digital Realty Trust’s (DLR - Free Report) second-quarter 2023 core FFO per share of $1.68 beat the Zacks Consensus Estimate of $1.65. The figure, however, declined 2.3% on a year-over-year basis.
Results reflect better-than-anticipated revenues, aided by strong enterprise leasing activity, robust renewal spreads and healthy organic growth.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.