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Public Storage (PSA) Q1 FFO Misses Estimates, Occupancy Falls
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Public Storage (PSA - Free Report) reported a first-quarter 2024 core FFO per share of $4.03, which lagged the Zacks Consensus Estimate of $4.07. The figure also declined 1.2% year over year.
While this self-storage REIT came up with a better-than-anticipated top line, aided by an improvement in the realized annual rent per occupied square foot in the reported quarter, a rise in property tax expenses and marketing expenses, as well as higher interest expenses, acted as spoilsports.
Quarterly revenues of $1.16 billion exceeded the Zacks Consensus Estimate by 0.4%. Moreover, revenues increased 5.8% year over year.
Behind the Headlines
Public Storage’s same-store revenues rose marginally year over year to $913.1 million in the first quarter, highlighting higher realized annual rent per occupied square foot, partly offset by a decline in occupancy. This storage REIT witnessed a 0.8% increase in realized annual rental income per occupied square foot to $22.53. However, the weighted average square foot occupancy of 92.1% was down 0.8% year over year. Our estimate was 92.2%.
The cost of operations for same-store facilities increased 4.8% year over year, mainly due to a rise in property tax expenses and marketing expenses.
Consequently, PSA’s same-store net operating income (NOI) decreased 1.5% to $677.4 million. However, this REIT’s NOI growth from non-same-store facilities was $35.4 million, mainly due to the impact of facilities acquired in 2023 as well as the fill-up of recently developed and expanded facilities.
The company achieved a 77.2% same-store direct NOI margin in the quarter, down from 78.7% in the prior-year quarter.
Interest expenses increased to $67.8 million in the first quarter, up from $36.1 million in the year-ago period. Our estimate was $60.6 million.
Portfolio Activity
In the first quarter, Public Storage opened one newly developed facility and completed various expansion projects, which together added 0.3 million net rentable square feet, costing $35.0 million.
As of Mar 31, 2024, PSA had several facilities in development and expansion, which are expected to add 3.7 million net rentable square feet at an estimated cost of $783.0 million. It expects to incur the remaining $393.7 million of development costs related to these projects, mainly over the next 18 to 24 months.
Balance Sheet Position
Public Storage exited the first quarter of 2024 with $271.6 million of cash and equivalents, down from $370 million as of Dec 31, 2023.
2024 Guidance
Public Storage projects 2024 core FFO per share in the range of $16.60-$17.20. The Zacks Consensus Estimate is currently pegged at $16.92, which lies within the guided range.
The company’s full-year assumption is backed by a projection of a 1% decline to 1% growth in same-store revenues, a 2% to 3.5% rise in same-store expenses and a 2.4% decline to 0.7% expansion in same-store NOI.
Further, the company expects $500 million in acquisitions and $450 million in development openings.
Public Storage currently carries a Zacks Rank #3 (Hold).
Extra Space Storage Inc. (EXR - Free Report) reported first-quarter 2024 core FFO per share of $1.96, which beat the Zacks Consensus Estimate by a penny. However, the figure declined 3% from the prior-year quarter. Quarterly revenues of $799.5 million beat the Zacks Consensus Estimate of $786.5 million. The top line jumped 58.9% year over year, reflecting acquisition.
The results of Extra Space Storage reflect a rise in occupancy and better-than-anticipated revenues. However, higher same-store operating expenses and increased interest expenses during the quarter were a spoilsport.
Upcoming Earnings Releases
We now look forward to the earnings releases of other REITs like Digital Realty Trust, Inc. (DLR - Free Report) and Federal Realty Investment Trust (FRT - Free Report) , both of which are slated to report on May 2.
The Zacks Consensus Estimate for Digital Realty Trust’s first-quarter 2024 FFO per share is pegged at $1.63, which suggests a year-over-year decrease of 1.81%. DLR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Federal Realty’s first-quarter 2024 FFO per share is pegged at $1.65, which implies a year-over-year increase of 3.77%. FRT currently carries a Zacks Rank #3.
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.
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Public Storage (PSA) Q1 FFO Misses Estimates, Occupancy Falls
Public Storage (PSA - Free Report) reported a first-quarter 2024 core FFO per share of $4.03, which lagged the Zacks Consensus Estimate of $4.07. The figure also declined 1.2% year over year.
While this self-storage REIT came up with a better-than-anticipated top line, aided by an improvement in the realized annual rent per occupied square foot in the reported quarter, a rise in property tax expenses and marketing expenses, as well as higher interest expenses, acted as spoilsports.
Quarterly revenues of $1.16 billion exceeded the Zacks Consensus Estimate by 0.4%. Moreover, revenues increased 5.8% year over year.
Behind the Headlines
Public Storage’s same-store revenues rose marginally year over year to $913.1 million in the first quarter, highlighting higher realized annual rent per occupied square foot, partly offset by a decline in occupancy. This storage REIT witnessed a 0.8% increase in realized annual rental income per occupied square foot to $22.53. However, the weighted average square foot occupancy of 92.1% was down 0.8% year over year. Our estimate was 92.2%.
The cost of operations for same-store facilities increased 4.8% year over year, mainly due to a rise in property tax expenses and marketing expenses.
Consequently, PSA’s same-store net operating income (NOI) decreased 1.5% to $677.4 million. However, this REIT’s NOI growth from non-same-store facilities was $35.4 million, mainly due to the impact of facilities acquired in 2023 as well as the fill-up of recently developed and expanded facilities.
The company achieved a 77.2% same-store direct NOI margin in the quarter, down from 78.7% in the prior-year quarter.
Interest expenses increased to $67.8 million in the first quarter, up from $36.1 million in the year-ago period. Our estimate was $60.6 million.
Portfolio Activity
In the first quarter, Public Storage opened one newly developed facility and completed various expansion projects, which together added 0.3 million net rentable square feet, costing $35.0 million.
As of Mar 31, 2024, PSA had several facilities in development and expansion, which are expected to add 3.7 million net rentable square feet at an estimated cost of $783.0 million. It expects to incur the remaining $393.7 million of development costs related to these projects, mainly over the next 18 to 24 months.
Balance Sheet Position
Public Storage exited the first quarter of 2024 with $271.6 million of cash and equivalents, down from $370 million as of Dec 31, 2023.
2024 Guidance
Public Storage projects 2024 core FFO per share in the range of $16.60-$17.20. The Zacks Consensus Estimate is currently pegged at $16.92, which lies within the guided range.
The company’s full-year assumption is backed by a projection of a 1% decline to 1% growth in same-store revenues, a 2% to 3.5% rise in same-store expenses and a 2.4% decline to 0.7% expansion in same-store NOI.
Further, the company expects $500 million in acquisitions and $450 million in development openings.
Public Storage currently carries a Zacks Rank #3 (Hold).
Public Storage Price, Consensus and EPS Surprise
Public Storage price-consensus-eps-surprise-chart | Public Storage Quote
Performance of Another Self-Storage REIT
Extra Space Storage Inc. (EXR - Free Report) reported first-quarter 2024 core FFO per share of $1.96, which beat the Zacks Consensus Estimate by a penny. However, the figure declined 3% from the prior-year quarter. Quarterly revenues of $799.5 million beat the Zacks Consensus Estimate of $786.5 million. The top line jumped 58.9% year over year, reflecting acquisition.
The results of Extra Space Storage reflect a rise in occupancy and better-than-anticipated revenues. However, higher same-store operating expenses and increased interest expenses during the quarter were a spoilsport.
Upcoming Earnings Releases
We now look forward to the earnings releases of other REITs like Digital Realty Trust, Inc. (DLR - Free Report) and Federal Realty Investment Trust (FRT - Free Report) , both of which are slated to report on May 2.
The Zacks Consensus Estimate for Digital Realty Trust’s first-quarter 2024 FFO per share is pegged at $1.63, which suggests a year-over-year decrease of 1.81%. DLR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Federal Realty’s first-quarter 2024 FFO per share is pegged at $1.65, which implies a year-over-year increase of 3.77%. FRT currently carries a Zacks Rank #3.
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.