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Public Storage (PSA) Q3 FFO Lags Estimates, Expenses Flare Up

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Public Storage’s (PSA - Free Report) third-quarter 2019 core funds from operations (FFO) per share of $2.73 improved 1.1% from the prior-year figure of $2.70. However, the reported figure missed the Zacks Consensus Estimate by a penny.

Quarterly revenues of $729.3 million climbed 3.3% from the prior-year quarter but narrowly missed the Zacks Consensus Estimate of $732.9 million.

The company’s lower-than-expected FFO per share reflects the unfavorable impact of higher expenses in the quarter for its same-store facilities, resulting from elevated marketing expenses and property taxes. Nevertheless, higher realized annual rent per occupied square foot and uptick in occupancy supported its same-store revenues. Additionally, Public Storage benefited from its expansion efforts in the reported quarter.

Behind the Headlines

Same-store revenues inched up 1.1% year over year to nearly $611.2 million during the third quarter. This upside was primarily driven by a 0.7% increase in realized annual rent per occupied square foot to $17.82. Weighted-average square foot occupancy of 94.2% expanded 40 basis points year over year.

However, same-store cost of operations also flared up 6.4% year over year to $170.9 million, primarily reflecting rise in marketing expenses as well as uptick in property taxes. Consequently, the company’s same-store NOI edged down 0.9% to $440.4 million.

Nonetheless, the company’s NOI from non-same store facilities grew on the back of the facilities acquired in 2018 and 2019, and the fill-up of the recently-developed and expanded facilities.

Portfolio Activity

During the September-end quarter, Public Storage bought 10 self-storage facilities, comprising 0.8 million net rentable square feet of area, for $110.7 million. These included two each in Georgia and Massachusetts, and one each in Florida, Indiana, Minnesota, North Carolina, Tennessee and Texas. Following Sep 30, 2019, the company acquired or was under contract to acquire eight self-storage facilities, spanning 0.6 million net rentable square feet of space, for $69.6 million.

Finally, as of Sep 30, 2019, the company had several facilities in development (1.3 million net rentable square feet), with an estimated cost of $219 million, as well as expansion projects (2.4 million net rentable square feet) worth roughly $313 million. Public Storage estimates to incur the remaining $348 million of development costs related to these projects, mainly over the next 18 months.


Public Storage exited third-quarter 2019 with around $541.4 million of cash and cash equivalents, up from the $361.2 million recorded at the end of 2018.


On Oct 23, Public Storage’s board of trustees announced a regular quarterly dividend of $2.00 per share. The amount will be paid on Dec 30, to shareholders of record as of Dec 13, 2019.

In Conclusion

Though Public Storage’s FFO per share and revenues improved year over year, the estimate miss for both is disappointing. Expenses have been flaring up, which is a concern for bottom-line growth. The company’s expansion efforts, however, are encouraging. Public Storage’s balance-sheet strength is expected to support its growth endeavors. However, there is a development boom of self-storage units in many markets. This high supply is likely to intensify competition, curb its power to raise rents and turn on discounting.

Public Storage currently carries a Zacks Rank #2 (Buy). 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 and EPS Surprise

Public Storage price-consensus-eps-surprise-chart | Public Storage Quote

We, now, look forward to the earnings releases of other REITs like Realty Income Corporation (O - Free Report) , Outfront Media Inc. (OUT - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) , all of which are slated to report their quarterly numbers next week.

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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